1
EXHIBIT 10.3
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED PURSUANT TO A CONFIDENTIAL TREATMENT
REQUEST FILED WITH THE COMMISSION. ASTERISKS (*) IDENTIFY WHERE SUCH
CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED PORTIONS HAVE BEEN FILED
SEPARATELY WITH THE COMMISSION.
JMG CAPITAL MANAGEMENT LLC
LIMITED LIABILITY COMPANY
AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT (the "Agreement") is made
and entered into as of the commencement of business on April 28, 1998 (the
"Effective Date") by and among the Persons (as defined herein) who become
signatories hereto and who are identified from time to time on Schedule A hereto
as Members (as defined herein).
WHEREAS, JMG Capital Management, Inc. ("JMG")and Xxxxxxxx X. Xxxxxx
have formed JMG Capital Management LLC (the "Company") as a limited liability
company pursuant to the Delaware Limited Liability Company Act, 6 Del. C. ss.
18-101 et seq and have filed a Certificate of Formation (the "Certificate") of
the Company with the Office of the Secretary of State of the State of Delaware;
WHEREAS, JMG has transferred substantially all of the business and
assets of JMG to the Company in exchange for the assumption by the Company of
certain of the liabilities of JMG and for a membership interest in the Company
with the effect that the Company will conduct the business formerly conducted by
JMG;
WHEREAS, the Company has admitted Xxxxxxxx X. Xxxxxx as a Member of
the Company with the rights and duties set forth herein; and
WHEREAS, Asset Alliance Corporation, a Delaware corporation, has
purchased certain interests in the Company and contributed such interests to
Asset Alliance Holding Corporation, a Delaware corporation ("AAC"), and the
existing Members of the Company wish to admit AAC as a Member with the rights
and duties set forth herein and to admit Asset Alliance Management Corp., a
Delaware corporation wholly-owned by AAC, as the managing Member (the "Manager")
with the rights and duties set forth herein and AAC, the Manager and the
foregoing existing Member wish to provide for the operation, governance,
delegation of day-to-day management to a management
2
committee initially consisting of the individuals identified on Schedule B
hereto, allocation and distribution of profits and losses and other matters as
among the Members;
NOW, THEREFORE, in consideration of the mutual promises contained
herein and for good and valuable consideration the receipt and adequacy of which
is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
GENERAL
1.1 Definitions. For purposes of this Agreement, the following capitalized
terms shall have the following meanings:
"AAA" is defined in Section 7.15.
"AAC" is defined in the recitals.
"AAC's Unpaid Preferred Distribution" means an amount equal to the
excess of (i) 50% of the amount by which Revenues From Operations (as defined
herein) exceeds Qualifying Shared Operating Expenses (as defined herein), in
each case for all periods of the Company since January 1, 1998 ("AAC's Preferred
Distribution Amount"), over (ii) the aggregate distributions made to AAC
pursuant to Section 3.3(a)(ii) since January 1, 1998 (for this purpose, the
Special Reduction (as defined in the Purchase Agreement) shall be deemed to be a
distribution made to AAC pursuant to Section 3.3(a)(ii)).
"Act" means the Delaware Limited Liability Company Act, Title 6,
Section 18-101, et. seq., of the Delaware Code, as the same may be amended from
time to time.
"Additional Non-Manager Members" is defined in Section 4.3(a).
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account (as
defined herein) as of the end of the relevant allocation period, after giving
effect to the following adjustments:
2
3
(a) Crediting to such Capital Account (i) any amount which such
Member is obligated to restore following the liquidation of such Member's
Membership Interest in the Company (pursuant to the terms of this Agreement or
otherwise); (ii) the amount of such Member's share of the Company Minimum Gain
(which share will be determined in accordance with the method for determining a
partner's share of partnership minimum gain under Regulations (as defined
herein) Section 1.704-2(g)); and (iii) the amount of such Member's share of
Member-Related Minimum Gain (as defined herein) (which share will be determined
in accordance with the method for determining a partner's share of partner
nonrecourse debt minimum gain under Regulations Section 1.704-2(i)(5)); and
(b) Debiting to such Capital Account the items described in
Regulations Sections 1.704- 1(b)(2)(ii)(d)(4), (5), and (6).
This definition is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d), and will be interpreted consistently therewith.
"Admission" is defined in Section 4.1(a).
"Adverse Change" ****[This definition has been omitted pursuant to
the confidential treatment request referenced on the cover page hereto. The
omitted portion has been filed separately with the Commission.]****
"Affiliate" means any Person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the Person specified and "controlled Affiliate" means any
Affiliate of a Person that is directly, or indirectly through one or more
intermediaries, controlled by such Person but does not include, for purposes of
Article 2 hereof, any investment fund for which the Company or any controlled
Affiliate serves as general partner, investment advisor, manager or in a similar
capacity. The term "control" shall mean with respect to any Person the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
3
4
"Agreement" means this Limited Liability Company Agreement, as it
may be further amended, supplemented or amended from time to time in accordance
with the terms hereof.
"Allocation Year" means (i) the period beginning on the Effective
Date and ending on December 31, 1998 or (ii) any subsequent twelve (12) month
period commencing on January 1 and ending on December 31.
"Applicable Law" means any statute, law, ordinance, rule, public
administrative interpretation, regulation, order, writ, injunction, directive,
judgment, decree or other requirement of any governmental authority or
self-regulating organization applicable to the Company, any controlled
Affiliate, any client, any Member or any of their respective properties, assets,
officers, directors, employees or agents.
"Assignment" means any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb and noun forms of such term), or any offer to do any
of the foregoing, of all or any portion of a Membership Interest or JMG
Interest, as applicable. "Assignor" means a Person who makes an Assignment and
"Assignee" means a Person who receives an Assignment.
"Authorized Affiliate" means, with respect to the Company, any
Person controlled by the Company or by the Members and designated as an
Authorized Affiliate by the Management Board (as defined herein) and the
Manager.
"Authorizing Events" is defined in Section 2.2(e).
"Bankruptcy" or "Bankrupt" means, with respect to any Member, such
Member making an assignment for the benefit of creditors, involuntarily or
voluntarily becoming a party to any liquidation or dissolution action or
proceeding with respect to such Member or any bankruptcy, reorganization,
insolvency or other proceeding for the relief of financially distressed debtors
with respect to such Member, or a receiver, liquidator, custodian or trustee
being appointed for such Member or a substantial part of such Member's assets
and, if any of the same occur involuntarily, the same not being dismissed,
stayed
4
5
or discharged within 90 days; or the entry of an order for relief against such
Member under Title 11 of the United States Bankruptcy Code. A Member shall be
deemed bankrupt if the Bankruptcy of such Member shall have occurred and be
continuing.
"Benchmark Operating Expenses" means ****.
"Book Depreciation" means, for each allocation period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to the Company's assets for such year or other period for
federal income tax purposes, except that if the Gross Asset Value of any asset
differs from its adjusted basis for federal income tax purposes at the beginning
of such year or other period, Book Depreciation with respect to such asset will
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 with respect to such asset for such year or other period bears to such
beginning adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization or other cost recovery deduction with respect to such
asset for such year is zero, Book Depreciation will be determined with reference
to such beginning Gross Asset Value using any reasonable method selected by the
Manager and the Management Board.
"Capital Account" means an account established and maintained for
each Member as provided in Section 3.1.
"Capital Contribution" means, as to each Member, the aggregate
amount of cash and the initial Gross Asset Value of any property other than cash
(net of liabilities assumed or taken subject to by the Company, without
duplication) contributed to the capital of the Company by or in the name of such
Member (or any prior holders of the Capital Account of such Member) in
connection with the issuance of Membership Interests or otherwise; provided,
however, that any contribution made by any Non-Manager Member pursuant to
Section 6.1(d) of the Purchase Agreement shall not be considered a Capital
Contribution but instead shall entitle such Non-Manager Member to the
distribution referred to in clause (i) of the final sentence of Section 3.4(a)
hereof.
5
6
"Capital Expenditures" means any expenditure of the Company, and the
Company's allocable portion of any expenditure of any controlled Affiliate, that
is not considered an expense under generally accepted accounting principles,
consistently applied, other than any Mandatory Investment (as defined herein).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor code thereto.
"Company Minimum Gain" means the sum, for all Company assets that
are subject to any Nonrecourse Liability (as defined herein), of the amounts of
income or gain that would be recognized if each such asset were disposed of in
full satisfaction of all Nonrecourse Liabilities secured by such asset (and for
no other consideration), and will be determined in accordance with the
principles set forth for determining partnership minimum gain in Regulations
Section 1.704-2(d).
"Competition" means ****[This definition has been omitted pursuant
to the confidential treatment request referenced on the cover page hereto. The
omitted portion has been filed separately with the Commission.]****
"Covered Person" shall mean a Member, any Affiliate of a Member, any
officer, director, shareholder, partner, employee or member of a Member of any
of its Affiliates, or any officer of the Company.
"Debenture Payment Default" is defined in Section 2.5(e).
"Effective Date" is defined in the opening paragraph.
"Fair Market Value" shall mean the fair market value as agreed upon
by the Manager and the Management Board (or, for purposes of Section 3.4 hereof,
if there shall be no Manager, the Liquidating Trustee (as defined herein) and
the Management Board) or, in the absence of such agreement, as determined by an
appraiser selected by the Manager (or, for purposes of Section 3.4 hereof, if
there shall be no Manager, the Liquidating Trustee) with
6
7
the prior consent of the Management Board, which consent will not be
unreasonably withheld.
"Fiscal Year" is defined in Section 5.2.
"For Cause" shall mean, with respect to the termination of a
Member's employment with the Company or any controlled Affiliate, any of the
following:
****[The remainder of this definition (approximately one and a half
pages) has been omitted pursuant to the confidential treatment request
referenced on the cover page hereto. The omitted portion has been filed
separately with the Commission.]****
"GAAP" is defined in Section 5.4(a).
