EXHIBIT 10.21
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
WACHOVIA/PRUDENTIAL FINANCIAL ADVISORS LLC
DATED AS OF [____________], 2003
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TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS.............................................................................................1
Section 1.1. Defined Terms................................................................................1
ARTICLE 2 FORMATION OF COMPANY...................................................................................10
Section 2.1. Formation...................................................................................10
Section 2.2. Name; Office; Registered Agent..............................................................10
Section 2.3. Purpose and Powers of the Company...........................................................11
Section 2.4. Term........................................................................................11
Section 2.5. Filings; Qualification in Other Jurisdictions...............................................11
Section 2.6. Company Property............................................................................12
ARTICLE 3 CAPITAL CONTRIBUTIONS..................................................................................12
Section 3.1. Initial Capital Contributions...............................................................12
Section 3.2. Additional Capital Contributions............................................................12
Section 3.3. Issuance of Membership Interests; Failure to Make Additional Capital Contributions..........14
Section 3.4. Treatment of Retail Brokerage Combination Transactions......................................15
Section 3.5. Broker Contribution Debt....................................................................20
Section 3.6. Formulas Used For Retail Brokerage Combination Transactions.................................21
Section 3.7. Withdrawal of Capital.......................................................................23
Section 3.8. Capital Accounts............................................................................23
Section 3.9. No Interest.................................................................................24
ARTICLE 4 RIGHTS AND OBLIGATIONS OF MEMBERS......................................................................24
Section 4.1. Members.....................................................................................24
Section 4.2. No Management or Dissent Rights.............................................................24
Section 4.3. Other Activities............................................................................24
Section 4.4. No Right to Withdraw........................................................................25
Section 4.5. Places of Meetings..........................................................................25
Section 4.6. Member Meetings.............................................................................25
Section 4.7. Notice of Meetings..........................................................................25
Section 4.8. Quorum......................................................................................26
Section 4.9. Voting......................................................................................26
Section 4.10. Action Without a Meeting; Telephonic Meetings...............................................26
Section 4.11. Record Date.................................................................................27
Section 4.12. Matters Requiring Member Approval...........................................................27
Section 4.13. Reimbursements..............................................................................29
Section 4.14. Partition...................................................................................29
Section 4.15. Liability...................................................................................29
ARTICLE 5 BOARD OF MANAGERS; OFFICERS; EXCULPATION; INDEMNITY...................................................29
Section 5.1. Board of Managers...........................................................................29
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Section 5.2. Removal and Resignation.....................................................................31
Section 5.3. Meetings of the Board of Managers...........................................................31
Section 5.4. Action Without a Meeting; Telephonic Meetings...............................................32
Section 5.5. Chairman of the Board of Managers...........................................................33
Section 5.6. Officers; Designation and Election of Officers; Duties......................................33
Section 5.7. Initial Business Plan; Budget and Forecast..................................................34
Section 5.8. Exculpation and Indemnification.............................................................35
Section 5.9. Voting of Shares Held.......................................................................38
Section 5.10. Transactions with Affiliates................................................................38
ARTICLE 6 ACCOUNTING, TAX, FISCAL AND LEGAL MATTERS..............................................................39
Section 6.1. Fiscal Year.................................................................................39
Section 6.2. Bank Accounts...............................................................................39
Section 6.3. Books of Account, Tax Matters...............................................................39
Section 6.4. Audits; Inspection of Books and Records.....................................................41
Section 6.5. Financial Information and Related Matters...................................................42
Section 6.6. Tax Election................................................................................42
Section 6.7. Auditors....................................................................................42
Section 6.8. Regulatory Compliance Liaison...............................................................42
ARTICLE 7 ALLOCATIONS AND DISTRIBUTIONS..........................................................................43
Section 7.1. Allocations.................................................................................43
Section 7.2. Distributions...............................................................................46
ARTICLE 8 TRANSFERS..............................................................................................47
Section 8.1. Restrictions on Transfers; Additional Members...............................................47
ARTICLE 9 DISSOLUTION, LIQUIDATION AND TERMINATION...............................................................49
Section 9.1. No Dissolution..............................................................................49
Section 9.2. Events Causing Dissolution..................................................................49
Section 9.3. Bankruptcy of a Member......................................................................49
Section 9.4. Winding Up..................................................................................49
Section 9.5. Distribution of Assets......................................................................50
Section 9.6. Distributions in Cash or in Kind............................................................50
Section 9.7. Claims of the Members.......................................................................51
ARTICLE 10 MISCELLANEOUS.........................................................................................51
Section 10.1. Compliance with Formation Agreement.........................................................51
Section 10.2. Performance of Obligations; Futher Assurances...............................................51
Section 10.3. Amendment or Modification...................................................................51
Section 10.4. Waiver......................................................................................51
Section 10.5. Entire Agreement............................................................................51
Section 10.6. Third Party Beneficiaries...................................................................52
Section 10.7. Non-Assignability; Binding Effect...........................................................52
Section 10.8. Severability................................................................................52
Section 10.9. Injunctive Relief...........................................................................52
Section 10.10. Governing Law...............................................................................52
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Section 10.11. Submission to Jurisdiction..................................................................53
Section 10.12. Dispute Resolution..........................................................................53
Section 10.13. WAIVER OF JURY TRIAL........................................................................53
Section 10.14. Notices.....................................................................................53
Section 10.15. Counterparts................................................................................55
Section 10.16. Interpretation..............................................................................55
SCHEDULES
Schedule 4.1 - Members, Membership Interests and Percentage Interests
Schedule 5.1 - Managers
Schedule 5.6 - Officers
Schedule 5.7 - Initial Business Plan
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of
Wachovia/Prudential Financial Advisors LLC, a Delaware limited liability company
(the "Company"), is made as of [__________], 2003, by and between the parties
hereto, each as members of the Company (each of such parties, for so long as
they remain members, and any other Person (as defined in Section 1.1) that may
hereafter become a member of the Company in accordance with the provisions of
this Agreement, a "Member" and collectively, the "Members").
RECITALS
A. Pursuant to a Retail Brokerage Company Formation Agreement, dated
as of February 19, 2003 (as it may be amended from time to time, the "Formation
Agreement"), by and between WACHOVIA CORPORATION, a North Carolina corporation
("Wachovia"), and PRUDENTIAL FINANCIAL, INC., a New Jersey corporation
("Prudential"), the parties thereto agreed to contribute certain assets and
liabilities to the Company. Capitalized terms used but not defined in these
recitals have the meanings given to them in Section 1.1.
B. Pursuant to the Formation Agreement, in consideration of their
respective contributions, the parties to the Formation Agreement agreed that the
Company would initially issue an aggregate number of Membership Interests in the
Company equal to 62% of the total Membership Interests to the Initial Wachovia
Member, and an aggregate number of Membership Interests in the Company equal to
38% of the total Membership Interests to the Initial Prudential Member.
C. Wachovia has, as of the date hereof, executed and delivered a
guarantee of payment and performance of the obligations of each Wachovia Member
from time to time party hereto, and Prudential has, as of the date hereof,
executed and delivered a guarantee of payment and performance of the obligations
of each Prudential Member from time to time party hereto.
D. Concurrently with the execution and delivery hereof, the Closing
contemplated by the Formation Agreement has been consummated.
ARTICLE 1
DEFINITIONS
Section 1.1. Defined Terms. In this Agreement, except where the
context otherwise requires:
"Acquired Retail Brokerage Business" shall have the meaning set forth
in the Formation Agreement.
"Act" shall mean the Delaware Limited Liability Company Act, 6 Del.C.
Section 8-101, et seq., as amended from time to time.
"Acting Combining Member" shall mean a Member designated by a
Combining Member to make all elections on behalf of the Affiliated Members of
such Combining Member.
"Acting Non-Combining Member" shall mean a Member designated by a
Non-Combining Member to make all elections on behalf of the Affiliated Members
of such Non-Combining Member.
"Additional Capital Contribution" shall have the meaning set forth in
Section 3.2(b).
"Additional Member" and "Additional Members" shall have the respective
meanings set forth in Section 8.1(a).
"Affiliate" shall have the meaning set forth in the Formation
Agreement, and "Affiliated" and "Affiliation" shall have a correlative meaning.
"Agreement" shall mean this Amended and Restated Limited Liability
Company Agreement, as it may be amended or otherwise modified from time to time.
"Appraised Value" shall have the meaning set forth in the Formation
Agreement, but shall not include any of the provisos thereto.
"Board of Managers" shall have the meaning set forth in Section
5.1(a).
"Broker Contribution Date" shall have the meaning set forth in Section
3.4(c).
"Broker Contribution Debt" shall mean indebtedness for borrowed money
in an aggregate amount equal to the amount determined by applying the formula
set forth in Section 3.6(b).
"Business" shall mean the retail securities brokerage business,
including correspondent clearing and settlement activities, however conducted,
including electronic, direct and discount securities brokerage activities, and,
for clarity, shall include all businesses included in the Contributed Businesses
(as defined in the Formation Agreement) and exclude all businesses included in
the Excluded Businesses (as defined in the Formation Agreement) as of the date
of the Formation Agreement.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in Charlotte, North
Carolina or New York, New York are authorized or obligated by law or executive
order to close.
"Capital Account" shall have the meaning set forth in Section 3.8.
"Capital Contributions" shall mean contributions to the capital of the
Company pursuant to Article 3.
"Carrying Value" shall mean, with respect to any asset of the Company,
such asset's adjusted basis for federal income tax purposes, except that the
Carrying Value of all
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assets may be adjusted to equal their fair market values, in accordance with the
rules set forth in Treasury Regulations Section 1.704-1(b)(2)(iv)(f),
immediately prior to: (i) the date of the acquisition of any additional
Membership Interest in the Company by any new or existing Member in exchange for
more than a de minimis capital contribution; or (ii) the date of the
distribution of more than a de minimis amount of assets (other than a pro rata
distribution) to a Member. The Carrying Value of any asset of the Company
distributed to any Member will be adjusted immediately prior to such
distribution to equal its fair market value. The Carrying Value of any asset
contributed by any Member (including upon formation of the Company) will be
adjusted immediately prior to such contribution to equal its fair market value.
In the case of any asset that has a Carrying Value that differs from its
adjusted tax basis, Carrying Value will be adjusted by the amount of
depreciation calculated for purposes of the definition of "Profit" and "Loss"
rather than the amount of depreciation calculated for federal income tax
purposes. Assets of the Company, as used herein, shall include both tangible and
intangible assets.
"Certificate" shall have the meaning set forth in Section 2.1(a).
"Change in Tax Effect" means that the Acting Combining Member shall
have received an opinion of nationally recognized outside tax counsel
experienced in such matters, which counsel shall be Xxxxxxx Xxxxxxx & Xxxxxxxx
or Xxxxxxxxx & Xxxxxxxx or such other counsel reasonably acceptable to the
Acting Non-Combining Member (with copies provided to the Company and to the
Acting Non-Combining Member), to the effect that, as a result of (i) any
amendment to, change in or announced prospective change in, the laws (or
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, or (ii) any official administrative
pronouncement or judicial decision interpreting or applying such laws (or
regulations), there is more than an insubstantial risk that the Combining Member
will be required to recognize gain for United States federal income tax purposes
on the contribution of the Acquired Retail Brokerage Business to the Company, or
to incur any other material and adverse consequences under the United States
federal income tax laws in connection with a proposed Leveraged Contribution or
Lookback Leveraged True-Up.
"Closing" shall have the meaning set forth in the Formation Agreement.
"Closing Date" shall have the meaning set forth in the Formation
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law), including
effective date and transition rules (whether or not codified).
"Combining Member" shall mean any Member that is the Combining Party
(as defined in the Formation Agreement) or an Affiliate of the Combining Party,
as contemplated by Section 8.3 of the Formation Agreement.
"Company" shall have the meaning set forth in the preamble hereto.
"Company Leveraged Contribution" shall have the meaning set forth in
Section 3.4(b).
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"Designated Combining Member" shall mean one or more Members
designated by the Acting Combining Member to make an Additional Capital
Contribution, incur the Broker Contribution Debt, receive Membership Interests
and/or take such other actions as are specified in Section 3.4 (or one or more
Permitted Transferees of the Acting Combining Member designated by it to make
such Additional Capital Contribution, incur such Broker Contribution Debt,
receive such Membership Interests and/or take such other actions).
"Designated Non-Combining Member" shall mean one or more Members
designated by the Acting Non-Combining Member to make an Additional Capital
Contribution or other payment, receive Membership Interests and/or take such
other actions as are specified in Section 3.4 (or one or more Permitted
Transferees of the Acting Non-Combining Member which are designated by it to
make such Additional Capital Contribution or other payment, receive such
Membership Interests and/or take such other actions).
"Disposition Transaction" shall mean any sale, lease or other
disposition (including by way of disposition or issuance to any third party of
any equity interests in any Subsidiary of the Company) of, or any termination
and liquidation, dissolution, winding-up or similar event affecting, assets of
the Company or any Subsidiary of the Company or any equity investment by a
Person not Affiliated with a Member (and other than a Subsidiary of the Company)
in any Subsidiary of the Company.
"Distributable Cash" shall have the meaning set forth in Section
7.2(a).
"Excess Membership Interests" shall have the meaning set forth in
Section 4.9(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exculpated Person" shall have the meaning set forth in Section
5.8(a).
"FA Notes" shall mean notes issued prior to the Closing by an employee
employed in the Contributed Businesses (as defined in the Formation Agreement)
to Wachovia, Prudential, or any of their Subsidiaries, which are payable in full
to the holder thereof upon termination of such employee's employment.
"Final Closing Balance Sheet" shall have the meaning set forth in the
Formation Agreement.
"Formation Agreement" shall have the meaning set forth in the recitals
hereto.
"Indemnified Person" shall have the meaning set forth in Section
5.8(b).
"Initial Wachovia Member" shall mean [Wachovia Brokerage Holdings
LLC], a Delaware limited liability company.
"Initial Prudential Member" shall mean Prudential Securities
Incorporated, a Delaware corporation.
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"Initial Tax Matters Member" shall mean the Initial Wachovia Member.
"Integration Period" shall mean the period from the Closing Date to
the earlier to occur of (i) the second anniversary of the Closing Date or (ii)
the date on which the platform of Wachovia Securities (as defined in the
Formation Agreement) with respect to the Wachovia Contributed Business (as
defined in the Formation Agreement) and the platform of Prudential Securities
(as defined in the Formation Agreement) with respect to the Prudential
Contributed Business (as defined in the Formation Agreement) are integrated and
operating as a single platform.
"IRS" shall mean the United States Internal Revenue Service.
"Large Retail Broker" shall have the meaning set forth in the
Formation Agreement.
"Large Retail Brokerage Combination" shall have the meaning set forth
in the Formation Agreement.
"Leveraged Contribution" shall have the meaning set forth in Section
3.4(b).
"Liquidating Agent" shall have the meaning set forth in Section
9.4(a).
"Lookback Leveraged True-Up" shall have the meaning set forth in
Section 3.4(e).
"Lookback Option" shall have the meaning set forth in Section 3.4(b).
"Lookback Period" shall have the meaning set forth in Section 3.4(b).
"Major Tax Item" shall have the meaning set forth in Section 6.3(e).
"Manager" shall have the meaning set forth in Section 5.1(a).
"Member" and "Members" shall have the respective meanings set forth in
the preamble hereto.
"Member-Incurred Costs" shall have the meaning set forth in Section
3.2(e).
"Member Leveraged Contribution" shall have the meaning set forth in
Section 3.4(b).
"Membership Interest" and "Membership Interests" shall mean the
limited liability company interest(s) of a Member in the Company, as set forth
opposite such Member's name on Schedule 4.1 hereto from time to time, including
such Member's share of the Profits and Losses of the Company, and also the right
of such Member to any and all of the benefits to which such Member may be
entitled as provided in this Agreement and in the Act, together with the
obligations of such Member to comply with all the provisions of this Agreement
and of the Act. The Company may issue whole or fractional Membership Interests.
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"Non-Combining Member" shall mean any Member that is the Non-Combining
Party (as defined in the Formation Agreement) or an Affiliate of the
Non-Combining Party, as contemplated in Section 8.3 of the Formation Agreement.
"Non-De Minimis Disposition Transaction" shall mean any Disposition
Transaction with respect to businesses, assets or Subsidiaries of the Company or
its Subsidiaries that in the aggregate generated more than 5% of the Company's
consolidated revenues during the prior fiscal year (or, in the case of a
Disposition Transaction occurring during the fiscal year in which the Closing
occurred, 5% of the Company's consolidated revenues on a pro forma basis for the
calendar year preceding such fiscal year).
