EXHIBIT 10.7
EXECUTION COPY
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
VHS HOLDINGS LLC
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DATED AS OF SEPTEMBER 23, 2004
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TABLE OF CONTENTS
Page
ARTICLE I ORGANIZATION........................................................................... 2
Section 1.1. Certificate.............................................................. 2
Section 1.2. Name..................................................................... 2
Section 1.3. Term..................................................................... 2
Section 1.4. Office and Agent......................................................... 2
Section 1.5. Qualification in Other Jurisdictions..................................... 2
Section 1.6. No State Law Partnership................................................. 3
ARTICLE II CAPITAL CONTRIBUTIONS................................................................. 3
Section 2.1. Authorization and Issuance of Units...................................... 3
Section 2.2. Additional Capital Contributions......................................... 3
Section 2.3. Additional Members....................................................... 3
Section 2.4. No Withdrawal............................................................ 3
Section 2.5. Loans from Members....................................................... 3
ARTICLE III GENERAL GOVERNANCE AND MANAGEMENT.................................................... 4
Section 3.1. Purposes and Powers...................................................... 4
Section 3.2. Board of Representatives................................................. 4
Section 3.3. Meetings of the Board.................................................... 6
Section 3.4. Payments to Representatives; Reimbursements.............................. 6
Section 3.5. Board Committees......................................................... 6
Section 3.6. Member Action............................................................ 7
Section 3.7. Officers................................................................. 7
Section 3.8. Fiduciary Duties......................................................... 9
Section 3.9. Board of the IPO Entity.................................................. 10
Section 3.10. VCOC.................................................................... 10
Section 3.11. Proxy................................................................... 10
Section 3.12. Lack of Authority....................................................... 11
Section 3.13. Withdrawal and Resignation of Members................................... 12
ARTICLE IV MANAGEMENT MEMBERS' REPRESENTATIONS, WARRANTIES AND AGREEMENTS........................ 12
Section 4.1. Units Unregistered....................................................... 12
Section 4.2. Additional Investment Representations.................................... 13
ARTICLE V TRANSFERS.............................................................................. 14
Section 5.1. Limitations on Transfer.................................................. 14
Section 5.2. Void Transfers........................................................... 14
Section 5.3. Successors and Substitute Members........................................ 15
Section 5.4. Certificates; Legend..................................................... 15
Section 5.5. Company Right of First Refusal........................................... 16
Section 5.6. Tag-Along Rights......................................................... 18
Section 5.7. Right to Drag-Along...................................................... 20
ARTICLE VI CERTAIN PROVISIONS APPLICABLE TO MANAGEMENT MEMBERS................................... 21
Section 6.1. Company Call Option...................................................... 21
Section 6.2. Unvested Units........................................................... 24
ARTICLE VII SUBSIDIARY WARRANTS; Initial Public Offering......................................... 24
Section 7.1. Subsidiary Warrants...................................................... 24
Section 7.2. Subsidiary IPO; Withdrawal of Shares..................................... 24
ARTICLE VIII CERTAIN PROVISIONS APPLICABLE TO MSCP AND THE MANAGEMENT MEMBERS.................... 26
Section 8.1. Pre-Emptive Rights....................................................... 26
Section 8.2. Affiliate Transactions................................................... 26
Section 8.3. Information Rights....................................................... 27
ARTICLE IX DISTRIBUTIONS......................................................................... 27
Section 9.1. In General............................................................... 27
Section 9.2. Discretionary Distributions.............................................. 27
Section 9.3. Tax Distributions........................................................ 28
Section 9.4. Limitation on Distributions.............................................. 28
Section 9.5. Withholding Authorized................................................... 28
Section 9.6. Section 83(b) Election................................................... 29
ARTICLE X ALLOCATIONS AND CAPITAL ACCOUNTS....................................................... 29
Section 10.1. Capital Accounts........................................................ 29
Section 10.2. Allocations............................................................. 29
Section 10.3. Miscellaneous and Regulatory Tax Allocations............................ 29
Section 10.4. Loss Limitation......................................................... 31
Section 10.5. Allocations for Tax Purposes............................................ 31
Section 10.6. Distribution in Kind.................................................... 31
ARTICLE XI DISSOLUTION AND LIQUIDATION........................................................... 32
Section 11.1. Duration................................................................ 32
Section 11.2. Liquidation of Company.................................................. 32
Section 11.3. Priority on Liquidation................................................. 32
Section 11.4. Wavier of Appraisal, Valuation Rights, Partition and Right to Court
Decree of Dissolution................................................. 33
ARTICLE XII BOOKS AND RECORDS.................................................................... 34
Section 12.1. Books................................................................... 34
Section 12.2. Tax Reports and Elections............................................... 34
ARTICLE XIII EXCULPATION AND INDEMNIFICATION..................................................... 35
Section 13.1. Exculpation and Indemnification......................................... 35
Section 13.2. Insurance............................................................... 37
ARTICLE XIV COMPETITIVE OPPORTUNITY AND Competing Activities..................................... 37
Section 14.1. Competitive Opportunity................................................. 37
Section 14.2. Competing Activities.................................................... 37
ARTICLE XV Confidentiality; Intellectual Property Rights......................................... 38
Section 15.1. Confidentiality......................................................... 38
Section 15.2. Intellectual Property................................................... 39
ARTICLE XVI DEFINITIONS.......................................................................... 39
Section 16.1. Defined Terms........................................................... 39
Section 16.2. Other Definitional Terms; Interpretation................................ 53
ARTICLE XVII MISCELLANEOUS....................................................................... 53
Section 17.1. Assignment and Binding Effect........................................... 53
Section 17.2. Notices................................................................. 54
Section 17.3. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial......... 55
Section 17.4. Entire Agreement........................................................ 55
Section 17.5. Counterparts............................................................ 55
Section 17.6. Severability............................................................ 55
Section 17.7. Amendment and Modification.............................................. 56
Section 17.8. Waiver.................................................................. 56
Section 17.9. Further Assurances...................................................... 56
Section 17.10. Sections, Exhibits..................................................... 56
Section 17.11. Specific Enforcement................................................... 56
Section 17.12. Successors............................................................. 56
Section 17.13. Computation of Time.................................................... 56
Section 17.14. Liability for Debts of the Company; Limited Liability.................. 57
Section 17.15. No Right of Partition.................................................. 57
Section 17.16. Power of Attorney...................................................... 57
Section 17.17. Title to Company Assets................................................ 58
Section 17.18. Creditors.............................................................. 58
Section 17.19. Other Blackstone Investors............................................. 58
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT,
dated as of September 23, 2004 (the "Agreement"), concerning VHS Holdings LLC
(the "Company"), a Delaware limited liability company, is entered into by and
among the Investor Members (as defined herein) and the Management Members (as
defined herein).
RECITALS
WHEREAS, the Company was originally formed on July 19, 2004, as a limited
liability company pursuant to the Act by filing a Certificate of Formation of
the Company (as it may be amended or modified from time to time, the
"Certificate") with the office of the Secretary of State of the State of
Delaware and entering into the Limited Liability Company Agreement of the
Company, dated as of July 19, 2004 (the "Original Operating Agreement");
WHEREAS, the Company and its wholly owned subsidiary, Health Systems
Acquisition Corp. ("Merger Sub"), are party to an Agreement and Plan of Merger,
dated as of July 23, 2004 (the "Merger Agreement"), among the Company, Merger
Sub and Vanguard Health Systems, Inc. ("Vanguard"), pursuant to which Merger Sub
will merge with and into Vanguard (the "Merger") and Vanguard will become a
subsidiary of the Company;
WHEREAS, in connection with the Merger, (i) Blackstone will purchase from
the Company 369,930 Class A membership interests of the Company (the "Class A
Units"), (ii) MSCP will purchase from the Company 130,000 Class A Units and
(iii) the Management Members (including the Other Rollover Members) will
purchase from the Company 124,070 Class A Units;
WHEREAS, each Class A Unit consists of one Class A-1 Unit and one Class
A-2 Unit and, except as described in these Recitals and in Section 7.2, each
Class A-1 Unit and the related Class A-2 Unit will be attached to each other;
WHEREAS, certain affiliates of Blackstone which are not parties to this
Agreement (the "Other Blackstone Investors") will be investing directly in
125,000 shares of common stock of Merger Sub (which will be converted into
common stock of Vanguard pursuant to the Merger) rather than Class A Units and,
as a result, the Company will issue to Blackstone an additional 125,000 Class
A-2 Units;
WHEREAS, the Senior Management Members will also purchase from the Company
Class B membership interests of the Company (the "Class B Units"), Class C
membership interests of the Company (the "Class C Units") and Class D membership
interests of the Company (the "Class D Units"; collectively with the Class B
Units and the Class C Units, the "Equity Incentive Units") (the Equity Incentive
Units and the Class A Units are herein collectively referred to as the "Units");
WHEREAS, each of the Members desires to be a Member of the Company and to
acquire the number of Units set forth opposite such Member's name on the
attached Schedule A hereto;
WHEREAS, this Agreement shall become effective as of the Closing, as
defined in the Merger Agreement (the "Effective Date");
WHEREAS, the Members desire to continue the Company as a limited liability
company under the Act and to amend and restate the Original Operating Agreement
in its entirety; and
WHEREAS, the Members and the Other Blackstone Investors will enter into
the Registration Rights Agreement with Vanguard at the Closing.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged and intending to be legally bound hereby, the parties to
this Agreement hereby agree as follows:
ARTICLE I
ORGANIZATION
Section 1.1. Certificate. The Certificate has been prepared, executed and
filed by an authorized person within the meaning of the Act, in the Office of
the Secretary of State of the State of Delaware. The rights and obligations of
the Members shall be determined pursuant to the Act and this Agreement. To the
extent that the rights or obligations of any Member are different by reason of
any provision of this Agreement than they would be in the absence of such
provision, this Agreement shall, to the extent permitted by the Act, control.
Section 1.2. Name. In accordance with, and subject to the provisions of
this Agreement, the name of the Company shall be "VHS Holdings LLC" and the
Company may conduct business under that name or any other name hereafter
approved by the Board. Each Officer is considered an authorized person within
the meaning of the Act who may execute, deliver, and file any amendment and/or
restatement of the Certificate as necessary to change the name of the Company
consistent with the provisions of this Section 1.2.
Section 1.3. Term. The term of the Company commenced as of the date of the
filing of the Certificate. The term of the Company shall continue until the
Company is dissolved in accordance with the provisions of Article XI hereof. The
existence of the Company as a separate legal entity shall continue until the
cancellation of the Certificate as provided in the Act.
Section 1.4. Office and Agent. The principal place of business of the
Company shall be such place or places as the Board may determine from time to
time. The registered agent and office in the State of Delaware shall be National
Registered Agents, Inc., 0 Xxxxxxxxxx Xxxxxx, Xxxxx 0X, in the City of Dover,
Delaware or as hereafter determined by the Board in accordance with the Act.
Section 1.5. Qualification in Other Jurisdictions. The Officers shall
cause the Company to be qualified or registered under foreign entity or assumed
or fictitious name statutes or similar laws in any jurisdiction in which the
Company owns property or transacts business to the extent such qualification or
registration is necessary or advisable in order to protect the limited liability
of the Members or to permit the Company lawfully to own property or transact
business. In connection with the foregoing, any Officer, acting alone, shall
execute, deliver and file any
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certificates (and any amendments and/or restatements thereof) necessary for the
Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business.
Section 1.6. No State Law Partnership. The Members intend that the Company
not be a partnership (including a limited partnership) or joint venture, and
that no Member be a partner or joint venturer of any other Member by virtue of
this Agreement, for any purposes other than as set forth in Section 12.2(d), and
neither this Agreement nor any other document entered into by the Company or any
Member relating to the subject matter hereof shall be construed to suggest
otherwise.
ARTICLE II
CAPITAL CONTRIBUTIONS
Section 2.1. Authorization and Issuance of Units. (a) The authorized Units
which the Company has authority to issue consist of 2,000,000 Class A Units,
41,945 Class B Units, 41,945 Class C Units and 35,952 Class D Units. Unless
otherwise determined by the Board, all Units issued hereunder shall be
certificated.
(b) Each Member has made to the Company a Capital Contribution in the
amount listed on Schedule A. In exchange for their respective Capital
Contributions, the Members received the number and classes of Units set forth
opposite such Member's name on Schedule A. The initial Capital Account of each
Member described above shall equal the amount of such Member's initial aggregate
Capital Contributions, as shown on Schedule A.
Section 2.2. Additional Capital Contributions. No Member shall be
obligated to make any additional Capital Contribution. No Member shall be
permitted to make any additional Capital Contribution without the approval of
the Board.
Section 2.3. Additional Members. By approval of the Board of
Representatives of the Company (the "Board") in accordance with Section 3.3 and
subject to Section 8.1, the Company is authorized to issue additional Membership
Interests, Units or other economic interests in the Company ("Additional
Interests") to any Person in such amounts and on such terms as the Board may
determine. Each Person who subscribes for any of the Additional Interests shall,
by approval of the Board, pursuant to Section 3.3, be admitted as a Member of
the Company at the time such Person (i) executes this Agreement or a counterpart
of this Agreement or (ii) is named as a Member in a written agreement with the
Company to such effect or in the permanent records of the Company, effective as
of the earlier of such times.
Section 2.4. No Withdrawal. No Person shall be entitled to withdraw any
part of such Person's Capital Contribution or Capital Account or to receive any
distribution from the Company, except as expressly provided herein.
Section 2.5. Loans from Members. Loans by Members to the Company shall not
be considered Capital Contributions. If any Member shall loan funds to the
Company, the making of such loans shall not result in any increase in the amount
of the Capital Account of such
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Member. The amount of any such loans shall be a debt of the Company to such
Member and shall be payable or collectible in accordance with the terms and
conditions upon which such loans are made.
ARTICLE III
GENERAL GOVERNANCE AND MANAGEMENT
Section 3.1. Purposes and Powers. The parties hereto agree and acknowledge
that the Company has been organized for the purpose of owning and managing the
business and affairs of Vanguard and its Subsidiaries. Except as specifically
provided otherwise in this Agreement, the management and control of the business
and affairs of the Company shall to the maximum extent permitted under
applicable Law be vested exclusively in the Board, which shall possess all
rights and powers of managers as provided in the Act and otherwise by Law.
Except as otherwise expressly provided for herein, the Members hereby consent to
the exercise by the Board of all such powers and rights conferred on them by the
Act or otherwise by Law with respect to the management and control of the
Company. No Member and no Representative, in its capacity as such, shall have
any power to act for, sign for, or do any act that would bind the Company.
Section 3.2. Board of Representatives. (a) Initial Board. The Board shall
initially consist of the five representatives (the "Representatives"), three of
whom will be appointed by Blackstone (the "Blackstone Representatives"), one of
whom will be a representative appointed by Xxxxxx Xxxxxxx Xxxx Xxxxxx Capital
Partners IV, L.P. ("MSCP IV") as described in Section 3.2(b) (the "MSCP
Representative") and one of whom will be the Chief Executive Officer of Vanguard
(the "CEO"). Blackstone shall have the right to increase the size of the Board
to nine members, with two of the additional members being appointed by
Blackstone and the other two being independent representatives identified by
Xxxxxxx X. Xxxxxx, Xx. and acceptable to Blackstone in its sole discretion (the
"Independent Representatives").
The initial Board shall consist of the following members:
Blackstone Representatives: Xxxx Xxxxxxxx
Xxxxxxxx Xxxxxxx
Xxxxxxx Xxx Xxxxx
MSCP Representative: Xxxx Xxx
CEO: Xxxxxxx X. Xxxxxx, Xx.
(b) Representative-designees.
(i) From and after the Effective Date, MSCP IV shall be entitled
to appoint one (1) Representative to the Board; provided that at such
time (if any) as the aggregate number of Securities held by MSCP is
less than 50% of the aggregate number of Securities held by MSCP
immediately after the Effective Date, then MSCP IV will no longer be
entitled to appoint a Representative to the
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Board and shall cause its one Representative to promptly resign from
the Board. MSCP IV may remove and replace the Representative that it
has designated at any time and for any reason. MSCP IV's rights under
this Section 3.2(b) shall not be transferable or assignable.
(ii) From and after the Effective Date, if at any time the CEO is
not Xxxxxxx X. Xxxxxx, Xx., the Management Members (other than the
Other Rollover Members) shall have the right to appoint one (1)
Representative to the Board; provided that at such time (if any) as
the aggregate number of Securities held by the Management Members is
less than 50% of the aggregate number of Securities held by the
Management Members immediately after the Effective Date, then the
Management Members will no longer be entitled to appoint a
Representative to the Board and shall cause its one Representative to
promptly resign from the Board. The decision to appoint a
Representative pursuant to this Section 3.2(b)(ii), and the identity
of such Representative, shall be determined by the holders of a
majority of all Units held by Management Members who are not Other
Rollover Members. The Management Members' rights under this Section
3.2(b) shall not be transferable or assignable.
(iii) From and after the date on which the Management Members
have appointed a Representative pursuant to Section 3.2(b)(ii),
Blackstone shall have the right to increase the size of the Board and
to appoint one or more additional Representatives such that the
Representatives appointed by Blackstone constitute a majority of the
Board.
(iv) The provisions of Sections 3.2(a) and (b) shall terminate if
Blackstone's Ownership Percentage is less than 10%.
(c) Chairman and Lead Representative. A Chairman of the Board (the
"Chairman") and a Lead Representative (the "Lead Representative") may, from time
to time, be appointed by the Representatives from among themselves or any other
member of the Board. The Chairman of the initial Board shall be Xxxxxxx X.
Xxxxxx, Xx. The Lead Representative of the initial Board shall be Xxxx Xxxxxxxx.
The Chairman, if appointed, shall preside over meetings of the Board and shall
otherwise have no greater authority than any other Representative. In the
absence of the Chairman, the Lead Representative shall preside at all meetings
of the Board. The Lead Representative, if appointed, shall have duties
customarily performed by a "lead director" or "presiding director" and shall
otherwise have no greater authority than any other Representative.
(d) Voting. Each Representative, including the Chairman and the Lead
Representative, shall have a single vote. Except as otherwise required by Law,
the affirmative vote of a majority of the Representatives in attendance at any
meeting at which a quorum is present in accordance with Section 3.3(c) shall be
required to authorize any action. Any vote, consent or other action of the Board
may be undertaken with the unanimous written consent (in lieu of meeting) of the
Representatives, in each case who have been appointed and who are then in
office.
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(e) Proxies. Any Representative may vote at a meeting of the Board or any
committee thereof either in person or by proxy executed in writing by such
Representative. A telegram, telex, cablegram or similar transmission by the
Representative, or a photographic, photostatic, facsimile or similar
reproduction of a writing executed by the Representative shall (if stated
thereon) be treated as a proxy executed in writing for purposes of this Section
3.2(e). Proxies for use at any meeting of the Board or any committee thereof or
in connection with the taking of any action by written consent shall be filed
with the Board, before or at the time of the meeting or execution of the written
consent, as the case may be. No proxy shall be valid after eleven months from
the date of its execution unless otherwise provided in the proxy. A proxy shall
be revocable unless the proxy form conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest.