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, subject to the following
exceptions and adjustments:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company will be the gross Fair Market Value of such asset, as
determined by the contributing Member and the Manager and the Management Board;
(b) The Gross Asset Value of all Company assets will be adjusted to
equal their respective gross Fair Market Values, as determined by the Manager
and the Management Board, immediately preceding the occurrence of any of the
following events: (i) a contribution of money or other property (other than a de
minimis amount) as consideration for the acquisition of an additional interest
in the Company by any new or existing Member if the Manager and the Management
Board determine that such adjustment is necessary or appropriate to reflect the
relative economic interests of the Member in the Company; (ii) the distribution
by the Company to a Member of more than a de minimis amount of money or other
property as consideration for an interest in the Company if the Manager and the
Management Board determine that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Members in the Company; and (iii)
the liquidation or dissolution of the
7
8
Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g);
(c) The Gross Asset Value of any Company asset distributed to any
Member will be the gross Fair Market Value of such asset on the date of
distribution as determined by the contributing Member and the Manager and the
Management Board;
(d) The Gross Asset Values of Company assets will be increased (or
decreased) to reflect any adjustment to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subsection (f) of the
definition of Net Income (as defined herein) or Net Loss (as defined herein);
provided, however, that Gross Asset Values will not be adjusted pursuant to this
subsection (d) to the extent the Manager and the Management Board determine that
an adjustment pursuant to subsection (b) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subsection (d); and
(e) If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subsection (a), (b), or (d) above, such Gross Asset Value
will thereafter be adjusted by the Book Depreciation (calculated in accordance
with Regulations Section 1.704-1(b)(2)(iv)(g)) rather than depreciation or
amortization or other cost recovery deduction as determined for federal income
tax purposes, taken into account with respect to such asset for purposes of
computing Net Income and Net Loss.
"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, parents and children (and estates, trusts, partnerships and
other entities and legal relationships of which a substantial majority in
interest of the beneficiaries, owners, investors, members or participants at all
times in question are, directly or indirectly, one or more of the Persons
described above and/or such individual) and any person who acquires an interest
in such individual's Membership Interest by will, intestacy laws or the laws of
descent or survivorship, by the laws of community property or
8
9
otherwise pursuant to a court order upon the divorce of such individual.
"Inadequate Performance" is defined in Section 4.5(d) hereof.
"Indebtedness" shall mean, with respect to a Person (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred in
the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations of such Person
under any financing leases, (d) all obligations of such Person in respect of
acceptances issued or created for the account of such Persons, and (e) all other
obligations or liabilities treated as indebtedness under the most senior debt
instruments of Asset Alliance Corporation outstanding from time to time.
"Intellectual Property" is defined in Section 2.5(b).
"Issuance Items" is defined in Section 3.2(b)(xiv).
"JMG Interest" with respect to any Person means that portion of the
outstanding shares of JMG common stock, no par value, directly or indirectly
beneficially owned by such Person.
"Liable Member" is defined in Section 1.8(f).
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).
"Liquidating Trustee" is defined in Section 6.2(a) hereof.
9
10
"Management Board" is defined in Section 2.2(a) hereof.
"Manager" is defined in the recitals, subject to change in
accordance with Article 4 hereof.
"Manager Member Interest" means the Membership Interest of the
Manager and all rights and benefits to which the Manager, AAC and their
Affiliates are entitled under this Agreement and the Act together with the
obligations of the Manager and AAC hereunder.
"Mandatory Investments" is defined in Section 3.3(a)(i) hereof.
"Member" shall mean any Person admitted to the Company as a "member"
within the meaning of the Act, which includes AAC, the Manager and the
Non-Manager Members (as defined herein) (excluding, for this purpose, Assignees
until admitted as Members pursuant to the provisions hereof), and includes any
Person admitted as an additional or substitute Non-Manager Member pursuant to
the provisions of this Agreement, in such Person's capacity as a Member of the
Company, in each case unless otherwise indicated. For purposes of the Act, the
Members shall constitute one (1) class or group of members.
"Members Indirect Interest" shall mean with respect to any Member
other than JMG, that share of JMG's Membership Interest attributable to a Member
determined by dividing the number of shares of JMG common stock, no par value,
directly or indirectly beneficially owned by such Member by the total number of
outstanding shares of JMG common stock, no par value, and multiplying such
quotient by JMG's Membership Interest, and with respect to JMG shall mean 0.
"Members Indirect Percentage Interest" shall mean with respect to
any Member other than JMG that share of JMG's Percentage Interest (as defined
herein) attributable to a Member determined by dividing the number of shares of
JMG common stock, no par value, directly or indirectly beneficially owned by
such Member by the total number of outstanding shares of JMG common stock, no
par value, and multiplying such quotient by JMG's Percentage Interest, and with
respect to JMG shall mean 0%.
10
11
"Membership Interest" means the limited liability company interest
of a Member in the Company at any particular time, including any and all rights
and benefits to which such Member is entitled under this Agreement and the Act,
together with the obligations of such Member under this Agreement and the Act.
"Member-Related Minimum Gain" means the minimum gain attributable to
Member-Related Nonrecourse Debt, determined in accordance with the rules set
forth for determining partner nonrecourse debt minimum gain in Regulations
Section 1.704-2(i)(3).
"Member-Related Nonrecourse Debt" means any nonrecourse debt of the
Company for which any Member or related person bears the economic risk of loss
(within the meaning of Regulations Section 1.752-2), and includes, for example,
nonrecourse debt with respect to which a Member or such related person is the
lender.
"Member-Related Nonrecourse Deduction" means any item of Company
loss, deduction or expense that is attributable to a Member-Related Nonrecourse
Debt, and will be determined in accordance with the rules set forth for
determining partner nonrecourse deductions in Regulations Section 1.704-2(i)(2).
"Net Income" or "Net Loss," as the case may be, for any period,
means an amount equal to the Company's Taxable Income (as defined herein) or
Taxable Loss (as defined herein) for such period, with the following
adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Income and Net Loss
pursuant to this definition will be added to such Taxable Income or will reduce
such Taxable Loss;
(b) Any expenditure of the Company described in Code Section
705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Income or Net Loss pursuant to this definition, will reduce
such Taxable Income or increase such Taxable Loss;
11
12
(c) If the Gross Asset Value of any Company asset is adjusted
pursuant to subsection (b) or (d) of the definition of Gross Asset Value, the
amount of such adjustment will be taken into account as gain or loss from the
disposition of such asset for purposes of computing Net Income or Net Loss;
(d) Gain or loss resulting from the disposition of any Company asset
with respect to which gain or loss is recognized for federal income tax purposes
will be computed by reference to the Gross Asset Value of the asset disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;
(e) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such Taxable Income or Loss,
there will be taken into account Book Depreciation for such allocation period;
(f) 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 Regulations Section 1.704-1(b)(2)(iv)(m) to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member's Interest, the amount of such adjustment will be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and will be taken into account for purposes of
computing Net Income or Net Loss; and
(g) Notwithstanding any other provision of this definition, any item
which is specially allocated pursuant to Section 3.2(b) of the Agreement will
not be taken into account in computing Net Income or Net Loss.
"Non-Manager Member" shall mean any Person who is or becomes a
Member pursuant to the terms hereof other than AAC, the Manager or any of their
Affiliates.
"Non-Manager Member Membership Interest" means the Membership
Interest of a Non-Manager Member and expressly excludes any Manager Member
Interest.
12
13
"Non-Manager Member Percentage Interest" means, for each Non-Manager
Member, the percentage obtained by dividing such Non-Manager Member's Percentage
Interest by the sum of the Percentage Interest held by all Non-Manager Members,
and multiplying such quotient by 100%.
"Non-Manager Member Pool" for any Allocation Year shall mean the
amount added to Non-Manager Members Unpaid Subordinated Distribution (as defined
herein) for such Allocation Year prior to any distributions thereof or any
compensation by the Company or any controlled Affiliate to any Member.
"Non-Manager Members Unpaid Catch-Up Distribution" means an amount
equal to the excess of (i) the amount, if any, by which distributions made to
AAC pursuant to Section 3.3(a)(ii) since January 1, 1998 exceed AAC's Preferred
Distribution Amount for all periods of the Company from January 1, 1998 through
the most recently completed Fiscal Year, over (ii) the aggregate distributions
made to Non-Manager Members pursuant to Section 3.3(a)(i) since January 1, 1998.
"Non-Manager Members Unpaid Subordinated Distribution" means an
amount equal to the excess of (i) 100% of Revenues From Operations for all
periods of the Company since January 1, 1998 over (ii) the sum of (A) 100% of
Operating Expenses (as defined herein) and Capital Expenditures for all periods
of the Company since January 1, 1998 (B) AAC's Unpaid Preferred Distribution,
(C) the aggregate distributions made to AAC pursuant to Section 3.3(a)(ii) since
January 1, 1998 (for this purpose, the Special Reduction (as defined in the
Purchase Agreement) shall be deemed to be a distribution made to AAC pursuant to
Section 3.3(a)(ii)), (D) Non-Manager Members Unpaid Catch-Up Distribution, (E)
the aggregate distributions made to Non-Manager Members pursuant to Section
3.3(a)(i) since January 1, 1998 and (F) the aggregate amount of salary paid to
Members pursuant to any employment agreements between the Company and such
Members.
"Nonrecourse Deduction" means any item of Company loss, deduction or
expense that is attributable to a Nonrecourse Liability, and will be determined
in accordance with the rules set forth in Regulations Sections 1.704-2(c) and
1.704-2(j)(1).
13
14
"Nonrecourse Liability" means any Company liability (or portion
thereof) for which no Member or related Person bears the economic risk of loss
(within the meaning of Regulations Section 1.752-2).
"Obligor" is defined in Section 2.5(e).
"Operating Expense" means, for any period, any expenditure,
liability or other item made or incurred during such period that is treated as
an expense (as opposed to a capital expenditure or repayment of principal for
borrowed money, for example) of the Company (including the Company's allocable
share of any such expense of any controlled Affiliate) for such period under
generally accepted accounting principles, consistently applied, and shall also
include the sum of all amounts by which any items previously included in
Revenues From Operations become partly or entirely uncollectible or are
collected at less than the amount previously included but in no event shall
Operating Expenses include (i) any amount for amortization or depreciation for
such period, (ii) any compensation to any Members or (iii) any net decline in
the aggregate value of all the capital interests of the Company in investment
funds for which the Company acts as investment advisor, general partner or the
like and the Company's allocable share of any such net decline in the aggregate
value of all the capital interests of any controlled Affiliate in investment
funds for which such controlled Affiliate acts in such capacity. Operating
Expense shall be reduced by any recoveries of previously incurred Operating
Expense including proceeds of insurance paid for out of Operating Expense. Any
recoveries in excess of Operating Expense for a particular period will be
carried over to the next period as a credit to Operating Expense.
"Percentage Interest" means the percentage set forth on Schedule A
for each Member as amended from time to time by the Manager in accordance with
the terms hereof.
"Period Benchmark Expenses" for any period shall mean Benchmark
Expenses times a fraction the numerator of which is the number of days in such
period and the denominator of which is 365.
14
15
"Permanent Disability" with respect to any Non-Manager Member means
such Non-Manager Member's physical or mental disability, as certified by a
physician satisfactory to the Manager which renders such Non-Manager Member
incapable of performing his material duties and services as an employee of the
Company and which continues for more than six consecutive months during any
one-year period or more than twelve months during any two-year period.
"Person" shall mean any individual, partnership (limited or
general), corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Premium Multiple" is defined in Section 2.2(e) hereof.