"One Time Costs" shall have the meaning set forth in the Formation
Agreement.
"Percentage Interest" shall mean, with respect to a Member at any
time, the quotient expressed as a percentage obtained by dividing (x) the number
of Membership Interests owned by such Member at such time by (y) the number of
Membership Interests owned by all Members at such time.
"Permitted Transferee" shall have the meaning set forth in the
Formation Agreement.
"Person" shall have the meaning set forth in the Formation Agreement.
"Proceeding" shall have the meaning set forth in Section 5.8(d).
"Profit" and "Loss" shall mean, for each Tax Year or other period, an
amount equal to the taxable income or loss of the Company for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) will be included in taxable income or loss)
and with the accounting method used by the Company for federal income tax
purposes, with the following adjustments:
(i) any income of the Company that is exempt from U.S. federal
income tax and not otherwise taken into account in computing Profit or Loss
will be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant
to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in computing Profit or Loss will be subtracted from such
taxable income or loss;
(iii) if the Carrying Value of any asset of the Company differs from
its adjusted tax basis for federal income tax purposes, any gain or loss
resulting from a disposition of such asset will be calculated with
reference to such Carrying Value;
(iv) upon an adjustment to the Carrying Value of any asset of the
Company (other than an adjustment in respect of depreciation) pursuant to
the definition of
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Carrying Value, the amount of the adjustment will be included as gain or
loss in computing such taxable income or loss;
(v) if the Carrying Value of any asset of the Company differs from
its adjusted tax basis for federal income tax purposes, the amount of
depreciation, amortization or cost recovery deductions with respect to such
asset will for purposes of determining Profit and Loss be an amount which
bears the same ratio to such Carrying Value as the federal income tax
depreciation, amortization or other cost recovery deductions bears to such
adjusted tax basis; and
(vi) notwithstanding any other provision of this definition, any
items of income, gain, loss or deduction that are specially allocated
pursuant to Section 7.1(c) will not be taken into account in computing
Profit or Loss.
"Prudential" shall have the meaning set forth in the recitals hereto.
"Prudential Member" shall have the meaning set forth in the Formation
Agreement.
"Prudential Permitted Transferee" shall have the meaning set forth in
the Formation Agreement.
"Put/Call Exercise Notice" shall have the meaning set forth in the
Formation Agreement.
"Requisite Membership Interests" shall mean:
(i) for so long as the Members consist solely of Wachovia Members and
Prudential Members, both (A) Membership Interests of the Wachovia Members
representing a majority of the aggregate number of Membership Interests of
all of the Wachovia Members and (B) Membership Interests of the Prudential
Members representing a majority of the aggregate number of Membership
Interests of all of the Prudential Members; and
(ii) after the admission of any Third Party Member:
(A) with respect to any matter as to which Members have a right
to vote or consent pursuant to this Agreement or the Act, other than
the approval of any amendment or waiver of any provision of this
Agreement described in clauses (B), (C), (D) or (F) through below,
Membership Interests of Members whose Percentage Interests aggregate
to at least 80%;
(B) with respect to the decision of the Members to dissolve the
Company in accordance with Section 9.2 or the approval of any
amendment or waiver to the dissolution provisions of Section 9.2,
Membership Interests of Members whose Percentage Interests aggregate
to at least 80%;
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(C) with respect to the approval of any amendment or waiver of
the provisions of Article 3, the Member consent rights set forth in
Section 4.12, the exculpation and indemnification provisions in
Section 5.8 in any manner materially adverse to the Members and their
Affiliates, or the allocation and distribution provisions of Article 7
or Section 9.5(a)(or any definitions set forth in this Section 1.1 to
the extent applied in such Sections), Membership Interests of Members
whose Percentage Interests aggregate to at least 95%;
(D) with respect to the approval of any amendment or waiver of
Section 10.3 (other than the proviso thereof) or the first sentence of
Section 10.4 (or this definition of "Requisite Membership Interests"),
Membership Interests of Members whose Percentage Interests aggregate
to at least 95%;
(E) with respect to the approval of any amendment or waiver of
any provision of this Agreement to establish any new class of
Membership Interests or to cause the rights and preferences of the
Membership Interests to not be equal (except as expressly provided in
this Agreement as of the date hereof), Membership Interests of Members
whose Percentage Interests aggregate to at least 95%;
(F) with respect to the approval of any amendment or waiver of
Section 6.6 or any other provision of this Agreement that would result
in the Company becoming subject to U.S. federal income tax as a
corporation, Membership Interests of Members whose Percentage
Interests aggregate to at least 95%; and
(G) with respect to the approval of the amendment or waiver of
any other provision of this Agreement (other than as specified above),
Membership Interests of Members whose Percentage Interests aggregate
to more than 50%.
For purposes of this definition, "Membership Interests" (and the Percentage
Interests related thereto) shall not include any Excess Membership
Interests.
"Retail Brokerage Combination Transaction" shall have the meaning set
forth in the Formation Agreement.
"Signing Review Accountants" shall have the meaning set forth in
Section 6.3(b).
"Subsidiary" shall have the meaning set forth in the Formation
Agreement.
"Tax Dispute Resolution Procedure" shall mean the submission of any
disputed tax item to the Signing Review Accountants, who shall make a binding
determination with respect to such tax item. Such determination shall be
accompanied by a written legal analysis upon which such determination shall be
based, concluding that it is at least more likely than not that the treatment of
the tax item as determined by the Signing Review Accountants is correct. If more
than one potential determination with respect to the same tax item could satisfy
the requirement of the preceding sentence, the determination of the Signing
Review Accountants shall adopt the treatment supported by the highest level of
substantive legal comfort. Notwithstanding the foregoing, if (in the judgment of
the Signing Review Accountants) the treatment of any tax item would have a
significant economic effect on only one Member (or one
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Member and its Affiliates), the affected Member's position shall prevail if the
Signing Review Accountants determine that there is a reasonable basis for such
position.
"Tax Matters Member" shall have the meaning set forth in Section
6.3(f).
"Tax Year" shall mean (i) the fiscal year of the Company determined
pursuant to Section 6.1 or (ii) if after the date of this Agreement, the taxable
year is required by the Code to be a period other than the period described in
clause (i), then each 12-month period that is the taxable year of the Company
determined in accordance with the requirements of the Code; provided that in the
case of a dissolution, Tax Year means the period from the day after the end of
the most recently ended Tax Year until the dissolution of the Company, and for
purposes of making allocations of Profit and Loss, Tax Year means any portion of
a taxable year of the Company to the extent required to comply with Section 706
of the Code.
"Third Party Member" shall mean an Additional Member that is not a
Wachovia Member or a Prudential Member or any of their respective Permitted
Transferees.
"Transfer" shall mean a transfer, sale, assignment, pledge,
hypothecation or gift of, creation of a security interest in or encumbrance or
other lien on, or any other disposal (whether or not voluntary) of, any
Membership Interest or beneficial interest therein.
"Transaction Documents" shall have the meaning set forth in the
Formation Agreement.
"Treasury Regulations" shall have the meaning set forth in the
Formation Agreement.
"Uncalled One Time Cost Amount" shall have the meaning set forth in
Section 3.2(d).
"Unleveraged Contribution" shall have the meaning set forth in Section
3.4(b).
"Wachovia" shall have the meaning set forth in the recitals hereto.
"Wachovia/Company Master Agreement" shall have the meaning set forth
in the Formation Agreement.
"Wachovia Member" shall have the meaning set forth in the Formation
Agreement.
"Wachovia Permitted Transferee" shall have the meaning set forth in
the Formation Agreement.
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ARTICLE 2
FORMATION OF COMPANY
Section 2.1. Formation.
(a) The Members hereby acknowledge the formation of the Company as a
limited liability company under and pursuant to the Act pursuant to the
Certificate of Formation of the Company (the "Certificate"), dated [________],
2003.
(b) The Company shall have one class of Membership Interests, which
shall have equal rights and preferences in the assets of the Company except as
otherwise expressly provided herein. A Membership Interest shall for all
purposes be personal property. All Membership Interests in the Company are
securities governed by Article 8 of the Uniform Commercial Code, as provided in
Section 8-103(c) of the Uniform Commerical Code, as in effect from time to time
in the State of Delaware.
(c) Upon the execution and delivery of this Agreement or a counterpart
to this Agreement and a written agreement to be bound by the terms of the
Formation Agreement applicable to it, each of the Persons named as a Member on
Schedule 4.1 shall be admitted as a Member of the Company with a number of
Membership Interests representing the Percentage Interests set forth on Schedule
4.1 hereto, with effect as of the date hereof. The Board of Managers may update
Schedule 4.1 to reflect any changes in the Members, Membership Interests and
Percentage Interests of the Members in accordance with the terms of this
Agreement.
(d) The Members intend for the contributions to the Company by the
Initial Wachovia Member and the Initial Prudential Member of the cash and other
assets and liabilities specified in the Formation Agreement, and the admission
of the Initial Wachovia Member and the Initial Prudential Member as Members on
the date hereof, to be treated for federal income tax purposes as a contribution
to the Company by the Initial Wachovia Member and the Initial Prudential Member
of 62% and 38%, respectively, of the Company's assets. The Initial Wachovia
Member and the Initial Prudential Member each hereby acknowledges the receipt on
the date hereof of 620 Membership Interests and 380 Membership Interests,
respectively.
(e) The rights, duties and liabilities of the Members shall be as
provided in the Act, except as otherwise provided herein.
(f) This Agreement amends, restates and supersedes in its entirety the
Limited Liability Company Agreement of the Company, dated as of [________],
2003.
Section 2.2. Name; Office; Registered Agent.
(a) The name of the Company as of the date hereof is
"Wachovia/Prudential Financial Advisors LLC", and its business shall be carried
on in this name with such variations and changes as the Board of Managers deem
necessary or appropriate in order to comply with requirements of the
jurisdictions in which the Company's operations are conducted. The Board of
Managers shall have the power at any time to change the name of the Company at
its sole
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discretion; provided, however, that prior to the end of the Integration Period,
no such variation or change shall be made if it would result in the Company
operating under a name that does not include "Wachovia/Prudential", unless such
variation or change shall have been unanimously approved by the Board of
Managers.
(b) The principal place of business of the Company shall be located in
Richmond, Virginia, which location may be changed at any time by the Board of
Managers. The Company shall also have additional offices as shall be determined,
from time to time, by the Board of Managers. The Company's registered agent and
office in Delaware shall be Corporation Service Company, 0000 Xxxxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx 00000. At any time, the Board of Managers may
designate another registered agent and/or registered office.
Section 2.3. Purpose and Powers of the Company.
(a) The Company is formed for the object and purpose of, and the
nature of the business to be conducted and promoted by the Company is, engaging
directly, or through its Subsidiaries, in the Business, without geographic
restriction of any kind, and in any and all activities necessary, desirable or
incidental thereto. In addition, subject to Section 4.12, the Company may engage
in such other businesses as the Board of Managers may determine.
(b) Subject to any specific limitation set forth in this Agreement,
the Company shall have the power and authority to take any and all actions that
limited liability companies may take under the Act and that are necessary,
appropriate, proper, advisable, incidental or convenient to or for the
furtherance of the purpose set forth in this Section 2.3.
(c) The Company shall do all things necessary to maintain its limited
liability company existence separate and apart from each Member and any
Affiliate of any Member, including holding regular meetings of the Board of
Managers and maintaining its books and records on a current basis separate from
that of any Affiliate of the Company or any other Person.
Section 2.4. Term. The term of the Company shall have commenced on
the date the Certificate was filed in the office of the Secretary of State of
the State of Delaware and shall continue in full force and effect in perpetuity;
provided that the Company may be dissolved in accordance with the provisions of
this Agreement and the Act.
Section 2.5. Filings; Qualification in Other Jurisdictions. The
Company shall prepare, following the execution and delivery of this Agreement,
any documents required to be filed or, in the Board of Managers' view,
appropriate for filing under the Act, and the Company shall cause each such
document to be filed in accordance with the Act, and, to the extent required by
federal, state, local or foreign law, to be filed and recorded, and/or notice
thereof to be published, in the appropriate place in each jurisdiction in which
the Company may hereafter establish a place of business. The Board of Managers
may cause the Company to be qualified, formed or registered under assumed or
fictitious name statutes or similar laws in any jurisdiction in which the
Company transacts business where the Company is not currently so qualified,
formed or registered. Each Manager and officer of the Company, as an authorized
person within the meaning of the Act, shall execute, deliver and file any such
documents (and any amendments
11
and/or restatements thereof) necessary for the Company to accomplish the
foregoing. The Board of Managers may appoint any other authorized persons to
execute, deliver and file any such documents.
Section 2.6. Company Property. All property of the Company, both
tangible and intangible, shall be deemed to be owned by the Company as an
entity. A Member has no interest in specific Company property.
ARTICLE 3
CAPITAL CONTRIBUTIONS
Section 3.1. Initial Capital Contributions. The Company hereby
acknowledges the receipt of contributed capital pursuant to the transactions
described in the Formation Agreement.
Section 3.2. Additional Capital Contributions.
(a) No Member shall be required or permitted to make any additional
Capital Contributions to the Company except as provided in this Article 3.
(b) Members may, in the case of clause (i) below, and shall, in the
case of clauses (ii), (iii) and (iv) below, from time to time make additional
Capital Contributions to the Company (each, an "Additional Capital
Contribution"):
(i) at such time and in such amounts as the Board of Managers may
determine to offer to the Members;
(ii) in connection with the contribution of an Acquired Retail
Brokerage Business in accordance with Section 3.4;
(iii) in connection with the payment and satisfaction of One Time
Costs to the extent described in Section 3.2(d) below; and
(iv) in connection with a deemed Capital Contribution in
accordance with Section 7.2(a)(ii)(B).
(c) If the Board of Managers determines that the Members shall be
offered the opportunity to make Additional Capital Contributions in accordance
with Section 3.2(b)(i), the Board of Managers shall offer to the Members by
written notice the opportunity to make Additional Capital Contributions pro rata
in proportion to their Percentage Interests immediately prior to the time of
contribution in order to maintain their respective Percentage Interests. Each
Member shall have 15 Business Days following delivery of such notice to notify
the Board of Managers in writing of its decision whether or not to make such
Additional Capital Contribution, in whole or in part. Thereafter, the Board of
Managers shall notify each Member of the amount of its required Additional
Capital Contribution and the date such Additional Capital Contribution shall be
due. The election by any Member not to exercise its rights under this Section
3.2(c) to
12
make an Additional Capital Contribution in any one instance shall not affect its
rights as to any subsequent proposed Additional Capital Contribution.
(d) The Board of Managers shall from time to time determine the amount
of One Time Costs (the "Uncalled One Time Cost Amount") that (x) the Company has
actually incurred for which no Capital Contribution has been previously made by
the Members and (y) the Board of Managers estimates in good faith that the
Company will incur in the next 60 days. Upon identifying such Uncalled One Time
Cost Amounts, the Board of Managers shall call on each Member to make an
Additional Capital Contribution in the amount of the Uncalled One Time Cost
Amount multiplied by such Member's Percentage Interest as of the date of such
notice by delivering a notice to each Member, which notice shall identify the
relevant One Time Costs and the Uncalled One Time Cost Amount. Each Member shall
pay its share of such Uncalled One Time Cost Amount within 15 Business Days
following delivery of such written notice, by wire transfer of immediately
available funds to a bank account identified by the Company in such written
notice. If at any time the Board determines that it has made calls in respect of
One Time Costs in excess of actual One Time Costs, and it is unlikely that any
additional One Time Costs will be incurred or required in the next 90 days, the
Company shall return the excess amount to the Members by redeeming and
cancelling a number of Membership Interests issued in respect thereof equitably
in proportion to the Capital Contributions actually made by each such Member
with respect to such Uncalled One Time Cost Amounts.
(e) If at any time a Member has incurred any One Time Costs
("Member-Incurred Costs") which were not otherwise reimbursed pursuant to this
Section 3.2(e), the Member shall submit to the Company (with a copy to each of
the other Members) an itemized schedule of such Member-Incurred Costs together
with such supporting detail as the Company may reasonably request. Within 15
Business Days after receipt of such schedule and supporting detail, the Company
shall reimburse such Member for such Member-Incurred Costs by wire transfer of
immediately available funds to a bank account designated by such Member.