Section 3.3. Meetings of the Board.
(a) Meetings. The Board shall meet at least quarterly, at such time and at
such place as the Board may designate. Special meetings of the Board shall be
held at the request of the Chairman or the Lead Representative upon at least
seven days (if the meeting is to be held in person) or five days (if the meeting
is to be held telephonically) written notice to all of the Representatives, or
upon such shorter notice as may be approved by all of the Representatives;
provided that if the nature of the action to be taken is such that time is of
the essence with respect to such action, such meeting may be held without such
five days' notice if at least one business day's written notice has been given
and (A) a good faith effort has been made to notify and consult with each of the
Representatives entitled to vote on such action and (B) a quorum exists for the
taking of such action. Any Representative may waive the requirement of such
notice as to itself, before, at or after the meeting. Any notice given pursuant
to this Section 3.3(a) via electronic transmission (including e-mail if receipt
of email is confirmed by recipient via email or otherwise) shall be deemed to
have been given in writing.
(b) Conduct of Meetings. Any meeting of the Board may be held in person,
telephonically or through other communications equipment by means of which all
participating members of the Board can simultaneously hear each other during the
meeting.
(c) Quorum. A majority of the Representatives who have been appointed
pursuant to the provisions of this Agreement and who are then in office shall be
necessary to constitute a quorum of the Board for purposes of conducting
business.
Section 3.4. Payments to Representatives; Reimbursements. All
Representatives will be entitled to reimbursement of their reasonable
out-of-pocket expenses incurred in connection with their attendance at Board
meetings and such reasonable and customary fees as may be authorized by the
Board.
Section 3.5. Board Committees. The Board may organize an Audit Committee,
a Compensation Committee and such other committees of the Board as it deems
reasonably necessary to effectively govern the Company. Except as may be
required by applicable Law or any exchange or over the counter market on which
the securities of the Company are listed or quoted, Blackstone shall have
majority representation on all committees of the Board. For so
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long as MSCP IV shall have the right to designate a Representative pursuant to
Section 3.2, MSCP IV shall be entitled to designate one non-voting observer to
attend any and all meetings of any and all committees of the Board. Such
non-voting observer shall be entitled to receive all notices of such meetings
and all information received by the voting members of such committees as if such
non-voting observer were a voting member of such committees. MSCP IV may remove
and replace its non-voting observer designee at any time and for any reason.
Section 3.6. Member Action.
(a) Except as otherwise provided herein or in the Act, only the holders of
Class A Units will be entitled to vote on any matters requiring a vote, consent
or other action of the Members. Any action shall be authorized if the
affirmative vote of the holders of a majority of the Class A Units present at a
meeting at which a quorum is present shall be obtained. Any action which may be
taken by the Members under this Agreement shall be authorized if consents in
writing setting forth the action so taken are signed by Members who hold a
majority of the Class A Units then outstanding. All Members who do not
participate in taking the action by written consent shall be given written
notice thereof by the Secretary of the Company after such action has been taken.
The presence in person or by proxy of the holders of a majority of the
outstanding Class A Units shall be necessary to constitute a quorum for action
by the Members. Whenever the giving of any notice to Members is required by Law
or this Agreement, a waiver thereof, in writing and delivered to the Company
signed by the Person or Persons entitled to said notice, whether before or after
the event as to which such notice is required, shall be deemed equivalent to
notice. Attendance of a Member at a meeting or execution of a written consent to
any action shall constitute a waiver of notice of such meeting or action.
(b) Any Designated Action which requires the approval of either Investor
Group shall be effective if approved by the Investor Members of such Investor
Group holding a majority of the Securities held by all Investor Members of such
Investor Group.
Section 3.7. Officers. (a) Designation and Appointment. The Board may,
from time to time, employ and retain Persons as may be necessary or appropriate
for the conduct of the Company's business (subject to the supervision and
control of the Board), including employees, agents and other Persons (any of
whom may be a Member or Representative) who may be designated as Officers of the
Company, with titles including but not limited to "chief executive officer,"
"president," "vice chairman," vice president," "treasurer," "secretary,"
"general counsel," "director," "chief financial officer" and "chief operating
officer" as and to the extent authorized by the Board. Any number of offices may
be held by the same Person. In the Board's discretion, the Board may choose not
to fill any office for any period as it may deem advisable. Officers need not be
residents of the State of Delaware or Members. Any Officers so designated shall
have such authority and perform such duties as the Board may, from time to time,
delegate to them. The Board may assign titles to particular Officers. Each
Officer shall hold office until his successor shall be duly designated and shall
have qualified as an Officer or until his death or until he shall resign or
shall have been removed in the manner hereinafter provided. The salaries or
other compensation, if any, of the Officers of the Company shall be fixed from
time to time by the Board.
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(b) Resignation and Removal. Any Officer may resign as such at any time.
Such resignation shall be made in writing and shall take effect at the time
specified therein, or if no time is specified, at the time of its receipt by the
Board. The acceptance by the Board of a resignation of any Officer shall not be
necessary to make such resignation effective, unless otherwise specified in such
resignation. Any Officer may be removed as such, either with or without cause,
at any time by the Board. Designation of any Person as an Officer by the Board
shall not in and of itself vest in such Person any contractual or employment
rights with respect to the Company.
(c) Duties of Officers Generally. The Officers, in the performance of
their duties as such, shall (i) owe to the Company and the Members duties of
loyalty and due care of the type owed by the officers of a corporation to such
corporation and its stockholders under the laws of the State of Delaware, (ii)
keep the Board reasonably apprised of material developments in the business of
the Company, and (iii) present to the Board, at least annually, a review of the
Company's performance, an operating budget for the Company, and a capital budget
for the Company.
(d) Chief Executive Officer. Subject to the powers of the Board, the chief
executive officer of the Company shall be in general and active charge of the
entire business and affairs of the Company, and shall be its chief policy making
Officer.
(e) Vice Chairman. The Vice Chairman, or if there be more than one, then
each of them, shall, subject to the powers of the Board and the chief executive
officer of the Company, participate in the supervision of the business and
affairs of the Company, and shall have such other powers and perform such other
duties as may be prescribed by the chief executive officer or by the Board. A
Vice Chairman need not be a member of the Board.
(f) President. The president of the Company shall, subject to the powers
of the Board and the chief executive officer of the Company, have general and
active management of the business of the Company, and shall see that all orders
and resolutions of the Board are effectuated. The president of the Company shall
have such other powers and perform such other duties as may be prescribed by the
chief executive officer of the Company or by the Board.
(g) Chief Financial Officer. The chief financial officer of the Company
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the Company, including accounts of the Company's assets,
liabilities, receipts, disbursements, gains, losses, capital and Units. The
chief financial officer of the Company shall have custody of the funds and
securities of the Company, keep full and accurate accounts of receipts and
disbursements in books belonging to the Company, and deposit all moneys and
other valuable effects in the name and to the credit of the Company in such
depositories as may be designated by such officer. The chief financial officer
of the Company shall have such other powers and perform such other duties as may
from time to time be prescribed by the chief executive officer of the Company or
by the Board.
(h) Vice President(s). The vice president(s) of the Company shall perform
such duties and have such other powers as the chief executive officer of the
Company or the Board may
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from time to time prescribe. A vice president may be designated as an Executive
Vice President, a Senior Vice President, an Assistant Vice President, or a vice
president with a functional title.
(i) Secretary. The secretary of the Company shall, if requested by the
Board, attend meetings of the Board, record all the proceedings of the meetings
and perform similar duties for the committees of the Board when required. The
secretary of the Company shall keep all documents as may be required under the
Act. The secretary shall perform such other duties and have such other authority
as may be prescribed elsewhere in this Agreement or from time to time by the
chief executive officer of the Company or the Board. The secretary of the
Company shall have the general duties, powers and responsibilities of a
secretary of a Corporation. If the Board chooses to appoint an assistant
secretary or assistant secretaries, the assistant secretaries, in the order of
seniority, shall in the Company secretary's absence, disability or inability to
act, perform the duties and exercise the powers of the secretary of the Company,
and shall perform such other duties as the chief executive officer of the
Company or the Board may from time to time prescribe.
(j) Treasurer. The treasurer of the Company shall receive, keep, and
disburse, or cause to be received, kept or disbursed, all moneys belonging to or
coming to the Company. The treasurer of the Company shall prepare, or cause to
be prepared, detailed reports and records of all expenses, losses, gains,
assets, and liabilities of the Company as directed by the chief financial
officer of the Company and shall perform such other duties in connection with
the administration of the financial affairs of the Company as may from time to
time be prescribed by the chief financial officer or the chief executive officer
of the Company or by the Board.
Section 3.8. Fiduciary Duties. Notwithstanding anything to the contrary in
this Agreement or at law or in equity including but not limited to the Act, each
Member agrees that any fiduciary duty imposed under Delaware law (including the
duty of loyalty and the duty of care) on the Investor Members and the
Representatives shall be defined, limited and eliminated as provided in this
Section 3.8. (For the avoidance of doubt, this Section 3.8 is not intended to
create any duties on the part of any Member who is not an Investor Member but
shall also not be deemed to limit any duties which are otherwise imposed on such
Member under Delaware law or which are created pursuant to an express agreement
with such Member.)
(a) Certain Potential Conflicts. Each Member acknowledges that:
(i) each Investor Member and its Affiliates may engage in material
business transactions with the Company or its Subsidiaries; and
(ii) the directors, officers, and/or employees of an Investor Member
and its Affiliates may serve as directors, officers and/or employees of
the Company or its Subsidiaries.
(b) Limitation of Liability. To the fullest extent permitted by Law, but
subject to Section 8.2, no Investor Member or its respective Affiliates or any
director, officer or employee of any Investor Member or its Affiliates who may
serve as an officer, director and/or employee of the Company or its Subsidiaries
shall be liable to the Company or its Subsidiaries:
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(i) by reason of any business decision or transaction undertaken by
such Investor Member or its Affiliates which may be adverse to the
interests of the Company or its Subsidiaries;
(ii) by reason of any activity undertaken by such Investor Member or
its Affiliates or by any other Person in which such Investor Member or
their respective Affiliates may have an investment or other financial
interest which is in competition with the Company or its Subsidiaries; or
(iii) by reason of any transaction of the Company or its
Subsidiaries with such Investor Member or its Affiliates, or any
transaction of the Company or its Subsidiaries in which such Investor
Member or its Affiliates shall have a financial interest, unless the party
seeking to assert such liability shall prove, by clear and convincing
evidence, that such transaction was not fair to the Company or its
Subsidiaries at the time it was authorized by the Board or a committee
thereof.
Section 3.9. Board of the IPO Entity. For so long as either MSCP IV or the
Management Members shall have the right to designate a Representative pursuant
to Section 3.2, the Company shall at all times, subject to the immediately
following sentence, cause the Board of Directors of each of the IPO Entity, VHS
Health Holding Company I, LLC and VHS Health Holding Company II, LLC
(collectively, the "Designated Subsidiaries") and each committee thereof to be
comprised in its entirety of the same individuals as then comprise the Board. If
either MSCP IV or the Management Members shall at any time hold Shares in lieu
of Units as a result of a transaction effected pursuant to Section 7.2, then the
Company and the Members shall take such steps as are necessary, including
entering into a stockholders agreement with each of the Designated Subsidiaries,
to cause the Board of Directors of each Designated Subsidiary and each committee
thereof to be constituted as if the terms and conditions of Section 3.2 were
applicable to such Board of Directors rather than the Board.
Section 3.10. VCOC. In the event that the Company ceases to qualify as an
"operating company" (as defined in the first sentence of 29 C.F.R. Section
2510.3-101(c)), then the Company and each Member will cooperate in good faith to
take all reasonable action necessary to provide that the investment (or at least
51% of the investment valued at cost) of each Member that qualifies as a
"venture capital operating company" (as defined in 29 C.F.R. Section
2510.3-101(d)) (a "VCOC Member") shall continue to qualify as a "venture capital
investment" (as defined in 29 C.F.R. Section 2510.3-101(d)).
Section 3.11. Proxy.
(a) Each Management Member hereby agrees, until the occurrence of the
Lapse Date, to take all Designated Actions in the manner that the Management
Representative, in his sole and absolute discretion, shall direct, at any
meeting of Members of the Company, at any and all adjournments thereof, and on
any other occasion in respect of which the consent of such Management Member
with respect to his, her or its Units may be given or may be requested or
solicited by the Company or any other Person, whether at a meeting, pursuant to
the execution of a written consent, under this Agreement or otherwise, for all
purposes in connection with any
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Designated Action, and such Management Member hereby ratifies and confirms all
that the Management Representative may do by virtue hereof.
(b) For purposes of effecting any Designated Action, each Management
Member does hereby irrevocably constitute and appoint the Management
Representative his, her or its true and lawful attorney, agent and proxy for and
in his, her or its name, place and stead, with the exclusive right to take all
Designated Actions, in the Management Representative's sole and absolute
discretion, at any meeting of the Members of the Company, at any and all
adjournments thereof, and on any other occasion in respect of which the consent
of such Management Member may be given or may be requested or solicited by the
Company or any other Person, whether at a meeting, pursuant to the execution of
a written consent, under this Agreement or otherwise, for all purposes in
connection with any Designated Action, and such Management Member hereby
ratifies and confirms all that the Management Representative may do by virtue
hereof. Each Management Member agrees with the Management Representative that,
without the prior written consent of the Management Representative, he, she or
it will not, so long as this Agreement shall be in effect with respect to any
such Management Member, take any Designated Action, appoint any person other
than the Management Representative as his, her or its attorney, agent or proxy
with respect to such Units, or take any action inconsistent with the appointment
of the Management Representative as his, her or its lawful attorney, agent and
proxy, or the exercise by the Management Representative of the powers granted to
him, hereunder.
(c) The parties hereto agree that, in taking or giving directions for the
taking of any Designated Action or in otherwise acting hereunder, the Management
Representative shall have no responsibility in respect of the management of the
Company by Representatives for whom he shall have voted or for any action taken
by any such Representatives or for any action taken pursuant to any consent
given or vote cast by him or other action taken by him, and the Management
Representative's powers herein shall be discretionary and any of them may be
exercised from time to time when he sees fit and without leave of any court or
any other Person and the Management Representative may refrain from exercising
any powers or rights from time to time as he sees fit in each case irrespective
of any relationship that the Management Representative or any of his Affiliates
may have with any of the parties hereto otherwise than pursuant to this
Agreement.
(d) The powers granted pursuant to this Section 3.11, and the proxy
granted pursuant hereto, are coupled with an interest and shall be irrevocable
prior to the Lapse Date.
(e) Each Management Member agrees not to Transfer any of his, her or its
Units prior to the Lapse Date (other than (i) Transfers of Units pursuant to
Section 5.5, 5.6 or 5.7 and (ii) Transfers to the Company) unless the proposed
Transferee shall have agreed in writing to be bound as a "Management Member" by
the terms of this Section 3.11.
(f) Xxxxxxx X. Xxxxxx, Xx. accepts his appointment as proxy and agent and
agrees to serve in such capacity pursuant to the terms of this Section 3.11.
Section 3.12. Lack of Authority. No Member in its capacity as such has the
authority or power to act for or on behalf of the Company in any manner, to do
any act that would be (or
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could be construed as) binding on the Company or to make any expenditures on
behalf of the Company, unless such specific authority has been expressly granted
to such Member by the Board, and the Members hereby consent to the exercise by
the Board and the Representatives of the powers conferred on them by law and
this Agreement.
Section 3.13. Withdrawal and Resignation of Members.
(a) No Member shall have the power or right to withdraw or otherwise
resign as a Member from the Company prior to the dissolution of the Company
pursuant to Article XI except as otherwise expressly permitted by this Agreement
or any of the other agreements contemplated hereby. Upon (i) a transfer of all
of a Member's Units in a Transfer permitted by this Agreement and (ii) the
admission of such Transferee as a Member pursuant to Section 5.1(b), such
transferring Member shall cease to be a Member.
(b) Notwithstanding that a payment on account of a withdrawal may be made
after the effective time of such withdrawal, any completely withdrawing Member
will not be considered a Member for any purpose after the effective time of such
complete withdrawal, and, in the case of a partial withdrawal, such Member's
Capital Account (and corresponding voting and other rights) shall be reduced for
all other purposes hereunder upon the effective time of such partial withdrawal.
ARTICLE IV
MANAGEMENT MEMBERS' REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Section 4.1. Units Unregistered. Each Management Member acknowledges and
represents that such Management Member has been advised by the Company that:
(a) the offer and sale of the Units to such Management Member have not
been registered under the Securities Act;
(b) the Units must be held, and such Management Member must continue to
bear the economic risk of the investment in, the Units unless the subsequent
offer and sale of such Units by such Management Member are registered under the
Securities Act and all applicable state securities laws or an exemption from
such registration is available, and the offer and sale of the Units may never be
so registered;
(c) there is no established market for the Units and it is not anticipated
that there will be any public market for the Units in the foreseeable future;
(d) a restrictive legend in the form set forth in Section 5.4 shall be
placed on the Unit Certificates; and
(e) a notation shall be made in the appropriate records of the Company
indicating that the Units are subject to restrictions on transfer and, if the
Company should at some time in the future engage the services of a securities
transfer agent, appropriate stop-transfer instructions may be issued to such
transfer agent with respect to the Units.
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Section 4.2. Additional Investment Representations. Each Management Member
represents and warrants that:
(a) the Management Member's financial situation is such that such
Management Member can afford to bear the economic risk of holding the Units for
an indefinite period of time, has adequate means for providing for the
Management Member's current needs and personal contingencies, and can afford to
suffer a complete loss of the Management Member's investment in the Units;
(b) the Management Member's knowledge and experience in financial and
business matters are such that the Management Member is capable of evaluating
the merits and risks of the investment in the Units;
(c) the Management Member understands that the Units are a speculative
investment which involves a high degree of risk of loss of Management Member's
investment therein, there are substantial restrictions on the transferability of
the Units and, on the date on which such Management Member acquires such Units
and for an indefinite period following such date, there will be no public market
for the Units and, accordingly, it may not be possible for the Management Member
to liquidate the Management Member's investment, including in case of emergency,
if at all;
(d) the terms of this Agreement provide that if the Management Member
ceases to provide services to the Company and its Affiliates, the Company and
its Affiliates have the right to repurchase the Units (other than the Class A
Units) at a price which may be less than the Fair Market Value thereof;
(e) the Management Member understands and has taken cognizance of all the
risk factors related to the purchase of the Units and, other than as set forth
in this Agreement, no representations or warranties have been made to the
Management Member or Management Member's representatives concerning the Units,
the Company, the Subsidiaries or their respective prospects or other matters;
(f) the Management Member has been given the opportunity to examine all
documents and to ask questions of, and to receive answers from, the Company and
its representatives concerning the Company and its Subsidiaries, the acquisition
of Vanguard by the Company, this Agreement, the Registration Rights Agreement,
the Company's organizational documents and the terms and conditions of the
purchase of the Units and to obtain any additional information which the
Management Member deems necessary;
(g) all information which the Management Member has provided to the
Company and the Company's representatives concerning the Management Member and
the Management Member's financial position is complete and correct as of the
date of this Agreement; and
(h) the Management Member is an "accredited investor" within the meaning
of Regulation D of the Securities Act.