"Proceeding" is defined in Section 2.8(b).
"Purchase Agreement" is defined in Section 1.8(a) hereof.
****[This definition has been omitted pursuant to the confidential
treatment request referenced on the cover page hereto. The omitted portion has
been filed separately with the Commission.]****
"Regulations" means the Regulations promulgated under the Code.
"Regulatory Allocations" is defined in Section 3.2(b)(xv).
"Resignation" is defined in Section 4.5(e) hereof.
"Revenues From Operations" shall mean, for any period, the gross
revenues (without reduction to reflect expenses) of the Company (except as set
forth herein and except as otherwise agreed by the Manager and the Management
Board in a writing making reference to this definition), determined on an
accrual basis in accordance with generally accepted accounting principles
consistently applied, but (i) adjusted upward (but only to the extent not
duplicative) for the following items; (A) the sum of
15
16
the increase, if any, during such period in the Company's capital accounts in
any partnership (or similar investment entity) on account of such capital, (B)
the sum of the increase, if any, during such period in the Company's allocable
share of any such increase in such capital accounts of a controlled Affiliate
and (C) the sum of all cash withdrawals received during such period by the
Company (and the Company's allocable share of any such withdrawals by a
controlled Affiliate) with respect to any such partnership (or similar
investment entity), and (ii) adjusted downward (but only to the extent not
duplicative) for the following items: (A) the sum of the decrease, if any,
during such period in the Company's capital account in any partnership (or
similar investment entity) on account of such capital, (B) the sum of the
decrease, if any, during such period in the Company's allocable share of any
such decrease in such capital accounts of a controlled Affiliate and (C) the sum
of all Company cash contributed during such period by the Company (and the
Company's allocable share of any such contributions by a controlled Affiliate)
to any such partnership (or similar investment entity). For the foregoing
purposes gross revenues allocable to the capital accounts of the Company or a
controlled Affiliate in any partnership (or similar investment entity) other
than on account of capital (i.e. incentive or performance allocations) shall be
measured on an account by account basis and shall consist, for each such account
at any given point in time, of the amount thereof that would be allocated to the
Company's account (or such controlled Affiliate's account) if the date for
calculation and allocation or obligation to pay such allocation or fee were such
point in time, the effect of the foregoing being that at any particular time
other than the point in time that such fee or allocation is actually calculated
and allocated or payable (which itself may result in a positive addition to
Revenues From Operations or a negative deduction from Revenues From Operations)
the calculation required hereunder may result in a positive addition to Revenues
From Operations or a negative deduction from Revenues From Operations for the
period since the most recent calculation thereof hereunder; and (iii) gross
revenues from periodic investment advisory and management fees, if any, shall be
accrued on a daily, weekly, monthly or calendar quarterly basis. Notwithstanding
the foregoing, Revenues From Operations shall not include (i) proceeds of
(including any gain on) the
16
17
disposition of any asset of the Company, (ii) Capital Contributions by a Member
to the Company during such period, and (iii) proceeds received in respect of any
insurance policy (other than business interruption insurance).
"Series A Debenture" means the Series A Subordinated Convertible
Debenture due April 30, 2003, issued by Asset Alliance Corporation to JMG.
"Series B Debenture" means the Series B Subordinated Convertible
Debenture due April 30, 2003, issued by Asset Alliance Corporation to JMG.
"Taxable Income" and "Taxable Loss", as the case may be, for any
period, means the taxable income or taxable loss of the Company for such period,
determined in accordance with Code Section 703(a), including all items of
income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1).
1.2 Formation of Limited Liability Company. The Company was formed as a
Delaware limited liability company on March 20, 1998 by the filing of the
Company's Certificate of Formation, dated March 20, 1998 (the "Certificate of
Formation"), in the Office of the Secretary of State of the State of Delaware in
accordance with the Act.
1.3 Name. The name of the Company shall be, and the business of the
Company shall be conducted under the name of, "JMG Capital Management LLC" until
such time as amendments to the Certificate of Formation changing such name have
been filed in accordance with Applicable Law.
1.4 Continuation of Company. The Manager shall from time to time take all
such actions as may be deemed by it to be necessary or appropriate to effectuate
and permit the continuation of the Company as a limited liability company under
the Act and qualify the Company to act in any other state or country where the
Manager deems qualification necessary or desirable. The Members shall execute
such certificates, documents and instruments and take such other action as may
be necessary to enable the Manager to fulfill its responsibility under this
Section 1.4.
17
18
1.5 Offices. The Company's registered agent and office in the State of
Delaware shall be as set forth in the Certificate, subject to change at any time
by the Manager. The principal offices of the Company shall be at 0000 Xxxxxx xx
xxx Xxxxx, Xxxxx 0000, Xxx Xxxxxxx, XX 00000 or such other or supplemental
location or locations as the Management Board shall determine from time to time.
The Company may maintain offices at such other locations as the Management Board
may determine.
1.6 Purpose and Powers. The Company is organized for the purpose of acting
as an investment manager and providing investment management and advisory,
consulting, marketing, administrative and other services ancillary thereto or
useful in connection therewith. The Company may also engage in any other lawful
business or activity permitted by the Act that is agreed to in writing by the
Manager and the Management Board. In pursuing such purposes, the Company shall
possess and may exercise all of the powers and privileges permitted by the Act,
together with any powers incidental thereto, including the following:
(a) to conduct its business, carry on its operations and have and
exercise the powers granted to a limited liability company by the Act in any
state, territory, district or possession of the United States, or in any foreign
country that may be necessary, convenient or incidental to the accomplishment of
the purpose of the Company;
(b) to acquire by purchase, lease, contribution of property or
otherwise, own, hold, operate, maintain, finance, improve, lease, sell, convey,
mortgage, transfer, demolish or dispose of any real or personal property that
may be necessary, convenient or incidental to the accomplishment of the purpose
of the Company;
(c) to open, maintain and close bank, brokerage and other financial
accounts and to draw checks or other orders for the payment of money;
(d) to engage attorneys, accountants and such other persons as may
be necessary or advisable in connection with the foregoing objects and purposes;
18
19
(e) to employ and terminate employees, consultants and other agents
and define their duties and fix their compensation;
(f) to xxx and be sued, to present, defend, settle legal actions or
arbitration proceedings and participate in administrative or other proceedings,
in its name;
(g) to enter into, perform and carry out contracts of any kind,
including, without limitation, contracts with any Member, any Affiliate thereof,
or any agent of the Company necessary to, in connection with, convenient to, or
incidental to the accomplishment of the purpose of the Company;
(h) to purchase, take, receive, subscribe for or otherwise acquire,
own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose
of, and otherwise use and deal in and with, shares or other interests in or
obligations of domestic or foreign corporations, associations, general or
limited partnerships (including, without limitation, the power to be admitted as
a partner thereof and to exercise the rights and perform the duties created
thereby), trusts, limited liability companies (including, without limitation,
the power to be admitted as a Member or appointed as a Manager thereof and to
exercise the rights and perform the duties created thereby), or individuals or
direct or indirect obligations of the United States or of any government, state,
territory, governmental district or municipality or of any instrumentality of
any of them;
(i) to lend money for its proper purpose, to invest and reinvest its
funds, and to take and hold real and personal property for the payment of funds
so loaned or invested;
(j) to indemnify any Person in accordance with the Act and to obtain
any and all types of insurance;
(k) to cease its activities and cancel its Certificate of Formation;
(l) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with respect
to any
19
20
lease, contract or security agreement in respect of any assets of the Company;
(m) to borrow money and issue evidences of Indebtedness, and to
secure the same by a mortgage, pledge or other Lien on the assets of the
Company;
(n) to pay, collect, compromise, litigate, arbitrate or otherwise
adjust or settle any and all other claims or demands of or against the Company
or to hold such proceeds against the payment of contingent liabilities; and
(o) to make, execute, acknowledge and file any and all documents or
instruments necessary, convenient or incidental to the accomplishment of the
purpose of the Company.
1.7 Term. The Company shall continue in perpetuity until the Company is
dissolved in accordance with the provisions of this Agreement.
1.8 Members; Limited Authority and Liability.
(a) The names and addresses of the Members, the amount of the
initial Capital Account of each Member and the Percentage Interest of each
Member are set forth in Schedule A hereto, which Schedule may be amended from
time to time to reflect any change in the identity of Members and any changes in
the Percentage Interest of the Members, it being understood that changes in
Capital Accounts shall be recorded in the books and records of the Company and
not in Schedule A. The initial Capital Account balance of AAC shall be equal to
the aggregate value of the Purchase Price (as defined in the Purchase Agreement
dated March 26, 1998 by and among Asset Alliance Corporation, the initial
Non-Manager Members and other Persons, the "Purchase Agreement"), as such value
may be adjusted to reflect changes in the Purchase Price pursuant to Section 3.2
of such Purchase Agreement. Such aggregate Fair Market Value shall be allocated
among such contributed assets by the Manager and the Management Board.
(b) Article 2 grants authority to the Members to take certain
actions as specified therein. Except as provided in Article 2, no Member, in its
capacity as
20
21
such, has the authority or the power to act for or on behalf of the Company, to
do any act that would be binding on the Company, or incur any expenditures on
behalf of the Company. No Member shall be liable for the debts, obligations or
liabilities of the Company of any kind whatsoever, including under a judgment,
decree or order of a court, except as provided by Applicable Law. Subject to
Section 4.4 hereof, No Member shall be required to make any contribution to the
Company by reason of any negative balance in its Capital Account. A negative
balance in a Member's Capital Account shall not create any liability on the part
of the Member to any third party.
(c) Except as otherwise provided herein or by any applicable state
law, the Members shall be liable only to make their Capital Contributions
pursuant to this Section 1.8 and as set forth in Schedule A, and no Member shall
be required to lend any funds to the Company or to make any additional Capital
Contributions to the Company. No Member shall have any personal liability for
the repayment of any Capital Contribution of any other Member.
(d) The Company shall not admit additional Member(s) except as
specifically provided herein.
(e) No Individual Authority. Subject to the provisions of this
Agreement, no Member, acting alone, shall have any authority to act for, or to
undertake or assume, any obligations, debt, duty, or responsibility on behalf
of, any other Member.
(f) No Member Responsible for Other Member's Commitment. Neither the
Company nor any Member shall be responsible or liable for any Indebtedness or
obligation that is hereafter incurred by any other Member (or any of such
Member's shareholders, partners, directors, officers or Affiliates). In the
event that a Member (or any of such Member's shareholders, partners, directors,
officers or Affiliates (collectively, the "Liable Member")), whether prior to or
after the date hereof, incurs (or has incurred) any debt or obligation for which
neither the Company nor the other Members are to have any responsibility or
liability, the Liable Member shall and does hereby indemnify and hold harmless
the Company and the
21
22
other Member from any liability or obligation they may incur in respect thereof.