Following such payment, the amount of such Member-Incurred Costs shall be
treated as an Uncalled One Time Cost Amount and shall be subject to the Capital
Contribution provisions of Section 3.2(d).
(f) Additional Capital Contributions shall be made (i) in the case of
Section 3.2(b)(i) or (iii), in cash or, with the approval of the Board of
Managers, in assets or other properties and (ii) in the case of Section
3.2(b)(ii), through the contribution of either assets or equity interests in an
entity that is disregarded for federal income tax purposes (or such other equity
interests that the Non-Combining Member may agree to be so contributed) of the
relevant Acquired Retail Brokerage Business or, in the case of the Non-Combining
Member, in cash as provided in Section 3.4. Except as otherwise provided in
Section 3.4, the value of all properties and assets contributed to the Company
shall be determined as of the date of contribution in accordance with Section
3.2(g).
(g) The "fair market value" of any non-cash Additional Capital
Contributions (other than with respect to an Acquired Retail Brokerage Business)
to be valued pursuant to this Section 3.2(g) shall be the price that an
unrelated third party would pay if it were to acquire in an arm's-length
transaction the property proposed to be so valued as determined by the unanimous
vote of the Board of Managers in accordance with this Section 3.2(g). The
Managers shall attempt in good faith to agree on any such fair market value and
on the Appraised Value of the
13
Company whenever required for purposes of Section 3.3 (and, when acting for such
purpose, the Board of Managers shall be deemed to be the "Appraiser" referred to
in the definition of "Appraised Value"). If the Managers shall have failed to
agree upon any such fair market value within 30 days after any such non-cash
Additional Capital Contribution is proposed to be made, such fair market value
and/or Appraised Value shall be determined by a nationally recognized
independent investment banking firm selected by the Board of Managers (with the
approval of at least one Manager appointed by the Prudential Members) and such
determination shall be accepted and adopted as the unanimous determination of
the Board of Managers.
Section 3.3. Issuance of Membership Interests; Failure to Make
Additional Capital Contributions.
(a) Except as provided in Section 3.4, whenever Additional Capital
Contributions are made, each Member making such Additional Capital Contribution
shall be issued a number of additional Membership Interests equal to:
(A / B) * C
where:
A = the amount of cash comprising such Additional Capital
Contribution plus the fair market value of any non-cash
Additional Capital Contribution determined in accordance with
Section 3.2(g)
B = the Appraised Value of the Company immediately prior to the
contribution of such Additional Capital Contribution, as
determined in accordance with Section 3.2(g)
C = the total number of Membership Interests outstanding
immediately prior to such Additional Capital Contribution
(assuming that all contributions are made by all Members
simultaneously with respect to such Additional Capital
Contribution).
(b) If any Member (i) fails to contribute to the Company all or any
portion of an Additional Capital Contribution agreed upon or required to be made
by such Member in accordance with Section 3.2(b)(i) or (iii) within 10 Business
Days after the date scheduled for such Additional Capital Contribution, or (ii)
elects not to exercise its rights in full to make an Additional Capital
Contribution pursuant to Section 3.2(c) within the 15 Business Day period
referred to therein, then in any such case the other Members shall be entitled
to make such Additional Capital Contribution (ratably in accordance with their
respective Percentage Interests), and each Member making such Additional Capital
Contribution shall be issued a number of additional Membership Interests in
accordance with Section 3.3(a).
(c) The Company shall not issue new Membership Interests to any Third
Party unless such Interests shall have been offered to the existing Members. Any
such Membership Interests not subscribed by the then-current Members shall be
offered to the remaining Members in accordance with their relative Percentage
Interests. Such unsubscribed Membership Interests may be offered by the Company
only if the Members shall not have first subscribed therefor in
14
accordance with this Section and any applicable approvals set forth in Section
4.12(a)(iv) shall have been obtained.
Section 3.4. Treatment of Retail Brokerage Combination
Transactions.
(a) Generally. As contemplated by Section 8.3 of the Formation
Agreement in connection with a Retail Brokerage Combination Transaction, the
Members shall take the actions specified in this Section 3.4 in connection with
the contribution of an Acquired Retail Brokerage Business to the Company.
(b) Elections and Notices.
(i) On or before the 20th Business Day following the
receipt of the notice provided by the Combining Party to the Non-Combining
Party (each as defined in the Formation Agreement) with respect to a Retail
Brokerage Combination Transaction pursuant to Section 8.3(c)(i) of the
Formation Agreement (or such later date as is set forth in the proviso to
Section 8.3(c)(ii) of the Formation Agreement), unless (x) the
Non-Combining Member has delivered a Put/Call Exercise Notice pursuant to
Section 9.3 of the Formation Agreement, or (y) the Combining Member has
notified the Company and the Non-Combining Member that the Acquired Retail
Brokerage Business is an Excludible Retail Brokerage Business (as defined
in the Formation Agreement) and the Company and the Non-Combining Member
have not consented to the contribution of such Excludible Retail Brokerage
Business to the Company, the Acting Non-Combining Member shall deliver a
notice to the Company and the Combining Members in which the Acting
Non-Combining Member shall state its election to:
(A) cause the Designated Non-Combining Member to make
either an Additional Capital Contribution to the Company or a payment to
the Designated Combining Member pursuant to Section 3.4(d)(i) or (ii), as
applicable (depending upon whether the Acting Combining Member elects to
make a Leveraged Contribution or an Unleveraged Contribution of the
Acquired Retail Brokerage Business);
(B) make no such Additional Capital Contribution or
payment, in which case the aggregate Percentage Interests of the
Non-Combining Members will be reduced as a result of the contribution of
such Acquired Retail Brokerage Business and the issuance of additional
Membership Interests to the Designated Combining Member pursuant to Section
3.4(c);
(C) in the event the Retail Brokerage Combination
Transaction is scheduled to be consummated prior to the end of the
Integration Period, cause the Designated Combining Member to delay the
contribution of the Acquired Retail Brokerage Business until the end of the
Integration Period; or
(D) in the case of a Large Retail Brokerage
Combination, exercise an option (the "Lookback Option") to delay its
election among the foregoing alternatives for a period (the "Lookback
Period") of two years following the Broker Contribution Date.
15
If no such notice is delivered by the date specified above, the Acting
Non-Combining Member shall be deemed to have elected clause (B).
(ii) In the event the Acting Non-Combining Member makes
the election specified in clause (i)(A) above, within 20 Business Days
after such election by the Acting Non-Combining Member (and in any case at
least five Business Days prior to the consummation of the Retail Brokerage
Combination Transaction) the Acting Combining Member shall deliver a notice
to the Company and the Non-Combining Members, in which the Acting Combining
Member shall state its election to:
(A) cause the Designated Combining Member to
contribute the Acquired Retail Brokerage Business to the Company on a
leveraged basis (a "Leveraged Contribution") pursuant to Section
3.4(c) and either (1) incur the Broker Contribution Debt itself (a
"Member Leveraged Contribution") or (2) cause the Company to incur the
Broker Contribution Debt (a "Company Leveraged Contribution"); or
(B) cause the Designated Combining Member to
contribute the Acquired Retail Brokerage Business to the Company
pursuant to Section 3.4(c) without the incurrence by either the
Combining Members or the Company of any Broker Contribution Debt (an
"Unleveraged Contribution").
(iii) If the Acting Non-Combining Member makes the election
set forth in Section 3.4(b)(i)(C) above, on or before the 90th day prior to
the end of the Integration Period, the Acting Non-Combining Member shall
deliver a notice to the Company and the Combining Members in which the
Acting Non-Combining Member shall state its election to:
(A) cause the Designated Non-Combining Member to make
either an Additional Capital Contribution to the Company or a payment
to the Designated Combining Member pursuant to Section 3.4(d)(i) or
(ii), as applicable (depending upon whether the Acting Combining
Member elects to make a Leveraged Contribution or an Unleveraged
Contribution of the Acquired Retail Brokerage Business pursuant to
Section 3.4(c)); or
(B) make no such Additional Capital Contribution or
payment, in which case the aggregate Percentage Interests of the
Non-Combining Members will be reduced as a result of the contribution
of such Acquired Retail Brokerage Business and the issuance of
additional Membership Interests to the Combining Members pursuant to
Section 3.4(c).
If no such notice is delivered by the date specified above, the Acting
Non-Combining Member shall be deemed to have elected clause (B).
(iv) If the Acting Non-Combining Member makes the election
specified in Section 3.4(b)(i)(D) above, on or before the 90th day prior to
the end of the Lookback Period, the Acting Non-Combining Member shall
deliver a notice to the Company and
16
the Combining Members in which the Acting Non-Combining Member shall state
its election to:
(A) cause the Designated Non-Combining Member to make
either an Additional Capital Contribution to the Company or a payment
to the Designated Combining Member pursuant to Section 3.4(e)(ii),
(iii) or (iv), as applicable (depending upon whether the Acting
Combining Member elects to make a Lookback Leveraged True-Up pursuant
to Section 3.4(e)(i));
(B) make no such Additional Capital Contribution or
payment, in which case the aggregate Percentage Interests of the
Non-Combining Members will remain at their then-current diluted level;
or
(C) if the Acting Non-Combining Member is a
Prudential Member, deliver a Put/Call Exercise Notice in accordance
with Section 9.3 of the Formation Agreement with respect to the Large
Retail Brokerage Combination subject to the Lookback Option.
If no such notice is delivered by the date specified above, the Acting
Non-Combining Member shall be deemed to have elected clause (B).
(c) Contribution of Acquired Retail Brokerage Business by Combining
Member. On the date of consummation of a Retail Brokerage Combination
Transaction or as soon thereafter as practicable:
(i) The Designated Combining Member shall contribute,
or cause to be contributed, the Acquired Retail Brokerage Business to the
Company (the date of such contribution, the "Broker Contribution Date");
and
(ii) The Company shall issue an aggregate number of
Membership Interests as calculated pursuant to Section 3.6(a) to the
Designated Combining Member and shall comply with Section 3.5 with respect
to the Broker Contribution Debt, if applicable.
Notwithstanding the foregoing, in the event the Acting Non-Combining Member
makes the election set forth in Section 3.4(b)(i)(C), the Combining Members
shall, in accordance with the Non-Combining Member's election, delay the
contribution of the Acquired Retail Brokerage Business and retain the Acquired
Retail Brokerage Business outside of the Company and its Subsidiaries until the
Integration Period has elapsed, and within 20 Business Days after such election
by the Acting Non-Combining Member (and in any case at least five Business Days
prior to the consummation of the Retail Brokerage Combination Transaction) the
Acting Combining Member shall deliver a notice to the Company and the
Non-Combining Members of its election pursuant to Section 3.4(b)(ii). In such
circumstances, the Combining Members shall not be in violation of this Article 3
or Section 8.3 of the Formation Agreement during the Integration Period.
(d) Additional Capital Contribution or Payment by Designated
Non-Combining Member. On the Broker Contribution Date, in the event the Acting
Non-Combining Member
17
made the election set forth in clause Section 3.4(b)(i)(A) or Section
3.4(b)(iii)(A), as the case may be, the Designated Non-Combining Member shall
take one of the following actions:
(i) Contribution to the Company. In a Leveraged
Contribution, (A) make an Additional Capital Contribution to the Company in
cash by wire transfer of immediately available funds in an aggregate amount
as calculated by Section 3.6(b) (or such lesser amount as the Acting
Non-Combining Member determines in its sole discretion), in exchange for
which (B) the Company shall issue to the Designated Non-Combining Member an
aggregate number of Membership Interests as calculated pursuant to Section
3.6(c) and comply with Section 3.5 with respect to the Broker Contribution
Debt; or
(ii) Payment to the Designated Combining Member. In an
Unleveraged Contribution, (A) make a payment to the Designated Combining
Member in cash by wire transfer of immediately available funds in an
aggregate amount as calculated pursuant to Section 3.6(b) (or such lesser
amount as the Acting Non-Combining Member determines in its sole
discretion), in exchange for which (B) such Designated Combining Member
shall assign and deliver to the Designated Non-Combining Member an
aggregate number of Membership Interests as calculated in Section 3.6(c).
(e) Events Upon Lookback Option. If the Acting Non-Combining Member
exercises its Lookback Option, (i) the Designated Combining Member nevertheless
shall contribute, or shall cause the contribution of, the Large Retail Broker to
the Company pursuant to an Unleveraged Contribution, in exchange for which (ii)
the Company shall issue the Membership Interests to the Designated Combining
Member as of the Broker Contribution Date in accordance with Section 3.4(c) as
if the Acting Non-Combining Member elected to take no action as described in
Section 3.4(b)(i)(B). Thereafter, if the Acting Non-Combining Member makes the
election referred to in Section 3.4(b)(iv)(A), the Members shall take the
following actions:
(i) Election by Acting Combining Member to Incur Debt.
Within 20 Business Days after such election by the Acting Non-Combining
Member, the Acting Combining Member shall deliver a notice to the Company
and the Acting Non-Combining Member stating its election whether or not to
cause the Company to incur Broker Contribution Debt at the end of the
Lookback Period in connection with the Designated Non-Combining Member's
Additional Capital Contribution (a "Lookback Leveraged True-Up");
(ii) Issuance of Membership Interests. If the Acting
Combining Member elects to effect a Lookback Leveraged True-Up, (A) the
Designated Non-Combining Member shall, at the end of the Lookback Period,
make an Additional Capital Contribution to the Company in cash by wire
transfer of immediately available funds in an aggregate amount as
calculated pursuant to Section 3.6(b) (or such lesser amount as the Acting
Non-Combining Member determines in its sole discretion), in exchange for
which (B) the Company shall issue to the Designated Non-Combining Member an
aggregate number of Membership Interests as calculated pursuant to Section
3.6(c). In addition, the Company shall incur the Broker Contribution Debt,
distribute the proceeds
18
therefrom in accordance with Section 3.5(c) and otherwise comply with the
other provisions of Section 3.5 with respect thereto;
(iii) Payment to the Designated Combining Member. If the
Acting Combining Member does not elect to effect a Lookback Leveraged
True-Up, (A) the Designated Non-Combining Member shall make a payment to
the Designated Combining Member in cash by wire transfer of immediately
available funds in an aggregate amount as calculated pursuant to Section
3.6(b) (or such lesser amount as the Acting Non-Combining Member determines
in its sole discretion), in exchange for which (B) the Designated Combining
Member shall assign and deliver to the Designated Non-Combining Member an
aggregate number of Membership Interests as calculated pursuant to Section
3.6(c); and
(iv) Other True-Up Payments. Whether or not a Lookback
Leveraged True-Up is elected by the Acting Combining Member, (A) the
Designated Non-Combining Member shall be entitled to make a payment to the
Designated Combining Member in cash by wire transfer of immediately
available funds in an aggregate amount (or such lesser amount as the Acting
Non-Combining Member determines in its sole discretion) equal to the sum of
all of the differences between (x) each Additional Capital Contribution
(and/or payment to a Designated Combining Member pursuant to this Section
3.4) during the Lookback Period (and prior to the Additional Capital
Contribution or payment provided in this Section 3.4(e)) which the
Designated Non-Combining Member and its Affiliated Members would have been
able to have made had the Acting Non-Combining Member made the election in
Section 3.4(b)(i)(A) and (y) each Additional Capital Contribution (and/or
payment to a Designated Combining Member pursuant to this Section 3.4)
during the Lookback Period (and prior to the Additional Capital
Contribution or payment provided in this Section 3.4(e)) which the
Designated Non-Combining Member and its Affiliated Members were then
actually entitled to make, in exchange for which (B) the Designated
Combining Member shall assign and deliver to the Designated Non-Combining
Member an aggregate number of Membership Interests represented by such sum
(or such proportionately smaller number of Membership Interests, as the
case may be), based on, with respect to each such Additional Capital
Contribution, the valuation of the Company that was determined pursuant to
Section 3.6(d) at the time of each such Additional Capital Contribution;
provided that if the then Designated Non-Combining Member and its
Affiliated Members failed to make their then full amount of any such
Additional Capital Contribution (and/or payment to a Designated Combining
Member pursuant to this Section 3.4) that they were then entitled to make
during the Lookback Period, the aggregate payment that the Designated
Non-Combining Member is entitled to make pursuant to this clause (iv) and
the aggregate number of Membership Interests to which such Designated
Non-Combining Member is entitled to receive pursuant to this clause (iv)
with respect to each such Additional Capital Contribution (and/or payment
to a Designated Combining Member pursuant to this Section 3.4) that
occurred during the Lookback Period, shall be proportionately reduced based
on the ratio that the amount of such Additional Capital Contribution
(and/or payment to a Designated Combining Member pursuant to this Section
3.4) that was actually then made by such Designated Non-Combining Member
and its Affiliated Members bears to the amount of their then full amount of
such
19
Additional Capital Contribution (and/or payment to a Designated Combining
Member pursuant to this Section 3.4) that they were then entitled to make.