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ARTICLE V
TRANSFERS
Section 5.1. Limitations on Transfer.
(a) Except as otherwise permitted in this Agreement, MSCP and the
Management Members shall not Transfer any Units without prior approval by the
Board. Except as otherwise permitted in this Agreement (including Section 7.2),
MSCP and the Management Members shall not Transfer any Shares prior to the
earlier to occur of (i) the fifth anniversary of the Effective Date and (ii) the
occurrence of a Change of Control (the earlier of (i) and (ii) the "Lapse
Date").
(b) The restrictions set forth in Section 5.1(a) shall not apply to: (i)
in the case of a Transferor that is a natural person, Transfers of Securities to
Permitted Transferees of the Transferor, (ii) in the case of a Transferor that
is an entity, (A) prior to an IPO, Transfers of Securities to Affiliates of such
Transferor or, in the case of MSCP, to Metalmark Subadvisor LLC, any Affiliate
of Metalmark Subadvisor LLC or any investment fund managed by Metalmark
Subadvisor LLC or any of its Affiliates and (B) from and after the legal
dissolution of any MSCP investment fund, Transfers of Securities to Permitted
Transferees of MSCP who are investors of such fund in accordance with such
fund's organizational documents and contractual obligations, (iii) from and
after a Qualified IPO, Transfers of Shares made in compliance with the
requirements of Rule 144 of the Securities Act, (iv) Transfers of Shares
pursuant to the Registration Rights Agreement, (v) Transfers of Securities
pursuant to Sections 5.5, 5.6 or 5.7 and (vi) Transfers of Class A Units or
Shares from and after the Lapse Date. In addition, no Transfer permitted
pursuant to Section 5.1(a), 5.5 or clauses (i) or (ii) of this Section 5.1(b)
shall be effective unless the Transferee (A) agrees to be bound by the terms and
conditions of this Agreement as a Member (and, if applicable, as a Management
Member or Investor Member), and any related agreements to which the Transferor
of such Transferee previously agreed to be bound and (B) executes a counterpart
to this Agreement and such other documents or instruments as the Board may
determine are necessary or appropriate to effect such Transferee's admission as
a Member (and, if applicable, as a Management Member or Investor Member).
(c) No holder of Securities shall grant any proxy or become party to any
voting trust or other agreement that is inconsistent with, conflicts with or
violates any provision of this Agreement. Notwithstanding anything to the
contrary contained herein, no Member shall Transfer any Units prior to a
Qualified IPO if such Transfer would cause (i) the Company to be taxed as a C
Corporation, (ii) a termination of the Company for purposes of Section 708 of
the Code or (iii) the Company to be treated as a publicly-traded partnership for
purposes of Section 7704 of the Code.
Section 5.2. Void Transfers. Any Transfer or attempted Transfer of any
Securities in violation of any provision of this Agreement shall be null and
void, and the Company shall not record such Transfer on its books or, to the
fullest extent permitted by Law, treat any purported Transferee of such
Transferee as the owner thereof for any purpose.
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Section 5.3. Successors and Substitute Members. Upon the bankruptcy,
termination, liquidation or dissolution of a Member which is a partnership,
trust, corporation, limited liability company or other entity or the bankruptcy,
death or incapacity of a Member who is an individual, the estate or successor in
interest of such Member shall thereupon succeed only to the rights of such
Member to receive allocations and distributions hereunder (but not the other
rights hereunder) and may become a substitute Member only upon the approval of
the Board.
Section 5.4. Certificates; Legend.
(a) Each Security shall be evidenced by a certificate (a "Security
Certificate") in substantially the form of Exhibit A attached hereto. Each
certificate evidencing Securities shall be stamped or otherwise imprinted with a
legend in substantially the following form, or such similar legend as may be
specified in any other agreement with the Company:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN
TRANSFER AND OTHER RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED
LIMITED LIABILITY COMPANY OPERATING AGREEMENT, DATED AS OF SEPTEMBER 23,
2004 AMONG VHS HOLDINGS LLC AND CERTAIN OF ITS MEMBERS, AS IT MAY BE
AMENDED FROM TIME TO TIME, AND, AMONG OTHER THINGS, MAY NOT BE OFFERED OR
SOLD EXCEPT IN COMPLIANCE WITH SUCH TRANSFER RESTRICTIONS. COPIES OF SUCH
AGREEMENTS ARE ON FILE WITH THE SECRETARY OF VHS HOLDINGS LLC AND ARE
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE HOLDER OF THIS
CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL
OF THE PROVISIONS OF THE AFORESAID AGREEMENTS."
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(b) The Company shall maintain all records for the exchange and
registration of Securities Certificates representing Units ("Units
Certificates"), including all forms of transfer for Units Certificates, and
shall:
(i) keep at its principal place of business a register (the
"Register") in such form as it may determine, in which, subject to
such reasonable regulations as it may prescribe, it shall provide for
the registration of Units Certificates and of transfers thereof;
(ii) ensure that all Units Certificates presented for transfer
shall be duly endorsed for transfer or be accompanied by a written
instrument of transfer; and
(iii) Ensure that each Units Certificate shall bear an original
issue date.
Notwithstanding anything contained herein to the contrary, the Company
shall not be required to ascertain whether any transfer or exchange of Units
Certificates complies with the registration provisions or exemptions from the
Securities Act, the Exchange Act, applicable state securities laws or the
Investment Company Act of 1940, as amended; provided that if a Units Certificate
is specifically required to be delivered to the Company by a Transferee of a
Units Certificate, the Company shall be under a duty to examine the same to
determine whether it conforms to the requirements of this Agreement and shall
promptly notify the party delivering the same if such Units Certificate does not
so conform.
(c) Prior to due presentment of a Units Certificate for registration or
transfer, the Company, or any agent or manager of the Company, may treat the
person in whose name such Units Certificate is registered as the owner of the
Units Certificate for the purpose of receiving distributions pursuant to this
Agreement and for all other purposes whatsoever, and the Company shall not be
affected by notice to the contrary.
(d) If (i) any mutilated Units Certificate is surrendered to the Company,
or (ii) the Company receives evidence to its satisfaction of the destruction,
loss or theft of any Units Certificate, together with indemnity or security
sufficient to hold it harmless, the Company shall execute, and upon its written
request the Company shall authenticate and deliver, in exchange for any such
mutilated Units Certificate or in lieu of any such destroyed, lost or stolen
Units Certificate, a new Units Certificate of like tenor and principal amount,
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Units Certificate under this Section 5.4(d), the Company may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses in connection therewith. The
provisions of this Section 5.4(d) are exclusive and shall preclude (to the
extent permissible under applicable law) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Units Certificates.
Section 5.5. Company Right of First Refusal.
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(a) Subject to Section 7.2(c), after the fifth anniversary of the
Effective Date and until the earlier of a Change of Control or a Qualified IPO
(the "ROFR Period"), the Company shall have a right of first refusal with
respect to any proposed Transfer of Securities by MSCP and/or Management Members
(each a "Transferring Member"), and any Transferring Member must first comply
with the provisions of this Section 5.5.
(b) At any time a Transferring Member proposes to make a bona fide
Transfer of Securities during the ROFR Period (other than (i) a Transfer
pursuant to clause (i) or (ii) of Section 5.1(b), (ii) pursuant to the
Registration Rights Agreement or (iii) pursuant to Section 5.6 or 5.7), and such
Transferring Member has received a bona fide arm's length offer (the "Offer") to
purchase all or any portion of its Securities (the "Offered Securities") from
any Person (the "Offeror") which the Transferring Member wishes to accept, such
Transferring Member shall cause the Offer to be reduced to writing and shall
notify the Company in writing of its wish to accept the Offer (the "Offering
Notice").
(c) Offering Notice. The Offering Notice shall contain an irrevocable
offer to sell the Offered Securities to the Company at a price equal or
equivalent (as determined in the manner set forth in Section 5.5(d)(i) below) to
the price contained in, and otherwise on the same terms and conditions of, the
Offer and shall be accompanied by a copy of the Offer (which shall identify the
Offeror).
(d) Company Option; Exercise.
(i) For a period of 20 days after the date upon which the Company
shall have received the Offering Notice (the "Company Option
Period"), the Company shall have the right to elect to purchase all
(but not less than all) of the Offered Securities either (A) at the
same price and on the same terms and conditions as the Offer or (B)
if the Offer includes any consideration other than cash, then at the
sole option of the Company, at the equivalent cash price, determined
in good faith by the Board and reasonably agreed to by the
Transferring Member. If the Company does not elect to purchase all of
the Offered Securities pursuant to this Section 5.5(d), then the
Transferring Member may sell all of the Offered Securities to the
Offeror in accordance with Section 5.5(f).
(ii) The right of the Company to purchase the Offered Securities
under Section 5.5(d)(i) shall be exercisable by delivering written
notice of the exercise thereof, prior to the expiration of the
Company Option Period, to the Transferring Member. The failure of the
Company to deliver such a notice to the Transferring Member within
the Company Option Period to the Transferring Member shall be deemed
to be a waiver of the Company's rights under Section 5.5(d)(i).
(e) Closing. The closing of the purchase of Offered Securities subscribed
for by the Company under Section 5.5(d) shall be held at the executive office of
the Company at 11:00 a.m., local time, no later than 30 days after the Company's
election to purchase the Offered Securities pursuant to Section 5.5(d) is
delivered to the Transferring Member or at such other
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time and place as the parties to the transaction may agree ; provided that if
such sale is subject to any prior regulatory approval, then such 30-day period
shall be extended until the expiration of ten days after all such approvals
shall have been received, but in no event shall such period be extended for more
than an additional 60 days without the consent of the Transferring Member. At
such closing, the Transferring Member shall deliver certificates representing
the Offered Securities, duly endorsed for transfer and accompanied by all
requisite transfer taxes, if any, and such Offered Securities shall be free and
clear of any liens, and the Transferring Member shall so represent and warrant,
and shall further represent and warrant that it is the sole beneficial and
record owner of such Offered Securities with the full right, power and authority
to convey the Offered Securities to the Company. The Company shall deliver at
the closing payment in full in immediately available funds for the Offered
Securities purchased by it. At such closing, all of the parties to the
transaction shall execute such additional documents as are otherwise necessary
or appropriate.
(f) Sale to the Offeror. If the Company does not elect to purchase all of
the Offered Securities under Section 5.5(d), or if the Company does so elect but
the regulatory approvals necessary to consummate such purchase are not obtained
within the time periods referred to in Section 5.5(e), then in either such case
the Transferring Member may sell all (but not less than all) of the Offered
Securities to the Offeror on terms and conditions no less favorable to the
Transferring Member than those set forth in the Offering Notice; provided,
however, that such sale is bona fide and made pursuant to a contract entered
into not later than 60 days after the earlier to occur of (i) the waiver by the
Company of its option to purchase the Offered Securities and (ii) the expiration
of the Company Option Period (the "Contract Date"); and provided, further, that
such sale shall not be consummated unless and until (A) such Offeror shall
represent in writing to the Company that it is aware of the rights and
obligations of the Company contained in this Agreement and (B) prior to the
purchase by such Offeror of such Offered Securities, such Offeror shall become a
party to this Agreement and shall agree to be bound by the terms and conditions
hereof to the same extent as the Transferring Member. If such sale is not
consummated within 60 days after the Contract Date for any reason, then the
restrictions provided for herein shall again become effective, and no Transfer
of such Offered Securities may be made thereafter by the Transferring Member
without again complying with this Section 5.5; provided that if such sale is
subject to any prior regulatory approval, then such 30-day period shall be
extended until the expiration of ten days after all such approvals shall have
been received, but in no event shall such period be extended for more than an
additional 120 days without the consent of the Company.
Section 5.6. Tag-Along Rights.
(a) Subject to Section 7.2(c), prior to a Qualified IPO, if Blackstone
proposes to Transfer, in a single transaction or a series of related
transactions, any Securities owned by it to any Person (other than (i) a
Transfer to an Affiliate of Blackstone or (ii) a Transfer pursuant to the
Registration Rights Agreement) (a "Tag-Along Purchaser"), then, unless
Blackstone is entitled to give and does give a Drag-Along Notice pursuant to
Section 5.7(b) hereof and the Drag-Along Sale that is the subject of such
Drag-Along Notice is consummated within the applicable time period referred to
in Section 5.7(c), Blackstone shall first provide written notice to each of MSCP
and the Management Members, which notice (the "Tag-Along Notice") shall include:
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(i) the maximum number of Securities proposed to be Transferred (the "Tag-Along
Securities"); (ii) the purchase price per security (the "Tag-Along Price") for
the Tag-Along Securities; (iii) any other material terms and conditions of such
sale, including the proposed transfer date and (iv) the proposed form of
agreement. Each of MSCP and the Management Members (and any other Person that
holds similar tag along rights) that has been provided with the Tag-Along Notice
(each, a "Tag-Along Member") shall have the right to require Blackstone to
include in such Transfer to such Tag-Along Purchaser, upon the terms set forth
in the Tag-Along Notice, up to the aggregate number of Securities which are held
by such Tag-Along Member multiplied by a fraction, the numerator of which is the
aggregate number of Securities proposed to be Transferred by Blackstone as
reflected in the Tag-Along Notice and the denominator of which is the total
number of Securities which are held by Blackstone (the "Tag-Along Fraction"). If
the number of Securities elected to be Transferred by the Tag-Along Members
together with the number of Securities proposed to be Transferred by Blackstone
is greater than the number of Tag-Along Securities specified in the Tag-Along
Notice, then the number of Securities being sold by each such seller (including
Blackstone) shall be reduced such that the applicable seller shall be entitled
to (and obligated to) sell only its pro rata share of Securities (based on the
aggregate number of Securities held by such seller to the total number of
Securities held by all of such electing sellers).
(b) The tag-along rights provided by Section 5.6 must be exercised by any
Tag-Along Member wishing to sell its Securities within 15 days following the
date of delivery of the Tag-Along Notice (the "Election Period"), by delivery of
a written notice to the Company indicating such Tag-Along Member's wish to
irrevocably exercise its rights and specifying the number of Securities it
wishes to sell. The failure of a Tag-Along Member to respond within such 15-day
period shall be deemed to be a waiver of such Tag-Along Member's rights under
Section 5.6.
(c) In connection with any Transfer pursuant to this Section 5.6, each
Tag-Along Member shall make to the Tag-Along Purchaser the same representations,
warranties, covenants, indemnities and agreements as Blackstone makes in
connection with such Transfer (except that in the case of representations,
warranties, covenants, indemnities and agreements pertaining specifically to
Blackstone, each Tag-Along Member shall make the comparable representations,
warranties, covenants, indemnities and agreements pertaining specifically to
itself); provided that all representations, warranties and indemnities shall be
made by Blackstone and such Tag-Along Member severally and not jointly and that
the liability of Blackstone and such Tag-Along Member thereunder shall be borne
by each of them on a pro rata basis based on the number of Securities which are
Transferred. Subject to Section 5.6(d), the Tag-Along Members shall receive the
same type and amount of consideration per Security as is paid or delivered to
Blackstone in such Transfer. Each Tag-Along Member shall be responsible for its
proportionate share of the costs and expenses incurred in connection with such
Transfer to the extent not paid or reimbursed by the Company or the Tag-Along
Purchaser.
(d) Notwithstanding the foregoing, the tag-along provisions of this
Section 5.6 shall only apply to Equity Incentive Units which are Vested Units
(in each case based on the Fair Market Values of each class of Unit), assuming
for purposes of this Section 5.6 that the distribution pursuant to Section 9.2
is deemed to be effected pro forma for the proposed tag-along
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transaction, and Equity Incentive Units which are not Vested Units shall not be
regarded as Securities for purposes of this Section 5.6.
Section 5.7. Right to Drag-Along.
(a) Subject to Section 7.2(c), prior to a Qualified IPO, any bona fide
Transfer proposed by Blackstone of a majority of the outstanding Securities to
any Person (other than to an Affiliate of Blackstone) shall be subject to the
provisions of this Section 5.7.
(b) If Blackstone enters into a definitive agreement for a Transfer which
is subject to this Section 5.7 (the "Drag-Along Sale"), then Blackstone may,
within 15 days following the execution of such agreement send written notice
(the "Drag-Along Notice") to each of MSCP and the Management Members notifying
them that they will be required to Transfer the number of Securities held by
such Member multiplied by a fraction (the "Drag-Along Fraction") the numerator
of which is the aggregate number of Securities proposed to be sold by Blackstone
as reflected in the Drag-Along Notice and the denominator of which is the total
number of Securities which are held by Blackstone (the "Dragged Securities").
Such Drag-Along Notice shall set forth the name of the proposed transferee, the
proposed amount and form of consideration and the other terms and conditions of
the offer, including a copy of the definitive agreement relating to the
Drag-Along Sale. Upon receipt of a Drag-Along Notice, each of MSCP and the
Management Members shall be required to Transfer its Dragged Securities to such
proposed transferee at the same price and on the same terms as those governing
the Drag-Along Sale, including making the same representations, warranties,
covenants, indemnities and agreements that Blackstone agrees to make (except
that, in the case of representations and warranties pertaining specifically to
Blackstone, each of MSCP and the Management Members shall make the comparable
representations and warranties pertaining specifically to itself); provided that
all representations, warranties and indemnities shall be made by each Member
severally and not jointly and that the liability of each Member thereunder shall
be borne by each of them on a pro rata basis based on the number of Securities
which are Transferred. Each Member shall be responsible for its proportionate
share of the costs and expenses incurred in connection with such Transfer to the
extent not paid or reimbursed by the Company or the purchaser.
(c) If the Drag-Along Sale is not consummated within 180 days of the date
of the Drag-Along Notice, then the provisions of this Section 5.7 shall
terminate and be of no further force and effect with respect to such Drag-Along
Sale, but all other provisions of this Agreement (including Section 5.6) shall
continue to apply to the proposed Transfer that was the subject of such
Drag-Along Sale; provided that, if such Drag-Along Sale is subject to prior
regulatory approval, such 180-day period shall be extended until the expiration
of 30 days after all such approvals have been received, but in no event later
than 365 days following the date of the Drag-Along Notice.
(d) Notwithstanding the foregoing, the drag-along provisions of this
Section 5.7 shall apply to all Equity Incentive Units (in each case based on the
Fair Market Values of each class of Unit), assuming for purposes of this Section
5.7 that the distribution pursuant to Section 9.2 is deemed to be effected pro
forma for the proposed Drag-Along Sale.
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ARTICLE VI
CERTAIN PROVISIONS APPLICABLE TO MANAGEMENT MEMBERS
Section 6.1. Company Call Option.
