EXHIBIT 10.8
AMENDED AND RESTATED
PARTNERS' OPERATING AGREEMENT
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THIS AMENDED AND RESTATED PARTNERS' OPERATING AGREEMENT (this "Agreement")
is entered into as of the 1st day of April, 1996, among DIAMOND TECHNOLOGY
PARTNERS, INC., an Illinois corporation (the "Company") and certain individuals
designated by the Company or any "Affiliate" (as defined in Section 1.1(f)
hereof) as a "Partner;" said individuals and all other persons who may hereafter
be designated by the Company or any Affiliate as "Partners" pursuant to the
provisions hereof, are referred to herein collectively as the "Partners" and
individually as a "Partner."
WITNESSETH:
WHEREAS, the parties to this Agreement entered into that certain Partners'
Operating Agreement dated as of March 22, 1994, which was amended by: (i) a
certain First Amendment to Diamond Technology Partners, Inc. Partners' Operating
Agreement dated June 24, 1994; (ii) a certain Second Amendment to Diamond
Technology Partners, Inc. Partners' Operating Agreement dated as of November 30,
1994; and (iii) a certain Third Amendment to Diamond Technology Partners, Inc.
Partners' Operating Agreement dated as of April 27, 1995 (collectively, the
"Prior Partners' Operating Agreement"), whereby the parties established a set of
procedures relating to the utilization of the combined voting power of the
Partners' shares of stock of the Company, including internal governance and
compensation provisions to be realized through the strength of said combined
voting power and whereby the parties granted a proxy to the person holding the
position of Chairman of the Board and Chief Executive Officer of the Company and
provided for the selection of any successors to such Chief Executive Officer
("CEO");
WHEREAS, the parties to this Agreement and various other shareholders of
the Company entered into that certain Voting and Stock Restriction Agreement
dated as of March 22, 1994, which was amended by: (i) a certain Amendment to
Voting and Stock Restriction Agreement dated as of March 22, 1994; (ii) a
certain Amendment Number Two to Voting and Stock Restriction Agreement dated as
of November 30, 1994; and (iii) a certain Amendment Number Three to Voting and
Stock Restriction Agreement dated as of April 27, 1995 (collectively the "Prior
Voting Agreement");
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the Prior Voting Agreement is being amended and restated in its
entirety, to provide, among other things, for the incorporation therein of the
provisions relating to the grant of the proxy to the CEO (the "Voting
Agreement");
WHEREAS, a Delaware company has been, or will be, organized by the
shareholders of the Company to own the stock of, and to provide certain
management services for, the Company and other possible Affiliates; and
WHEREAS, the parties wish to amend each of the aforementioned agreements,
and, in light of the agreements having already been amended several times, now
wish to amend and restate the Prior Partners' Operating Agreement in its
entirety, to eliminate certain provisions that will be incorporated into the
Voting Agreement and to modify the Prior Partners' Operating Agreement to
incorporate the new company structure resulting from the reincorporation and the
formation of a wholly owned subsidiary;
NOW, THEREFORE, for and in consideration of the foregoing premises and the
mutual covenants and agreements contained herein, and other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
SUCCESSOR CEO
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1.1. Selection of Successor.