(f) No Retroactive Effect. If an Acting Non-Combining Member elects to
make an Additional Capital Contribution or a payment to the Designated Combining
Member pursuant to Section 3.4(e)(ii), (iii) and/or (iv) at the end of the
Lookback Period, the increase in the aggregate Percentage Interests of the
Designated Non-Combining Member as a result of such contribution or payment
shall not be given retroactive effect, and such Designated Non-Combining Member
shall not be entitled to any distributions foregone during the Lookback Period.
(g) Change in Tax Effect. If after the Closing Date, a Change in Tax
Effect occurs, the Combining Member may in its sole discretion elect to
contribute the applicable Acquired Retail Brokerage Business to the Company by
means of a Leveraged Contribution in which the amount of Broker Contribution
Debt is such lesser amount (but not less than $0) as will permit the Designated
Combining Member to complete the contribution of the applicable Acquired Retail
Brokerage Business to the Company and the other transactions contemplated by
Section 3.4(d)(i) or (e)(ii) without any of the adverse consequences referred to
in the definition of Change in Tax Effect. Prior to taking such action, the
Acting Combining Member shall consult with the Acting Non-Combining Member (for
a period not to exceed 30 days) to determine in good faith whether there are
alternative methods to accomplish the purposes of this Section 3.4 without any
of the adverse consequences referred to in the definition of Change in Tax
Effect, and if available, the Combining Members will use their reasonable best
efforts to cooperate with the Non-Combining Members to implement such
alternative.
(h) Future Events. The Company and the Members shall cooperate with
each other to the extent necessary to make such adjustments, if any, as are
necessary in order to preserve the intent and effect of Sections 3.4, 3.5 and
3.6 in connection with the admission of a Third Party Member.
Section 3.5. Broker Contribution Debt.
(a) Broker Contribution Debt shall have such terms as reasonably
requested by the Acting Combining Member and approved by the Board of Managers
(such approval not to be unreasonably withheld or delayed) such that it is
treated as "partner nonrecourse debt" as defined in Treasury Regulations Section
1.704-2(b)(4) with respect to which only the Designated Combining Member "bears
the economic risk of loss" under Treasury Regulations Section 1.752-2, and the
terms of the Broker Contribution Debt shall provide that principal shall not be
amortized for at least two years after the date of incurrence. The other terms
of the Broker Contribution Debt shall be determined in accordance with Section
5.10, if applicable.
(b) If the Acting Non-Combining Member elected to cause an Additional
Capital Contribution to be made pursuant to Section 3.4(b)(i)(A) or Section
3.4(b)(iii)(A), as the case may be, and such Additional Capital Contribution is
so made, then on the Broker Contribution Date:
20
(i) In the case of a Member Leveraged Contribution,
(A) the Designated Combining Member shall borrow the Broker Contribution
Debt from one of its Affiliates or a third party on the Broker Contribution
Date immediately prior to the contribution of the Acquired Retail Brokerage
Business to the Company, (B) the Designated Combining Member shall retain
the proceeds of the Broker Contribution Debt, and (C) the Broker
Contribution Debt will be assigned to, and assumed by, the Company
concurrently with the contribution of such Acquired Retail Brokerage
Business to the Company; or
(ii) In the case of a Company Leveraged Contribution, the
Company shall (A) borrow the Broker Contribution Debt from one of the
Designated Combining Member's Affiliates or a third party on the Broker
Contribution Date concurrently with the contribution of the Acquired Retail
Brokerage Business to the Company, (B) promptly distribute the proceeds of
the Broker Contribution Debt to the Designated Combining Member, and (C)
otherwise retain the Broker Contribution Debt in accordance with its terms.
(c) If the Acting Combining Member exercises its right to cause a
Lookback Leveraged True-Up, subject to the Designated Non-Combining Member
making its Additional Capital Contribution pursuant to Section 3.4(e)(ii), the
Company shall (i) borrow the Broker Contribution Debt from one of the Combining
Member's Affiliates or a third party at the end of the Lookback Period, (ii)
redeem from, and cancel a number of Membership Interests held by, the Designated
Combining Member as calculated by Section 3.6(c) in exchange for the
distribution of the proceeds of the Broker Contribution Debt to the Designated
Combining Member, and (iii) otherwise retain the Broker Contribution Debt in
accordance with its terms.
(d) The Company shall apply the amount of the Additional Capital
Contribution made to the Company by the Designated Non-Combining Member in
connection with a Company Leveraged Contribution or Lookback Leveraged True-Up
as follows:
(i) first, if the Designated Non-Combining Member is an
Affiliate of Prudential, to pay the principal and accrued interest of the
Prudential Note (as such term is defined in the Formation Agreement) to the
extent permitted under the Prudential Note;
(ii) second, to pay third party indebtedness of the
Company and its Subsidiaries (other than the Broker Contribution Debt); and
(iii) third, in such amounts and in such a manner as
determined by the Board of Managers, for (1) the operations of the Company
and its Subsidiaries, (2) investment in short-term, investment grade
securities, or (3) loans to all Members in accordance with their respective
Percentage Interests or as otherwise agreed by the Members.
Section 3.6. Formulas Used For Retail Brokerage Combination
Transactions.
(a) Membership Interests Issuable to Designated Combining Member. The
aggregate number of Membership Interests issuable by the Company to the
Designated Combining Member is equal to:
21
((A + B - C) / D) * E
where:
A = the Appraised Value of the Acquired Retail Brokerage
Business
B = One Time Costs incurred by the Combining Member and its
Affiliates with respect to the acquisition of the Acquired
Retail Brokerage Business
C = the amount of the Broker Contribution Debt (which, in the
case of an Unleveraged Contribution, shall be zero)
D = the Appraised Value of the Company on the Broker
Contribution Date immediately prior to the contribution of the
Acquired Retail Brokerage Business (and assuming no incurrence
of Broker Contribution Debt)
E = the total number of Membership Interests outstanding on the
Broker Contribution Date immediately prior to the contribution
of the Acquired Retail Brokerage Business.
(b) Designated Non-Combining Member's Additional Capital Contribution
and Other Payments. The aggregate amount that a Designated Non-Combining Member
may make in Additional Capital Contributions to the Company or pay to the
Designated Combining Member is:
(A + B) * C
where
A = the Appraised Value of the Acquired Retail Brokerage
Business (which, in the case of a Lookback Leveraged True-Up,
shall be as of the Broker Contribution Date immediately prior to
the contribution of the Acquired Retail Brokerage Business to
the Company)
B = One Time Costs incurred by the Combining Member and its
Affiliates with respect to the acquisition of the Acquired
Retail Brokerage Business
C = the aggregate Percentage Interests of the Designated
Non-Combining Member and its Affiliated Members on the Broker
Contribution Date immediately prior to the contribution of the
Acquired Retail Brokerage Business
or such lesser amount as the Designated Non-Combining Member determines in its
sole discretion.
(c) Membership Interests Issuable or Deliverable to Designated
Non-Combining Member or Redeemable from Designated Combining Member. The
aggregate number of Membership Interests that are either (i) issuable by the
Company to the Designated Non-Combining
22
Member or deliverable by a Designated Combining Member to the Designated
Non-Combining Member or (ii) redeemable from the Designated Combining Member by
the Company, as applicable, is equal to:
(A / B) * C
where:
A = the amount of the Additional Capital Contribution made by
the Designated Non-Combining Member pursuant to Sections
3.4(d)(i) or (e)(ii) or payment to the Designated Combining
Member pursuant to Section 3.4(d)(ii) or (e)(iii) or the amount
of Broker Contribution Debt the proceeds of which are to be used
for the redemption pursuant to Section 3.5(c), as applicable
B = the Appraised Value of the Company on the Broker
Contribution Date immediately prior to giving effect to the
contribution of the Acquired Retail Brokerage Business (and
assuming no incurrence of Broker Contribution Debt)
C = the total number of Membership Interests outstanding on the
Broker Contribution Date immediately prior to the contribution
of the Acquired Retail Brokerage Business.
(d) Valuations. All valuations (including Appraised Value) required by
this Section 3.6 shall be determined in accordance with Article 11 of the
Formation Agreement and, if not specified therein, in accordance with this
Agreement.
Section 3.7. Withdrawal of Capital. (a) No Member shall be
entitled to withdraw any part of its Capital Contributions in the Company or to
receive any distribution from the Company, except as expressly provided herein.
(b) No Member shall have any liability for the return of the Capital
Contributions of any other Member. No Member shall be required to make up a
negative balance in its Capital Account.
(c) No Member shall have priority over any other Member either as to
the return of the amount of such Member's Capital Contributions or, except as
otherwise provided in Section 7.1, as to any allocation of any item of income,
gain, loss, deduction or credit of the Company.
Section 3.8. Capital Accounts. The Company shall establish and
maintain on its books and records a capital account for each Member (a "Capital
Account") in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv).
Each Member's Capital Account shall thereafter be (a) increased by the amount of
cash contributed to the Company by such Member, the fair market value of any
property contributed to the Company by such Member (as determined pursuant to
this Agreement) and the amount of Profits allocated to such Member in accordance
with such Member's Percentage Interest pursuant to Article 7 hereof, and (b)
23
decreased by the amount of cash distributed by the Company to such Member, the
fair market value of any asset distributed by the Company to such Member (as
determined pursuant to this Agreement) and the amount of Losses allocated to
such Member in accordance with such Member's Percentage Interest pursuant to
Article 7 hereof.
Section 3.9. No Interest. No interest shall be paid on Capital
Contributions or on the balance in each Member's Capital Account.
ARTICLE 4
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 4.1. Members. The Members of the Company, and their
respective numbers of Membership Interests and Percentage Interests, are listed
on Schedule 4.1 attached hereto. No Person may be a Member without the ownership
of a Membership Interest. The Members shall have only such rights and powers as
are granted to them pursuant to the express terms of this Agreement and the Act.
Except as otherwise expressly provided in this Agreement, no Member, in such
capacity, shall have any authority to bind, to act for, to sign for or to assume
any obligation or responsibility on behalf of, any other Member or the Company.
Section 4.2. No Management or Dissent Rights. Except as otherwise
required by law, the Members shall not have any right to take part in the
management or operation of the Company other than through the Managers appointed
by the Members to the Board of Managers. No Member shall, without the prior
written approval of the Board of Managers, take any action on behalf of or in
the name of the Company, or enter into any commitment or obligation binding upon
the Company, except for actions expressly authorized by the terms of this
Agreement. Members shall not be entitled to any rights to dissent or seek
appraisal with respect to any transaction, including, without limitation, the
merger or consolidation of the Company with any Person.
Section 4.3. Other Activities.
(a) Except as otherwise expressly provided in the Formation Agreement,
any Member may engage in or possess any interest in another business or venture
of any nature and description, independently or with others, and neither the
Company nor any Member shall have any rights in or to any such independent
ventures or the income or profits derived therefrom. Any Member shall be able to
transact business or enter into agreements with the Company to the fullest
extent permissible under the Act, subject to the terms and conditions of this
Agreement.
(b) Except as otherwise expressly provided in the Formation Agreement,
if a Member (or any Manager appointed by such Member) acquires knowledge of a
potential transaction or matter which may be a business opportunity for both
such Member and the Company or another Member, such Member (and its Manager
appointees) shall have no duty to communicate or offer such business opportunity
to the Company or any other Member and shall not be liable to the Company or the
other Members for breach of any duty (including fiduciary duties) as a Member or
Manager of the Company by reason of the fact that such Member or
24
Manager pursues or acquires such business opportunity for itself, directs such
opportunity to another Person, or does not communicate information regarding
such opportunity to the Company.
Section 4.4. No Right to Withdraw. Except as set forth in Section
8.1, no Member shall have any right to voluntarily resign or otherwise withdraw
from the Company without the prior written consent of all the remaining Members.
A resigning Member shall only be entitled to receive amounts approved by the
Board of Managers on the terms and conditions set forth by such Board of
Managers. A resigning Member shall not be entitled to a distribution of the fair
value of its Membership Interests under Section 18-604 of the Act.
Section 4.5. Places of Meetings. Meetings of the Members may be
held in Charlotte, North Carolina; Richmond, Virginia; or Newark, New Jersey,
unless otherwise determined by a unanimous decision of the Board of Managers or
agreed in advance by the Members holding the Requisite Member Interests.
Section 4.6. Member Meetings.
(a) A quarterly meeting of Members shall be held on such date and at
such time and place as shall be designated from time to time by the Board of
Managers (but not less often than once each fiscal quarter) and stated in the
notice of the meeting, at which meeting the Secretary of the Company shall
circulate an agenda for each such quarterly meeting, which agenda shall include
a discussion of the financial reports of the Company most recently delivered
pursuant to Article 6 of this Agreement, such other matters relating to the
Company as any Member shall request to be included in such agenda and such other
matters relating to the Company as the representatives of the Members attending
such meeting shall elect to discuss. The Members may request that the Managers
or officers of the Company participate in such quarterly meetings or make
presentations regarding such matters relating the Company and the Business as
the Members shall reasonably request; provided that such participation does not
unreasonably interfere with the normal performance of their duties.
(b) A special meeting of the Members for any purpose or purposes may
be called at any time by (i) the Board of Managers, (ii) the Chief Executive
Officer of the Company, or (iii) on no more than three occasions during any
fiscal year, at the request of any Prudential Member as long as the Prudential
Members hold together at least an aggregate of a 5% Percentage Interest. At a
special meeting, no business shall be transacted and no action shall be taken
other than that stated in the notice of the meeting.
Section 4.7. Notice of Meetings. Written notice stating the place,
day and hour of every meeting of the Members and, in case of a special meeting,
the purpose or purposes for which the meeting is called, shall be mailed not
less than (a) with respect to an annual meeting, ten nor more than 60 days
before the date of the meeting (or if sent by facsimile, not less than three
Business Days before the date of the meeting) or (b) with respect to a special
meeting, five nor more than 60 days before the date of the meeting (or if sent
by facsimile, not less than three Business Days before the date of the meeting),
in either case to each Member entitled to vote at such meeting, at its address
maintained in the records of the Company by the Company's Secretary. Such
further notice shall be given as may be required by law, but meetings may be
25
held without notice if all the Members entitled to vote at the meeting are
present in person or by telephone or represented by proxy or if notice is waived
in writing by those not present, either before or after the meeting.
Section 4.8. Quorum. Any number of Members holding the Requisite
Membership Interests entitled to vote with respect to the business to be
transacted, who shall be present in person or by telephone or represented by
proxy at any meeting duly called, shall constitute a quorum for the transaction
of business. If less than a quorum shall be in attendance at the time for which
a meeting shall have been called, the meeting may be adjourned from time to time
by a majority of the Members present or represented by proxy without notice
other than by announcement at the meeting.
Section 4.9. Voting.
(a) At any meeting of the Members, each Member entitled to vote on any
matter coming before the meeting shall, as to such matter, have a vote, in
person, by telephone or by proxy, equal to the number of Membership Interests
held in its name on the relevant record date established pursuant to Section
4.11. Notwithstanding the foregoing, to the extent that the aggregate number of
Membership Interests beneficially owned by the Prudential Members and their
Affiliates represent at any time in the aggregate a Percentage Interest in
excess of 49% as a result of Additional Capital Contributions made by them
pursuant to Section 3.2(b)(ii), then all Membership Interests beneficially owned
by the Prudential Members and their Affiliates in excess of such 49% limit (as
determined in good faith by the Board of Managers) shall be deemed to be "Excess
Membership Interests" and shall not be entitled to any voting rights under this
Agreement or the Act unless and until the Membership Interests beneficially
owned by the Prudential Members and their Affiliates no longer represent a
Percentage Interest in excess of 49%, at which time such Excess Membership
Interests shall have the same voting power as all other Membership Interests
hereunder. For purposes of this Section 4.9, beneficial ownership of Membership
Interests shall be determined in accordance with Rules 13d-3 and 13d-5 under the
Exchange Act.
(b) Except as otherwise specified herein, the affirmative vote or
consent of Members holding the Requisite Membership Interests shall constitute
the act of the Members. Every proxy shall be in writing, dated and signed by the
Member entitled to vote or its duly authorized attorney-in-fact.