(a) If a Senior Management Member's Services to the Company and its
Subsidiaries terminate for any reason (a "Termination Event"), the Company shall
have the right but not the obligation to purchase, from time to time after such
Termination Event, for a period of 181 days following the later of (x) the
termination of such Senior Management Member's Services and (y) with respect to
Equity Incentive Units which are Vested Units, the date such Equity Incentive
Units become Vested Units (the "Call Option Period"), the Equity Incentive Units
held by such Senior Management Member. To exercise such purchase right with
respect to a Senior Management Member, the Company shall deliver to such Senior
Management Member prior to the expiration of the Call Option Period a written
notice specifying the number and class of Units with respect to which the
Company has elected to exercise such purchase right, whereupon such Senior
Management Member shall be required to sell to the Company, the Equity Incentive
Units specified in such notice, at a price per Equity Incentive Unit equal to
the applicable purchase price determined pursuant to Section 6.1(c).
(b) If upon expiration of the Call Option Period, the Company has not
purchased all of a terminated Senior Management Member's Equity Incentive Units
which are Vested Units, the Company shall on or before the expiration of the
Call Option Period provide written notice to all of the other Senior Management
Members and all of the Investor Members (collectively, the "Other Members") of
(i) its decision not to purchase some or all of such Equity Incentive Units and
(ii) the number and class of such Equity Incentive Units which the Company did
not purchase, and the Other Members shall have the right to purchase all or a
portion of such remaining Equity Incentive Units which are Vested Units at a
price per Equity Incentive Unit equal to the applicable purchase price
determined pursuant to Section 6.1(c). The Other Members' rights to purchase
such Equity Incentive Units and such Senior Management Member's corresponding
obligation to sell such Equity Incentive Units shall terminate on the 30th day
following the expiration of the Call Option Period. Each of the Other Members
that elects to exercise such purchase right shall provide written notice to the
Company prior to the 30th day following the expiration of the Call Option Period
specifying that the number of such Equity Incentive Units it wishes to purchase
(and, if the aggregate number of Equity Incentives Units specified in such
notices exceeds the number of Equity Incentive Units available, the number of
Equity Incentive Units which each Other Member shall be entitled to purchase
shall be reallocated in proportion to each such Other Member's Ownership
Percentage). Upon receipt of the Other Members' notices, the Company will notify
such Senior Management Members of the Other Members' elections and such Senior
Management Member will be obligated to sell to the Other Members the number of
such Equity Incentive Units determined in accordance with this Section 6.1(b).
(c) Upon a termination of a Senior Management Member's Services to the
Company and its Subsidiaries for any reason, the purchase price for the Equity
Incentive Units which are Unvested Units will be the lower of Cost and Fair
Market Value determined, in the case of a purchase by the Company pursuant to
Section 6.1(a), as of the date on which the Company
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exercised its call right pursuant to Section 6.1(a) or, in the case of a
purchase by a Member pursuant to Section 6.1(b), as of the 30th day following
the expiration of the applicable Call Option Period (such date, the "Call Price
Determination Date"). Upon a termination of a Senior Management Member's
Services by the Company for Cause, the purchase price for the Equity Incentive
Units which are Vested Units will be the lower of Cost and Fair Market Value
determined as of the Call Price Determination Date. Upon a termination of a
Senior Management Member's Services to the Company for any reason other than a
termination by the Company for Cause (including a termination by a Senior
Management Member for Good Reason), the purchase price for the Equity Incentive
Units which are Vested Units will be Fair Market Value determined as of the Call
Price Determination Date.
(d) The closing of the purchase of the Equity Incentive Units pursuant to
Section 6.1(a) or 6.1(b) shall occur at such time and place as the parties to
such purchase shall agree, and in any event within 45 days of the Call Price
Determination Date; provided that if such purchase is subject to any prior
regulatory approval, then such 45-day period shall be extended until the
expiration of ten days after all such approvals shall have been received;
provided further that if all such approvals are not obtained within 120 days of
the expiration of such 45-day period, then the provisions of this Section 6.1
shall terminate and be of no further force and effect with respect to such
Equity Incentive Units. At such closing, the Senior Management Member shall
deliver Units Certificates, representing such Equity Incentive Units, duly
endorsed for transfer and accompanied by all requisite transfer taxes, if any,
and such Equity Incentive Units shall be free and clear of any liens, and the
Senior Management Member selling such Equity Incentive Units shall so represent
and warrant, and shall further warrant that it is the sole beneficial and record
owner of such Equity Incentive Units with the full right, power and authority to
convey such Equity Incentive Units to the purchaser. At such closing, all of the
parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate. The Equity Incentive Units may be purchased
(i) by delivery of funds deposited into an account designated by the Senior
Management Member selling such Equity Incentive Units, a bank cashier's check, a
certified check or a company check of the purchaser for the purchase price, (ii)
if the purchaser is the Company and is prohibited from paying cash by any
financing arrangements of the Company and is unable to pay the purchase price in
Shares as described in clause (iii) below, by a note of the Company payable in
installments over a period of up to five (5) years from the date of issuance of
such note, having a principal amount equal to the applicable purchase price,
bearing interest at the prime lending rate in effect from time to time (which
note shall be a negotiable instrument under applicable Law), or (iii) if a
Qualified IPO has occurred, by delivery of a number of Shares equal to the
aggregate purchase price of the Equity Incentive Units divided by the Public
Share FMV as of the close of trading on the trading day immediately prior to the
day of delivery thereof to the Senior Management Member, rounded up to the
nearest whole number. The Company shall notify the Senior Management Members in
writing of the method by which it has elected to purchase the Equity Incentive
Units at least 10 days prior to the closing of such purchase. The parties hereto
acknowledge that the Company may be unable to pay with Shares to the extent it
is unable to deliver such securities pursuant to an exemption from registration
under the Securities Act and any applicable state securities laws or pursuant to
a registration statement on Form S-3 or Form S-8.
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(e) Notwithstanding anything to the contrary elsewhere herein, the Company
shall not be obligated to purchase any Equity Incentive Units at any time
pursuant to this Section 6.1, regardless of whether it has delivered a notice of
its election to purchase any such Equity Incentive Units, (i) to the extent that
(A) the purchase of such Equity Incentive Units (together with any other
purchases of Equity Incentive Units pursuant to this Section 6.1, or pursuant to
similar provisions in any other agreements with other investors, of which the
Company has at such time been given or has given notice) or (B) in the event of
an election to purchase such Equity Incentive Units with Shares, the issuance of
such Shares by the IPO Entity, the purchase of such Shares by the Company or the
distribution of such Shares to the applicable Senior Management Member(s) would
result (x) in a violation of any Law (including any unavailability of a
registration statement or exemption from registration necessary to allow
delivery of the Shares to the applicable Senior Management Member(s)), (y) after
giving effect thereto (including any dividends or other distributions or loans
from a Subsidiary of the Company to the Company in connection therewith), in a
Financing Default or (z) in the Company being required to disgorge any profit to
the IPO Entity pursuant to Section 16(b) of the Exchange Act, (ii) if
immediately prior to such purchase of Equity Incentive Units, issuance or
purchase of Shares, as the case may be, there exists a Financing Default which
prohibits such issuance or purchase (including any dividends or other
distributions or loans from a Subsidiary of the Company to the Company in
connection therewith), or (iii) if the Company does not have funds available to
effect such purchase of Equity Incentive Units or Shares. The Company shall
within 15 days of learning of any such fact so notify the Members in writing
that it is not obligated to purchase such Equity Incentive Units, whereupon
Sections 6.1(b) and 6.1(c) shall apply to such Equity Incentive Units as if the
Company had never delivered a notice electing to purchase such Equity Incentive
Units (except that each reference to "the 30th day following the expiration of
the Call Option Period" in Section 6.1(b) shall be deemed a reference to "the
30th day following the delivery by the Company of the notice referred to in
Section 6.1(e)" and the definition of "Call Price Determination Date" shall be
deemed modified in a corresponding manner).
(f) Fair Market Value for the Equity Incentive Units to be purchased under
this Section 6.1 will be determined by the Board or the compensation committee
of the Board in good faith (without any discounts applied in the case of a
termination of the Services of the relevant Senior Management Member by the
Company without Cause, by the relevant Senior Management Member with Good Reason
or as a result of the death or disability of the relevant Senior Management
Member, but with a 25% discount applied to reflect minority interest and
illiquidity in the event of a termination by the relevant Senior Management
Member without Good Reason prior to the fifth anniversary of the Effective
Date). If the relevant Senior Management Member disagrees with the Board's
determination of Fair Market Value, he or she may require the Company to retain
an Independent Appraiser to determine the Fair Market Value (it being understood
that the Independent Appraiser shall be instructed in its determination of Fair
Market Value to apply any discount applicable pursuant to the preceding
sentence). The determination of Fair Market Value by the Independent Appraiser
shall be final and binding upon the Company and such Senior Management Member.
The Company will bear the cost of such appraisal unless the Fair Market Value as
determined by the Independent Appraiser is less than 110% of the Board's
determination of Fair Market Value pursuant to the first sentence of this
paragraph, in which case the Senior Management Member will bear the cost of the
appraisal. Notwithstanding
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the foregoing, following a Qualified IPO, Fair Market Value for the Equity
Incentive Units for purposes of this Section 6.1 shall in all cases be based on
the Public Share FMV.
Section 6.2. Unvested Units. Any Equity Incentive Units that fail to
become Vested Units and are purchased by the Company pursuant to Section 6.1
from any Senior Management Member prior to a Change of Control (and/or, in the
case of Class C Units, a Liquidity Event) shall, at any time prior to a Change
of Control (or Liquidity Event, in the case of Class C Units) as determined by
the CEO, and approved by the Board, be granted to the Senior Management Members
who are employees of the Company or any of its Affiliates (at a purchase price
equal to Cost) or the closest economic equivalent thereof (e.g., options with
exercise price equal to $1,000 per Share in the case of such Class B and Class C
Units and options with an exercise price equal to $3,000 per Share, in the case
of such Class D Units) shall be granted to key employees of the IPO Entity or
any of its Affiliates (other than the Senior Management Members) under the 2004
Stock Incentive Plan of Vanguard, in each case based on consultation with the
CEO, but with final allocation determined by the Board.
ARTICLE VII
SUBSIDIARY WARRANTS; INITIAL PUBLIC OFFERING
Section 7.1. Subsidiary Warrants. At the Effective Date, the Company shall
cause Vanguard to issue to the Company three (3) classes of warrants, designated
as Class B, Class C and Class D (the "Warrants"). Each class of Warrants will be
exercisable for a number of Shares equivalent to the proportional percentage of
equity in the Company represented by the related Class of Units (assuming full
vesting). The Warrants will not have any vesting requirements. The exercise
price shall be $1,000 per Share in the case of the Class B and Class C Warrants
and $3,000 per Share in the case of the Class D Warrants. The Warrants will have
antidilution protection consistent with the 2004 Stock Incentive Plan of
Vanguard, including an adjustment for any extraordinary cash dividends paid by
Vanguard. At the Company's election, the Warrants may be exercised pursuant to a
cashless exercise. The Company shall not agree to any amendment of, or grant any
waiver under, the Warrants that in either such case would have an adverse effect
on the Units without the prior approval of the Management Representative and the
MSCP Representative (or, if there is no MSCP Representative, MSCP IV). The
Company shall not Transfer the Warrants without the prior approval of the
Management Representative and the MSCP Representative (or, if there is no MSCP
Representative, MSCP IV). If the "Exercise Price" of a Warrant (as defined in
such Warrant) is reduced to the par value of the Shares pursuant to the terms
thereof, then the Company shall, to the extent that any portion of the Equity
Incentive Units relating to such Warrant become Vested Units, exercise such
Warrant with respect to such portion of the Shares for which such Warrant is
exercisable. Notwithstanding anything to the contrary herein, the Company shall
make distributions with respect to the Class A-1 Units only with Shares (other
than Shares underlying the Warrants) or the proceeds thereof and shall make
distributions with respect to the Equity Incentive Units only with Shares
underlying the Warrants or the proceeds thereof.
Section 7.2. Subsidiary IPO; Withdrawal of Shares.
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(a) Upon an IPO of Vanguard (the "IPO Entity"), at the option of the Board
all (but not less than all) of the Units may (i) be converted into or redeemed
for Shares or other securities of the IPO Entity (including potentially newly
granted options at fair market value), provided such conversion or redemption
does not result in any economic diminution to the holder of such Units
(disregarding the tax treatment of such conversion or redemption) or in such
holder receiving Shares or other securities containing vesting terms that are
less favorable to such holder relative to the vesting terms of such Units as in
effect immediately prior to conversion or redemption or (ii) remain outstanding;
provided that the Board shall only take the action described in clause (i) if
the Board determines in good faith that the failure to take such action would be
materially adverse to the best interests of all equityholders of the Company
taken as a whole (it being understood that for purposes of such determination
the availability of tax deductions arising from redeeming or converting Units,
in whole or in part, for options shall not be taken into consideration by the
Board). If the Board shall elect to take the action referred to in clause (i),
the Company shall use its reasonable best efforts to structure any such
conversion or redemption in a manner designed to minimize, to the extent
possible, any adverse tax consequences to the holders of Units arising from such
conversion or redemption. If any such conversion or redemption is effected in
compliance with this Section 7.2, each Member agrees to consent to and raise no
objection to such conversion or redemption and shall execute and deliver all
agreements, instruments and documents as may be reasonably required in order to
consummate such conversion or redemption.
(b) Notwithstanding Section 7.2(a), contemporaneously with the
consummation of the IPO or upon the occurrence of the Lapse Date or the Company
ceasing to hold a majority of the outstanding Shares, each of the holders of the
Class A Units shall have the right, on 15 days prior written notice to the
Company, to have all of its Class A-1 Units redeemed by the Company for such
holder's Ownership Percentage of all of the Shares held by the Company (other
than Shares underlying the Warrants, regardless of whether the Warrants have
previously been exercised) and any proceeds thereof; provided that, if the
Company shall have received such written notices from the holders of a majority
of the outstanding Class A Units, the Company shall have the right to make such
redemptions in respect of all outstanding Class A Units. If and when an event
(including the conclusion of any vesting periods or the acceleration thereof)
occurs which causes a final settlement of the Equity Incentive Units and the
Equity Incentive Units have failed to fully become Vested Units, each holder of
Class A-2 Units shall be entitled, on 15 days prior written notice to the
Company, to have such holder's Class A-2 Units redeemed by the Company for
Shares underlying the Warrants representing a percentage of the equity of the
IPO Entity equivalent to the percentage of equity in the Company represented by
such Class A-2 Units, regardless of whether the Warrants have previously been
exercised (other than such Shares which are allocable to any Equity Incentive
Units which are Vested Units) and any proceeds thereof.
(c) Notwithstanding anything else to the contrary contained in this
Agreement, if an IPO has occurred, any Shares received for Class A Units by any
Member pursuant to this Section 7.2 shall not be subject to any Transfer
restrictions (other than any applicable underwriters' lock-up), including,
without limitation, the restrictions provided for in Article V.
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ARTICLE VIII
CERTAIN PROVISIONS APPLICABLE TO MSCP AND THE MANAGEMENT MEMBERS
Section 8.1. Pre-Emptive Rights.
(a) If at any time prior to an IPO, the Company or the IPO Entity issues
(i) any equity or equity-linked securities or (ii) any securities proposed to be
purchased by Blackstone ((i) and (ii) collectively, the "Offered Securities"),
MSCP and the Management Members (the "Pre-Emptive Rights Holders") shall have a
preemptive right to purchase or subscribe for the number or amount of such
Offered Securities in the offering as it may elect to purchase or subscribe for,
up to such Member's Ownership Percentage (determined as of the time of the
approval of such issuance) of the total number or amount of Offered Securities
proposed to be issued. The Company shall provide each Pre-Emptive Rights Holder
with notice of a proposed issuance subject to this preemptive right at least 10
days prior to such issuance specifying the number of or amount of such Offered
Securities and proposed terms of such issuance. If a Pre-Emptive Rights Holder
exercises its right, it shall be required to pay the same consideration for each
Offered Security as the Company shall receive for each Offered Security
purchased by a Person other than a Pre-Emptive Rights Holder and as the Company
shall have specified in its notice of the proposed issuance (except that if the
Company or its subsidiary, as applicable, receives non-cash consideration, the
Pre-Emptive Rights Holder shall have the option, if it so chooses, to pay in
cash the Fair Market Value of such non-cash consideration). The preemptive right
given by the Company pursuant to this Section 8.1(a) shall terminate as to each
Pre-Emptive Rights Holder if such Pre-Emptive Rights Holder shall not have
notified the Company in writing of its election to exercise such right within 10
days after receipt of the notice of the proposed issuance; provided that such
right shall become available once again if the price or any other material term
of the proposed issuance shall change, in which case the parties shall again
follow the procedures set forth in this Section 8.1(a).
(b) The preemptive rights under Section 8.1(a) shall not apply to the
following: (i) securities issued to officers, employees or directors (other than
representatives of MSCP or Blackstone) of, or consultants to, the Company or its
Subsidiaries pursuant to profit sharing, management stock option or other
management incentive plans; (ii) securities issued to non-Affiliates pursuant to
any merger, consolidation, acquisition of assets or businesses or similar
transaction; (iii) securities issued pursuant to a stock split or stock
dividend; (iv) securities issued pursuant to the exercise of any option, warrant
or convertible security; (v) securities issued pursuant to a public offering;
(vi) securities issued in connection with third-party debt financing; or (vii)
securities issued to the Company or any of its Subsidiaries.
Section 8.2. Affiliate Transactions. Prior to an IPO, without the consent
of each of the MSCP Representative (or, if there is no MSCP Representative,
MSCP IV) and the Management Representative (which consent shall not be
unreasonably withheld), the Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, make any payment to, or sell, lease,
transfer, or otherwise dispose of any of its properties or assets to or purchase
any property or assets from, or enter into or make or amend any transaction or
series of transactions, contract, agreement, understanding, loan, advance, or
guarantee with, or for the benefit of, any Affiliate of
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the Company (including Blackstone and any Affiliate thereof) (excluding any
issuance or sale of securities) (each of the foregoing, an "Affiliate
Transaction") involving aggregate consideration in excess of $1 million, unless
(i) such Affiliate Transaction is on terms that are not materially less
favorable to the Company or the relevant Subsidiary than those that could be
obtained in a comparable transaction by the Company or such Subsidiary with an
unrelated Person and (ii) with respect to any Affiliate Transaction or series of
Affiliate Transactions in excess of $20 million, the Company delivers to the
MSCP Representative (or, if there is no MSCP Representative, MSCP IV) and the
Management Representative not less than 5 business days prior to the
consummation of such Affiliate Transaction or series of Affiliate Transactions a
resolution adopted in good faith by the majority of the Board and set forth in
an officer's certificate approving such Affiliate Transaction and certifying
that such Affiliate Transaction complies with clause (i) above.
Section 8.3. Information Rights. So long as MSCP or the Management Members
continue to have the right to appoint at least one Representative pursuant to
Section 3.2, each of the MSCP Representative and the Management Representative
shall be entitled to receive, and the Company shall provide to the MSCP
Representative and the Management Representative, annual audited financial
statements, monthly financial reporting packages, annual budgets and any other
material information with respect to the Company and its Subsidiaries reasonably
requested by the MSCP Representative or the Management Representative.