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Upon any CEO of the Company ceasing to hold the office of CEO as determined
according to the terms of the Voting Agreement, his or her successor shall be
selected by means of the following procedures, which shall be conducted as
expeditiously as possible as soon as the occasion shall arise:
(a) The Management Committee of the Partners (as constituted
pursuant to Section 2.1 hereof), by vote of a majority of its members,
shall slate six Partners for election of three of them to a "CEO
Nominating Committee," to consist of three Partners;
(b) The Partners shall vote on the six nominees, and the three
receiving the highest number of votes shall constitute the CEO
Nominating Committee;
(c) The CEO Nominating Committee, by vote of a majority of its
members, shall select a Partner as its nominee (who may, if said
committee so desires, be the incumbent CEO) and shall propose such
nominee to the Partners;
(d) The Partners, by the affirmative vote of a simple majority of
the Partners, may approve the nominee who shall thereby become the
holder of the proxy granted under the Voting Agreement; however, if they
shall fail to approve the nominee, the entire procedure set forth in
this Section 1.1 shall be repeated, beginning with the slating and
election of a new CEO Nominating Committee;
(e) The nominee shall be submitted to the Board of Directors of the
Company (the "Board of Directors"), which shall vote on his or her
election as CEO. The Board of Directors shall only consider nominations
for CEO pursuant to the procedures provided in this Section 1.1. It is
intended and understood that each person selected under the foregoing
procedures to be the successor CEO shall become the successor holder of
the
proxy granted under the Voting Agreement; and
(f) The CEO of the Company, and each successor CEO, shall also be
submitted to the Board of Directors of each Affiliate (as defined in
this Section), which shall vote on his or her election as CEO of the
Affiliate (or such other position of comparable authority). The CEO of
each Affiliate shall be deemed to have resigned from that position upon
his or her resignation or removal as the CEO of the Company. For
purposes of this Agreement, the term "Affiliate" shall mean any
affiliate, subsidiary, or parent of, or any other entity controlling,
controlled by, or under common control of, the Company.
1.2. Removal of CEO.
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Notwithstanding the foregoing, the present CEO shall be subject to
removal by the Board of Directors from said position at any time after the
effective date (the "IPO Date") of the registration statement filed under the
Securities Act of 1933 (as amended), in connection with the first public
offering of securities of the Company, and each subsequent CEO shall be subject
to removal at any time -- i.e., shall be required to resign as CEO and to assign
the proxy to a successor pursuant to the Voting Agreement, who shall be selected
in accordance with Section 1.1 hereof -- in the event that either of the
following shall occur:
(a) if the Management Compensation Committee (as constituted
pursuant to Article II hereof) shall have sent to the Partners a
proposal to initiate the CEO nominating process, and the proposal is
approved by the affirmative vote of two-thirds (2/3) of the total number
of Partners; or
(b) if an annual compensation plan, as presented to the
Partners pursuant to Article III hereof, is not approved by at least
seventy percent (70%) of the Partners, pursuant to Section 3.6.
1.3. Retention of Present CEO.
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Each Partner hereby promises and agrees that, subject to the provisions
of the Voting Agreement relating to the CEO ceasing to hold office, the present
CEO shall continue to hold such office until the sixth (6th) anniversary date of
the IPO Date. Accordingly, each Partner elected to the Board of Directors shall
vote to elect and retain the present CEO in such position until the IPO Date.
Further, each Partner elected to the Board of Directors of any Affiliate shall
also vote to elect and retain the present CEO as the CEO (or such other position
of comparable authority) of the Affiliate until the IPO Date.
ARTICLE II
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COMMITTEE STRUCTURE
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2.1. Management Committee.
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There shall be a "Management Committee," consisting of the CEO and
Partners appointed to the Management Committee by the CEO (each of whom shall be
appointed for an indefinite term and who may be removed from such position at
any time by the CEO). The Management Committee is a committee of the Partners
and may take any action within its authority for the Company and any of the
Affiliates.
2.2. Management Compensation Committee and Nominating Committee.
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In addition to the CEO Nominating Committee and the Management
Committee, there shall be a "Management Compensation Committee" and a
"Nominating Committee," each consisting of three Partners. For each position to
be filled on one of such committees, the Management Committee shall nominate
three candidates; the Partners shall vote on the three nominees, and the Partner
receiving the highest number of votes shall be deemed elected to the committee.
Members of each of these committees shall be elected for staggered terms of
three years each, with one member elected each year (except for the three
initial members of the committee, who shall be elected for terms of one, two,
and three years, respectively, with the Partner receiving the most votes deemed
elected to the longest term). No Partner may serve consecutive terms on either
of these committees, no Partner may serve simultaneously on both committees, and
the CEO may not serve on either committee. Each committee can have, at most,
one member of the Management Committee as a member of the committee. In case of
tie votes, or of the death of a Partner or the inability of a Partner to
continue to serve or his or her resignation from a committee or the Company, the
CEO shall break the tie or specify the replacement for such Partner.