Section 4.10. Action Without a Meeting; Telephonic Meetings.
(a) On any matter requiring an approval or consent of Members under
this Agreement or the Act, the Members may take such action without a meeting
and without a vote if a consent or consents in writing, setting forth the action
so taken, shall be signed by Members representing the requisite number of votes
required to approve the taking of such action.
(b) Members may participate in meetings of the Members by means of
conference telephone or similar communications equipment by means of which all
Persons participating in the meeting can hear each other. Participation in a
telephonic meeting pursuant to this Section 4.10
26
shall constitute presence at such meeting and shall constitute a waiver of any
deficiency of notice.
Section 4.11. Record Date. For the purpose of determining Members
entitled to notice of or to vote at any meeting of Members or any adjournment
thereof, or entitled to receive a payment of any kind, or in order to make a
determination of Members for any other proper purpose, the Board of Managers may
fix in advance a date as the record date for any such determination of Members,
such date in any case to be not more than 70 days prior to the date on which the
particular meeting or action, requiring such determination of Members, is to be
held or taken. If no record date is fixed for the determination of Members
entitled to notice of or to vote at a meeting of Members, or Members entitled to
receive payment of a distribution, the date on which notices of the meeting are
mailed or the date on which the resolution of the Board of Managers declaring
such distribution is adopted, as the case may be, shall be the record date for
such determination of Members. When a determination of Members entitled to vote
at any meeting of Members has been made as provided in this Section 4.11, such
determination shall apply to any adjournment thereof unless the Board of
Managers fixes a new record date, which it shall do if the meeting is adjourned
to a date more than 120 days after the date fixed for the original meeting.
Section 4.12. Matters Requiring Member Approval.
(a) Notwithstanding anything in this Agreement to the contrary, the
Company shall not, and shall cause its Subsidiaries not to, take, cause to be
taken, or agree to or authorize, any of the following actions, without the
affirmative vote or consent of Members holding the Requisite Membership
Interests:
(i) the entry by the Company or any of its Subsidiaries
into an agreement to effect, or, in the absence of such an agreement, the
consummation of, any Non-De Minimis Disposition Transaction during any
fiscal year in which the aggregate Disposition Transactions theretofore
entered into by the Company and its Subsidiaries (and not terminated prior
to consummation thereof) shall have involved the disposition of
Subsidiaries, businesses or assets (or parts thereof) which, in the
aggregate, generated more than 25% of the Company's consolidated revenues
for the prior fiscal year (or, in the case of Disposition Transactions
occurring during the fiscal year in which the Closing occurred, 25% of the
Company's consolidated revenues on a pro forma basis for the calendar year
preceding such fiscal year);
(ii) the entry by the Company or any of its Subsidiaries
into an agreement to effect, or, in the absence of such an agreement, the
consummation of, a Large Retail Brokerage Combination; provided, however,
that for clarity, this clause (ii) shall not prohibit or otherwise affect
the right of a Member or any of its Affiliates (other than the Company and
its Subsidiaries) to (A) effect a Large Retail Brokerage Combination or (B)
cause the Acquired Retail Brokerage Business involved in such Large Retail
Brokerage Combination to be contributed to the Company in accordance with
Section 3.4, and the Company and any of its Subsidiaries shall be
authorized to enter into any agreement necessary or advisable to facilitate
such contribution without regard
27
to the restriction set forth in this clause (ii) to the extent such
contribution is permitted under the applicable provisions of this Agreement
and the Formation Agreement;
(iii) any filing of any petition in bankruptcy by (or the
decision not to oppose any similar petition filed by a third party in
respect of) the Company or any of its Subsidiaries;
(iv) the admission of any Third Party Member; provided,
however, that (x) a Permitted Transferee of a Wachovia Member or a
Prudential Member and any transferee to whom a Wachovia Member or
Prudential Member may Transfer any Membership Interests pursuant to Section
9.2 of the Formation Agreement shall be admitted as an Additional Member
and (y) a Designated Combining Member or Designated Non-Combining Member
shall be admitted as an Additional Member upon the receipt of Membership
Interests pursuant to Section 3.4, in each case, without the requirement of
any approval by the Members pursuant to this Section 4.12;
(v) any fundamental change in the purpose of the Company
specified in Section 2.3, including, without limitation, any determination
by the Board of Managers to engage in a line of business not provided in
Section 2.3; provided that for purposes of this clause (v), changes in the
business, operations and strategy of the Company shall not be considered a
fundamental change in the purpose of the Company if the Company and its
Subsidiaries, taken as a whole, continue to engage primarily in the
business of providing financial advice and securities brokerage services
through registered representatives and do not engage to a material extent
in the business of sponsoring and distributing asset management or
insurance products;
(vi) the settlement of any regulatory matter involving
admissions of wrongdoing by the Company or any of its Subsidiaries or a
fine in excess of $250,000; provided that in the case of the settlement of
regulatory matters, the consent of the Members shall not be unreasonably
withheld; or
(vii) any agreement to take any of the foregoing actions
that is not conditioned upon obtaining the consent of the Members (but only
if such consent is then required to be obtained by this Section 4.12).
(b) Notwithstanding the foregoing, at any time following the fifth
anniversary of the Closing, if (i) the Members of the Company consist solely of
Wachovia Members and Prudential Members and (ii) Prudential's Percentage
Interest is less than 25%, the matters set forth in clauses (i), (ii), (iv) and
(vi) above shall not require the approval or consent of the Members pursuant to
this Section 4.12.
(c) The Company shall cause its Subsidiaries not to, at any time, take
any action or effect any transaction, or enter any agreement to take any action
or effect any transaction, to which the prior approval provisions of Section
4.12(a) apply, unless such action or transaction has been approved by the
Members of the Company in accordance with the provisions of this Section 4.12.
28
(d) In connection with the exercise of voting rights pursuant to this
Section 4.12, a Member may consider its own best interests when determining how
to cast its vote and shall in no event be deemed to have any fiduciary duty to
any other Member or to the Company.
Section 4.13. Reimbursements. To the extent not inconsistent with
or already covered by the provisions of the Transaction Documents to which a
Member is a party, the Company shall reimburse the Members for all ordinary and
necessary out-of-pocket expenses or expense accruals incurred by the Members on
behalf of the Company but only if such expenses or accruals were authorized by
or under the authority of the Board of Managers. Such reimbursement shall be
treated as an expense of the Company that shall be deducted in computing the
Profits and Losses of the Company and shall not be deemed to constitute a
distributive share of Profits or a distribution or return of capital to any
Member.
Section 4.14. Partition. Each Member waives any and all rights that
it may have to maintain an action for partition of the Company's property.
Section 4.15. Liability. Except as otherwise required by the Act,
the debts, obligations and liabilities of the Company, whether arising in
contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member or Manager shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a Member or Manager. No Member shall be required by this
Agreement to loan the Company any funds or otherwise provide any financial or
credit support.
ARTICLE 5
BOARD OF MANAGERS; OFFICERS;
EXCULPATION; INDEMNITY
Section 5.1. Board of Managers.
(a) There shall be a Board of Managers (the "Board of Managers") made
up of the number of individuals (who need not be Members) specified in this
Agreement, which Board of Managers shall have sole responsibility for managing
the business and affairs of the Company, except as otherwise expressly provided
for herein or in the Act. Subject to Section 5.1(b), the Board of Managers shall
be made up of five managers (each, a "Manager"), three of whom shall be
designated by a Wachovia Member acting on behalf of all the Wachovia Members,
and two of whom shall be designated by a Prudential Member acting on behalf of
all the Prudential Members. Such Wachovia Member designee and Prudential Member
designee shall each also appoint one or more alternate Managers. The alternate
Managers appointed on behalf of the Wachovia Members shall have the power and
authority to vote in place of any other Manager appointed on behalf of the
Wachovia Members if any such Manager is not present in person or by telephone or
represented by proxy at a meeting of the Board of Managers (and when so acting,
such alternate Manager shall be considered a Manager for all purposes
hereunder). The alternate Managers appointed on behalf of the Prudential Members
shall have the power and authority to vote in place of any other Manager
appointed on behalf of the Prudential Members if any such Manager is not present
in person or by telephone or represented by proxy at a meeting of the Board of
Managers (and when so acting, such alternate Manager shall be considered a
Manager for all purposes hereunder). For purposes of determining whether
29
a quorum is present, an alternate Manager shall be included if any Manager for
which such alternate Manager has been appointed shall not be present in person
or by proxy. All alternate Managers shall be permitted to be present at any
meetings of the Board of Managers, whether or not they are entitled to vote
thereat. The individuals listed in Schedule 5.1 hereto are the Managers and
alternate Managers chosen by the Members and designated as the initial Managers
and alternate Managers of the Company commencing following the Closing. Each
Manager and alternate Manager shall hold such position until his or her
successor is designated or until his or her earlier death, disability,
resignation or removal.
(b) The number of Managers constituting the Board of Managers and the
composition thereof shall not be changed; provided that, in the event of the
admission of a Third Party Member, the Board of Managers shall be entitled, but
not required, to adjust the number of Managers and the composition of the Board
of Managers to provide that each Member following such admission shall be
entitled to designate a number of Managers such that the percentage of all
Managers designated by such Member shall be as near as practicable to its
Percentage Interest (and shall further be entitled to appoint one or more
alternates for the Managers so designated); provided, however, that unless
otherwise approved by the affirmative vote of Members holding the Requisite
Membership Interests, the total number of Managers of the Board of Managers
shall not be fewer than 5 nor more than 10.
(c) The Board of Managers, acting by vote of the Managers as provided
in this Article 5, shall have the power, discretion and authority on behalf and
in the name of the Company to carry out any and all of the objects and purposes
of the Company contemplated by this Agreement and the Formation Agreement and to
perform or authorize all acts which it may deem necessary or advisable in
connection therewith. The Members, in such capacity, shall have no part in the
management of the Company and shall have no authority or right to act on behalf
of or bind the Company in connection with any matter, except as expressly
provided in this Agreement or as deemed necessary or appropriate by the Board of
Managers. The Members agree that all determinations, decisions and actions made
or taken by the Board of Managers shall be conclusive and absolutely binding
upon the Company, the Members and their respective successors, assigns and
personal representatives.
(d) Each Manager will serve without compensation unless otherwise
agreed in writing by such Manager and the Board of Managers. Each Manager shall
be entitled to reimbursement for reasonable and necessary out-of-pocket expenses
incurred by such Manager during the course of conducting the Company's business,
subject to any agreement to the contrary between such Manager and the Company.
Notwithstanding the foregoing, the Board of Managers may authorize compensation
and reimbursement from the funds of the Company for the Managers' designees and
representatives, agents, employees and officers appointed by the Managers in
furtherance of the business or purposes of the Company.
(e) No Member or Manager (acting in his or her capacity as such) shall
have any right or authority to bind the Company to any third party with respect
to any matter except pursuant to a resolution authorizing such action, which
resolution is duly adopted by the Board of Managers by the affirmative vote
required for such matter pursuant to the terms of this Agreement. No Manager
shall be disqualified from voting on any issue, notwithstanding any
30
interest that such Manager or the Member nominating such Manager may have
therein which differs from the interest of the Company or the other Members.
(f) Each Manager may authorize another individual (who may or may not
be a Manager) to act for such Manager by proxy at any meeting of the Board of
Managers, or to express consent or dissent to a Company action in writing
without a meeting. Without limiting the manner in which a Manager may authorize
another Person or Persons to act for such Manager as proxy, a writing
authorizing a Person or Persons to act for such Manager as proxy, which has been
executed by such Manager and entered into the books and records of the Company,
shall be a valid means by which a Manager may grant such authority.
(g) Any Manager, and each alternate Manager acting in such capacity,
appointed pursuant to this Section 5.1 shall assume the powers, duties and
obligations of a Manager as provided under this Agreement and is designated as a
"manager" under the Act and shall be subject to the terms hereof and thereof.
The Managers shall deal with all the Members in good faith, shall act in a
manner they believe in good faith to be in or not opposed to the best interests
of the Company, and shall have only those duties and obligations as are
expressly provided for in this Agreement, and except to the extent so provided,
no Manager shall owe any fiduciary or other duties to the Company, any Member or
any other Person. It is expressly understood and agreed by the Members that each
Manager shall be deemed to have fulfilled fully the requirements of this Section
5.1(g) in connection with the approval of any cost, service, agreement,
transaction or arrangement subject to Section 5.10 if such cost, service,
agreement, transaction or arrangement satisfies the standard set forth in
Section 5.10(b).
Section 5.2. Removal and Resignation.
(a) Each Member or group of Members may remove any Manager or
alternate designated by it at any time, with or without cause, effective upon
written notice to the other Members and the Chief Executive Officer of the
Company.
(b) Any Manager may resign by written notice to the Board of Managers.
Unless otherwise specified therein, a Manager's resignation shall take effect
upon delivery. Vacancies created on the Board of Managers resulting from the
resignation, death, retirement or disability of a Manager shall be filled by the
Member that appointed such Manager.
(c) Upon the removal or resignation of any Manager or alternate, the
Member or group of Members that designated such Manager or alternate shall be
entitled to appoint a replacement and such appointment shall become effective
immediately upon delivery of written notice of such appointment to the other
Members and the Chief Executive Officer.
Section 5.3. Meetings of the Board of Managers.
(a) Regular meetings of the Board of Managers shall be held on a
quarterly basis at such date and time as the Board of Managers may designate.
Special meetings of the Board of Managers may be called by any Manager at any
time. Unless otherwise agreed by all the Managers in advance, meetings of the
Board of Managers may be held only in Charlotte, North Carolina; Richmond,
Virginia; or Newark, New Jersey.
31
(b) Notice of a meeting stating the place, date and hour of the
meeting and the purpose or purposes for which the meeting is called shall be
given to each Manager either by mail not less than ten days before the date of
the meeting or by telephone, telegram or facsimile no less than three Business
Days before the date of the meeting. Notice of any meeting may be waived in
writing by any Manager. Presence at the meeting shall constitute waiver of any
deficiency of notice under this Section 5.3, except when such Manager or
alternate Manager attends the meeting for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not called or convened in accordance with this Agreement.
(c) The Secretary of the Company shall circulate to each Manager an
agenda for the quarterly meeting not less than ten days in advance of such
quarterly meeting (or if sent by facsimile, three Business Days before the date
of such quarterly meeting). Such agenda shall include a discussion of the
financial reports most recently delivered pursuant to Article 6 of this
Agreement and any other matters that an Manager may reasonably request to be
included on such agenda. Managers or officers of the Company shall attend such
meeting and make such presentations relating to the Company as any Manager may
reasonably request.
(d) The presence in person (including the presence of an alternate
Manager) or by proxy of a number of Managers equal to a majority of the total
number of Managers fixed pursuant to this Agreement shall constitute a quorum
for the conduct of business at any meeting of the Board of Managers. Except as
otherwise provided herein, the affirmative vote of a majority of the total
number of Managers fixed pursuant to this Agreement at a meeting shall
constitute the act of the Board of Managers.
(e) The Board of Managers shall meet with the Company's internal
auditors at least once each fiscal quarter and with the Company's independent
auditors at least twice each fiscal year.
(f) The Secretary of the Company or, if he or she is not present, any
individual whom the Chairman may appoint, shall keep minutes of each meeting
which shall reflect all actions taken by the Board thereat.
(g) The Board of Managers may establish other provisions and
procedures relating to the governance of its meetings that are not in conflict
with the terms of this Agreement.
Section 5.4. Action Without a Meeting; Telephonic Meetings.
(a) On any matter requiring an approval or consent of the Board of
Managers under this Agreement or the Act, the Board of Managers may take such
action without a meeting and without a vote if a consent or consents in writing,
setting forth the action so taken, shall be signed by the Managers having not
less than the minimum number of votes that would have been required to authorize
or take such action at a meeting (provided that at least one Manager appointed
by a Wachovia Member and at least one Manager appointed by a Prudential Member
shall have approved such action).
32
(b) Members of the Board of Managers may participate in a meeting of
the Board of Managers, by means of a conference telephone or similar
communications equipment by means of which all Persons participating in the
meeting can hear one another. Participation in a meeting pursuant to this
Section 5.4 shall constitute presence in person at such meeting and shall
constitute a waiver of any deficiency of notice pursuant to Section 5.3, except
when such Manager or alternate Manager attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not called or convened in accordance with this
Agreement.
Section 5.5. Chairman of the Board of Managers. The Board of
Managers shall appoint a Manager to act as Chairman of the Board of Managers.