(g) Investment Representations. Each Member represents that it is
acquiring its Membership Interest in the Company for its own account for
investment purposes only and not with a view to the distribution or resale
thereof, in whole or in part, and each Member agrees that it will not effect any
disposition of all or any portion of, or offer to effect any disposition of all
or any portion of its Membership Interest, or solicit offers to buy from or
otherwise approach or negotiate in respect thereof with any person or persons
whomsoever, all or any portion of its interest (i) in any manner which would
violate or cause the Company or any Member to violate applicable federal or
state securities laws and (ii) other than in accordance with the provisions of
this Agreement.
1.9 No State-Law Partnership. No provisions of this Agreement (including,
without limitation, the provisions of Article 2) shall be deemed or construed to
constitute the Company a partnership (including, without limitation, a limited
partnership) or joint venture, or any Member or Manager a partner or joint
venturer of or with any other Member or Manager, for any purposes other than tax
purposes.
1.10 Merger. The Company may merge with, or consolidate into, another
Delaware limited liability company or "other business entity" (as defined in
Section 18-209(a) of the Act) upon the approval of the Manager and the
Management Board.
1.11 Status. No Member shall take any action that would require
termination of the Company for Federal or state tax purposes or registration of
the Company or any class of its securities under the Investment Company Act of
1940 or the Securities Exchange Act of 1934 or result in the Company being
taxable as a corporation for Federal or state tax purposes.
1.12 Reliance by Third Parties. Except as set forth in Section 2.2(c),
Persons dealing with the Company are entitled to rely conclusively upon the
power and authority of an officer of the Company authorized to act by this
Agreement or by action of the Management Board.
22
23
ARTICLE 2
MANAGEMENT
2.1 Manager. It is understood and agreed that the Management Board
provided for in Section 2.2 shall irrevocably be delegated and have the
authority to manage the day-to-day business of the Company, that certain
actions, but only to the extent expressly specified hereinafter, that are
material to the business or that affect the interests of the Manager and its
Affiliates may only be taken by the Management Board with the consent of the
Manager, that certain activities, but only to the extent expressly specified
hereinafter, in the financial and compliance areas require coordination between
the Management Board and the Manager and that for regulatory reasons the Manager
shall have the ability to alter the foregoing structure through removal of the
members of the Management Board but that except in narrowly defined
circumstances any such alteration will subject the Manager to the substantial
penalties set forth in Section 2.2(e) hereof.
(a) Subject to the other terms of this Agreement, including the
reservations and delegations of power and authority set forth in Section 2.2 and
elsewhere herein, (i) the management and control of the business of the Company
shall be vested generally in the Manager, who shall be a Member and a "manager"
of the Company within the meaning of the Act; (ii) the Manager, as specified or
limited, as the case may be, in Section 2.2 and elsewhere, shall have exclusive
power and authority, in the name of and on behalf of the Company, to perform all
acts and do all things which in its sole discretion it deems necessary or
desirable to conduct the business of the Company, without the vote or consent of
any of the other Members; and (iii) any action taken by the Manager, and the
signature of the Manager (or any authorized representative) on any instrument on
behalf of the Company, shall conclusively evidence the authority of the Company
with respect thereto and shall bind the Company. Notwithstanding the foregoing,
the Manager shall have no power or authority whatsoever to make recommendations
with respect to or to determine which transactions the Company shall cause or
recommend any investment advisory clients of the Company to enter into, or the
time at which, the
23
24
party with which or the terms on which any right, power or privilege of the
Company is exercised or performed with respect to the account of any such client
or the assets in the account of any such client.
(b) The Manager shall have the specific power and authority in its
reasonable discretion, after consultation with the Management Board to take any
of the following actions: (i) such actions as may be necessary to cause the
Company, any of its Affiliates or any of its Members, employees or agents to
comply with any Applicable Law or this Agreement; (ii) such actions as the
Manager is specifically authorized by this Agreement to take (subject to having
obtained any required Management Board approval); (iii) such actions as are
necessary to prevent actions that require the Manager's consent pursuant to the
terms of this Agreement if such consent has not been given; and (iv) termination
of any Member of the Company upon termination of such Member's employment "For
Cause" after all actions and determinations required by the definition thereof
have been taken and made.
(c) The Manager shall be obligated to devote only such time to the
business and affairs of the Company as it deems necessary in its sole discretion
for the performance of its duties under this Agreement.
(d) The Manager and its Affiliates may engage in other business
ventures of every nature and description, including the creation, acquisition,
financing, operation and disposition of investment managers or interests therein
that are or may be competitive with the Company's businesses. The Manager and
its Affiliates shall not be obligated to present any opportunity to the Company
even if such opportunity would be suitable for the Company or arose because of
the Manager's or any of its Affiliates' interest in or operation of the Company.
Neither the Company nor any of the Members other than the Manager shall have any
right in or to any such other ventures and no such activity by the Manager or
its Affiliates shall be deemed improper or result in any liability to the
Manager or its Affiliates.
(e) Any consent of the Manager required hereunder shall be in
writing, shall be obtained prior to the action sought to be taken, and shall,
except as otherwise set forth, be given or withheld in the good faith discre-
24
25
tion of the Manager. The Manager shall designate in writing to the Management
Board from time to time one or more persons who shall serve as authorized
representatives of the Manager to provide such written consent and two or more
alternate representatives who are so authorized in the event the primary
authorized person is not available.
2.2 Management Board.
(a) ****[This subsection (approximately one page) has been omitted
pursuant to the confidential treatment request referenced on the cover page
hereto. The omitted portion has been filed separately with the Commission.]****
(b) ****[This subsection (approximately one page) has been omitted
pursuant to the confidential treatment request referenced on the cover page
hereto. The omitted portion has been filed separately with the Commission.]****
(c) None of the Company, the Management Board nor any controlled
Affiliate may do, and the Management Board shall use all reasonable efforts to
prevent the Company and any controlled Affiliate from doing, any of the
following without the consent of the Manager and which if purported to have been
done without such consent shall be void ab initio with no force or effect
whatsoever:
(i) take any action (including with respect to employment
agreements, benefit plans and capital expenditures) or enter into, amend,
take any action under or terminate any agreement, plan, arrangement or
understanding that could reasonably be expected to conflict with this
Agreement, prevent the Company from being able to distribute to AAC any of
the distributions contemplated hereunder or have a materially adverse
effect on the condition (financial or otherwise), operations, assets,
liabilities, business, operations or prospects of the Company or any
controlled Affiliate;
(ii) create, incur, assume or suffer to exist any Indebtedness of
the Company or any controlled
25
26
Affiliate or any Lien upon any assets of the Company or any controlled
Affiliate;
(iii) take or omit any action which could reasonably be expected to
result in the termination of employment of any Member of the Company or
enter into, amend, take any action under or terminate any employment
agreement with any Member of the Company;
(iv) except as permitted by Section 4.3(a), admit any Person as a
Member, issue or acquire any Membership Interests or other equity
interests in the Company or remove any Member;
(v) issue or acquire any partner, Member, beneficial ownership,
share or other equity interests in any controlled Affiliate or remove any
partner, Member, trustee or director thereof;
(vi) invest any of the Company's assets in general partner interests
(except as required by the partnership agreements of the investment
partnerships of which the Company or any controlled Affiliate acts as the
general partner from time to time) or in securities other than high
quality money market instruments;
(vii) form or organize or hold an interest in any controlled
Affiliate;
(viii) use as accountants for the Company any firm other than the
independent public accountants for the Manager and its Affiliates;
(ix) enter into or perform any agreement with (A) any Member,(B) any
member of the Management Board, (C) any parent, sibling, spouse or child
of any Member or Management Board member or any parent, sibling, spouse or
child of any of the foregoing Persons or (D) any controlled Affiliate of
any Person in (A), (B) or (C) above;
(x) pay or cause any investment vehicle managed by the Company to
pay any compensation or remuneration to any Member or Management Board
member other than distributions to Members in re-
26
27
spect of their Membership Interests and pursuant to an employment
agreement approved by the Manager; or
(xi) take any action which may be taken only by the Manager or
requires the consent of the Manager.
(xii) taking any action that would constitute an Adverse Change.
(d) Neither the Company nor any controlled Affiliate shall do any of
the following without the consent of the Manager and the Management Board:
(i) enter into transactions with Affiliates;
(ii) sell or purchase any material amount of assets or any other
business, terminate any material advantageous agreement, merge or
consolidate the Company with any other Person or liquidate, dissolve or
terminate the Company;
(iii) enter into any line of business other than that set forth in
the first sentence of Section 1.6 of this Agreement or alter its
investment style in a manner materially inconsistent with the investment
style theretofore employed by the Company or, for periods prior to the
Effective Time, by JMG;
(iv) enter into, amend in any material respect, extend or terminate
any partnership, joint venture or material investment advisory or
investment management agreement to which the Company is a party;
(v) dispose of any assets of the Company if such disposition would
result in a Code Section 704(c) allocation to the Non-Managing Members in
an aggregate amount of $150,000 or more.
(e) ****[This subsection (approximately half a page) has been
omitted pursuant to the confidential treatment request referenced on the cover
page hereto. The omitted portion has been filed separately with the
Commission.]****
27
28
(f) ****[This subsection (approximately half a page) has been
omitted pursuant to the confidential treatment request referenced on the cover
page hereto. The omitted portion has been filed separately with the
Commission.]****
2.3 Operations of the Business of the Company. (a) The Management Board
shall exercise its reasonable best efforts so that ****[The remainder of this
section has been omitted pursuant to the confidential treatment request
referenced on the cover page hereto. The omitted portion has been filed
separately with the Commission.]****
(b) The Company will maintain in full force and effect such
insurance as is customarily maintained by companies of similar size in the same
or similar businesses (including, without limitation, errors and omissions
liability insurance but excluding key-man life insurance). The Company or the
Manager may maintain key-man life insurance and disability insurance policies on
each Member, from time to time, and the Members will use all commercially
reasonable efforts to cooperate with the Manager and the Company to effectuate
the foregoing; provided, however, that neither the Company nor the Manager shall
be obligated to maintain such insurance.
(c) Notwithstanding any of the provisions of this Agreement to the
contrary, all accounting, financial reporting and bookkeeping policies and
procedures of the Company shall be established in conjunction with policies and
procedures determined under the supervision of the Manager. The Company shall
have a continuing obligation to keep the Manager's chief financial officer
informed of material financial developments with respect to the Company.