2.3. Duties of Nominating Committee.
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(a) The Nominating Committee's objectives are to screen thoroughly
all new Partner candidates for the Company and any Affiliates, and to present
those it deems appropriate to the Partners for a vote of admittance. The
Nominating Committee will work within the guidelines presented by the Management
Committee regarding the need for and limitations to the number of new Partners.
(b) A new Partner will be admitted when he or she has the endorsement of the
Nominating Committee and the affirmative vote of eighty percent (80%) of the
Partners, at which time he or she shall be submitted for election by the Board
of Directors as an officer of the Company or the Affiliate employing such
Partner, as the case may be; provided, however, that no person shall be deemed
to have become a "Partner" for purposes of this Agreement until such person
shall have executed a written agreement in which he or she agrees to be subject
to all of the provisions hereof and to accept, assume and perform all of the
duties and obligations of a Partner hereunder.
2.4. Duties of Management Committee.
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(a) The Management Committee will review all new proposals, new
work,
new contracts and proposed new client relationships for the Company and any
Affiliates. The Management Committee shall have the sole authority to accept
new work and make all decisions regarding staffing. Additionally, no new client
relationships will be initiated without approval of the Management Committee and
the assignment of a client director.
(b) On an annual basis, the Management Committee will be responsible for
the preparation of a strategic update and an operating plan for each of the
Company and any of the Affiliates, as necessary. These documents will be
presented at a full Partners' meeting for discussion and comment. They will then
be presented to the Board of Directors of the Company for approval.
2.5. Other Duties.
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(a) Any Partner may be removed from his or her position as a Partner
and have his or her employment relationship with the Company and/or an Affiliate
terminated, at any time and without any reason or cause or the need to assert or
demonstrate any reason or cause, if the CEO shall recommend such removal and
termination and if the recommendation shall be approved by the affirmative vote
of at least two-thirds (2/3) of the members of the Management Compensation
Committee and by all of the members (other than such Partner, if a member) of
the Management Committee.
(b) The functions of the Management Compensation Committee, and
related functions of the other committees, are set forth in Article III, below.
ARTICLE III
ANNUAL COMPENSATION PLAN
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3.1. Aggregate Compensation.
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At the beginning of the last quarter of each fiscal year, the CEO and
the Management Committee shall commence deliberations and determine
recommendations concerning the aggregate amount of bonuses (if any) and the
aggregate number of stock options (if any) to be granted to all employees, based
on their performance during said fiscal year, and the aggregate amount of base
compensation to be payable to all employees for the coming fiscal year. The CEO
and the Management Committee shall send the recommendations to the Board of
Directors of the Company and each of the Affiliates (as applicable).
3.2. Board of Directors Approval.
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The Board of Directors of the Company and each of the Affiliates (as
applicable), after receiving such recommendation, shall make a decision
regarding these aggregate amounts. If such Boards of Directors (or their
respective Compensation Committee) shall have approved the recommendation, it
shall be sent to the Management Committee; if it shall not approve the
recommendation, the matter shall be referred back to the CEO and the Management
Committee,
and the entire procedure shall re-commence.
3.3. Allocations to Partners.
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(a) The Management Committee, after the Board of Directors has
approved the aggregate recommendations, shall recommend specific allocations to
individual Partners of the aggregate amounts of bonuses, options and base
compensation set forth in the recommendations, and shall refer the matter to the
Management Compensation Committee.
(b) The Management Compensation Committee, after receiving the
recommendations, shall make a decision thereon:
(i) If it approves the recommendations, it shall submit the
recommendations to the Partners for approval; or
(ii) If it shall not approve the recommendations, it shall
refer the matter back to the Management Committee.
3.4. Approval by Partners.
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If, after receiving the recommendations, at least seventy percent
(70%) of the Partners shall approve them, the recommendations shall be referred
to the Board of Directors of the Company and the Affiliates (as applicable) for
final approval; if fewer than seventy (70%) of the Partners shall approve the
recommendations, the matter shall be referred back to the CEO and the Management
Committee (under Section 3.1 of this Agreement) and, subject, in the case of
recommendations made after the IPO Date, to the implementation of the removal
procedures set forth in Section 1.2 hereof, the entire process of this Article
III shall be repeated until concluded.