The Chairman of the Board of Managers shall preside at all meetings of Members
and the Board of Managers at which he is present, subject to the ultimate
authority of the Board of Managers to appoint an alternate presiding officer at
any meeting. He shall also contribute to the performance evaluation and
compensation decisions with regard to the Chief Executive Officer, subject to
the ultimate authority of the Board of Managers, and perform such other duties
as from time to time may be assigned to him by the Board of Managers, subject,
in each case, to the ultimate authority of the Board of Managers. The Chief
Executive Officer shall consult with the Chairman on the business plan and
budget of the Company, executive appointments and compensation, changes in the
integration plan, and such other matters as the Board of Managers shall
determine from time to time. Xxxx X. Xxxxxxxxxx, Xx. shall be the initial
Chairman of the Board of Managers and, absent cause, Xx. Xxxxxxxxxx shall not be
removed as the Chairman of the Board of Managers until at least the end of the
Integration Period.
Section 5.6. Officers; Designation and Election of Officers;
Duties.
(a) The officers of the Company shall consist of a Chief Executive
Officer, a Chief Financial Officer, and a Secretary. Other officers, including
one or more Vice-Presidents, and assistant and subordinate officers, may from
time to time be elected by the Board of Managers. The Persons listed in Schedule
5.6 hereto are the officers designated as the initial officers of the Company.
All officers shall hold office for such term as shall be determined from time to
time by the Board of Managers and until their successors are elected by the
Board of Managers. Any two offices may be held by the same Person as the Board
of Managers may determine. An officer of the Company need not be an employee of
the Company and may be an officer or employee of any Member or any Member's
Subsidiaries and other Affiliates.
(b) Removal of Officers; Vacancies. Any officer of the Company may be
removed summarily with or without cause, at any time, by approval of the Board
of Managers. Vacancies may be filled by approval of the Board of Managers.
(c) Powers and Duties. The officers of the Company shall have such
authority and perform such duties in the management of the Company as may be
prescribed by the Board of Managers and, to the extent not so prescribed, as
generally pertain to their respective offices, subject to the control of the
Board of Managers. Officers shall act in a manner they believe in good faith to
be in or not opposed to the best interests of the Company and shall have only
those duties and obligations as are specified in this Agreement and in addition,
as determined by the Board of Managers, and shall perform those duties and
obligations in good faith, and except to
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the extent so provided, no officer shall owe any fiduciary or other duties to
the Company, any Member or any other Person. Any action taken by an officer that
would have satisfied the duties imposed on a Manager if such Person were acting
as a Manager in such circumstance shall be deemed to fulfill fully the
requirements of this Section 5.6(c) applicable to such officer, including but
not limited to those actions concerning any cost, service, agreement,
transaction or arrangement subject to Section 5.10.
(d) Officers as Agents; Reliance by Third Parties.
(i) The officers, to the extent of their powers set forth
in this Agreement or in a resolution of the Board of Managers, are agents
of the Company for the purpose of the Company's business, and the actions
of the officers taken in accordance with such powers shall bind the
Company.
(ii) Any Person dealing with the Company may rely upon a
certificate signed by any officer as to:
(A) the identity of any Member, Manager or alternate
Manager or officer;
(B) the existence or nonexistence of any fact or
facts which constitute a condition precedent to acts by Members, the Board
of Managers or officers or in any other manner germane to the affairs of
the Company;
(C) the Persons who are authorized to execute and
deliver any instrument or document of or on behalf of the Company;
(D) the authenticity of any copy of this Agreement
and amendments hereto;
(E) any act or failure to act by the Company or as to
any other matter whatsoever involving the Company or, solely with respect
to the activities of the Company, any Member; and
(F) the authority of the Board of Managers, any
officer, any employee or agent of the Company, or the Tax Matters Member.
(e) Compensation. The compensation of all officers of the Company
shall be determined by the Board of Managers.
Section 5.7. Initial Business Plan; Budget and Forecast.
(a) Attached as Schedule 5.7 hereto is an outline of the material
terms expected to be included in the initial business plan of the Company, for
the period beginning on the Closing Date and ending on December 31, 2003.
(b) No later than 30 days before the end of each fiscal year,
management of the Company shall develop and submit to the Board of Managers for
adoption (i) a budget for the
34
Company and its consolidated Subsidiaries for the following fiscal year, which
budget will include quarterly earnings, expense and cash flow forecasts for each
quarter during the fiscal year covered by such budget and a comparison of actual
to budgeted results for the year preceding the year covered by such budget, and
(ii) an earnings, expense and cash flow forecast for the two fiscal years
following the fiscal year covered by such budget, which forecasts will be on a
quarterly basis for the first fiscal year after the fiscal year covered by such
budget and on an annual basis for the second following year.
(c) Management of the Company will include in each budget of the
Company a summary of all financial and other arrangements expected to be in
effect between the Company and any Member or its Affiliates, including a
description of services expected to be provided by or to the Company and fees
expected to be paid by or to a Member or its Affiliates for the fiscal year
covered by the budget. Management of the Company will also include in such
budget management's estimate of the aggregate "Costs" (as defined in the
Wachovia/Company Master Agreement) expected to be incurred by the Company
pursuant to the Wachovia/Company Master Agreement during the fiscal year covered
by the budget, specifying the amount of such Costs estimated to be incurred
during such fiscal year in respect of "Rate-Based Services" (as defined in the
Wachovia/Company Master Agreement) to be provided to the Company thereunder. The
Board of Managers shall, in connection with the approval of the budget, consider
and discuss the Rates proposed by Wachovia to apply to Rate-Based Services for
the following fiscal year in light of the provisions of Section 5.10 and,
following such consideration and discussion, shall determine whether or not to
approve such Rates pursuant to the Wachovia/Company Master Agreement.
Section 5.8. Exculpation and Indemnification.
(a) Exculpation.
(i) No Person made or threatened to be made a party to
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such Person or such Person's
testator or intestate is or was a Member, Manager or alternate Manager,
officer of the Company or serves or served at the request of the Company
any other enterprise as a member, manager, partner, director, officer,
employee or agent (each in their capacity as such, an "Exculpated Person")
shall be liable to the Company or any other Exculpated Person, except that
an Exculpated Person shall be liable for any loss, damage or claim incurred
by reason of such Exculpated Person's (x) willful misconduct, fraud or bad
faith or (y) receipt from the Company of a personal benefit to which such
Exculpated Person is not legally entitled.
(ii) An Exculpated Person shall be fully protected in
relying in good faith upon the records of the Company and upon such
information, opinions, reports or statements presented to the Company by
any Person as to matters the Exculpated Person reasonably believes are
within such other Person's professional or expert competence and who has
been selected with reasonable care by or on behalf of the Company,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, Profits or Losses or any other facts
pertinent to the existence and amount of assets from which distributions to
Members might properly be paid.
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(b) Indemnification by the Company. To the fullest extent permitted by
applicable law, the Company shall indemnify and hold harmless any Person made or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
Person is or was a Member, Manager or alternate Manager, or officer of the
Company or serves or served at the request of the Company as a member, manager,
partner, director, officer, employee or agent of any other enterprise (each in
their capacity as such, an "Indemnified Person"), except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of (i) willful misconduct,
fraud or bad faith or (ii) receipt from the Company of a personal benefit to
which such Indemnified Person is not legally entitled. Expenses incurred by any
such Indemnified Person in defending any such action, suit or proceeding shall
be paid or reimbursed by the Company promptly upon receipt by it of an
undertaking of such Indemnified Person to repay such expenses if it shall
ultimately be determined that such Indemnified Person is not entitled to be
indemnified by the Company. The rights provided to any Indemnified Person by
this Section 5.8 shall be enforceable against the Company by such Indemnified
Person who shall be presumed to have relied upon it in serving or continuing to
serve as a Member, Manager, alternate Manager, member, manager, partner,
director, officer, employee or agent as provided above. No amendment of this
Section 5.8 shall impair the rights of any Indemnified Person arising at any
time with respect to events occurring prior to such amendment. For purposes of
this Section 5.8, the term "Company" shall include any predecessor of the
Company and any constituent entity (including any constituent of a constituent)
absorbed by the Company in a consolidation or merger; the term "other
enterprise" shall include any corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise; service "at the request of the
Company" shall include service as an Indemnified Person of the Company which
imposes duties on, or involves services by, such Indemnified Person with respect
to an employee benefit plan, its participants or beneficiaries; any excise taxes
assessed on an Indemnified Person with respect to an employee benefit plan shall
be deemed to be indemnifiable expenses; and action taken or omitted by an
Indemnified Person with respect to an employee benefit plan which such
Indemnified Person reasonably believes to be in the interest of the participants
and beneficiaries of such plan shall be deemed to be action not opposed to the
best interests of the Company.
(c) Survival. Notwithstanding anything to the contrary contained in
this Agreement, the provisions of this Section 5.8 shall survive the
termination, voluntary or involuntary, of a Membership Interest and shall
survive the termination of this Agreement or dissolution of the Company.
(d) Availability. The provisions of this Section 5.8 shall be
applicable to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative or investigative and whether formal or
informal (in each case, a "Proceeding") commenced after the date of this
Agreement against any Indemnified Person arising from any act or omission,
whether occurring before or after the date of this Agreement. No amendment or
repeal of this Section 5.8 shall have any effect on the rights provided under
this Section 5.8 with respect to any act or omission occurring prior to such
amendment or repeal. The Company promptly shall take all such actions, and make
all such determinations, as shall be necessary or appropriate to comply with its
obligation to make any indemnity under this Section 5.8 and shall promptly pay
or reimburse all reasonable expenses, including attorneys' fees, incurred by any
such Indemnified Person in connection with such actions and determinations or a
Proceeding of
36
any kind arising therefrom, upon receipt by the Company of an undertaking by
such Indemnified Person to repay such expenses if it shall ultimately be
determined that such Indemnified Person is not entitled to be indemnified by the
Company.
(e) Standard of Conduct. The termination of any Proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not of itself create a presumption that the Indemnified
Person was not entitled to indemnification pursuant to Section 5.8(b).
(f) Insurance. The Company may purchase and maintain insurance to
indemnify it against the whole or any portion of the liability assumed by it in
accordance with this Section 5.8 and may also procure insurance, in such amounts
as the Board of Managers may determine, on behalf of any Person who is or was an
Indemnified Person against any liability asserted against or incurred by him in
any such capacity or arising from his status as such, whether or not the Company
would have power to indemnify him against such liability under the provisions of
this Section 5.8.
(g) Non-Exclusivity. Every reference in this Section 5.8 to Members,
Managers or alternate Managers, or officers shall include former Members,
Managers or alternate Managers, or officers and their respective heirs,
executors and administrators. The indemnification hereby provided and provided
hereafter pursuant to the power hereby conferred by this Section 5.8(g) on the
Board of Managers shall not be exclusive of any other rights to which any Person
may be entitled, including any right under policies of insurance that may be
purchased and maintained by the Company or others, with respect to claims,
issues or matters in relation to which the Company would not have the power to
indemnify such Person under the provisions of this Section 5.8. Such rights
shall not prevent or restrict the power of the Company to make or provide for
any further indemnity, or provisions for determining entitlement to indemnity,
pursuant to one or more indemnification agreements or other arrangements
(including, without limitation, creation of trust funds or security interests
funded by letters of credit or other means) approved by the Board of Managers
(whether or not any of the Members, Managers or alternate Managers, or officers
of the Company shall be a party to or beneficiary of any such agreements or
arrangements); provided, however, that any provision of such agreements or other
arrangements shall not be effective if and to the extent that it is determined
to be contrary to this Section 5.8 or applicable laws of the State of Delaware.
(h) Application of Formation Agreement and Transaction Documents.
Nothing contained in this Section 5.8 is intended to relieve any Member or any
other Person from any liability or other obligation of such Person pursuant to
the Formation Agreement or any other Transaction Document, or to in any way
impair the enforceability of any provision of such agreements against any party
thereto.
(i) Limitations. Any indemnity under this Section 5.8 shall be
provided solely out of, and only to the extent of, the Company's assets, and no
Member shall be required directly to indemnify any Indemnified Person pursuant
to this Section 5.8. None of the provisions of this Section 5.8 shall be deemed
to create any rights in favor of any Person other than Indemnified Persons and
Exculpated Persons.
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Section 5.9. Voting of Shares Held. Subject to Section 4.12 and
unless otherwise provided by resolution of the Managers, the Board of Managers
may from time to time appoint an attorney or attorneys or agent or agents of the
Company, in the name and on behalf of the Company or any Subsidiary, to cast the
vote which the Company or such Subsidiary may be entitled to cast as a member,
partner, shareholder or otherwise in any other enterprise, any of whose
securities may be held by the Company or such Subsidiary, at meetings of the
holders of the shares or other securities of such other enterprise, or to
consent in writing to any action by any such other enterprise, and the Board of
Managers shall instruct the Person or Persons so appointed as to the manner of
casting such votes or giving such consent and may execute or cause to be
executed on behalf of the Company such written proxies, consents, waivers or
other instruments as may be necessary or proper. To the extent that any such
vote relates to a matter that is subject to Section 4.12, prior to taking any of
the foregoing actions, the Company shall first have obtained the requisite
approval of the Members in accordance with Section 4.12.
Section 5.10. Transactions with Affiliates.
(a) The Company and its Subsidiaries may not enter into, modify or
amend any transaction or agreement with any Member or any Affiliate of a Member
after the Closing Date if the terms of such transaction or agreement or such
modification or amendment are materially less favorable in the aggregate to the
Company and its Subsidiaries than the terms that could be obtained by the
Company or such Subsidiary through an arm's-length transaction or agreement with
an unrelated party. Notwithstanding the foregoing, Wachovia may allocate costs
to the Company in a manner consistent with and not materially less favorable to
the Company than Wachovia's allocation to its other Subsidiaries at such time
for the same or similar products or services.
(b) Without limiting the scope of Section 5.10(a), the Members
acknowledge and agree that the Board of Managers is expressly authorized to
approve any "Rates", "Costs" and "Services" (each as defined in the
Wachovia/Company Master Agreement), as well as any other costs, services,
agreements, transactions or arrangements of a type that Wachovia renders to or
enters into with its other Subsidiaries, so long as the Board of Managers
determines in good faith that such costs, services, agreements, transactions or
arrangements comport with the standard described in Section 5.10(a), including
the last sentence thereof. Upon such good faith determination, the Managers
shall be deemed to have discharged fully their duties set forth in Section
5.1(g) with respect to such approval in all respects. For purposes of Section
3.1(b) of the Formation Agreement, the Board of Managers may approve any change
to the arrangements referred to therein if such change satisfies the standard
set forth in the penultimate sentence of Section 3.1(b), and upon such good
faith determination, the Managers shall be deemed to have discharged fully their
duties set forth in Section 5.1(g). Without limiting the foregoing, it is
understood and agreed that the Board of Managers shall be under no obligation
whatsoever to solicit any bids or quotations from any other party, or obtain any
independent valuations or appraisals, before approving any costs, services,
agreements, transactions or arrangements with a Member or an Affiliate thereof.
For the avoidance of doubt, the Members acknowledge that it is the policy of
Wachovia in effect as of the date of this Agreement for all of its Subsidiaries
to obtain substantially all of their support services from Wachovia or its other
Subsidiaries to the extent available.
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(c) Notwithstanding anything herein to the contrary, the Company
Entities may document and reduce to writing any transaction, agreement or other
arrangement with Wachovia or any of its Affiliates that is in effect on the date
hereof.
ARTICLE 6
ACCOUNTING, TAX, FISCAL AND LEGAL MATTERS
Section 6.1. Fiscal Year. The Company hereby adopts a 12-month
period ending on each December 31 as its fiscal year. The Board of Managers
shall have the authority to change the fiscal year of the Company without any
amendment to this Agreement.
Section 6.2. Bank Accounts. All funds of the Company shall be
deposited in a bank account or accounts opened in its name. In the absence of
instructions from the Board of Managers to the contrary, the Chief Executive
Officer shall determine the institution or institutions at which the accounts
will be opened and maintained, the types of accounts, and the Persons who will
have authority with respect to the accounts and the funds therein.
Section 6.3. Books of Account, Tax Matters.