Notwithstanding any of the provisions of this Agreement to the contrary, all
legal, compliance and regulatory matters of the Company shall be coordinated
with the Manager, and the Company shall have an ongoing obligation to keep the
Manager informed of all significant legal, compliance and related activities, in
accordance with procedures to be established by the Manager and the Management
Board.
(d) The Management Board shall, when accepting additional clients or
investors in its investment funds,
28
29
give first priority to AAC and its Affiliates (other than the Company and
Pacific Asset Management LLC) with respect to 1/3 of the amount of all
subscriptions and contributions accepted until such time as AAC and its
Affiliates (other than the Company and Pacific Asset Management LLC) have
obtained allocations of 10% of each such respective investment fund and of total
assets under management other than in investment funds.
2.4 Compensation and Expenses of the Manager. The Manager and its
Affiliates may receive reimbursement of expenses and compensation for services
provided to the Company only to the extent approved by the Management Board.
2.5 Non-Competition, Non-Solicitation and Non-Disclosure.
(a) ****[This subsection (approximately one and a half pages) has
been omitted pursuant to the confidential treatment request referenced on the
cover page hereto. The omitted portion has been filed separately with the
Commission.]****
(b) Each Member agrees that any and all presently existing
investment advisory businesses of the Company and all business developed by the
Company, including by such Member or any other employee of the Company,
including without limitation, all proprietary investment methodologies, all
investment advisory contracts, fees and fee schedules, commissions, records,
data, client lists, agreements, trade secrets, and any other incident of any
business developed by the Company or earned or carried on by the Member for the
Company other than any such matters that are in the public record (unless they
are so available by virtue of a breach of the provisions of this Section 2.5),
and all trade names, service marks and logos under which the Company does
business, and any combinations or variations thereof and all related logos, are
and shall be the exclusive property of the Company, for its sole use, and (where
applicable) shall be payable directly to the Company. In addition, each Member
acknowledges and agrees that the investment performance of the accounts managed
by the Company was attributable to the efforts of the team of professionals of
the Company and not to the efforts of any single individual, and that therefore,
the perfor-
29
30
xxxxx records of the accounts managed by the Company are and shall be the
exclusive property of the Company. Notwithstanding the foregoing, such Member
may be permitted to identify with such performance where in fact such Member
exercised the sole final decision making authority resulting in such
performance. Each Member acknowledges that, in the course of performing services
hereunder and otherwise the Member has had, and will from time to time have,
access to information of a confidential or proprietary nature, as commonly and
generally understood, including without limitation, confidential or proprietary
investment methodologies, trade secrets, proprietary or confidential plans,
client identities and information, client lists, business operations or
techniques, records and data (collectively, "Intellectual Property") owned or
used in the course of business by the Company. Each Member agrees always to keep
secret and not ever publish, divulge, furnish, use or make accessible to anyone
(otherwise than in the regular business of the Company) any Intellectual
Property of the Company that is not otherwise publicly available (other than
Intellectual Property that is publicly available by virtue of a breach of the
provisions of this Section 2.5). At the termination of the Member's services to
the Company, all data, memoranda, client lists, notes, programs and other
papers, items and tangible media, and reproductions thereof relating to the
foregoing matters in the Member's possession or control, shall be returned to
the Company and remain in the Company's possession (except where the return of
such items shall be unreasonable or impracticable in relation to the importance
or confidentiality of such items).
(c) As a further condition and material inducement to Admission as a
Member, each Member (other than the Manager, AAC and JMG) agrees, for the
benefit of the Company and the other Members, to enter into employment
agreements to substantially the same effect as the provisions of Sections 2.5(a)
and (b) hereof. The provisions of this Section 2.5 shall not be deemed to limit
any of the rights of the Company or the Manager under any of such agreements or
under Applicable Law, but shall be in addition to the rights set forth in each
of such agreements and those which arise under Applicable Law.
(d) For purposes of this Section 2.5 and Section 2.6, the term
"client" shall include any investor
30
31
in any investment fund to which the Company provides or previously provided
investment management services, but shall not include members of the Immediate
Family of such Member and the term "Company" shall include each controlled
Affiliate of the Company.
(e) ****[This subsection (approximately half a page) has been
omitted pursuant to the confidential treatment request referenced on the cover
page hereto. The omitted portion has been filed separately with the
Commission.]****
2.6 Remedies Upon Breach.
(a) Each Member agrees that any breach of the provisions of Section
2.5 of this Agreement or of the provisions of any agreement referred to in
Section 2.5(c) by such Member could cause irreparable damage to the Company and
the other Members. The Company and the Manager shall have the right to seek an
injunction or other equitable relief (in addition to other legal remedies) to
prevent any violation of a Member's obligations hereunder or thereunder.
(b) In the event that a Member is terminated pursuant to Section
2.1(b)(iv), then such Member and any member of his Immediate Family shall be
obligated to sell to the other Non-Manager Members of the Company, at the
election of each of them made within 30 days after such Member's termination
becomes effective, all of such Member's Membership Interests and all of such
Member's JMG Interest and to pay to the Company the after-tax proceeds of any
sale or other transfer of any portion of his Membership Interest and JMG
Interest or any interest therein to any Person during the two preceding years.
To the extent such other Non-Manager Members shall fail to make such election,
the Company at the election of the Manager made within 30 days after receiving
notice of the results of elections by the Non-Manager Members, may purchase all
or any portion of such Member's Membership Interest and all or any portion of
such Member's Members Indirect Interest. The price at which the other
Non-Manager Members or the Company shall be entitled to purchase such Member's
Membership Interest, JMG Interest or Members Indirect Interest, as the case may
be, shall be (i) in the case of termination For Cause in whole or in part on
account of a violation of Section 2.5 of this
31
32
Agreement or the parallel provisions of such Member's employment or
noncompetition agreement with the Company, an amount equal to such Member's tax
basis in such Member's Membership Interests, JMG Interest or Members Indirect
Interest, as the case may be, and (ii) in the case of a termination For Cause
for any reason entirely other than on account of a violation of Section 2.5 of
this Agreement or the parallel provisions of such Member's employment agreement
with the Company, in the case of such Member's Membership Interest and Members
Indirect Interest, an amount equal to the product of the sum of such Member's
Percentage Interest and that portion of JMG's Percentage Interest represented by
the Member's Members Indirect Interest prior to such termination times the
Non-Manager Member Pool for the Allocation Year following the Allocation Year
during which such termination occurs and, in the case of such Member's JMG
Interest, an amount equal to the price that would be paid for that portion of
JMG's Membership Interest represented by the Member's Members Indirect Interest.
Such purchase price shall be paid as promptly as practicable after determination
thereof.
(c) Each Member agrees that the enforcement of the provisions of
Sections 2.5 and 2.6 hereof, and the enforcement of the provisions of any
agreement referred to in Section 2.5(c) are necessary to ensure the protection
and continuity of the business, goodwill and confidential business information
of the Company for the benefit of each of the Members. Each Member agrees that,
due to the proprietary nature of the Company's business, the restrictions set
forth in Section 2.5 hereof and in such agreements are reasonable as to duration
and scope. If any provision contained in this Article 2 shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Article 2. It is the intention of the parties hereto that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time that is not permitted by Applicable Law, or is in any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would then be valid or enforceable under applicable law, such provision shall be
construed and interpreted or reformed to provide for a restriction or cove-
32
33
nant having the maximum enforceable geographic area, time period and other
provisions as shall be valid and enforceable under Applicable Law.
2.7 No Employment Obligation. Each Member acknowledges that neither this
Agreement nor the provisions of any agreement referred to in Section 2.5(c)
create an obligation on the part of the Company to continue the employment of
such Member with the Company, and that such Member, unless he is a party to a
written employment agreement executed by the Company, is an employee at will of
the Company. Notwithstanding the foregoing, the Management Board or its delegate
shall have general authority regarding personnel decisions and the employment
status of employees who are not Members.
Each Member acknowledges that the obligations and rights under
Sections 2.5 and 2.6 hereof shall survive the termination of the employment of
such Member with the Company and/or the withdrawal or removal of such Member
from the Company, regardless of the manner of such termination, withdrawal or
removal in accordance with the provisions hereof and of the relevant agreements
of the type referred to in Section 2.5(c).
2.8 Liability and Indemnification
(a) No Liability.
(i) No Covered Person shall be personally liable to the Company or
other Members for any act or omission or for any costs, damages or
liabilities arising therefrom, performed or omitted on behalf of the
Company or in its, his or her capacity as a Covered Person in a manner
believed in good faith by such Covered Person to be within the scope of
authority granted to such Covered Person hereunder, except as otherwise
required by Applicable Law, provided that its, his or her actions or
omissions did not constitute fraud, bad faith, gross negligence or willful
misconduct.
(ii) Each Covered Person shall be fully protected in relying in good
faith upon information, opinions, reports or statements furnished by any
Person as to matters such Covered Person reasonably believes are within
such other Person's professional
33
34
or expert competence and who has been selected with reasonable care,
including information, opinions, reports or statements as to the value and
amount of assets, liabilities, profits or losses of the Company, the
valuation of transactions in which the Company engages or contemplates
engaging, the reasonableness of the terms of a transaction, and any other
facts pertinent to the existence and amount of assets from which a
distribution to Members and Assignees might properly be paid.
(b) Right to Indemnification. Subject to the limitations and
conditions as provided in this Section 2.8, each Person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or contemplated action, suit or proceeding, whether civil, criminal,
administrative, arbitrative or investigative (a "Proceeding"), or any appeal in
such a Proceeding, by reason of the fact that such Person is or was a Covered
Person shall be indemnified by the Company against all costs and expenses,
including reasonable attorney's fees, the costs and expenses of investigation,
and judgments and amounts paid in settlement actually and reasonably incurred in
connection with such action, suit or proceeding, if such Covered Person acted in
good faith and in a manner which such Covered Person believed in good faith to
be in the best interest of the Company.
(c) Advance Payment. The right to indemnification conferred in this
Section 2.8 shall include the right to be paid or reimbursed by the Company the
reasonable expenses incurred by a Covered Person who was, is or is threatened to
be made a named defendant or respondent in a proceeding in advance of the final
disposition of the proceeding and without any determination as to the Covered
Person's ultimate entitlement to indemnification; provided, however, that the
payment of such expenses incurred by any such Person in advance of the final
disposition of a Proceeding shall be made only upon delivery to the Company of a
written affirmation by such Covered Person of such Covered Person's good faith
belief that he has met the standard of conduct necessary for indemnification
under this Section 2.8 and a written undertaking, by or on behalf of such
Covered Person, to repay all amounts so advanced if it shall ultimately be
determined that such Covered Person is not entitled to be indemnified under this
Section 2.8 or otherwise.