ARTICLE IX
DISTRIBUTIONS
Section 9.1. In General. Any distributions of cash or other assets by the
Company to Members shall be made in accordance with this Article IX. Except to
the extent otherwise provided herein, any distributions required to be made pro
rata to holders of a class of Units shall be made based on their proportionate
ownership of the outstanding Units within the class. Available cash shall be
distributed, at such times and in such amounts as the Board determines in its
discretion. Notwithstanding any other provision hereof, the Company shall cause
its Subsidiaries to distribute or otherwise transfer to the Company, to the
fullest extent possible within the limits imposed by applicable Law or
agreement, the cash or cash equivalents necessary for the Company to make the
distributions to be made hereunder.
Section 9.2. Discretionary Distributions. Subject to Sections 7.1, 7.2,
9.3, 10.2, 10.3 and 11.3, available cash shall be distributed, at such times and
in such amounts as the Board determines in its discretion, in the following
order and priority:
(i) First, to the holders of Class A-1 Units to the extent of the
Invested Capital with respect to the Class A Units pro rata, in
accordance with the number of Class A-1 Units held by such holder
relative to the total number of Class A-1 Units;
(ii) Second, to the holders of Equity Incentive Units (both
Vested Units and Unvested Units) to the extent of the Invested
Capital with respect to
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such Equity Incentive Units pro rata, in accordance with the total
number of Equity Incentive Units held by such holder relative to the
total number of Equity Incentive Units;
(iii) Third, to the holders of Class A-1 Units and the holders of
Class B Units that are Vested Units and Class C Units that are Vested
Units until such time as the holders of Class A-1 Units have achieved
the Preferential Return Value (for the avoidance of doubt, such
Preferential Return Value to have been reduced by the amounts
distributed to the holders of Class A Units pursuant to Section
9.2(i)) pro rata, in accordance with the number of Class A-1 Units,
Class B Units that are Vested Units and Class C Units that are Vested
Units held by such holders relative to the total number of Class A-1
Units, Class B Units that are Vested Units and Class C Units that are
Vested Units; and
(iv) Fourth, to the holders of Class A-1 Units and the holders of
Equity Incentive Units that are Vested Units pro rata, in accordance
with the number of Class A-1 Units and Equity Incentive Units that
are Vested Units held by such holder relative to the total number of
Class A-1 Units and Equity Incentive Units that are Vested Units.
Section 9.3. Tax Distributions. To the extent of available cash, as
determined at the Board's discretion, the Company shall distribute to each
Member an amount equal to the excess, if any, of (A) the product of the
applicable Assumed Tax Rate and the Net Profit of the Company allocable to such
Member under Sections 10.2 and 10.3 with respect to the applicable Fiscal Year,
over (B) the amount of distributions made to such Member under Section 9.2 with
respect to such Fiscal Year. Any distributions under this Section 9.3 shall be
treated for purposes of this Agreement as having been distributed with respect
to the Units pursuant to Section 9.2.
Section 9.4. Limitation on Distributions. No distribution shall be
declared and paid (a) unless, after the distribution is made, the fair value of
the Company's assets is at least equal to all of the Company's liabilities or
(b) if the declaration or payment would cause the Company or any of its
Subsidiaries to breach any material agreement.
Section 9.5. Withholding Authorized. The Company is authorized to withhold
from distributions or other payments to a Member under this Agreement or from
any compensation otherwise payable to such Member, or with respect to
allocations to a Member, and to pay over to a Governmental Authority any amounts
required to be withheld pursuant to the Code (or any provisions of any other
Law) or as a result of the consummation of the transactions contemplated under
this Agreement or any ancillary agreements. Any amounts so withheld shall be
treated as having been distributed to such Member pursuant to Section 9.2 and
for all purposes of this Agreement. Each Member on whose behalf such
withholdings were made shall be required to promptly pay to the Company, in
cash, the amount of any withholding taxes that the Company is required to pay
unless such amounts were deducted from distributions or other payments or
compensation otherwise payable to such Member. To the fullest extent permitted
by law, each Member hereby agrees to indemnify and hold harmless the Company and
the other Members from and against any liability (including, without limitation,
any liability for taxes, penalties,
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additions to tax or interest) with respect to income attributable to or
distributions or other payments in respect of the Units to such Member.
Section 9.6. Section 83(b) Election. Within 30 days after purchasing any
Units (other than Class A Units), each Management Member shall make an election
with the Internal Revenue Service ("IRS") under Section 83(b) of the Code and
the regulations promulgated thereunder (an "83(b) Election") in the form of
Exhibit A attached hereto. Each Management Member shall submit such 83(b)
Election to the IRS within 30 calendar days after purchasing the Units and shall
promptly send a copy to the Company.
ARTICLE X
ALLOCATIONS AND CAPITAL ACCOUNTS
Section 10.1. Capital Accounts. A Capital Account shall be established for
each Member on the books of the Company and shall be maintained as provided in
the definition of Capital Account.
Section 10.2. Allocations. Net Profit and Net Loss of the Company shall be
determined and allocated among the Members with respect to each Fiscal Year of
the Company by the Board as of the end of each such year and at such other times
as the Board shall determine in a manner such that the Capital Account of each
Member, immediately after making such allocation, and after taking into account
actual distributions made during such Fiscal Year is, as nearly as possible,
equal (proportionately) to (i) the distributions that would be made to such
Member pursuant to Section 11.3 if the Company were dissolved, its affairs wound
up and its assets sold for cash equal to their Gross Asset Value, all Company
liabilities, including the Company's share of any liability of any entity
treated as a partnership for U.S. federal income tax purposes in which the
Company is a partner, were satisfied (limited with respect to each non-recourse
liability to the Gross Asset Value of the assets securing such liability) and
the net assets of the Company were distributed in accordance with Section 9.2 to
the Members immediately after making such allocation, minus (ii) such Member's
share of Company Minimum Gain and Member Minimum Gain determined pursuant to
Treasury Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5), computed
immediately prior to the hypothetical sale of assets. Subject to the other
provisions of this Article X, an allocation to a Member of a share of Net Profit
or Net Loss shall be treated as an allocation of the same share of each item of
income, gain, loss or deduction that is taken into account in computing Net
Profit or Net Loss.
Section 10.3. Miscellaneous and Regulatory Tax Allocations.
Notwithstanding anything to the contrary set forth in this Agreement, the
following special allocations, if applicable, shall be made in the following
order:
(a) Company Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of
this Article X, if there is a net decrease in Company Minimum Gain during any
Fiscal Year, each Member shall be specially allocated items of Company 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
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Company 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 each Member
pursuant thereto. The items to be so allocated shall be determined in accordance
with Treasury Regulations Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section
10.3(a) is intended to comply with the minimum gain chargeback requirements set
forth in Treasury Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
(b) Member Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(i)(4), notwithstanding any other provision
of this Article X, if there is a net decrease in Member Minimum Gain
attributable to a Member Non-recourse Debt during any Fiscal Year, each Member
who has a share of the Member Minimum Gain attributable to such Member
Non-recourse Debt, determined in accordance with Treasury Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain for
such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to the portion of such Member's share of the net decrease in Member Minimum Gain
attributable to such Member Non-recourse 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
1.704-2(j)(2). This Section 10.3(b) is intended to comply with Treasury
Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations or distributions described in subparagraphs (4),
(5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d), such Member
shall be allocated items of Company income or gain in an amount and manner
sufficient to eliminate such Member's Adjusted Capital Account Deficit as
quickly as possible to the extent required by the Treasury Regulations;
provided, that an allocation pursuant to this Section 10.3(c) shall be made only
if and to the extent that such Member would have an Adjusted Capital Account
Deficit after tentatively making all other allocations provided in this Article
X as if this Section 10.3(c) were not in this Agreement.
(d) Adjustments Occasioned by Code Section 754 Election. To the extent an
adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) or Code Section 743(b) is required pursuant to an election under
Code Section 754 to be taken into account in determining Capital Accounts as the
result of a distribution to a Member in complete liquidation of its interest,
the amount of such adjustment to 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 accordance with their interests in the event
Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member
to whom such distribution was made in the event Treasury Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(e) Treatment of Regulatory Allocations. The allocations set forth in this
Section 10.3 (the "Regulatory Allocations") are intended to comply with and
shall be interpreted
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consistently with certain requirements of Treasury Regulations Sections 1.704-1
and 1.704-2. Notwithstanding any other provisions of this Article X (other than
the Regulatory Allocations), the Regulatory Allocations shall be taken into
account in allocating other Net Profits and Net Losses and items of income,
gain, loss and deduction among Members so that, to the extent possible, the net
amount of such allocations of other Net Profits and Net Losses and other items
and the Regulatory Allocations to each Member shall be equal to the net amount
that would have been allocated to such Member if the Regulatory Allocations had
not occurred.
Section 10.4. Loss Limitation. Net Loss allocated pursuant to Section 10.2
shall not exceed the maximum amount of Net Loss that can be allocated without
causing any Member to have an Excess Loss. If some but not all Members would be
allocated an Excess Loss as a consequence of an allocation of Net Loss pursuant
to Section 10.2, the foregoing limitation shall be applied on a Member by Member
basis so as to allocate the maximum permissible Net Loss to each Member under
Treasury Regulations Section 1.704-1(b)(2)(ii)(d). Prior to any allocation of
Net Profit under Section 10.2, after an Excess Loss has been allocated to one or
more Members, an equal amount of Net Profit shall be allocated to such Members
in proportion to and to the extent of the Excess Losses previously allocated to
them.
Section 10.5. Allocations for Tax Purposes.
(a) In accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for Federal income
tax purposes and its initial Gross Asset Value using any method permitted under
Section 704(c) of the Code and the Treasury Regulations thereunder as determined
by the Tax Matters Partner.
(b) In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Gross Asset Value, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take into account any variation between the adjusted basis of such asset
for federal income tax purposes and its Gross Asset Value in the same manner as
under Section 704(c) of the Code and the Treasury Regulations thereunder.
(c) Subject to the preceding paragraphs (a) and (b), for United States
Federal, state and local income tax purposes, the income, gains, losses and
deductions of the Company shall, for each taxable period, be allocated among the
Members in the same manner and in the same proportion that such items have been
allocated among the Members' respective Capital Accounts.
Section 10.6. Distribution in Kind. If any property is distributed in kind
to the Members, it shall first be written up or down to its Fair Market Value as
of the date of such distribution, thus creating book gain or loss for the
Company, and the Fair Market Value of the property received by each Member as so
determined shall be debited against such Member's Capital Account at the time of
distribution.
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ARTICLE XI
DISSOLUTION AND LIQUIDATION
Section 11.1. Duration. The Company shall dissolve upon (i) the sale or
other disposition by the Company of all or substantially all of the assets,
properties or businesses the Company then owns, (ii) the dissolution of the
Company by action of the Board, or (iii) any other event that would cause the
dissolution of a limited liability company under the Act, unless the Company is
continued to the extent permitted by, and in accordance with, the Act.
Section 11.2. Liquidation of Company. Upon dissolution of the Company, the
Board shall appoint a Person to serve as the "Liquidator" who shall act at the
direction of the Board, unless and until a successor Liquidator is appointed as
provided herein. The Liquidator shall agree not to resign at any time without 30
days prior written notice. The Liquidator may be removed at any time, with or
without cause, by notice of removal and appointment of a successor Liquidator
approved by the Board. Within 30 days following the occurrence of any such
removal, a successor Liquidator may be elected by the Board. The successor
Liquidator shall succeed to all rights, powers and duties of the former
Liquidator. The right to appoint a successor or substitute Liquidator in the
manner provided herein shall be recurring and continuing for so long as the
functions and services of the Liquidator are authorized to continue under the
provisions hereof, and every reference herein to the Liquidator shall be deemed
to refer also to any such successor or substitute Liquidator appointed in the
manner herein provided. Except as expressly provided in this Article XI, the
Liquidator appointed in the manner provided herein shall have and may exercise,
without further authorization or consent of any of the parties hereto, all of
the powers conferred upon the Board under the terms of this Agreement (but
subject to all of the applicable limitations, contractual and otherwise, upon
the exercise of such powers to the extent necessary or desirable in the good
faith judgment of the Liquidator to carry out the duties and functions of the
Liquidator hereunder for and during such period of time as shall be reasonably
required in the good faith judgment of the Liquidator to complete the winding up
and liquidation of the Company as provided for herein). The Liquidator shall
receive as compensation for its services (i) no additional compensation, if the
Liquidator is an employee of the Company or any of its Subsidiaries, or (ii) if
the Liquidator is not such an employee, a reasonable fee plus out-of-pocket
costs and expenses or such other compensation as the Board may otherwise
approve.
Section 11.3. Priority on Liquidation. (a) The Liquidator shall liquidate
the assets of the Company, and apply and distribute the proceeds of such
liquidation, in the following order of priority, unless otherwise required by
mandatory provisions of applicable Law:
(i) First, to the satisfaction (whether by payment or the making of
reasonable provision for payment) of the Company's debts and obligations
to its creditors, including sales commissions and other expenses incident
to any sale of the assets of the Company and including the establishment
of and additions to such reserves as the Liquidator may deem necessary or
appropriate; and
(ii) Second, to the Members in the same manner as set forth in
Section 9.2.
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(b) The reserves established pursuant to subparagraph (a) of this Section
11.3 shall be paid over by the Liquidator to a bank or other financial
institution, to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such period
as the Liquidator deems advisable, such reserves shall be distributed to the
Members in the priorities set forth in Section 11.3(a)(ii).
(c) Notwithstanding the provisions of Section 11.3(a) which require the
liquidation of the assets of the Company, but subject to the order of priorities
set forth in Section 11.3(a), if upon dissolution of the Company the Board
determines that an immediate sale of part or all of the Company's assets would
be impractical or could cause undue harm to the Members, then the Board may, in
its discretion, defer the liquidation of any assets except those necessary to
satisfy Company liabilities and reserves, and may, in its discretion, distribute
to the Members, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 11.3(a)(ii), undivided interests in such Company assets as
the Liquidator deems reasonable and equitable and subject to any agreements
governing the operating of such properties at such time. For purposes of any
such distribution, the Board will determine the Fair Market Value of any
property to be distributed. After any such determination, each Member shall have
the right to require the Company to retain an Independent Appraiser to determine
the Fair Market Value of any property to be distributed under this Section
11.3(c); provided, that if the appraised value is less than 110% of the Board's
determination of the property's Fair Market Value, then such Member shall
reimburse the Company for all costs and expenses incurred in connection with
such independent appraisal.
(d) A reasonable time will be allowed for the orderly winding up of the
business and affairs of the Company and the liquidation of its assets pursuant
to Section 11.3(a) in order to minimize any losses otherwise attendant upon such
winding up. Distributions upon liquidation of the Company (or any Member's
interest in the Company) and related adjustments will be made by the end of the
Fiscal Year of the liquidation (or, if later, within 90 days after the date of
such liquidation) or as otherwise permitted by Treasury Regulation Section
1.704-1(b)(2)(ii)(b).
(e) The Company shall terminate when all of the assets of the Company have
been distributed in accordance with this Section 11.3 and the Certificate has
been canceled in the manner required by the Act.
Section 11.4. Wavier of Appraisal, Valuation Rights, Partition and Right
to Court Decree of Dissolution. The Members agree that irreparable damage would
be done to the Company if any Member brought an action in court to dissolve the
Company. Care has been taken in this Agreement to provide what the parties
believe are fair and just payments to be made to a Member whose relationship
with the Company is terminated for any reason. Accordingly, each of the Members
accepts the provisions of this Agreement as such Member's sole entitlement on
termination of such Member's membership in the Company. Each Member hereby
waives and renounces such Member's right to seek (i) partition of the property
of the Company, (ii) a court decree of dissolution or (iii) the appointment by a
court of a liquidator for the Company. To the extent permitted by the Act, the
rights of the Members or their successors under applicable Law with respect to
the inventory of assets, appraisals, accounting, or the sale of assets shall not
apply and are hereby expressly waived by all Members. Each Member
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expressly agrees that the provisions contained in this Agreement shall bind and
control such Member's successors.
ARTICLE XII
BOOKS AND RECORDS
Section 12.1. Books. The Company shall maintain complete and accurate
books of account of the Company's affairs at the Company's principal office,
which books shall be open to inspection by any Member (or its authorized
representative) to the extent required by the Act; provided that to the extent
permitted by Law, no Management Member shall be entitled to any information with
respect to the number or type of Equity Incentive Units beneficially owned by
any other Management Member.
Section 12.2. Tax Reports and Elections. (a) Not later than seventy-five
calendar days after the end of each Fiscal Year, the Board shall cause the
Company to furnish each Member an Internal Revenue Service Form K-1 and any
similar form required for the filing of state or local income tax returns for
such Member for such Fiscal Year. Upon the written request of any such Member
and at the expense of such Member, the Company will use reasonable efforts to
deliver or cause to be delivered any additional information necessary for the
preparation of any state, local and foreign income tax return which must be
filed by such Member.
(b) Except as set forth in Section 12.2(d) hereof, the Tax Matters Partner
shall determine whether to make or revoke any available election pursuant to the
Code. Each Member will, upon request, supply the information necessary to give
proper effect to any such election. In connection with any Transfer of Units by
a Management Member, such Management Member shall provide to the Company such
tax filings as the Company reasonably requests.
(c) To the extent applicable, the Company hereby designates Blackstone FCH
Capital Partners IV L.P. to act as the "Tax Matters Partner" (as defined in
Section 6231(a)(7) of the Code) in accordance with Sections 6221 through 6233 of
the Code. The Tax Matters Partner is authorized and required to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities, including resulting administrative and
judicial proceedings, and to expend Company funds for professional services and
costs associated therewith; provided, that the Tax Matters Partner may be
removed and replaced by, and shall act in such capacity at the direction of, the
Board. Each Member agrees to cooperate with the Tax Matters Partner and to do or
refrain from doing any or all things reasonably requested by the Tax Matters
Partner with respect to the conduct of such proceedings. Subject to the
foregoing proviso, the Tax Matters Partner will have reasonable discretion to
determine whether the Company (either on its own behalf or on behalf of the
Member) will contest or continue to contest any tax deficiencies assessed or
proposed to be assessed by any taxing authority. Any deficiency for taxes
imposed on any Member (including penalties, additions to tax or interest imposed
with respect to such taxes) will be paid by such Member, and if paid by the
Company, will be recoverable from such Member (including by offset against
distributions otherwise payable to such Member).
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(d) The Members intend that the Company shall be treated as a partnership
for U.S. federal, state and local income tax purposes. Except as otherwise
required by applicable Law, each of the Members and the Company shall take no
action inconsistent with, and shall make or cause to be made all applicable
elections with respect to (i) the treatment of the Company as a partnership for
U.S. federal income tax purposes and (ii) the treatment of the Company as not a
publicly traded partnership for U.S. federal income tax purposes.