(a) The Company shall maintain, at its principal place of business,
separate books of account for the Company that shall show a true and accurate
record of all costs and expenses incurred, all charges made, all credits made
and received and all income derived in connection with the operation of the
Company's business in accordance with generally accepted accounting principles
consistently applied, and, to the extent inconsistent therewith, in accordance
with this Agreement. Such books of account shall at all times be maintained at
the principal place of business of the Company and shall be open to inspection
and examination at reasonable times by each Member and its duly authorized
representatives for any purpose reasonably related to such Member's interest in
the Company.
(b) The Managers shall prepare and maintain, or cause to be prepared
and maintained, the books of account of the Company. The Company shall cause all
of its tax returns to be filed in a timely manner, and the Company's independent
accountants shall perform a signing review of tax returns that involve any Major
Tax Items prior to the filing thereof (such accountants, the "Signing Review
Accountants"). As soon as reasonably practicable after the end of each fiscal
year of the Company, but in no event later than July 15 of each year, the Board
of Managers shall furnish each Member with Internal Revenue Service Form K-1
(Form 1065), and such other information (including without limitation all
required state tax information reporting returns comparable to Form K-1, in no
event later than August 15 of each year) as shall be necessary to enable each
Member to prepare its income tax returns. All questions of accounting shall be
determined by the Board of Managers.
(c) In addition to such books and records, the Board of Managers shall
cause the Chief Executive Officer to maintain and make available at the
principal business office of the Company (or, with respect to copies of the
Company's income tax returns and reports, at the principal business office of
the Tax Matters Member): copies of this Agreement; a current list of
39
the full name and last known business address of each Member; a copy of the
Certificate, including all certificates of amendment thereto and executed copies
of all powers of attorney pursuant to which the Certificate or any certificate
of amendment has been executed; copies of the Company's federal, state, and
local (whether domestic or foreign) income tax returns and reports, if any; and
of any financial statements of the Company, in each case for the three most
recent years; and all other records required to be maintained pursuant to this
Agreement or the Act.
(d) Except as provided in the next paragraph, the Board of Managers
must approve all tax elections and tax accounting methods adopted by the Company
for income tax purposes, and all agreements and settlements proposed to be
entered into with the Internal Revenue Service or other taxing authority as a
result of an audit or examination of any of the Company's income tax returns.
Without limiting the authority of the Board of Managers to approve the final
terms of any settlement or other disposition of any tax proceeding or litigation
with the Internal Revenue Service, each Member shall have the right to
participate in the conduct and/or negotiation of any such settlement, proceeding
or litigation. Expenses of administrative proceedings and of litigation of
Company tax issues shall be paid by the Company.
(e) A Wachovia Member, acting on behalf of all Wachovia Members, and a
Prudential Member, acting on behalf of all Prudential Members, shall have the
right to review the Company's IRS Form 1065, and any Schedule K-1 thereto; any
IRS Form 5471 to be filed by the Company; and any income or franchise tax return
or report to be filed by the Company in (A) New York (including New York City),
(B) New Jersey, (C) California, (D) Virginia, (E) Illinois, (F) Florida, and (G)
North Carolina, at least 45 days prior to the filing of such returns, and shall
comment on such returns within 15 days of receipt thereof. The Members shall
determine in good faith each year whether the list of states in the preceding
sentence should be modified to reflect changes in tax law or the operations of
the Company. If, in connection with any such review, there is a disagreement
between the Members with respect to any tax election reflected in such return or
the reporting, amount, allocation, character, timing, method of accounting
applicable to, tax attributes of or any other relevant aspect of any tax item,
which affects (i) an item of income, gain, loss or deduction of the Company
equal to or greater than $10 million or (ii) a tax credit of the Company equal
to or greater than $3.5 million (in each case as determined by the Signing
Review Accountants), (iii) apportionment of income among the states listed
above, or (iv) any tax item specially allocated solely to one Member or its
Affiliated Members (each a "Major Tax Item"), such dispute shall be resolved
pursuant to the Tax Dispute Resolution Procedure.
(f) The Initial Tax Matters Member (and, to the extent that the
Initial Tax Matters Member is no longer a Member, another Wachovia Member
selected by the Board of Managers and agreed to in writing by such Wachovia
Member) hereby is designated the Company's tax matters member ("Tax Matters
Member"), with all powers and responsibilities of a "tax matters partner" as
defined in Section 6231(a)(7)(A) of the Code and shall manage administrative tax
proceedings conducted at the Company level by the Internal Revenue Service with
respect to Company matters. No Member may act independently with respect to any
tax matter relating to or affecting the Company without the prior express
approval of the Tax Matters Member and shall keep the Tax Matters Member
informed of each material development and make related documents available to
the Tax Matters Member before submission to any taxing authority or
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court, in each case, at the expense of such Member. Except as otherwise directed
by the Board of Managers pursuant to paragraph (d) above, the Tax Matters Member
may, in its sole discretion, cause the Company to make all elections required or
permitted to be made by the Company under applicable law and not otherwise
expressly provided for in this Agreement; provided, however, that at the request
of any Member, the Tax Matters Member shall cause the Company to make the
election under Section 754 of the Code. The Tax Matters Member shall consult
with and consider the views of the other Members with regard to any material
action it intends to take in its capacity as the Tax Matters Member. The Tax
Matters Member shall furnish promptly to the other Members copies of material
documents and notices received in connection with any administrative or judicial
proceeding relating to income tax or other material tax matters of the Company
and shall notify promptly the other Members if (i) the Tax Matters Member causes
an amended income tax or other material tax return to be filed on behalf of the
Company or (ii) any taxing authority commences an audit of an income tax return
of the Company and such audit is reasonably likely to result in one or more
material adverse adjustments or if any material adverse adjustment to any such
return is proposed in writing. The Tax Matters Member shall not settle any audit
or judicial proceeding with respect to any Major Tax Item without the written
consent of a Prudential Member, acting on behalf of all Prudential Members
(which consent shall not be unreasonably withheld or delayed). Any disagreement
between the Members with respect to a matter described in the preceding sentence
shall be resolved pursuant to the Tax Dispute Resolution Procedure.
Section 6.4. Audits; Inspection of Books and Records.
(a) The Board of Managers shall, in connection with the formulation
and presentation of the budget of the Company, determine and cause the Company
to adopt an annual internal audit plan, which may be on either a continuous or a
periodic basis and may be conducted by employees of any Member, or any Affiliate
of any Member, in each case designated by the Board of Managers, or by
independent auditors retained by the Company. The internal audit plan shall
contain procedures and protocols relating to the conduct of audits consistent
with the best practices of the industry. Without limiting the foregoing, the
Prudential Members shall be entitled to designate areas for audit pursuant to
the internal audit plan; provided that the amount of audit hours attributable to
the areas so designated shall not exceed 20% of the total audit hours (but in
any event not more than 6,000 hours) in any single year. The Company shall, and
the Board of Managers shall cause the Company to, implement such internal audit
plan and advise the Members promptly of each incident that comes to its
attention regarding the Company's failure to adhere to such internal audit plan
in any material respect.
(b) All books, records and accounts of the Company and its
Subsidiaries shall be open to inspection and examination by any of the Members
or their representatives at reasonable times and in a reasonable manner so as to
not unduly interfere with the management and business of the Company or its
Subsidiaries. The Company shall, and shall cause its Subsidiaries to, cause its
and their officers to make themselves available to discuss the affairs of the
Company and its Subsidiaries upon the reasonable request of any of the Members
or their representatives at reasonable times and in a reasonable manner so as to
not unduly interfere with the management and business of the Company or its
Subsidiaries. Such right of inspection may be exercised through any agent or
employee of such Member (including any Manager designated by such Member) or a
certified public accounting firm of recognized international standing designated
by
41
such Member. Such Member shall bear all expenses incurred in any examination
requested by such Member pursuant to this Section 6.4(b). Any information
obtained by a Member pursuant to this Section 6.4 shall be held in confidence
pursuant to the terms of Section 8.2 of the Formation Agreement.
Section 6.5. Financial Information and Related Matters.
(a) Annual Financials. The Company will prepare and deliver, or cause
to be prepared and delivered, to each Member, not less than 15 days before the
date on which Wachovia is required to file its Annual Report on Form 10-K with
the Securities and Exchange Commission, annual audited financial statements
(consisting of consolidated statements of financial condition, operations and
cash flows) prepared in accordance with generally accepted accounting
principles.
(b) Monthly and Quarterly Financials. The Company will prepare and
deliver, or cause to be prepared and delivered, to each Member unaudited
financial statements (consisting of consolidated statements of financial
condition, earnings and cash flows) within 12 days of the end of each of the
Company's fiscal quarters and within 12 days of the end of each month.
(c) Additional Information. The Company will also deliver to one
Wachovia Member on behalf of all Wachovia Members and one Prudential Member on
behalf of all Prudential Members the additional information required to be
delivered to the Parties (as defined in the Formation Agreement) by Schedule
8.2(g) to the Formation Agreement to the extent that such additional information
is not so delivered to Wachovia and Prudential, respectively.
Section 6.6. Tax Election. The Members intend that the Company
shall be treated as a partnership for United States federal, state, and local
and any foreign tax purposes to the extent such treatment is available (and no
Member will make an election otherwise), and agree to take such actions as may
be necessary to receive and maintain such treatment and refrain from taking any
actions inconsistent therewith. Notwithstanding the foregoing, nothing in this
Agreement is intended to create a partnership among the Members, and no Member
shall be liable for the debts, liabilities or obligations of the Company or any
other Member.
Section 6.7. Auditors. The auditors of the Company shall be such
firm of certified independent public accountants as shall be selected by the
Board of Managers. The initial auditors of the Company shall be KPMG LLC.
Section 6.8. Regulatory Compliance Liaison. Each Member shall be
entitled to designate a regulatory compliance liaison to the Company. The
Company shall (a) designate a regulatory compliance officer to (i) consult with
the regulatory compliance liaisons designated by the Members on a regular
periodic basis and (ii) provide such regulatory compliance liaisons with copies
of such material regulatory reports or filings as such regulatory compliance
liaisons may reasonably request from time to time concerning the Company's
compliance with applicable regulatory requirements (including, without
limitation, compliance with the Exchange Act, the Investment Advisers Act of
1940, as amended, and the rules and regulations promulgated thereunder, and the
rules and regulations of any self-regulatory organization), (b) keep such
regulatory compliance liaisons apprised of material compliance issues as
promptly as reasonably
42
practicable as such matters arise, and (c) consider the input of such regulatory
compliance liaisons in the Company's formulation of regulatory compliance policy
and in its response to regulatory non-compliance matters.
ARTICLE 7
ALLOCATIONS AND DISTRIBUTIONS
Section 7.1. Allocations.
(a) Percentage Interests of the Members. The Percentage Interest of
each Member initially shall be as indicated on Schedule 4.1.
(b) Allocation of Profit and Loss. Except as otherwise provided in
this Section 7.1, or required pursuant to Treasury Regulations Section
1.704-1(b)(1)(i), Profit and Loss of the Company for each fiscal year of the
Company shall be allocated among the Members in accordance with their respective
Percentage Interests, as such Percentage Interests may be in effect from time to
time.
(c) Special Allocations. Notwithstanding anything contained herein to
the contrary:
(i) If a Member would at any time receive, but for this
Section 7.1(c)(i), an allocation of deduction, loss, or expenditure that
would cause or increase a deficit balance in such Member's Capital Account
in excess of any amount of such deficit balance that the Member is
obligated to restore or deemed obligated to restore (as determined in
accordance with Treasury Regulations Sections 1.704-1(b)(2)(ii)(c),
1.704-2(g)(1) and 1.704-2(i)(5)), then the portion of such allocation that
would cause or increase such deficit Capital Account balance will be
specially allocated to the other Members, if any, with positive Capital
Account balances in proportion to such balances. The loss limitation under
this Section 7.1(c)(i) is intended to comply with Treasury Regulations
Section 1.704-1(b)(2)(ii)(d), including the reductions described in
subparagraphs (4), (5) and (6) therein.
(ii) If in any Tax Year, a Member receives an adjustment,
allocation or distribution described in Treasury Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain will
be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Treasury
Regulations, the deficit balance in such Member's Capital Account in excess
of any amount of such deficit balance that the Member is obligated to
restore or deemed obligated to restore (as determined in accordance with
Treasury Regulations Sections 1.704-1(b)(2)(ii)(c), 1.704-2(g)(1) and
1.704-2(i)(5)) as quickly as possible; provided that an allocation pursuant
to this Section 7.1(c)(ii) will be made only if and to the extent that such
Member would have a Capital Account deficit after all other allocations
provided for in this Article 7 have been tentatively made as if this
Section 7.1(c)(ii) were not in the Agreement. This Section 7.1(c)(ii) is
intended to qualify and be construed as a "qualified
43
income offset" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and will be interpreted consistently therewith.
(iii) If there is a net decrease in minimum gain attributed
to the Company or Member nonrecourse debt minimum gain (determined in
accordance with the principles of Treasury Regulations Sections 1.704-2(d)
and 1.704-2(i)) during any Company taxable year, the Members will be
allocated items of income and gain attributed to the Company for such year
(and, if necessary, subsequent years) in an amount equal to their
respective shares of such net decrease during such year, determined
pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5). The
items to be so allocated will be determined in accordance with Treasury
Regulations Section 1.704-2(f). This Section 7.1(c)(iii) is intended to
comply with the minimum gain chargeback requirements in such Treasury
Regulations and will be interpreted consistently therewith, including that
no chargeback will be required to the extent of the exceptions provided in
Treasury Regulations Sections 1.704-2(f) and 1.704-2(i)(4).
(iv) If any Member (A) is required to make an indemnity
payment to the Company pursuant to Section 7.2 of the Formation Agreement
or (B) pays any amount which gives rise to a tax deduction of the Company,
such payment shall be treated as a Capital Contribution by the Member and
the loss giving rise to the indemnity payment or the tax deduction
attributable to the payment shall be allocated to such Member.
(v) The allocation provisions set forth in this Article 7
and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Treasury Regulations Section
1.704-1(b) and will be interpreted and applied in a manner consistent with
such Treasury Regulations; provided, however, that such provisions will not
affect the economic rights of any Member, including rights to distributions
with respect to the Company.
(vi) Any special allocations of items of income, gain,
loss or deductions pursuant to Sections 7.1(c)(i), (ii) and (iii) will be
taken into account in computing subsequent allocations pursuant to Section
7.1(b) and this Section 7.1(c), so that the net amount of any items so
allocated will, to the extent possible, be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of
Section 7.1(b) if such special allocations had not occurred.
(vii) If any Member contributes to the Company an asset or
liability included on the applicable Final Closing Balance Sheet that
represents an item of income or deduction, respectively, that has not yet
been recognized for federal income tax purposes, such item of income or
deduction, as the case may be, shall be allocated to the contributing
Member when recognized by the Company.
(viii) In the event that any fees, interest, or other
amounts paid to any Member or any Affiliate thereof pursuant to this
Agreement or any other agreement attributed to the Company with any Member
or Affiliate thereof providing for the payment of such amount, and deducted
by the Company in reliance on Section 707(a)
44
and/or 707(c) of the Code, are disallowed as deductions to the Company on
its federal income tax return and are treated as Company distributions,
then:
(A) the Profit or Loss, as the case may be, for the
Tax Year in which such fees, interest, or other amounts were paid will
be increased or decreased, as the case may be, by the amount of such
fees, interest, or other amounts that are treated as Company
distributions; and
(B) there will be allocated to the Member to which
(or to whose Affiliate) such fees, interest, or other amounts were
paid, prior to the allocations pursuant to Section 7.1(b), an amount
of gross income for the Tax Year equal to the amount of such fees,
interest, or other amounts that are treated as Company distributions.
(ix) Any income, gain, loss, deduction or credit resulting
from the conversion, following the Closing Date, of a Prudential
Contributed Subsidiary (as defined in the Formation Agreement) listed on
Schedule 4.2(b) of the Formation Agreement to an entity that is disregarded
or treated as a partnership for United States federal income tax purposes
shall be allocated to the Prudential Member.
(d) Tax Allocations.
(i) For income tax purposes only, each item of income,
gain, loss, and deduction with respect to any asset of the Company, the
Carrying Value of which differs from its adjusted tax basis for federal
income tax purposes, will be allocated in accordance with the principles of
Section 704(c) of the Code so as to take into account the variation between
the adjusted tax basis of such asset and its Carrying Value. For purposes
of applying the principles of Section 704(c) of the Code, the Company will
use the traditional method described in Treasury Regulations Section
1.704-3(b).