34
35
(d) Indemnification of Employees and Agents. With the consent of the
Manager, the Company may indemnify and advance expenses to any employee or agent
of the Company to the same extent and subject to the same conditions under which
it is required to indemnify and advance expenses to Covered Persons under
Sections 2.8(b) and 2.8(c).
(e) Limitation on Indemnification. Notwithstanding anything to the
contrary contained in this Section 2.8, no Person shall be entitled to
indemnification under Section 2.8 if any such indemnification shall be
determined to be contrary to Applicable Law or if it is determined by a court of
competent jurisdiction that such Person is not entitled to indemnification
because it, he or she (i) did not act in good faith, (ii) engaged in conduct
constituting gross negligence, willful misconduct or fraud, or (iii) did not act
in a manner that it, he or she believed in good faith to be in the best interest
of the Company.
2.9 Non-Manager Member Investment and Trading Accounts. For so long as AAC
or an Affiliate of AAC is a Member of the Company, the Non-Manager Members shall
maintain investments (other than through their interests in the Company) in
investment vehicles managed by the Company in an aggregate amount for all
Non-Manager Members of at least $10.0 million less any reduction attributable to
fund depreciation (in the case of Xxxxxx individually, not less than $8.0
million). The Non-Manager Members may also maintain brokerage and investment
accounts that are not managed by the Company so long as (a) the aggregate amount
of funds of the Non-Manager Members managed by the Company is at least $10.0
million (as adjusted as aforesaid, less any reduction attributable to fund
depreciation), (b) the maintenance and operation of such accounts complies with
Applicable Law and the Company's compliance policies and (c) the Manager is
provided reasonable opportunity to examine such accounts as required by
Applicable Law and the Company's compliance policies. The Manager may limit the
amounts above $10.0 million (as increased as a result of appreciation) in the
aggregate that may be invested by Non-Manager Members in investment vehicles
managed by the Company as to which any cap, waiver or reimbursement of fees,
profit allocations or charges ordinarily applicable to an investment in such
vehicles may be granted to such Members.
35
36
ARTICLE 3
CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS
3.1 Capital Accounts.
(a) A single capital account ("Capital Account") shall be maintained
for each Member in accordance with the capital accounting rules of Section
704(b) of the Code. No Member shall have the right to withdraw any part of his
Capital Account until the dissolution and winding up of the Company, except as
distributions pursuant to this Article 3 may represent returns of capital, in
whole or in part. No Member shall be entitled to receive any interest on any
Capital Account balance. No Member shall have any personal liability for the
repayment of any Capital Contribution of any other Member. Except as may be
agreed to in connection with the issuance of additional Membership Interests, as
specifically set forth herein or as may be required under Applicable Law, no
Member shall be required to make any further Capital Contributions to the
Company.
(b) Each Member's opening Capital Account shall be as stated in
Schedule A hereto. Thereafter, a Member's Capital Account shall be credited with
(i) such Member's subsequent Capital Contributions; (ii) such Member's share of
the Net Income or other income and gain of the Company as provided herein; and
(iii) such other amounts as may be required in order for the Capital Account to
be considered to be determined and maintained in accordance with the rules under
Regulation Section 1.704-1(b)(2)(iv) or any successor section of similar import.
A Member's Capital Account shall be debited with (i) such Member's share of the
Net Loss or other deductions and losses of the Company as provided herein, (ii)
distributions made to such Member (including liquidating distributions), and
(iii) such other amounts as may be required for the Capital Account to be
considered to be determined and maintained in accordance with the rules under
Regulation Section 1.704-1(b)(2)(iv) or any successor section of similar import.
36
37
3.2 Allocations.
(a) Net Income and Net Loss. After giving effect to the special
allocations (other than with respect to provisions applying solely to
allocations for tax purposes) set forth in Section 3.2(b) and (i) - (l), Net
Income (increased by specially allocated items of deduction and loss and
decreased by specially allocated items of income and gain in Section 3.2(b)
hereof) and Net Loss(reduced by specially allocated items of deduction and loss
and increased by specially allocated items of income and gain in Section 3.2(b)
hereof) will be allocated among the Members as follows:
****[The remainder of this section (approximately seven and a half
pages) has been omitted pursuant to the confidential treatment request
referenced on the cover page hereto. The omitted portion has been filed
separately with the Commission.]****
(b) Acknowledgment of Tax Consequences. The Members are aware of the
income tax consequences of the allocations made by this Section 3.2, and hereby
agree to be bound by the provisions of this Agreement in reporting their share
of Taxable Income or Loss for income tax purposes.
3.3 Distributions.
(a) ****[This subsection (approximately one and a half pages) has
been omitted pursuant to the confidential treatment request referenced on the
cover page hereto. The omitted portion has been filed separately with the
Commission.]****
(b) Distributions Concerning Interests Transferred. Distributions
made under this Section 3.3 with respect to any transferred Membership Interest
will be made only to Members of record (or assignees as provided herein) on the
record date designated by the Company.
(c) No Violations. Notwithstanding anything in this Agreement to the
contrary, the Company will not be obligated to, and will not, make any
distribution that would (i) render the Company insolvent, (ii) violate the Act
or other Applicable Law or (iii) cause any Member to
37
38
have an Adjusted Capital Account Deficit as of the end of the current Allocation
Year.
(d) Distributions in Kind. If any assets of the Company are
distributed in kind, such assets will be distributed on the basis of the then
Fair Market Value thereof, as reasonably determined by the Manager and the
Management Board. All such distributions will be in the same proportion as if
such distribution had been made in cash.
3.4 Distributions Upon Dissolution; Establishment of a Reserve Upon
Dissolution.
(a) Upon the dissolution of the Company, after payment (or the
making of reasonable provision for the payment) of all liabilities of the
Company owing to creditors, the Company, or if there is none, the Liquidating
Trustee appointed as set forth in Section 6.2 hereof, shall set up such reserves
as it deems reasonably necessary for any contingent, conditional or unmatured
liabilities or other obligations of the Company. Such reserves may be paid over
by the Company or Liquidating Trustee to a bank (or other third party), to be
held in escrow for the purpose of paying any such contingent, conditional or
unmatured liabilities or other obligations. The remaining assets of the Company
shall be distributed (i) first to any Non-Manager Member that made a
contribution to the Company pursuant to Section 6.1(d) of the Purchase Agreement
in an amount equal to such contribution and which contribution will not be
credited to such Non-Manager Member's Capital Account and (ii) second to the
Members in accordance with the positive balance (if any) in their respective
Capital Accounts.
(b) Timing of Liquidation Distributions. Distributions in
liquidation will be made by the end of the taxable year in which the liquidation
occurs or, if later, within 90 days of the liquidating event and will otherwise
comply with Regulations Section 1.704-1(b); provided, however, that the
distribution of any assets held in reserve as provided above shall be
distributed at the expiration of such time as the Company or the Liquidating
Trustee deems advisable.
(c) Limitations on Payments made in Dissolution. Except as otherwise
specifically provided in this
38
39
Agreement, including Section 4.4 hereof, each Member will be entitled to look
solely to the assets of the Company for the return of his or her positive
Capital Account balance and will have no recourse for his or her Capital
Contribution and/or share of Net Income, or other items of income and gain,
against the Manager or any other Member.
(d) If any assets of the Company are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their Fair Market Value net of any liabilities encumbering such assets and,
to the greatest extent possible, shall be distributed pro-rata in accordance
with the total amounts to be distributed to each Member. Immediately prior to
the effectiveness of any such distribution-in-kind, each item of gain and loss
that would have been recognized by the Company had the property being
distributed been sold at Fair Market Value shall be determined and allocated in
accordance with Section 3.2 hereof to the Capital Accounts of those Persons who
were Members immediately prior to the effectiveness of such distribution.
(e) Actions by the Company under this Section 3.4 shall be taken
based upon agreement by the Manager and the Management Board.
3.5 Proceeds from Key-Man Insurance. In the event the Company acquired any
key-man life insurance on the life of a Non-Manager Member, the premium expense
and any proceeds of such insurance shall be allocated, distributed and reflected
in Members' Capital Accounts as agreed by the Manager and the Management Board.
ARTICLE 4
TRANSFER AND ISSUANCE OF INTERESTS
4.1 Limitation on Transfer of Membership Interests.
(a) ****[This subsection (approximately one page) has been omitted
pursuant to the confidential treatment request referenced on the cover page
hereto. The omitted portion has been filed separately with the Commission.]****
39
40
(b) Notwithstanding any other provision in this Article 4, no
Assignment or Admission shall be valid or effective unless the Assignor gives
the Company written notice before making any Assignment and, with such notice,
provides the Company with such evidence as the Company may require that such
Assignment or Admission will not violate this Agreement or Applicable Law.
(c) The Company or the Manager may require as a condition of any
Assignment that the Assignee assume all costs incurred by the Company in
connection therewith, including, but not limited to, legal fees and cost of
preparation and filing of any amendment to this Agreement if necessary or
desirable in connection therewith, and the Assignee shall execute, acknowledge
and deliver to the Company such documents or instruments in form and substance
satisfactory to the Company and the Manager as the Company and the Manager shall
deem necessary or desirable to effectuate such Assignment and to confirm the
agreement of the Assignee to be bound by all of the terms and provisions of this
Agreement. Any Assignment in contravention of any of the provisions of this
Section 4.1 shall be void ab initio and of no effect and shall not bind or be
recognized by the Company.
(d) No Assignee shall be admitted as a Member unless: (i) the
consent requirements set forth in Section 4.1(a) shall have been satisfied, (ii)
the Assignee shall have indicated such intention in the instrument effecting the
Assignment and the Assignee expressly agrees to be bound, to the same extent as
the other Members, by the provisions of this Agreement, and any other documents
required in connection therewith and to assume the obligations of the Assignor
hereunder and become a signatory to this Agreement, (iii) the Assignor and the
Assignee shall have executed or delivered such other instruments as the Company
may deem necessary or desirable to effectuate such admission, and (iv) the
Assignee shall have agreed to pay (to the extent the Assignor shall not have
paid such costs under Section 4.1(c) hereof), as the Management Board may
determine, all reasonable expenses and legal fees relating to the Assignment and
the Assignee's Admission, including, but not limited to, the cost of any
required counsel's opinion and the preparation, filing and/or publishing of any
amendment to this Agreement necessary to effect such Admission. Upon the
Admission of the Assignee as a Member, Schedule A at-
40
41
tached hereto shall be amended to reflect the name and address of such Member
and its Percentage Interest and, if the Assignor has Assigned all of its
Membership Interest, to eliminate the name and address of the Assignor.
(e) No Person shall be Admitted as a Member with a Membership
Interest providing such Member with any interest in any items allocated to AAC
without the prior written consent of the Manager. No Person shall be admitted as
a Member with a Membership Interest providing such Member with any interest in
any items allocated to the Non-Manager Members without the consent of the
Management Board.