ARTICLE XIII
EXCULPATION AND INDEMNIFICATION
Section 13.1. Exculpation and Indemnification. (a) No Member,
Representative, member of the Board, Officer, or any direct or indirect officer,
director, stockholder or partner of a Member (each, an "Indemnitee"), shall be
liable, responsible or accountable in damages or otherwise to the Company or to
any Member, for any act or failure to act by such Indemnitee in connection with
the conduct of the business of the Company, or by any other such Indemnitee in
performing or participating in the performance of the obligations of the
Company, so long as (i) such Indemnitee acted in the good faith belief that such
action or failure to act was in the best interests, or not opposed to the best
interests, of the Company and/or its Subsidiaries and (ii) such action or
failure to act was not in violation of this Agreement and did not constitute
gross negligence or willful misconduct. The provisions of this Section 13.1(a)
are intended by the parties to apply even if such provisions have the effect of
exculpating the Indemnitee from legal responsibility for the consequences of
such Indemnitee's own simple, full, partial or concurrent negligence. Except as
otherwise required by the Act, no Person who is a Member, Representative, an
Officer, or any combination of the foregoing, shall be personally liable under
any judgment of a court, or in any other manner, for any debt, obligation, or
liability of the Company, whether that liability or obligation arises in
contract, tort, or otherwise, solely by reason of being a Member,
Representative, member of the Board, Officer or any combination of the
foregoing. The Board may exercise any of the powers granted to it by this
Agreement and perform any of the duties imposed upon it hereunder either
directly or by or through its agents, and no Representative or any of such
Representative's Affiliates shall be responsible for any misconduct or
negligence on the part of any such agent appointed by the Board in good faith.
(b) The Company shall indemnify and hold harmless each Indemnitee to the
fullest extent permitted by law against losses, damages, liabilities, costs or
expenses (including reasonable attorneys' fees and expenses and amounts paid in
settlement) incurred by any such Indemnitee in connection with any action, suit
or proceeding to which such Indemnitee may be made a party or otherwise involved
or with which it shall be threatened by reason of its being a Member,
Representative, member of the Board, Officer, or any direct or indirect officer,
director, stockholder or partner of a Member, or while acting as (or on behalf
of) a Member on behalf of the Company or in the Company's interest; provided
that no Indemnitee shall be entitled to indemnification pursuant to this Section
13.1(b) in respect of any action or failure to act of such Indemnitee that was
in violation of this Agreement or constituted gross negligence or willful
misconduct. Such attorneys' fees and expenses shall be paid by the Company as
they are incurred upon receipt, in each case, of an undertaking by or on behalf
of the Indemnitee to repay
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such amounts if it is ultimately determined that such Indemnitee is not entitled
to indemnification with respect thereto.
(c) The right of an Indemnitee to indemnification hereunder shall not be
exclusive of any other right or remedy that a Member, Representative, member of
the Board or Officer may have pursuant to applicable Law or this Agreement.
(d) An Indemnitee shall be fully protected in relying in good faith upon
the records of the Company and upon such information, opinions, reports or
statements presented to the Company by any Person as to matters the Indemnitee
reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, or any other facts pertinent to the
existence and amount of assets from which distributions to the Member might
properly be paid.
(e) To the extent that, at law or in equity, an Indemnitee has duties
(including fiduciary duties) and liabilities relating thereto to the Company or
to any other Indemnitee, an Indemnitee acting under this Agreement shall not be
liable to the Company or to any other Indemnitee for its good faith reliance on
the provisions of this Agreement or any approval or authorization granted by the
Company or any other Indemnitee. The provisions of this Agreement, to the extent
that they restrict the duties and liabilities of an Indemnitee otherwise
existing at law or in equity, are agreed by the Members to replace such other
duties and liabilities of such Indemnitee.
(f) Whenever in this Agreement or any other agreement contemplated herein
the Board is permitted or required to take any action or to make a decision in
its "sole discretion" or "discretion" or under a grant of similar authority or
latitude, the Board shall be required to consider only such interests and
factors as it desires, including its own, and shall, to the maximum extent
permitted by applicable law, have no duty or obligation to give any
consideration to any interests or factors affecting any Member.
(g) Whenever in this Agreement the Board is permitted or required to take
any action or to make a decision in its "good faith" or under another express
standard, the Board shall act under such express standard and shall not be
subject to any other or different standards imposed by this Agreement or any
other agreement contemplated herein or by relevant provisions of Law or in
equity or otherwise, and, notwithstanding anything contained herein to the
contrary, so long as the Board acts in good faith, the resolution, action or
terms so made, taken or provided by the Board shall not constitute a breach of
this Agreement or any other agreement contemplated herein or impose liability
upon the Board, any Representative thereof or any of such Representative's
Affiliates.
(h) To the fullest extent permitted by Law, a Representative shall be
deemed the agent of the Member that so appointed such Person as Representative,
and such Representative shall not be deemed an agent or sub-agent of the Company
or the other Members and shall have no duty (fiduciary or otherwise) to the
Company or the other Members. Each Member, by execution of this Agreement,
agrees and consents to the actions and decisions of such Representative within
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the scope of such Representative's authority as provided herein as if such
actions or decisions had been taken or made by the Member appointing such
Representative.
(i) The foregoing provisions of this Section 13.1 shall survive any
termination of this Agreement.
Section 13.2. Insurance. The Company shall have the power to purchase and
maintain insurance on behalf of any Indemnitee or any Person who is or was an
agent of the Company against any liability asserted against such Person and
incurred by such Person in any such capacity, or arising out of such Person's
status as an agent, whether or not the Company would have the power to indemnify
such Person against such liability under the provisions of Section 13.1 or under
applicable Law.
ARTICLE XIV
COMPETITIVE OPPORTUNITY AND COMPETING ACTIVITIES
Section 14.1. Competitive Opportunity. If any Representative acquires
knowledge of a potential transaction or matter which may be an investment or
business opportunity or prospective economic or competitive advantage in which
the Company could have an interest or expectancy (a "Competitive Opportunity")
or otherwise is then exploiting any Competitive Opportunity, the Company will
have no interest in, and no expectation that, such Competitive Opportunity be
offered to it, any such interest or expectation being hereby renounced so that
each Representative shall (i) have no duty to communicate or present such
Competitive Opportunity to the Company and (ii) have the right to hold any such
Competitive Opportunity for such Representative's (and its agents', partners' or
Affiliates') own account and benefit; or to recommend, assign or otherwise
transfer or deal in such Competitive Opportunity to Persons other than the
Company or any Affiliate of the Company. For the avoidance of doubt, this
Section 14.1 shall not operate to limit the duties or obligations of any of the
Management Members.
Section 14.2. Competing Activities. Except as otherwise expressly provided
in a written agreement between the Company and any Investor Member:
(i) such Investor Member or its Affiliates may engage or invest in,
independently or with others, any business activity of any type or
description, including without limitation those that might be the same as
or similar to the Company's business, and which from time to time compete,
directly or indirectly, with the Company, and, without limiting the
foregoing, the Members acknowledge that the Investor Members and their
respective Affiliates may in their sole discretion pursue such competing
business without disclosure of such competition to the Company;
(ii) neither the Company, any subsidiary of the Company nor any
other Member shall have any right in or to the activities described in
Section 14.2(i) or to receive or share in any income or proceeds derived
therefrom; and
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(iii) to the extent required by applicable Law in order to
effectuate the purpose of this provision, the Company shall have no
interest or expectancy, and specifically renounces any interest or
expectancy, in any such business activities or ventures.
ARTICLE XV
CONFIDENTIALITY; INTELLECTUAL PROPERTY RIGHTS.
Section 15.1. Confidentiality.
(a) No Member shall at any time (whether during or after the period such
Member is a Member of the Company) (i) retain or use for the benefit, purposes
or account of the Member or any other Person; or (ii) disclose, divulge, reveal,
communicate, share, transfer or provide access to any Person outside the Company
and its Subsidiaries (other than its professional advisers who are bound by
confidentiality obligations), any non-public, proprietary or confidential
information (including trade secrets, know-how, research and development,
software, databases, inventions, processes, formulae, technology, designs and
other intellectual property, information concerning finances, investments,
profits, pricing, costs, products, services, vendors, customers, clients,
partners, investors, personnel, compensation, recruiting, training, advertising,
sales, marketing, promotions, government and regulatory activities and approval)
concerning the past, current or future business, activities and operations of
the Company, its Subsidiaries or Affiliates and/or any third party that has
disclosed or provided any of same to the Company on a confidential basis,
including, without limitation, the terms of this Agreement or the Registration
Rights Agreement ("Confidential Information") without the prior authorization of
the Company. Notwithstanding the foregoing, nothing in this Agreement shall
preclude any Member or its Permitted Transferees from using any Confidential
Information in any manner reasonably connected to its investment in the Company
or the conduct of its business.
(b) Confidential Information shall not include any information that is (i)
generally known to the industry or the public other than as a result of the
Member's breach of this covenant or any breach of other confidentiality
obligations by third parties; (ii) made legitimately available to the Member by
a third party without breach of any confidentiality obligation; or (iii)
required by Law to be disclosed; provided that in connection with sub-clause
(iii), the Member shall give prompt written notice to the Company of such
requirement, disclose no more information than is so required, and cooperate
with any attempts by the Company to obtain a protective order or similar
treatment.
(c) Except as required by Law or except in connection with any proposed
Transfer in accordance with this Agreement, the Member will not disclose to
anyone, other than the Member's legal or financial advisors, the existence or
contents of this Agreement.
(d) Upon termination of any Management Member's Services with the Company
or its Subsidiaries for any reason, such Management Member shall (i) cease and
not thereafter commence use of any Confidential Information or intellectual
property (including any patent, invention, copyright, trade secret, trademark,
trade name, logo, domain name or other source
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indicator) owned or used by the Company, its Subsidiaries or Affiliates; (ii)
immediately destroy, delete, or return to the Company, at the Company's option,
all originals and copies in any form or medium (including memoranda, books,
papers, plans, computer files, letters and other data) in such Management
Member's possession or control (including any of the foregoing stored or located
in such Management Member's office, home, laptop or other computer, whether or
not such computer is Company property) that contain Confidential Information or
otherwise relate to the business of the Company, its Affiliates and
Subsidiaries, except that such Management Member may retain only those portions
of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (iii) notify and fully cooperate with the Company
regarding the delivery or destruction of any other Confidential Information of
which such Management Member is or becomes aware.
Section 15.2. Intellectual Property. Each Management Member who has
participated or will participate in the creation or development of any
intellectual property in the course of such individual's Service to the Company
or its Subsidiaries hereby (i) disclaims and agrees to disclaim any rights with
respect to such intellectual property, (ii) agrees that the Company or a
Subsidiary of the Company, as the case may be, is or will be deemed to be the
sole original owner/author of all such intellectual property and, (iii) if
requested by the Company or a Subsidiary of the Company, will execute an
assignment or an agreement to assign solely in favor of the Company or such
Subsidiary or such predecessor in interest, as applicable, all right, title and
interest in all such intellectual property.
ARTICLE XVI
DEFINITIONS
Section 16.1. Defined Terms. As used in this Agreement, terms defined in
the headings and the recitals shall have their respective assigned meanings, and
the following capitalized terms shall have the meanings ascribed to them below:
"Act" shall mean the Delaware Limited Liability Company Act, Delaware
Code, Title 6, Sections 18-101, et seq., as in effect from time to time.
"Additional Interests" shall have the meaning specified in Section 2.3.
"Adjusted Capital Account Deficit" means, with respect to each Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
(i) Credit to such Capital Account any amount which such Member
is obligated to restore or is deemed obligated to restore pursuant to
Treasury Regulations Section 1.704-2(g)(1) and (without duplication)
1.704-2(i)(5); 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).
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The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" shall have the meaning ascribed thereto in Rule 12b-2
promulgated under the Exchange Act, as in effect on the date hereof.
"Affiliate Transaction" shall have the meaning specified in Section 8.2.
"Agreement" shall have the meaning specified in the Preamble.
"Applicable Percentage" shall mean, with respect to each Senior Management
Member, (i) in the case of the Class B Units and Class D Units: (1) 0% until
September 22, 2005; (2) 20% beginning on September 23, 2005 and terminating on
September 22, 2006; (3) 40% beginning on September 23, 2006 and terminating on
September 22, 2007; (4) 60% beginning on September 23, 2007 and terminating on
September 22, 2008; (5) 80% beginning on September 23, 2008 and terminating on
September 22, 2009; and (6) 100% on and after September 23, 2009 (provided,
that, the Applicable Percentage in respect of the Class B Units and Class D
Units upon and following a Change of Control shall be 100% on and after the date
of such Change of Control); and (ii) in the case of the Class C Units, the
Applicable Percentage shall be 100% upon the earlier of a Liquidity Event or
September 23, 2012 (and prior thereto shall be 0%). Notwithstanding the
foregoing, (x) the Applicable Percentage with respect to any Senior Management
Member's Equity Incentive Units shall not change after the date of the
Termination Event with respect to such Senior Management Member (except that,
with respect to a termination of a Senior Management Member's Services, other
than due to termination by the Company for Cause or by the Senior Management
Member without Good Reason, the Applicable Percentage of the Class B Units and
Class D Units held by such Senior Management Member shall increase by twenty
percent to the extent the Applicable Percentage has not increased by twenty
percent during the calendar year in which such termination occurs) and (y) in no
event shall the Applicable Percentage with respect to any class of Equity
Incentive Units be greater than 100%.
"Assumed Tax Rate" means with respect to any Fiscal Year and net income or
capital gain recognized during such Fiscal Year, the highest effective marginal
statutory combined U.S. federal, state and local income tax rate applicable
during such Fiscal Year to a corporation or natural person residing in New York
City.
"Blackstone" means, collectively, the Members identified in Schedule A as
a "Blackstone Member" and their respective Affiliates.
"Blackstone Representatives" shall have the meaning specified in Section
3.2(a).
"Board" shall have the meaning specified in Section 2.3.
"C Corporation" means a corporation subject to taxation under Section 11
of the Code.
"Call Option Period" shall have the meaning specified in Section 6.1(a).
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"Call Price Determination Date" shall have the meaning specified in
Section 6.1(c).
"Capital Account" means, for each Member, the Capital Account established
for each Member pursuant to Article X as maintained for each Member as follows:
(i) To each Member's Capital Account there shall be credited (i)
such Member's Capital Contributions, if any, when and as received and
(ii) the Net Profit and other items of Company income and gain
allocated to such Member pursuant to Section 10.2 or Section 10.3;
(ii) To each Member's Capital Account there shall be debited (i)
the aggregate amount of cash distributed to such Member, (ii) the Net
Loss and other items of Company loss and deduction allocated to such
Member pursuant to Section 10.2 or Section 10.3, and (c) the Gross
Asset Value of any Company assets (other than cash) distributed to
such Member in kind (net of any liabilities secured by such
distributed property that the Member is considered to assume or "take
subject to" under Section 752 of the Code);
(iii) Capital Accounts shall be otherwise adjusted in accordance
with Treasury Regulations Section 1.704-1(b); and
(iv) If Units are transferred in accordance with the terms of
this Agreement, the Transferee shall succeed to the Capital Account
of the Transferor to the extent it relates to the transferred Units.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Treasury
Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner
consistent with such Treasury Regulations.
"Capital Contribution" means for each Member the total amount of cash and
the Gross Asset Value of property contributed to the Company by such Member
pursuant to Section 2.1 or otherwise, net of any liabilities associated with
such contributed property that the Company is considered to assume or "take
subject to" under Section 752 of the Code, which Capital Contribution shall be
reflected on Schedule A hereto as amended from time to time in accordance with
the terms of this Agreement.
"Cause" means, with respect to any Management Member, (i) if such
Management Member is party to an employment agreement or severance protection
agreement with the Company or any of its Subsidiaries, "Cause" as defined in
such agreement (ii) if such Management Member is not party to either an
employment agreement or severance protection agreement with the Company or any
of its Subsidiaries, (A) the willful failure or refusal by such Management
Member to perform his or her duties to the Company or its Affiliates (other than
any such failure resulting from such Management Members' incapacity due to
physical or mental illness), which has not ceased within ten (10) days after a
written demand for substantial performance is delivered to such Management
Member by the Company, which demand identifies the manner in which the Company
believes that such Management Member has not
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performed such duties; (B) the willful engaging by such Management Member in
misconduct which is materially injurious to the Company or its Affiliates,
monetarily or otherwise (including, but not limited to, breach of any
confidentiality or non-competition covenants to which such Management Member is
bound), (C) the conviction of such Management Member of, or the entering of a
plea of nolo contendere by such Management Member with respect to, a felony or
(D) substantial or repeated acts of dishonesty by such Management Member in the
performance of the his/her duties to the Company or its Affiliates.
"CEO" shall have the meaning specified in Section 3.2(a).
"Certificate" shall have the meaning specified in the Recitals.
"Chairman" shall have the meaning specified in Section 3.2(c).
"Change of Control" means the occurrence of any of the following events:
(i) any Person (together with its Affiliates) (other than (1) the
Company or any of its Subsidiaries, (2) any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or any of its Subsidiaries, (3) an underwriter temporarily
holding securities pursuant to an offering of such securities, (4)
any corporation or other entity owned, directly or indirectly, by
the equityholders of the Company and Vanguard in substantially the
same proportions as their ownership of Securities, or (5) any Person
that is an equityholder of the Company or its Subsidiaries on the
Effective Date), is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 50% of the combined
voting power of the Company's then outstanding voting securities;
(ii) a merger or consolidation of the Company with any Person, other than
(a) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or parent entity)
50% or more of the combined voting power of the voting securities of
the Company or such surviving or parent entity outstanding
immediately after such merger or consolidation or (b) a merger or
consolidation in which no Person (together with its Affiliates)
(other than (1) the Company or any of its Subsidiaries, (2) any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its Subsidiaries, (3) an
underwriter temporarily holding securities pursuant to an offering
of such securities, (4) any corporation or other entity owned,
directly or indirectly, by the equityholders of the Company and
Vanguard in substantially the same proportions as their ownership of
Securities, or (5) any Person that is an equityholder of the Company
or its Subsidiaries on the Effective Date) acquired 50% or more of
the combined voting power of the Company's then outstanding
securities; or
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(iii) a complete liquidation of the Company and Vanguard or a sale or
disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect).
"Class A Unit" shall have the meaning specified in the Recitals.
"Class B Unit" shall have the meaning specified in the Recitals.
"Class C Unit" shall have the meaning specified in the Recitals.
"Class D Unit" shall have the meaning specified in the Recitals.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" shall have the meaning specified in the Preamble.
"Company Minimum Gain" has the same meaning as "partnership minimum gain"
in Treasury Regulations Section 1.704-2(b)(2) and 1.704-2(d). A Member's share
of Company Minimum Gain shall be computed in accordance with the provisions of
Treasury Regulations Section 1.704-2(g).
"Company Option Period" shall have the meaning specified in Section
5.5(d).
"Competitive Opportunity" shall have the meaning specified in Section
14.1.
"Confidential Information" shall have the meaning specified in Section
15.1(a).
"Contract Date" shall have the meaning specified in Section 5.5(f).
"Control" (including its correlative meanings, "Controlled by" and "under
common Control with") means possession, directly or indirectly, of the power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise) of a Person.
"Cost" means, with respect to a Member's Unit, the price per Unit paid by
such Member (as proportionately adjusted for all subsequent distributions in
respect of Units and other recapitalizations).