3.5. Implementation.
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The recommendations shall be implemented if approved by the Board of
Directors of the Company and each of the Affiliates (as applicable). The
recommendations shall apply to the Company and each of the Affiliates (as
applicable).
ARTICLE IV
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PARTNERS' COMPENSATION PROGRAM
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4.1. Adoption of Program.
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The Partners' hereby adopt the compensation program (the "Program"),
substantially in the form attached as Exhibit A hereto, and shall hold all
shares of common stock, no par value, of the Company (including all shares of
common stock, no par value, of Company owned by such Partner, and any other
shares of stock or other voting securities, of any class or series, of Company,
of any Affiliate, or of any entity into or with which Company or any Affiliate
may be
merged or consolidated, that the Partner may hereafter acquire by any means from
Company, any Affiliate or from any other person or entity, including shares
issued as stock dividends or pursuant to any recapitalization or reorganization,
and shares issued in exchange for such shares in any merger, consolidation,
reorganization, or transfer or exchange of assets, of Company or any Affiliate,
and any options, warrants, or other rights to acquire any such common stock;
collectively, the "Common Stock") subject to the terms of the Program.
4.2. Amendment.
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Except as may be provided in the Program, the Program may be amended from time
to time by recommendation of the Management Committee and the Management
Compensation Committee to the Board of Directors and by action of the Board of
Directors, subject to approval of a majority of all of the Partners. All of the
Partners agree to be bound by the terms of any amendments to the Program
approved according to the foregoing procedures.
ARTICLE V
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DEFERRED COMPENSATION PLAN
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The Deferred Compensation Plan that was instituted for certain Partners
pursuant to the Prior Partners' Operating Agreement is hereby terminated in all
respects. The Deferred Credits (as defined under the Prior Partners' Operating
Agreement) accrued for the benefit of each Partner who joined the Company (or
any Affiliate) prior to February 28, 1995, plus an amount equal to interest on
the undistributed portion thereof, compounded annually, at a rate equal to the
floating "prime rate" as announced from time to time by American National Bank
and Trust Company of Chicago (and adjusted for changes at the time of each
announced change in such rate), shall be payable by the Company to such Partner
pursuant to the recommendations of the Management Committee to the Board of
Directors and by action of the Board of Directors.
ARTICLE VI
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MISCELLANEOUS
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5.1. Stock Issuances to Employees.
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The Company promises and agrees not to grant, issue or sell any shares
of the Common Stock:
(a) to any person seeking to become a Partner until such
person shall have adopted this Agreement as if he or she was an original party
hereto; and
(b) to any person who is an employee of the Company
(including any person seeking to become a Partner), or as an inducement to a
person to become an employee of the Company, until such person shall have
adopted the Voting Agreement as if he or she was an original party thereto.
5.2. Affiliates.
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The Partners and the Company agree to use their best efforts to cause each
Affiliate of the Company, now or hereafter existing, to adopt this Agreement as
if such entity was an original party hereto.
5.3. Termination.
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This Agreement shall terminate upon the dissolution of the Company or at such
earlier time as only one Partner owns Common Stock.
5.4. Amendment.
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This Agreement may be amended in any manner by a written instrument
duly executed by the Company and all of the Partners.
5.5. Successors and Assigns.
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All of the terms, provisions and conditions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
heirs, administrators, executors, successors and assigns.
5.6. Severability.
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If any portion or provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions hereof shall
nevertheless be deemed valid, enforceable and carried into effect, unless the
effect thereof would clearly violate the manifest present intention of the
parties hereto.
5.7. Governing Law.
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This Agreement shall be subject to and governed by the laws of the
State of Illinois irrespective of the fact that any of the parties hereto may be
or become a resident of a different state.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Amended and Restated
Partners Operating Agreement to be executed as of the date first written above.
DIAMOND TECHNOLOGY
PARTNERS, INC.
By:
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Title:
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