4.2 Assignees.
(a) Any Person who acquires in any manner whatsoever any Membership
Interest or portion thereof, irrespective of whether such Person has accepted
and adopted in writing the terms and provisions of this Agreement, shall be
deemed by the acceptance of the benefit of the acquisition thereof to have
agreed to be subject to and bound by all the obligations of this Agreement that
any predecessor in interest of such Person was subject to or bound by. A Person
acquiring any Membership Interest, including the personal representative and
heirs of a deceased Member, shall have only such rights, and shall be subject to
all the obligations as are set forth in this Agreement; and, without limiting
the generality of the foregoing such Person shall not have any right to have the
value of its Membership Interest ascertained or receive the value of such
Membership Interest or, in lieu thereof, profits attributable to any right in
the Company, except as herein set forth.
(b) Any Assignee of a Membership Interest or portion thereof
pursuant to an Assignment satisfying the conditions of Section 4.1(a) hereof
shall have the right to receive the same share of the income, gain, deduction
and loss and of the distributions of the Company to which the Assignor would
have been entitled in respect of such Membership Interest or portion thereof. If
such Assignee desires to make an Assignment of his Membership Interest, it shall
be subject to all the provisions of this Article 4 to the same extent and in the
same manner as any Member desiring to make an Assignment.
41
42
(c) Any Member who shall Assign all of its Membership Interest shall
cease to be a Member and shall no longer have any rights or privileges of a
Member except that, unless and until his Assignee is admitted to the Company as
a substitute Member in accordance with Section 4.1(a) hereof, such Assignor
shall retain all rights and be subject to all obligations under the Act and this
Agreement. For so long as a Member has any JMG Interest such Member shall not
assign all of his Membership Interest.
(d) In the event that an Assignment shall be made, there shall be
filed with the Company a duly executed and acknowledged counterpart of the
instrument making such Assignment. Such instrument must evidence the written
acceptance of the Assignee to all the terms and provisions of this Agreement. If
such an instrument is not so filed, the Company need not recognize any such
purported Assignment for any purpose. The instrument so filed insofar as the
Company is concerned shall be construed as the total contract between the
Assignor and the Assignee, and the Company shall not be bound to recognize any
terms not disclosed in the instrument so filed.
4.3 Issuance of Additional Membership Interests.
(a) ****[This subsection (approximately two-thirds of a page) has
been omitted pursuant to the confidential treatment request referenced on the
cover page hereto. The omitted portion has been filed separately with the
Commission.]****
(b) ****[This subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.]****
(c) Upon the repurchase of Membership Interests or the issuance of
additional Membership Interests, the Manager shall make the appropriate
revisions to Schedule A hereto.
(d) ****[This subsection has been omitted pursuant to the
confidential treatment request referenced on the cover page hereto. The omitted
portion has been filed separately with the Commission.]****
42
43
4.4 Capital Contributions. ****[This section (approximately thirteen
lines) has been omitted pursuant to the confidential treatment request
referenced on the cover page hereto. The omitted portion has been filed
separately with the Commission.]****
4.5 Succession. The Members agree that it is in their best interests to
provide for an orderly succession of the day-to-day management of, and the
ownership of the Non-Manager Member Membership Interests in the Company. In
order to implement such agreement, the Members hereby agree as follows:
****[The remainder of this section (approximately four pages) has
been omitted pursuant to the confidential treatment request referenced on the
cover page hereto. The omitted portion has been filed separately with the
Commission.]****
4.6 JMG Interests. JMG agrees to comply with and enforce, and each
Non-Manager Member that is an equity holder, officer or director of JMG agrees
to comply with and to use its reasonable best efforts to cause JMG to comply
with and enforce, the provisions relating to the transfer, sale, assignment,
repurchase, redemption and issuance of securities of JMG set forth on Schedule
4.6 hereto, which Schedule 4.6 is hereby incorporated by reference herein and
made a part hereof.
ARTICLE 5
BOOKS AND RECORDS
5.1 Bank Accounts. The bank accounts of the Company shall be maintained in
such banking institutions authorized to do business in such places as the
Management Board shall determine, and withdrawals shall be made on such
signatures as the Management Board shall determine.
5.2 Fiscal Year. The fiscal year of the Company (the "Fiscal Year") shall
be the calendar year.
5.3 Books and Records. Books and records, complete and accurate in all
material respects, required by Applicable Law shall be kept or caused to be kept
by the
43
44
Management Board. The Company's financial books shall be kept on the accrual
method of accounting. All of the Company's books and records, together with an
executed copy of this Agreement and copies of all other agreements, contracts,
leases, insurance policies, employee benefit programs, securities trading
records and other instruments as any officer may execute or obtain for the
Company hereunder, including amendments thereto, shall at all times be kept at
the business office of the Company, and all such books and records shall be
available upon reasonable notice and without interference with the regular
business operations of the Company during normal business hours for inspection
by any Member or its duly authorized representative or, at the expense of any
Member, for audit by it or its duly authorized representative.
Along with all other books and records kept pursuant to this Section
5.3, the Company shall maintain the following records:
(a) the full name and mailing address of each member of the
Management Board;
(b) a current list of the full names set forth in alphabetical order
and last known mailing address of each Member, together with the Capital
Contribution and the share of Net Income or Net Loss of each Member or
information from which such shares can be readily derived;
(c) a copy of the Certificate of Formation and all amendments
thereto or restatements thereof, together with executed copies of any powers of
attorney pursuant to which any certificate or amendment has been executed;
(d) a copy of this Agreement and any amendments thereto and any
restatements thereof; and
(e) a copy of the Company's federal, state and local income tax or
information returns and reports, if any, for the three (3) most recent Fiscal
Years.
5.4 Reports to Members.
(a) Within 15 days after the end of each month and fiscal quarter of
the Company, the Management Board
44
45
shall send to the Members an unaudited balance sheet of the Company as of the
end of such month and, if such month coincides with the end of a fiscal quarter,
an unaudited balance sheet of the Company as of the end of such fiscal quarter
and unaudited statements of income (loss) for such fiscal quarter, each prepared
in accordance with generally accepted accounted principles consistently applied
("GAAP") except that monthly reports need not be prepared in accordance with
GAAP so long as they disclose the nature and effect of deviations from GAAP.
Except to the extent inconsistent with the sound operation of the Company's
business or not reasonably within the control of the Management Board, within 45
days after the end of each Fiscal Year or such lesser number of days as the
Manager shall inform the Management Board is necessary for AAC to announce its
financial results for such Fiscal Year in accordance with the expectations of
the financial markets, the Management Board shall send to the Members a balance
sheet of the Company as of the end of such Fiscal Year and statements of income
(loss), Members' capital and cash flow of the Company for such Fiscal Year, all
of which shall be audited by the Company's independent certified public
accountants and prepared in accordance with GAAP. In addition to the above, the
Management Board shall provide to the Members any other reports as are
reasonably requested by the Manager from time to time, including operating
budgets for the next succeeding four fiscal quarters, performance data and any
material AAC may need for any reports to shareholders or regulatory filings.
(b) To the extent practicable, the Management Board shall provide to
each Member by November 30 of each Fiscal Year an estimate of such Member's
share of the profits and losses for Federal and state income tax purposes for
such Fiscal Year. The Management Board shall, for each Fiscal Year and within
the time prescribed by law for such filing, file on behalf of the Company a U.S.
Federal partnership information tax return. The Management Board shall also file
on behalf of the Company such other tax returns and other documents from time to
time as may be required by the Federal government or by the State of Delaware or
any other state or any subdivision thereof. Except as otherwise consented to by
the Manager, all tax returns shall be prepared by the accountants for the
Company. The officers of the Company shall send a copy of the Company's tax
45
46
returns and a copy of Schedule K-1 or any successor or replacement form thereof,
and, upon request, such tax return, to each Member as soon after the expiration
of each Fiscal Year as such items are available.
(c) Each of the foregoing reports shall be subject to review and
modification by the Manager and the time periods set forth in the foregoing
provisions shall be subject to modification by the Manager to the extent
necessary to permit it to make required reports and filings on a timely basis.
5.5 Meetings. The Company and its officers shall be available to meet with
the Manager at the Manager's reasonable request by telephone or in person to
update the Manager as to the performance, operations, business plans and
prospect of the Company and to discuss matters of mutual interest.
5.6 Tax Matters. AAC shall be the "tax matters partner" for the Company
for purposes of Sections 6221 through 6233 of the Code. The tax matters partner
shall not be permitted to settle any assessment, deficiency action, or other
proceeding in respect of which the Company or any Member could have liability
without the consent of the Management Board.
ARTICLE 6
DISSOLUTION AND LIQUIDATION
6.1 Events Causing Dissolution.
(a) The Company shall be dissolved, its assets disposed of and its
affairs wound up upon the happening of any of the following events:
(i) The Company shall be dissolved upon the occurrence of any of the
events specified in Section 18-801 of the Act, including, without
limitation, (A) the written consent of all Members; (B) the death,
retirement, resignation, withdrawal, expulsion, Bankruptcy or dissolution
of a Member or the occurrence of any other event which terminates the
continued membership of a Member in the Company, unless there is at least
one remaining Member and the business of the Company is not discontinued
by
46
47
vote or written consent of all of the other Members within 180 days
following the occurrence of the event; (C) the sale of all or
substantially all of the assets of the Company; (D) the entry of a decree
of judicial dissolution under Section 18-802 of the Act; or (E) at such
earlier time as may be provided by applicable law; or
(ii) Any event which shall make it unlawful for the existence of the
Company to be continued.
(b) In the event of a Bankruptcy of a Member that does not cause the
Company to dissolve as provided in subparagraph (a) of this Section 6.1, such
Member shall cease to be a Member for all purposes hereunder unless upon the
consent of Members holding a majority in Percentage Interest, such Bankrupt
Member is permitted to remain a Member hereunder.
6.2 Liquidation.
(a) Upon the dissolution of the Company, the Company shall be
liquidated in accordance with this Section 6.2 and Sections 18-803 and 18-804 of
the Act. The liquidation shall be conducted and supervised by the Manager and
the Management Board or, if there is no Manager and Management Board, by a
person who shall be designated for such purpose unanimously by the Members (the
Manager and the Management Board, or such person so designated, being
hereinafter referred to as the "Liquidating Trustee"). The Liquidating Trustee
shall have all of the rights in connection with the liquidation and termination
of the Company that the Manager and Management Board would have with respect to
the assets and liabilities of the Company during the term of the Company, and
the Liquidating Trustee is hereby expressly authorized and empowered to
effectuate the liquidation and termination of the Company and the transfer of
any assets and liabilities of the Company. The Liquidating Trustee shall have
the right from time to time, by revocable powers of attorney, to delegate to one
or more persons any or all of such rights and powers and the authority and power
to execute documents in connection therewith, and to fix the reasonable
compensation of each such person, which compensation shall be charged as an
expense of liquidation. The Liquidating Trustee is also
47
48
expressly authorized to distribute the Company's property to the Members subject
to Liens.