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, that if the adjusted
basis for federal income tax purposes of an asset at the beginning of such
Fiscal Year is zero and the Gross Asset Value of the asset is
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positive, Depreciation shall be determined with reference to such beginning
Gross Asset Value using any permitted method selected by the Board.
"Designated Action" means (i) the voting of any Units and any action to be
taken with respect to a matter properly brought before the Members of the
Company, including without limitation the election of members of the Board, (ii)
any action to be taken by any Member in its capacity as such under this
Agreement, including without limitation any amendment, consent or waiver
relating to this Agreement and (iii) all actions taken in connection with any of
the actions referred to in clauses (i) and (ii) above.
"Designated Subsidiaries" shall have the meaning specified in Section 3.9.
"Drag-Along Fraction" shall have the meaning specified in Section 5.7(b).
"Drag-Along Notice" shall have the meaning specified in Section 5.7(b).
"Drag-Along Sale" shall have the meaning specified in Section 5.7(b).
"Dragged Securities" shall have the meaning specified in Section 5.7(b).
"Effective Date" shall have the meaning specified in the Recitals.
"83(b) Election" shall have the meaning specified in Section 9.6.
"Election Period" shall have the meaning specified in Section 5.6(b).
"Equity Incentive Units" shall have the meaning specified in the Recitals.
"Excess Loss" means any Net Loss the allocation of which to a Member would
cause such Member to have an Adjusted Capital Account Deficit (or increase the
amount of such deficit) at the end of any Fiscal Year.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date and subject to Section 6.1(e),
the fair market value on such date as determined by the Board in good faith
using its reasonable business judgment.
"Family Group," with respect to any natural person, means (i) the spouse,
issue, parents, grandparents, grandchildren, aunts, uncles, nieces and nephews
(in each case, whether natural or adopted) of such natural person and (ii) any
trust established solely for the exclusive benefit of such natural person or any
of the Persons referred to in the foregoing clause (i).
"Fiscal Year" means (i) the taxable year of the Company, which shall be
the calendar year unless otherwise required (or, in the Board's reasonable
discretion, permitted) by Section 706(b) of the Code, and (ii) for purposes of
Article X, the portion of any Fiscal Year for which
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the Company is required to (or does) allocate gross income, Net Profit, Net
Loss, or other items pursuant to Article X.
"Financing Default" means an event which would constitute (or with notice
or lapse of time or both would constitute) an event of default under any of the
following as they may be amended from time to time: (i) the Credit Agreement
dated as of September 23, 2004, among Vanguard Health Holding Company II, LLC,
Vanguard Holding Company II, Inc., Vanguard Health Holding Company I, LLC, Bank
of America, N.A., as Administrative Agent, Citicorp North America, Inc., as
Syndication Agent, General Electric Capital Corporation, LaSalle Bank, National
Association and Wachovia Bank, National Association, as Co-Documentation Agents,
Banc of America Securities LLC and Citigroup Global Markets Inc., as Joint Lead
Arrangers and Book Runners, and the lending institutions identified in the
Credit Agreement and the Administrative Agent and any extensions, renewals,
refinancings or refundings thereof in whole or in part; (ii) any other agreement
or instrument under which an amount of indebtedness of the Company or any of its
subsidiaries in excess of $10,000,000 is outstanding as of the time of the
aforementioned event and any extensions, renewals, refinancings or refundings
thereof in whole or in part; (iii) any provisions of the operating agreement of
the Company or the Company's or any of its material subsidiaries' organizational
documents designating the terms of any membership units or capital stock or
setting forth restrictive financial covenants; (iv) any amendment of, supplement
to or other modification of any of the agreements or instruments referred to in
clauses (i) through (iii) above; and (v) any of the securities issued pursuant
to or whose terms are governed by the terms of any of the agreements or
instruments set forth in clauses (i) through (iv) above, and any extensions,
renewals, refinancings or refundings thereof in whole or in part.
"Good Reason" means, with respect to any Management Member, (i) if such
Management Member is party to an employment agreement or a severance protection
agreement with the Company or any of its Subsidiaries, after the occurrence of a
Change of Control, "Good Reason" as defined in such agreement or (ii) in all
other cases (including in all cases prior to the occurrence of a Change of
Control), (A) the failure of the Company to pay or cause to be paid to such
Management Member any base salary or incentive compensation when due under the
terms of any applicable employment agreement or incentive arrangement, (B) any
adverse change in such Management Member's title or position such that they are
materially diminished from such Management Member's existing title or position
or (C) any substantial and sustained diminution in such Management Member's
authority or responsibilities such that they are materially inconsistent with
such Management Member's title or position; provided that any of the events
described in clauses (A), (B) or (C) shall constitute "Good Reason" only if the
Company fails to cure such event within 30 days after receipt from such
Management Member of written notice of the event which constitutes Good Reason;
provided further that "Good Reason" shall cease to exist for an event on the
60th day following the later of its occurrence or such Management Member's
knowledge thereof, unless such Management Member has given the Company written
notice thereof prior to such date.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
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"Gross Asset Value" means, with respect to any Company asset, the adjusted
basis of such asset for Federal income tax purposes, except as follows:
(v) The initial Gross Asset Value of any Company asset
contributed by a Member to the Company shall be the gross Fair Market
Value of such Company asset as of the date of such contribution;
(vi) The Gross Asset Value of each Company asset shall be
adjusted to equal its respective gross Fair Market Value, as of the
following times: (i) the acquisition of an additional Unit in the
Company by any new or existing Member in exchange for more than a de
minimis Capital Contribution unless the Board reasonably determines
that such adjustment is not necessary to reflect the relative
economic interests of the Members in the Company; (ii) the
distribution by the Company to a Member of more than a de minimis
amount of Company assets (other than cash) as consideration for all
or part of its Units unless the Board reasonably determines that such
adjustment is not necessary to reflect the relative economic
interests of the Members of the Company; (iii) the liquidation of the
Company within the meaning of Treasury Regulations Section Section
1.704-1(b)(2)(ii)(g); and (iv) such other dates as may be specified
in Treasury Regulations under Section 704(c) of the Code;
(vii) The Gross Asset Value of a Company asset distributed to any
Member shall be the Fair Market Value of such Company asset as of the
date of distribution thereof;
(viii) The Gross Asset Value of each Company asset shall be
increased or decreased, as the case may be, to reflect any
adjustments to the adjusted basis of such Company asset pursuant to
Section 734(b) or Section 743(b) of the Code, but only to the extent
that such adjustments are taken into account in determining Capital
Account balances pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m); provided, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent that an adjustment pursuant to subparagraph (ii) above is
made in conjunction with a transaction that would otherwise result in
an adjustment pursuant to this subparagraph (iv); and
(ix) If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to subparagraphs (i), (ii) or (iii)
above, such Gross Asset Value shall thereafter be adjusted to reflect
the Depreciation taken into account with respect to such Company
asset for purposes of computing Net Profits and Net Losses.
"Indemnitee" shall have the meaning specified in Section 13.1.
"Independent Appraiser" shall mean a nationally recognized firm of
independent public accountants or other valuation experts that shall be selected
by the Company and subject to the
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consent of the Person requesting the retention of such firm, which consent shall
not be unreasonably withheld.
"Independent Representatives" shall have the meaning specified in Section
3.2.
"Invested Capital" means, at any time with respect to any Units, the
aggregate amount of Capital Contributions made in respect of such Units.
"Investor Group" means any of Blackstone or MSCP.
"Investor Members" means those Members who are members of an Investor
Group.
"IPO" means an initial firm commitment underwritten public offering of
Shares pursuant to an effective registration statement under the Securities Act,
other than pursuant to a registration statement on Form S-4 or Form S-8 or other
limited purpose form.
"IPO Entity" shall have the meaning specified in Section 7.2.
"Lapse Date" shall have the meaning specified in Section 5.1(a)
"Law" means any statute, law, regulation, ordinance, rule, injunction,
order, decree, governmental approval, directive, requirement, or other
governmental restriction or any similar form of decision of, or determination
by, or any interpretation or administration of any of the foregoing by, any
Governmental Authority.
"Liquidity Event" means the completion of (i) a Transfer by Blackstone of
Securities to a Person other than a Permitted Transferee of Blackstone for
consideration consisting of cash or Liquid Securities, (ii) a recapitalization
of, or payment of a dividend or distribution by, the Company or its
Subsidiaries, (iii) a complete liquidation, dissolution or winding up of the
Company and Vanguard, or (iv) a distribution-in-kind by Blackstone of Securities
to its partners, members or shareholders in accordance with the terms of the
applicable Blackstone partnership agreement or other organizational document,
which, after giving effect to such transaction together with all other
previously completed transactions of a type described in clause (i), (ii), (iii)
or (iv), results in the receipt by Blackstone of consideration having a fair
market value (measured at the time of receipt) in excess of $2,500 per Security
in respect of at least 25% of the Securities held by Blackstone immediately
following the Effective Date (for the avoidance of doubt, if any transaction
affects more than 25% of such Securities, the consideration will be applied pro
rata to all such affected Securities); provided that with respect to any
distribution-in-kind under clause (iv), for purposes of this definition
Blackstone shall be deemed to have received consideration with respect to such
distribution-in-kind in an amount equal to the fair market value (measured as of
the time of such distribution-in-kind) of the Securities so distributed.
"Liquid Securities" means common stock of any corporation that (i) has
been registered under the Securities Act, (ii) is capable of being immediately
sold (without the exercise of any registration rights) by the recipient thereof
on a national securities exchange or quotation system
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in accordance with applicable Law immediately upon consummation of the
transaction in which such recipient received such common stock and (iii)
represents less than 10% of the total outstanding common stock of such
corporation (other than common stock held by Affiliates of such corporation).
"Management Representative" means Xxxxxxx X. Xxxxxx, Xx., or if Xx. Xxxxxx
is no longer CEO, the Representative of the Management Members on the Board, if
any, designated pursuant to Section 3.2(b)(ii).
"Management Members" means those Members identified as Management Members
on Schedule A (including the Other Rollover Members) and their respective
Permitted Transferees who have become Members.
"Member" means each Person that (a) is an initial signatory to this
Agreement, or has been admitted to the Company as a Member of the Company in
accordance with the provisions of this Agreement, and (b) has not ceased to be a
Member of the Company in accordance with the provisions of this Agreement or for
any other reason. No Person that is not a Member shall be deemed a "member"
under the Act.
"Member Minimum Gain" means an amount, with respect to each Member
Non-recourse Debt, equal to the Company Minimum Gain that would result if such
Member Non-recourse Debt were treated as a Non-recourse Liability, determined in
accordance with Treasury Regulations Section 1.704-2(i)(3).
"Member Non-recourse Debt" has the same meaning as the term "partner
nonrecourse debt" in Treasury Regulations Section 1.704-2(b)(4).
"Membership Interests" means a Member's entire equity interests in the
Company, including such Member's economic interest, the right to vote on or
participate in the Company's management, and the right to receive information
concerning the business and affairs of the Company, in each case, to the extent
expressly provided in this Agreement or required by the Act.
"Merger Agreement" shall have the meaning specified in the Recitals.
"MSCP" means, collectively, the Members identified in Schedule A as a
"MSCP Member" and their respective Affiliates.
"MSCP IV" shall have the meaning specified in Section 3.2.
"MSCP Representative" shall have the meaning specified in Section 3.2.
"Net Profit and Net Loss" means, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (including for this purpose, all items of
income, gain, loss or deduction required to be separately stated pursuant to
Code Section 703(a)(1)), with the following adjustments:
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(x) Any income of the Company that is exempt from Federal income
tax and not otherwise taken into account in computing Net Profit or
Net Loss pursuant to this definition shall be added to such taxable
income or loss;
(xi) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) of the
Code expenditures pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(i) (other than expenses in respect of which an
election is properly made under Section 709 of the Code), and not
otherwise taken into account in computing Net Profit or Net Loss
pursuant to this definition shall be subtracted from such taxable
income or loss;
(xii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii), (iii), or (iv) of the
definition of Gross Asset Value, the amount of such adjustment shall
be taken into account as gain (if the adjustment increases the Gross
Asset Value of an asset) or loss (if the adjustment decreases the
Gross Asset Value of an asset) from the disposition of such Company
asset for purposes of computing Net Profit or Net Loss;
(xiii) Gain or loss resulting from any disposition of any Company
asset with respect to which gain or loss is recognized for Federal
income tax purposes shall be computed by reference to the Gross Asset
Value of the Company asset disposed of, notwithstanding that the
adjusted tax basis of such Company asset may differ from its Gross
Asset Value;
(xiv) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation for
such Fiscal Year, computed in accordance with the definition of
Depreciation;
(xv) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) is required, pursuant
to Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Accounts as a result of a
distribution other than in liquidation of a Member's interest in the
Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) from the disposition of such
asset and shall be taken into account for purposes of computing Net
Profit or Net Loss; and
(xvi) Any items of income, gain, loss or deduction specially
allocated under Section 10.3, except Section 10.3(e), shall be
excluded.
"Non-recourse Liability" shall have the meaning set forth in Treasury
Regulations Section 1.752-1(a)(2).
"Offer" shall have the meaning specified in Section 5.5(b).
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"Offered Securities" shall have the meaning specified in Section 8.1(a).
"Offered Securities" shall have the meaning specified in Section 5.5(b).
"Offering Notice" shall have the meaning specified in Section 5.5(b).
"Offeror" shall have the meaning specified in Section 5.5(b).
"Officer" means each Person who has been designated as, and who has not
ceased to be, an officer of the Company pursuant to Section 3.7 hereof, subject
to the resolution of the Board appointing such Person as an officer of the
Company.
"Original Operating Agreement" shall have the meaning specified in the
Recitals.
"Other Blackstone Investors" shall have the meaning specified in the
Recitals.
"Other Rollover Members" means the Members (other than the Investor
Members) who are not employees of Vanguard on the date of this Agreement and
have purchased Class A Units by either contributing equity of Vanguard or the
cash proceeds from the Merger.
"Ownership Percentage" means, with respect to any Member, the percentage
obtained by multiplying 100 by an amount equal to (i) the number of Class A
Units and Shares owned by such Member (together with its Affiliates) divided by
(ii) the number of outstanding Class A Units and Shares (other than Class A
Units or Shares owned by the Company or any of its subsidiaries).
"Permitted Transferee" means (a) in the case of a natural person, any
individual who received a Member's Unit pursuant to applicable Laws of descent
and distribution or any member of such Member's Family Group, (b) in the case of
an entity, (i) any of its Affiliates, (ii) if such entity is a member of an
Investor Group, any other member of such Investor Group, (iii) any general or
limited partner of such entity or any other member of such entity's Investor
Group (if any), (iv) any managing director, general partner, director, limited
partner, officer or employee of such entity or any other member of such entity's
Investor Group (if any), or any member of a Family Group of any of the foregoing
Persons described in this clause (iv) or (v) any trust the beneficiaries of
which, or any corporation, limited liability company or partnership the
stockholders, members or general or limited partners of which, include only such
entity, Persons described in the foregoing clauses (i)-(iv) or members of a
Family Group of any such Person and (c) in the case of MSCP, (i) any Person
having a relationship to MSCP or Metalmark Subadvisor LLC of a type described in
the foregoing clause (b), (ii) any investment fund managed by Metalmark
Subadvisor LLC or any of its Affiliates or (iii) any sub-advisor to MSCP.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Pre-Emptive Rights Holders" shall have the meaning specified in Section
8.1(a).
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"Preferential Return Value" means, as of any time the aggregate dollar
amount that would be necessary to be distributed to the holders of Class A-1
Units so that the value of all distributions made by the Company with respect to
the Class A-1 Units as of such time equals three (3) times the Invested Capital
with respect to the Class A Units.
"Public Share FMV", per Share, means the arithmetic mean of the high and
low prices per share as reported on such date on the composite tape of the
principal national securities exchange on which such shares are listed or
admitted to trading, or, if no composite tape exists for such national
securities exchange on such date, then on the principal national securities
exchange on which such shares are listed or admitted to trading, or, if the
shares are not listed or admitted on a national securities exchange, the
arithmetic mean of the per share closing bid price and per share closing asked
price on such date as quoted on the National Association of Securities Dealers
Automated Quotation System (or such market in which such prices are regularly
quoted) (the "NASDAQ"), or, if no sale of shares shall have been reported on
such composite tape or such national securities exchange on such date or quoted
on the NASDAQ on such date, then the immediately preceding date on which sales
of the shares have been so reported or quoted shall be used to calculate the
Public Share FMV.
"Qualified IPO" shall mean an IPO that results in gross proceeds of at
least $50 million.
"Register" shall have the meaning set forth in Section 5.4(b).
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date hereof, by and among Vanguard, the Members and
the Other Blackstone Investors, as it may be amended, supplemented or restated
from time to time.
"Regulatory Allocations" shall have the meaning specified in Section
10.3(e).
"Representatives" shall have the meaning specified in Section 3.2(a).
"ROFR Period" shall have the meaning specified in Section 5.5(a).
"Securities" means, collectively, the Units and the Shares.
"Security Certificate" shall have the meaning set forth in Section 5.4(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Management Member" means each of the following Management Members:
Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxx, Xxxxxx X. Xxxxx; Xxxxxx X. Xxxxxxx; Xxxxx
Xxxxx; Xxxxxxxx X. Xxxxxxxxxx III; Xxxxx X. Xxxxxx; Xxxx X. Xxxxxxxx; Xxxxxx X.
Xxxxxxxx; Xxxxx Xxxxxxxx; Xxxxxx X. Xxxxxx; Xxxxxxx X. Xxx; Xxxxx X. Xxxxxxxx;
Xxxx X. Xxxxxx; Xxxx X. Xxxxxxx; Xxxxxx X. Ways; and Xxxxxxx Xxxxx.
"Services" means a Management Member's employment if the Management Member
is an employee of the Company or any of its Affiliates.
-51-
"Shares" means shares of common stock of the IPO Entity.
"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, Representatives or trustees thereof is at the time owned
or Controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the total voting power of stock (or equivalent ownership interest) of the
limited liability company, partnership, association or other business entity is
at the time owned or Controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or Control the managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Tag-Along Fraction" shall have the meaning specified in Section 5.6(a).
"Tag-Along Member" shall have the meaning specified in Section 5.6(a).
"Tag-Along Notice" shall have the meaning specified in Section 5.6(a).
"Tag-Along Price" shall have the meaning specified in Section 5.6(a).
"Tag-Along Purchaser" shall have the meaning specified in Section 5.6(a).
"Tag-Along Securities" shall have the meaning specified in Section 5.6(a).
"Tax Matters Partner" shall have the meaning specified in Section 12.2(c).
"Termination Event" shall have the meaning specified in Section 6.1(a).
"Transfer" (including its correlative meanings, "Transferor" and
"Transferee") shall mean, with respect to any security, directly or indirectly,
to sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a
security interest in, offer, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of any economic, voting or other rights
in or to such security. When used as a noun, "Transfer" shall have such
correlative meaning as the context may require.
"Transferring Member" shall have the meaning specified in Section 5.5(a).