(b) During the period of liquidation of the Company, all of the
provisions of this Agreement shall continue in effect. The Capital Accounts of
the Members prior to any distributions pursuant to this Section 6.2(b) shall be
credited or charged and shall be computed in accordance with the provisions of
this Agreement. Upon the dissolution of the Company, the proceeds from the
liquidation of the Company's assets (after making provisions for claims and
obligations as required under Section 704 of the Code) shall be applied as
promptly as possible in the following order:
(i) first, to the payment and discharge of the Company's debts and
liabilities (including loans made to the Company by the Members), in the
order of priority as provided by law (except those to Members of the
Company on account of their contributions), and the establishment of any
necessary reserves;
(ii) second, in accordance with Section 3.4 hereof an amount equal
to the liquidation proceeds.
(c) Each Member shall be furnished with a statement prepared by the
Liquidating Trustee which shall set forth the assets and liabilities of the
Company as at the date of complete liquidation, and each Member's share thereof.
Upon compliance with the distribution plan contemplated by Section 6.2(b) and
Section 3.4 hereof, each Member shall cease to be a Member of the Company, and
the Liquidating Trustee shall execute acknowledge and cause to be filed a
certificate of cancellation of the Company.
(d) A reasonable time shall be allowed for the orderly liquidation
of the assets of the Company and the discharge of liabilities so as to minimize
the losses normally attendant upon a liquidation.
(e) At no time during continuation of the Company shall any value
ever be placed on the Company name, or the right to its use, or to the goodwill
appertaining to the company or its business, either as among the Members or for
the purpose of determining the value of any Membership Interest, nor shall the
legal represen-
48
49
tatives of any Member have any right to claim any such value. In the event of a
termination and dissolution of the Company as provided in this Agreement,
neither the Company name, nor the right to its use, nor the aforesaid goodwill,
if any, shall be considered as an asset of the Company and no valuation shall be
put thereon for the purpose of liquidation or distribution, or for any other
purpose whatsoever; nor shall any value ever be placed thereon as between the
remaining or surviving Members and the legal representatives of the estate of
any deceased, insane, incompetent, dissolved, liquidated or Bankrupt Member.
6.3 Partition. Each Member waives any and all rights that it may have to
maintain an action for partition of the Company's property.
ARTICLE 7
MISCELLANEOUS
7.1 Governing Law.
(a) This Agreement, and the rights of the Members hereunder, shall
be governed by and construed in accordance with the laws of the State of
Delaware applicable to contracts made and to be performed entirely therein,
without regard to the conflict of laws principles thereof. In particular, this
Agreement shall be construed to the maximum extent possible to comply with all
of the mandatory terms and conditions of the Act. If, nevertheless, it shall be
determined by a court of competent jurisdiction that any provision of this
Agreement shall be invalid or unenforceable under the Act or other Applicable
Law, such invalidity or unenforceability shall not invalidate the entire
Agreement. In that case, this Agreement shall be construed so as to limit any
term or provision so as to make in enforceable or valid within the requirements
of any applicable law, and, in the event such term or provision cannot be so
limited, this Agreement shall be construed to omit such invalid or unenforceable
provisions.
(b) The parties hereby consent to exclusive jurisdiction and venue
for any action arising out of this Agreement in the Delaware Court of Chancery.
Each Member consents to service of process in any action or proceed-
49
50
ing involving the Company by the mailing thereof by registered or certified
mail, postage prepaid, to such Member's mailing address.
7.2 Administrative Actions. Either the Manager or the Management Board
shall have the authority to take such action as may be necessary or appropriate:
(i) To qualify or continue the Company as a limited liability
company;
(ii) Subject to Section 7.10, below, to reflect an amendment of this
Agreement;
(iii) To reflect the dissolution and termination of the Company; or
(iv) To effect Assignments, Admissions and terminations of Members
as specifically provided under the terms of this Agreement, including any
amendment to Schedule A attached hereto necessary to reflect the same.
7.3 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original for all purposes, but all of
which taken together shall constitute only one agreement. In making proof hereof
it will be necessary to produce only one copy hereof signed by the party to be
charged.
7.4 Severability. Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions herein (a) are
determined to be invalid or contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid, or (b) would cause any Member to be bound by or
liable for the obligations of the Company under the laws of any state or locale
as the same may now or hereafter exist, such provision or provisions shall be
deemed void and of no effect.
7.5 Notices. All notices, demands, solicitations of consent or approval
and other communications hereunder required or permitted shall be in writing and
shall be deemed to have been given when personally delivered or five days after
the date when deposited in the United
50
51
States mail and sent postage prepaid by registered or certified mail, return
receipt requested, or one day after sent by overnight mail or courier or
transmitted by facsimile, addressed as follows: if intended for (a) the Company,
to its business office or (b) the Members, to their respective addresses set
forth on Schedule A attached hereto, or to such other address which any Member
shall have given to the Company and the other Member for such purpose by notice
hereunder.
7.6 Titles. All section titles or captions contained in this Agreement are
for convenience only and shall not be deemed part of the text of this Agreement
and shall in no way affect, define, limit or describe the scope, intent or
interpretation of any provision hereof.
7.7 Entire Understanding. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements between and among them respecting the subject matter of this
Agreement.
7.8 Binding Agreement. This Agreement shall be binding upon and inure to
the benefit of the heirs, executors, administrators, legal representatives and
permitted successors and assigns of the parties hereto as well as their
Affiliates.
7.9 Parties in Interest. Nothing herein shall be construed to be to the
benefit of or enforceable by any third party as a third party beneficiary or
otherwise including, but not limited to, any creditor of the Company.
7.10 Amendments.
(a) This Agreement may be amended by the Manager or the Management
Board without the consent or approval of any Member for ministerial purposes in
the circumstances expressly permitted by this Agreement.
(b) Except as provided in Section 7.10(a) above, this Agreement may
not be amended or modified except with the consent of Members holding a majority
in Percentage Interest: provided, however, that the written consent of all
Members must be obtained to any amendment which would (i) amend this Section
7.10, (ii) increase or
51
52
extend the liability or obligation of any Member or (iii) increase the amount of
Capital Contributions payable by any Member; and, provided further, that no
amendment adversely affecting the rights or ownership interests of the
Non-Manager Members or AAC and its Affiliates under this Agreement may be made
without the consent of the Management Board or the Manager respectively, and no
amendment adversely affecting the rights or ownership interests of one or more
Non-Manager Members in a manner materially adverse to such Non-Manager Member(s)
in comparison to one or more other Non-Manager Members may be made without the
consent of Non-Manager Members holding a majority of the Non-Manager Member
Percentage Interests so affected.
(c) Notwithstanding any other provision of this Agreement, no action
may be taken under this Agreement unless such action is taken in compliance with
the provisions of the Act.
7.11 Further Assurances. The Members will execute and deliver such further
instruments and do such further acts and things as may be required to carry out
the terms, provisions, conditions, intent and purposes of this Agreement and the
transactions contemplated hereby.
7.12 Remedies Cumulative. No remedy conferred upon or reserved to the
Company or any Member by this Agreement is intended to be exclusive of any other
remedy. Each and every such remedy shall be cumulative and shall be in addition
to any other remedy given to the Company or any Member hereunder or now or
hereafter existing at law or in equity or by statute.
7.13 Construction. Each definition or pronoun herein shall be deemed to
refer to the singular, plural, masculine, feminine or neuter as the context
requires.
7.14 Consents. Any and all consents, agreements or approvals provided for
or permitted by this Agreement shall be in writing and a signed copy thereof
shall be filed and kept with the books of the Company.
7.15 Arbitration. Except as provided herein, any dispute, controversy or
claim arising out of or relating to this Agreement or the transactions
contemplated hereby shall be settled and finally determined by arbitration in
52
53
New York, New York or at such other location as the parties may agree, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "AAA") in force at the time of such arbitration. Judgment upon
any award rendered by such an arbitration may be rendered in any court having
jurisdiction. Except to the extent disclosure is required by Applicable Law,
rule, regulation, order or agreement, or any court or government authority with
jurisdiction (in which event public disclosure thereof may be made, but only to
the extent so required, after notice by the Member making such disclosure to the
other Members), each Member shall keep confidential and not make any disclosure
to any third party (other than its employees, agents and advisors to the extent
reasonably necessary and provided such Persons agree to keep the information
disclosed confidential to the same extent as the Member making such disclosure)
of the existence of the dispute, controversy or claim or the settlement or
resolution thereof. All fees and charges of the AAA and of the arbitrators and
all arbitration-related costs of the parties shall be borne as the arbitrators
shall determine in their award.
Any arbitration pursuant to this Section 7.15 shall be conducted by
a single arbitrator with substantial experience in the asset management industry
that is mutually agreeable to the Manager and the Non-Manager Member. The
written decision of the arbitrator shall be binding, final and conclusive upon
the parties. Any party may apply to a court of competent jurisdiction to enforce
the award of the arbitrators. The procedures specified in this Section 7.15
shall be the sole and exclusive procedures for the resolution of disputes
between the parties arising out of or relating to this Agreement; provided,
however, that a party may seek a preliminary injunction or other preliminary
judicial relief from a court of competent jurisdiction if in the judgment of
such party such action is necessary to avoid irreparable injury. Despite such
action, the parties will continue to participate in good faith in the procedures
specified in this Section 7.15 (it being understood and agreed that after the
initial decision of such court as to such preliminary injunction or other
preliminary judicial relief and after decision of any appellate body or the
expiration of all time periods for appellate review thereof, the parties shall
thereafter submit the dispute, controversy or claim to arbitration pursuant to
53
54
this Section 7.15). The arbitrator shall be empowered to award equitable or
injunctive relief. The award of damages, if any, shall be limited to actual
damages. The arbitrator is not empowered to award punitive damages.
54
55
IN WITNESS WHEREOF, the Members have caused this Agreement to be
duly executed and delivered as of the Effective Date.
ASSET ALLIANCE MANAGEMENT CORP.
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
ASSET ALLIANCE HOLDING CORPORATION
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------------------
Name: Xxxxxx X. Xxxxx
Title: Executive Vice President
JMG CAPITAL MANAGEMENT, INC.
By: /s/ Xxxxxxxx X. Xxxxxx
-----------------------------------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: President
/s/ Xxxxxxxx X. Xxxxxx
--------------------------------------------------------
Xxxxxxxx Xxxxxx