"Treasury Regulations" means the final or temporary regulations that have
been issued by the U.S. Department of Treasury pursuant to its authority under
the Code, and any successor regulations.
-52-
"Unit" shall have the meaning specified in the Recitals. Units may be
issued in different classes and in whole and fractional numbers. Except to the
extent otherwise provided herein, each Unit of a class represents the same
fractional interest in gross income, Net Profit, Net Loss and distributions as
each other Unit in such class.
"Unit Certificates" shall have the meaning set forth in Section 5.4(b).
"Unvested Units" shall mean, as of the date of any determination, with
respect to the Equity Incentive Units held by a Senior Management Member, any
such Equity Incentive Units that are not Vested Units.
"Vanguard" shall have the meaning specified in the Recitals.
"Vested Units" shall mean (1) as of the date of any determination, with
respect to each class of Equity Incentive Units held by a Senior Management
Member, the number of Equity Incentive Units of such class held by such Senior
Management Member times the Applicable Percentage of such Senior Management
Member with respect to such class and (2) all Class A Units.
"VCOC Member" shall have the meaning specified in Section 3.10.
"Warrants" shall have the meaning specified in Section 7.1.
Section 16.2. Other Definitional Terms; Interpretation.
(a) The words "hereof", "herein", and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(b) The headings in this Agreement are included for convenience of
reference only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
ARTICLE XVII
MISCELLANEOUS
Section 17.1. Assignment and Binding Effect. Except pursuant to Transfers
of Securities in accordance with this Agreement, neither the Company nor any
Member shall assign all or any part of this Agreement without the prior written
consent of the Company and all other Members. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties permitted hereunder.
-53-
Section 17.2. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be personally served in writing, shall
be deemed to have been given on the date of service, and shall be addressed as
follows:
To the Company: VHS Holdings LLC
c/o Blackstone Management Associates IV L.L.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
VHS Holdings LLC
00 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxx
Fax: (000) 000-0000
With copies to: Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx Xxxxx
Fax: (000) 000-0000
To Blackstone: The Blackstone Group
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Fax: (000) 000-0000
With a copy to: Xxxxxxx Xxxxxxx & Xxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx Xxxxx
Fax: (000) 000-0000
To MSCP: Xxxxxx Xxxxxxx Capital Partners
0000 Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxx
Fax: (000) 000-0000
With a copy to: Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx Xxxx
-54-
Fax: (000) 000-0000
To Any Management Member: c/o Vanguard Health Systems, Inc.
00 Xxxxxx Xxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: General Counsel
Fax: (000) 000-0000
Section 17.3. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
WHICH WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(b) The parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in any federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby irrevocably consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 17.2
shall be deemed effective service of process on such party.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 17.4. Entire Agreement. This Agreement and the Registration Rights
Agreement set forth the entire understanding and agreement of the parties hereto
and supersede any and all other understandings, term sheets, negotiations or
agreements between the parties hereto relating to the subject matter of this
Agreement and the Registration Rights Agreement.
Section 17.5. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
Section 17.6. Severability. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other provision
of this Agreement, but this Agreement shall be construed in a manner which, as
nearly as possible, reflects the original intent of the parties.
-55-
Section 17.7. Amendment and Modification. This Agreement may only be
modified or amended in writing by a majority of the holders of outstanding Class
A Units and, in the case of a modification or amendment that would adversely
affect the rights, privileges or interests of the holders of any class of the
Equity Incentive Units, by the holders of a majority of the outstanding Equity
Incentive Units of such class. Notwithstanding anything to the contrary in this
Section 17.7, any modification or amendment of this Agreement which would
adversely affect the rights, privileges or interests of any Member
disproportionately relative to the rights, privileges or interests of the other
Members shall require the agreement of such disproportionately affected Member.
Notwithstanding the foregoing, this Agreement shall be deemed amended from time
to time to reflect the addition of a party to this Agreement pursuant to Section
2.3 or 5.1(b), and no consent pursuant to this Section 17.7 shall be required in
connection with any such amendment.
Section 17.8. Waiver. Any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party granting
such waiver but such waiver or failure to insist upon strict compliance with
such representation or warranty, obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
future failure.
Section 17.9. Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws and regulations, to
consummate and make effective the provisions of this Agreement.
Section 17.10. Sections, Exhibits. References to a section are, unless
otherwise specified, to one of the sections of this Agreement and references to
an "Exhibit" or "Schedule" are, unless otherwise specified, to one of the
exhibits or schedules attached to this Agreement.
Section 17.11. Specific Enforcement. The Members and the Company
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they may
be entitled at law or in equity.
Section 17.12. Successors. Except as otherwise expressly provided in this
Agreement, Permitted Transferees are entitled to all of the rights and subject
to all of the obligations of the transferor hereunder from whom they received
their Securities regardless of whether the Agreement elsewhere so expressly
provides.
Section 17.13. Computation of Time. In computing any period of time under
this Agreement, the day of the act, event or default from which the designated
period of time begins
-56-
to run shall not be included. The last day of the period so computed shall be
included, unless it is a Saturday, Sunday or legal holiday, in which event the
period shall run until the end of the next day which is not a Saturday, Sunday
or legal holiday.
Section 17.14. Liability for Debts of the Company; Limited Liability
(a) Except as otherwise provided in the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company, and no
Member shall be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Member.
(b) Except as otherwise expressly required by Law, a Member, in its
capacity as such, shall have no liability to the Company, any other Member or to
the creditors of the Company in excess of such Member's Capital Contribution and
other payments required to be made by such Member under this Agreement.
(c) An individual Member may also be an employee, agent, officer or
director of the Company or any Subsidiary of the Company. The existence of these
relationships and acting in such capacities shall not affect the liability of
the individual Member so existing or acting.
Section 17.15. No Right of Partition. No Member shall have the right to
seek or obtain partition by court decree or operation of Law of any Company
property, or the right to own or use particular or individual assets of the
Company.
Section 17.16. Power of Attorney
(a) Each Member hereby constitutes and appoints each Representative and
the Liquidator, with full power of substitution, as such Person's true and
lawful agent and attorney in fact, with full power and authority in such
Person's name, place and stead, to execute, swear to, acknowledge, deliver, file
and record in the appropriate public offices (i) this Agreement, all
certificates and other instruments and all amendments thereof in accordance with
the terms hereof which the Board deems appropriate or necessary to form,
qualify, or continue the qualification of, the Company as a limited liability
company in the State of Delaware and in all other jurisdictions in which the
Company may conduct business or own property; (ii) all instruments which the
Board deems appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with its terms;
(iii) all conveyances and other instruments or documents which the Board deems
appropriate or necessary to reflect the dissolution of the pursuant to the terms
of this Agreement, including a certificate of cancellation; and (iv) all
instruments relating to the admission, withdrawal or substitution of any Member
pursuant to the terms hereof.
(b) The foregoing power of attorney is irrevocable and coupled with an
interest, and shall survive and not be affected by the death, disability,
incapacity, dissolution, bankruptcy, insolvency or termination of any Member and
the Transfer of all or any portion of such Member's Units and shall extend to
such Member's heirs, successors, assigns and personal representatives.
-57-
Section 17.17. Title to Company Assets. Company assets shall be owned by
the Company as an entity, and no Member, individually or collectively, shall
have any ownership interest in such Company assets or any portion thereof. Legal
title to any or all Company assets may be held in the name of the Company, the
Board or one or more nominees, as the Board may determine. The Board hereby
declares and warrants that any Company assets for which legal title is held in
its name or the name of any nominee shall be held in trust by the Board or such
nominee for the use and benefit of the Company in accordance with the provisions
of this Agreement. All Company assets shall be recorded as the property of the
Company on its books and records, irrespective of the name in which legal title
to such Company assets is held.
Section 17.18. Creditors. None of the provisions of this Agreement shall
be for the benefit of or, to the fullest extent permitted by law, enforceable by
any creditors of the Company or any of its Affiliates, and no creditor who makes
a loan to the Company or any of its Affiliates may have or acquire (except
pursuant to the terms of a separate agreement executed by the Company in favor
of such creditor) at any time as a result of making the loan any direct or
indirect interest in Company profits, losses, distributions, capital or property
other than as a secured creditor.
Section 17.19. Other Blackstone Investors. Blackstone shall cause the
Other Blackstone Investors to comply with Section 3.9 and Articles V, VI, XV,
XVI and XVII as if the Other Blackstone Investors were party to this Agreement
as a Blackstone Member. The parties hereto agree that Blackstone shall have the
rights and benefits under such Section and Articles as if the Other Blackstone
Investors were party to this Agreement as a Blackstone Member.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-58-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
VHS HOLDINGS LLC
By: /s/ Xxxx Xxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxx
Title: President and Treasurer
[Signature Page to LLC Agreement]
BLACKSTONE FCH CAPITAL PARTNERS IV L.P.
By: Blackstone Management Associates IV
L.L.C., as a General Partner
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
BLACKSTONE HEALTH COMMITMENT PARTNERS L.P.
By: Blackstone Management Associates IV
L.L.C., as a General Partner
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
BLACKSTONE CAPITAL PARTNERS IV - A L.P.
By: Blackstone Management Associates IV
L.L.C., as a General Partner
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP
IV - A L.P.
By: Blackstone Management Associates IV
L.L.C., as a General Partner
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: Managing Director
[Signature Page to LLC Agreement]
XXXXXX XXXXXXX CAPITAL PARTNERS III, X.X.
XXXXXX XXXXXXX CAPITAL INVESTORS, L.P.
MSCP III 892 INVESTORS, L.P.
By: MSCP III, LLC,
as General Partner of each of the
limited partnerships named above
By: Xxxxxx Xxxxxxx Capital Partners III,
Inc., as Member
By: /s/ Xxxx Xxx
-----------------------------------------
Name: Xxxx Xxx
Title: Managing Director
XXXXXX XXXXXXX XXXX XXXXXX CAPITAL
PARTNERS IV, X.X.
XXXXXX XXXXXXX XXXX XXXXXX CAPITAL
INVESTORS IV, L.P.
MSDW IV 892 INVESTORS, L.P.
By: MSDW Capital Partners IV, LLC,
as General Partner of each of the
limited partnerships named above
By: MSDW Capital Partners IV, Inc.,
as Member
By: /s/ Xxxx Xxx
-----------------------------------------
Name: Xxxx Xxx
Title: Managing Director
[Signature Page to LLC Agreement]
Management Members:
/s/ Xxxxxxx X. Xxxxxx, Xx.
------------------------------------
Name: Xxxxxxx X. Xxxxxx, Xx.
/s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxx
/s/ Xxxxx X. Xxxxx
------------------------------------
Name: Xxxxx X. Xxxxx
/s/ Xxxxxxxx X. Xxxxxxxxxx III
------------------------------------
Name: Xxxxxxxx X. Xxxxxxxxxx III
/s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
/s/ Xxxx X. Xxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxx
/s/ Xxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxx
/s/ Xxx Xxxxxxxx
------------------------------------
Name: Xxx Xxxxxxxx
/s/ Xxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxx
[Signature Page to LLC Agreement]
/s/ Xxxxxxx X. Xxx
------------------------------------
Name: Xxxxxxx X. Xxx
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
/s/ Xxxx X. Xxxxxx
------------------------------------
Name: Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
/s/ Xxxxxx X. Ways
------------------------------------
Name: Xxxxxx X. Ways
/s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxx
/s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
/s/ Xxxx Xxxx
------------------------------------
Name: Xxxx Xxxx
/s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
/s/ Xxxx X. XxXxxx
------------------------------------
Name: Xxxx X. XxXxxx
[Signature Page to LLC Agreement]
/s/ Xxxx X. XxXxxxxx
------------------------------------
Name: Xxxx X. XxXxxxxx
/s/ Xxxxxxx X. XxXxxxxxx
------------------------------------
Name: Xxxxxxx X. XxXxxxxxx
/s/ Xxxxxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
/s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
/s/ Xxxx X. Xxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxx
/s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
/s/ Xxxxxxx Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxx
/s/ Xxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxxxx
/s/ Xxxx Xxxxxx
------------------------------------
Name: Xxxx Xxxxxx
/s/ Xxxx Xxxxx
------------------------------------
Name: Xxxx Xxxxx
[Signature Page to LLC Agreement]
/s/ Xxxxxxx Xxxxx
------------------------------------
Name: Xxxxxxx Xxxxx
/s/ Xxx Xxxxxx
------------------------------------
Name: Xxx Xxxxxx
/s/ Xxxxxx Xxxxxxx
------------------------------------
Name: Xxxxxx Xxxxxxx
/s/ Xxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxxxx
/s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
/s/ Xxxxx Xxxx
------------------------------------
Name: Xxxxx Xxxx
/s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
/s/ Xxxxxx Xxxx
------------------------------------
Name: Xxxxxx Xxxx
/s/ Xxxxxxxx Xxxxxxxx
------------------------------------
Name: Xxxxxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
------------------------------------
Name: Xxxxx Xxxxx
[Signature Page to LLC Agreement]
/s/ Xxxxx Xxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxx
/s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
/s/ Xxxx Xxxxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxxxx
/s/ Xxxxx Xxx Xxxxxx
------------------------------------
Name: Xxxxx Xxx Xxxxxx
/s/ Nicke Xxxx Xxxxxx
------------------------------------
Name: Nicke Xxxx Xxxxxx
/s/ Xxxx Xxxxxxx
------------------------------------
Name: Xxxx Xxxxxxx
/s/ Xxxxx X. Mild
------------------------------------
Name: Xxxxx X. Mild
/s/ A. Xxxx Xxxxx
------------------------------------
Name: A. Xxxx Xxxxx
/s/ Xxxxx X. Xxxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxxx
/s/ Xxxxx Xxxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxxx
/s/ Xxxxxxx Xxxxxxxxx
------------------------------------
Name: Xxxxxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxx
------------------------------------
Name: Xxxxxx Xxxxxx
[Signature Page to LLC Agreement]
/s/ Xxxxxx Xxxx
----------------------------------------
Name: Xxxxxx Xxxx
/s/ Xxxxxxxx Xxxxxxxxx
----------------------------------------
Name: Xxxxxxxx Xxxxxxxxx
/s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
/s/ Xxxx X. Xxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxx
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
/s/ Xxxxxxx Xxxxxxx
----------------------------------------
Name: Xxxxxxx Xxxxxxx
/s/ Xxxx Xxxx XxXxxxxxxx Xx., as Trustee
----------------------------------------
Name: Xxxx Xxxx XxXxxxxxxx Xx. Trust
/s/ Xxxxxxx X. Xxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxx
/s/ Xxxxxx X. Xxxxxxx, Xx.
----------------------------------------
Name: Xxxxxx X. Xxxxxxx, Xx.
/s/ Xxxxx Xxxxxxx
----------------------------------------
Name: Xxxxx Xxxxxxx
[Signature Page to LLC Agreement]
/s/ Xxxxxxx X.X. Xxxx
------------------------------------
Name: Xxxxxxx X.X. Xxxx
[Signature Page to LLC Agreement]
BAPTIST HEALTH SERVICES.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
[Signature Page to LLC Agreement]
EXHIBIT A
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN
TRANSFER AND OTHER RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED LIMITED
LIABILITY COMPANY OPERATING AGREEMENT, DATED AS OF SEPTEMBER 23, 2004 AMONG VHS
HOLDINGS LLC AND CERTAIN OF ITS MEMBERS, AS IT MAY BE AMENDED FROM TIME TO TIME,
AND, AMONG OTHER THINGS, MAY NOT BE OFFERED OR SOLD EXCEPT IN COMPLIANCE WITH
SUCH TRANSFER RESTRICTIONS. COPIES OF SUCH AGREEMENTS ARE ON FILE WITH THE
SECRETARY OF VHS HOLDINGS LLC AND ARE AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST THEREFOR. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID
AGREEMENTS.
CERTIFICATE FOR CLASS __ UNITS OF VHS HOLDINGS LLC
Certificate Number: _____ Number of Units: _____
VHS Holdings LLC, a Delaware limited liability company (the "Company"),
hereby certifies that ____________________ (the "Holder") is the registered
owner of ____ Class __ Units of the Company. This certificate (the
"Certificate") shall constitute a security governed by Article 8 of the Delaware
Uniform Commercial Code-Investment Securities (Delaware Code Title 6: Section
8-101, seq.) The rights, powers, preferences, restrictions and limitations of
the Class ___ Units are set forth in, and this Certificate and the Class ___
Units hereby represented are issued and shall in all respects be subject to the
terms and provisions of, the Amended and Restated Limited Liability Company
Operating Agreement of the Company, dated as of September 23, 2004, as the same
may be amended from time to time (the "LLC Agreement"). By acceptance of this
Certificate, and as a condition to being entitled to any rights and/or benefits
with respect to the Class ___ Units evidenced hereby, a registered holder hereof
(including any registered transferee hereof) is deemed to have agreed, to comply
with and be
bound by all terms and conditions of the LLC Agreement. The Company will furnish
a copy of such LLC Agreement to each member of the Company without charge upon
written request to the Company at is principal place of business or registered
office, as the case may be.
Date: _______________, 200___
VHS HOLDINGS LLC
By: _______________________
Name:
Title:
EXHIBIT B
ELECTION TO INCLUDE UNITS IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased units (the "Units") of VHS Holdings, LLC
(the "Company") on ______ __, 200[_]. The undersigned desires to make an
election to have the Units taxed under the provision of Section 83(b) of the
Internal Revenue Code of 1986, as amended ("Code Section 83(b)"), at the time
the undersigned purchased the Units.
Therefore, pursuant to Code Section 83(b) and Treasury Regulation
Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election,
with respect to the Units (described below), to report as taxable income for
calendar year ____ the excess, if any, of the Units' fair market value on ____
__, 200[_] over the purchase price thereof.
The following information is supplied in accordance with Treasury
Regulation Section 1.83-2(e):
1. The name, address and social security number of the undersigned:
_____________________________
_____________________________
_____________________________
SSN:_________________________
2. A description of the property with respect to which the election
is being made: ______ Class B Units, ____ Class C Units and ____ Class D Units.
3. The date on which the property was transferred: _______ __,
200[_]. The taxable year for which such election is made: calendar year ____.
4. The restrictions to which the property is subject: The Units are
subject to a time-based vesting schedule and, in the case of Class C Units,
accelerated vesting upon attaining certain performance criteria. If the
undersigned ceases to be employed by the Company or any of its subsidiaries
prior to the vesting of the Units, the Units are subject to repurchase by the
Company at the lower of (i) the original purchase price paid for the Units and
(ii) the fair market value of the Units on the date of such repurchase. The
Units are also subject to transfer restrictions.
5. The aggregate fair market value on ______ __, 200[_] of the
property with respect to which the election is being made, determined without
regard to any lapse restrictions: $_______ (i.e., $__ for __ Class B Units, $__
for __ Class C Units and $__ for __ Class D Units).
6. The aggregate amount paid for such property: $_______ (i.e., $__
for __ Class B Units, $__ for __ Class C Units and $__ for __ Class D Units).
7. A copy of this election has been furnished to the Secretary of
the Company pursuant to Treasury Regulations Section 1.83-2(e)(7).
Dated: ______ __, 200[_] _____________________________
[NAME]