(ii) Subject to the provisions of Section 7.1(d)(i), items
of income, gain, loss, deduction and credit to be allocated for income tax
purposes will be allocated for each Tax Year among the Members in the same
manner and on the same basis as Profit and Loss are allocated, taking into
account special allocations made pursuant to Section 7.1(c).
(iii) Any bad debt deduction with respect to an FA Note
contributed by a Member and any deduction arising from the forgiveness of
such an FA Note or the payment of compensation associated with such an FA
Note shall be allocated to the contributing Member to the extent of the
greater of (A) the excess of (1) the face amount of such FA Note at Closing
over (2) the amount recorded in respect of such FA Note as an asset on the
contributing Member's Final Closing Balance Sheet and (B) any amount
recorded as a liability on the contributing Member's Final Closing Balance
Sheet that is associated with such FA Note. Any such deduction not
allocated to the contributing Member pursuant to the preceding sentence
shall be allocated in accordance with the other provisions of this Article
7.
45
Section 7.2. Distributions.
(a) Mandatory Distributions.
(i) Within 60 days after the end of each fiscal quarter
of the Company, the Board of Managers shall distribute to the Members 70%
of all Distributable Cash received by the Company and its Subsidiaries
during such fiscal quarter. "Distributable Cash" means, with respect to any
fiscal quarter, the Company's consolidated net earnings for such quarter,
determined in accordance with generally accepted accounting principles,
before deduction for any expense related to the amortization of intangible
assets.
(ii) In addition to any distributions made pursuant to
Section 7.2(a)(i):
(A) the Board of Managers may distribute any
additional amounts to the Members, whether out of Distributable Cash
or any other source, to the extent permitted by applicable Law, as the
Board of Managers may in its sole discretion determine, and
(B) once the amount of Distributable Cash received by
the Company (and not theretofore distributed by the Company pursuant
to Section 7.2(a)(i) and the preceding clause (A) of this Section
7.2(a)(ii)) from and after the Closing Date and through the end of the
preceding fiscal quarter exceeds $263 million, the Board of Managers
shall distribute to any Member who so elects, by written notice given
to the Company within 75 days after the end of the preceding fiscal
quarter, an amount equal to such Member's Percentage Interest of the
difference between (x) the total amount of Distributable Cash for such
preceding fiscal quarter, and (y) the total amount of all
distributions declared by the Board of Managers in respect of such
fiscal quarter pursuant to Section 7.2(a)(i) and the preceding clause
(A) of this Section 7.2(a)(ii). If not all Members make such an
election, each non-electing Member shall be deemed to have received
the distribution that it otherwise would have received (if it had made
such an election) and then immediately contributed such amount to the
Company as an Additional Capital Contribution, and in exchange
therefor the Company shall issue to each such non-electing Member, as
of the date of such deemed distribution, a number of Membership
Interests equal to:
(A / B) * C
where:
A = the amount of cash comprising such deemed distribution
pursuant to this Section 7.2(a)(ii)(B)
B = the Appraised Value of the Company, as determined by the
Board of Managers in accordance with Section 3.2(g)
C = the total number of Membership Interests outstanding
immediately prior to such distribution (assuming that all deemed
contributions pursuant
46
to this clause (B) are made by all Members simultaneously with
respect to such distribution).
(b) Other Distributions. Except as specified in this Article 7 and
Articles 3 and 9, (i) the Company shall have no obligation to distribute any
cash or other property of the Company to the Members, and (ii) the Board of
Managers shall have sole discretion in determining whether to distribute any
cash or other property of the Company, when available, and in determining the
timing, kind and amount of any and all distributions. If and to the extent that
the Company shall be required to withhold or pay any withholding or other taxes
with respect to any Member, such Member shall be deemed for all purposes of this
Agreement to have received a payment from the Company as of the time such
withholding or other tax is required to be paid, which payment shall be deemed
to be a distribution. Except as specified in this Article 7 and Articles 3 and
9, no Member is entitled to receive any distribution unless and until declared
by the Board of Managers.
(c) Distributions in Kind. No Member has any right to demand or
receive property other than cash. However, the Board of Managers may in its sole
discretion elect to make distributions, entirely or in part, in property of the
Company other than cash. Assets of the Company distributed in kind shall be
valued based on the fair market value thereof (as determined in good faith by
the Board of Managers).
(d) Limitations on Distributions. Notwithstanding anything in this
Agreement to the contrary:
(i) no distribution shall be made in violation of the
Act; and
(ii) all amounts distributed to Members will be
distributed to them pro rata in accordance with their Percentage Interests
(except as otherwise provided in Section 7.2(a)(ii)(B)).
(e) Exculpation. The Members hereby consent and agree that, except as
expressly provided herein or required by applicable law and except for
distributions not made in compliance with this Agreement, no Member shall have
an obligation to return cash or other property paid or distributed to such
Member under Section 18-502(b) of the Act or otherwise.
ARTICLE 8
TRANSFERS
Section 8.1. Restrictions on Transfers; Additional Members.
(a) Each Member agrees not to Transfer all or any part of its
Membership Interests, including but not limited to any economic interest in the
Company or its Profits or Losses (or take or omit to take any action, filing,
election or other action which could result in a deemed Transfer), except as may
be required or permitted by the Formation Agreement. Subject to Sections 3.3(c)
and 4.12 and upon approval of the Board of Managers, the Company is authorized
to admit any Person as an additional Member of the Company (each, an "Additional
47
Member" and collectively, the "Additional Members"); provided, however, that (x)
a Permitted Transferee of a Wachovia Member or a Prudential Member and any other
transferee of Membership Interests shall be admitted as an Additional Member
without the requirement of any approval by the Members or the Board of Managers
to the extent such Transfer was permitted by and effected in accordance with the
provisions of Article 9 of the Formation Agreement and (y) a Designated
Combining Member or Designated Non-Combining Member shall be admitted as an
Additional Member upon the receipt of Membership Interests without the
requirement of any approval by the Members or the Board of Managers to the
extent such receipt thereof was permitted by and effected in accordance with the
provisions of Section 3.4. Each such Person shall be admitted as an Additional
Member at the time (i) such Person executes and delivers this Agreement or a
counterpart of this Agreement and agrees in writing to be bound by the terms and
conditions of Article 8 (other than Section 8.4) and Articles 9 through 12 of
the Formation Agreement, (ii) if requested by any Member, a guarantee
substantially similar to Exhibit I of the Formation Agreement is executed and
delivered by the ultimate parent of such Additional Member, and (iii) any other
applicable requirements of the Formation Agreement is satisfied, at which time
such Person shall be named as a Member on Schedule 4.1.
(b) Additional Members shall not be entitled to any retroactive
allocation of the Company's income, gains, losses, deductions, credits or other
items; provided that, subject to the restrictions of Section 706(d) of the Code,
Additional Members shall be entitled to their respective share of the Company's
income, gains, losses, deductions, credits and other items arising under
contracts entered into before the effective date of the admission of any
Additional Members to the extent that such income, gains, losses, deductions,
credits and other items arise after such effective date. To the extent
consistent with Section 706(d) of the Code and Treasury Regulations promulgated
thereunder and as the Board of Managers determines, the Company's books may be
closed at the time Additional Members are admitted (as though the Company's Tax
Year had ended) or the Company may credit to the Additional Members pro rata
allocations of the Company's income, gains, losses, deductions, credits and
items for that portion of the Company's Tax Year after the effective date of the
admission of the Additional Members.
(c) Unless and until admitted as an Additional Member, a transferee of
any Membership Interest shall have no powers, rights or privileges of a Member
of the Company. Except as otherwise contemplated by the Formation Agreement and
Section 8.1(a) hereof, no transferee of a Membership Interest shall have the
right to become an Additional Member unless the Board of Managers, in its sole
and absolute discretion, expressly consents thereto in writing, and the
transferee agrees to become a Member of the Company and be bound by all of the
terms and conditions of this Agreement. Any attempted Transfer not in accordance
with the provisions of the Formation Agreement and this Section 8.1 shall be
null and void ab initio.
(d) Any Member that Transfers all of its, and owns no, Membership
Interests shall immediately cease to be a Member.
48
ARTICLE 9
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 9.1. No Dissolution. The Company shall not be dissolved by
the withdrawal of any Member, or the admission of Additional Members or
substitute Members in accordance with the terms of this Agreement or the
Formation Agreement.
Section 9.2. Events Causing Dissolution. The Company shall be
dissolved and its affairs shall be wound up upon the first to occur of the
following events:
(a) the determination of the Members, by means of an affirmative vote
of the Members holding the Requisite Membership Interests, to dissolve and
terminate the Company;
(b) sale of all or substantially all of the Company's assets;
(c) the entry of a decree of judicial dissolution under Section 18-802
of the Act; or
(d) at any time when there are no Members.
Section 9.3. Bankruptcy of a Member. The bankruptcy or dissolution
of a Member shall not in and of itself cause such Member to cease to be a Member
of the Company, and upon the occurrence of such event, the Company shall
continue without dissolution under the management and control of the remaining
Members, unless there are no remaining Members of the Company.
Section 9.4. Winding Up.
(a) In the event of the dissolution of the Company pursuant to Section
9.2, the Company's affairs shall be wound up by a liquidating agent of the
Company selected by the Board of Managers (in such capacity, the "Liquidating
Agent"), which Liquidating Agent shall be an individual who is knowledgeable
about the Business (if possible) and has substantial experience in the purchase
and sale of businesses.
(b) Upon dissolution of the Company and until the filing of a
certificate of cancellation as provided in Section 18-203 of the Act, the
Liquidating Agent may, in the name of, and for and on behalf of, the Company,
prosecute and defend lawsuits, whether civil, criminal or administrative, settle
and close the Company's business, dispose of and convey the Company's property
or sell the Company (and its Subsidiaries) as a going concern, discharge or make
reasonable provision for the Company's liabilities, and distribute to the
Members in accordance with Section 9.5 any remaining assets of the Company, all
without affecting the liability of Members and without imposing any liability on
any Liquidating Agent.
(c) Except as otherwise provided in this Agreement, the Members shall
continue to share distributions and tax allocations during the period of
liquidation in the same manner as before the dissolution. Subject to the
provisions of Section 9.5, the Liquidating Agent shall have
49
reasonable discretion to determine the time, manner and terms of any sale or
sales of the Company's property pursuant to such liquidation.
(d) A reasonable time period shall be allowed for the orderly winding
up and liquidation of the assets of the Company and the discharge of liabilities
to creditors so as to enable the Liquidating Agent to seek to minimize potential
losses upon such liquidation. The provisions of this Agreement shall remain in
full force and effect during the period of winding up and until the filing of a
certificate of cancellation of the Company with the Secretary of State of the
State of Delaware.
(e) Upon the completion of the winding up of the Company, any Manager
or the Liquidating Agent or other duly designated representative shall file a
certificate of cancellation of the Company with the Secretary of State of the
State of Delaware as provided in Section 18-203 of the Act.
Section 9.5. Distribution of Assets.
(a) As soon as practicable upon dissolution of the Company, the assets
of the Company (or liquidation proceeds) shall be distributed to the Members in
the following manner and order of priority (and ratably within each level of
priority):
(i) First, to creditors of the Company, including Members
who are creditors, to the extent permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision for payment thereof) other than liabilities for which reasonable
provision has been made and distributions to Members under Article 7 of
this Agreement, and
(ii) Second, to the Members pro rata in accordance with
their Percentage Interests.
(b) The Liquidating Agent shall have the power to establish any
reserves that, in accordance with sound business judgment, it deems reasonably
necessary to pay all claims and obligations, including all contingent,
conditional or unmatured claims and obligations, which reserves may be paid over
to an escrow agent selected by the Liquidating Agent to be held by such agent
for the purpose of (i) paying out such reserves in payment of the aforementioned
contingencies and (ii) upon the expiration of such period as the Liquidating
Agent may deem advisable, making a distribution of the balance thereof to the
Members in the manner provided in this Section 9.5.
Section 9.6. Distributions in Cash or in Kind. Upon the
dissolution of the Company, the Liquidating Agent shall use all commercially
reasonable efforts to liquidate all of the Company assets in an orderly manner
and apply the proceeds of such liquidation as set forth in Section 9.5; provided
that if in the good faith judgment of the Liquidating Agent, a Company asset
should not be liquidated, the Liquidating Agent shall distribute such asset, on
the basis of its value (determined in good faith by the Liquidating Agent), in
accordance with Section 9.5, subject to the priorities set forth in Section 9.5;
provided, further, that the Liquidating Agent shall in good faith attempt to
liquidate sufficient assets of the Company to satisfy in cash (or make
reasonable provision for) the debts and liabilities referred to in Section
9.5(a).
50
Section 9.7. Claims of the Members. The Members and former Members
shall look solely to the Company's assets for the return of their Capital
Contributions, and if the assets of the Company remaining after payment of or
due provision for all debts, liabilities and obligations of the Company are
insufficient to return such Capital Contributions, the Members and former
Members shall have no recourse against the Company, any Manager or alternate
Manager, or any other Member. No Member shall have any obligation to make any
Capital Contribution with respect to such insufficiency, and such insufficiency
shall not be considered a debt owed to the Company or to any other Person.
ARTICLE 10
MISCELLANEOUS
Section 10.1. Compliance with Formation Agreement. The Company
shall comply with the provisions of the Formation Agreement applicable to the
Company as if a party thereto.
Section 10.2. Performance of Obligations; Futher Assurances. Each
Member shall fully and faithfully carry out all its respective agreements and
covenants expressly set forth in this Agreement. Each Member shall, upon the
request from time to time of the Company and without further consideration, do,
execute and perform all such other acts, deeds and documents as may be
reasonably requested by the Company to carry out fully the purposes and intent
of this Agreement.
Section 10.3. Amendment or Modification. Neither this Agreement nor
the Certificate may be amended or modified by the Members, except by an
instrument in writing signed by the Members holding the Requisite Membership
Interests; provided that this Agreement and the Certificate may be amended at
any time to change the name of the Company by action of the Board of Managers to
the extent such change of name is permitted pursuant to Section 2.2.
Section 10.4. Waiver. Except as otherwise specifically provided
herein, any provision of this Agreement may only be waived at any time by an
instrument signed in writing by Members holding the Requisite Membership
Interests. Except as specifically provided herein, the failure or delay of any
Member to enforce at any time any of the provisions of this Agreement shall in
no way be construed to be a waiver of any such provision, nor in any way to
affect the validity of this Agreement or any part hereof or the right of any
Member thereafter to enforce each and every such provision. No waiver of any
breach of or non-compliance with this Agreement shall be held to be a waiver of
any other or subsequent breach or non-compliance. Except as specifically
provided herein, all remedies, either under this Agreement or by law or
otherwise afforded, will be cumulative and not alternative.
Section 10.5. Entire Agreement. This Agreement and the other
documents and agreements contemplated hereby contain the entire agreement
between the Members with respect to the subject matter hereof and supersede and
cancel all prior agreements, understandings, representations and warranties,
both oral and written, between the Members with respect thereto.
51
There are no agreements, undertakings, representations or warranties of any of
the Members with respect to the transactions contemplated hereby and thereby
other than those set forth herein or therein or made hereunder or thereunder.
Section 10.6. Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended to confer, nor shall anything herein confer, on
any Person other than the Members and their respective successors or permitted
assigns, any rights, remedies, obligations or liabilities, except that any
Person who is entitled to exculpation or indemnification pursuant to Section 5.8
and is not party to this Agreement shall be a third-party beneficiary of this
Agreement to the extent required for purposes of such Section 5.8; provided that
all claims for indemnification shall be made only in the name and on behalf of
such Person by a Member.
Section 10.7. Non-Assignability; Binding Effect. This Agreement is
assignable, in part or in whole, only concurrently with a valid assignment of
Membership Interests. A purported assignment of this Agreement or any of the
rights, interests or obligations hereunder not in compliance with the provisions
of this Agreement shall be null and void ab initio. Subject to the foregoing,
this Agreement shall inure to the benefit of and be binding upon the Members and
their respective successors and permitted assigns.
Section 10.8. Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is declared or held
illegal or invalid, in whole or in part, for any reason whatsoever, such
illegality or invalidity shall not affect the validity or enforceability of the
remainder of the Agreement, and such provision shall be deemed amended or
modified to the extent, but only to the extent, necessary to cure such
illegality or invalidity. Upon such determination of illegality or invalidity,
the Members shall negotiate in good faith to amend this Agreement to effect the
original intent of the Members. In any event, the invalidity or unenforceability
of any provision of this Agreement in any jurisdiction shall not affect the
validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of this Agreement, including that
provision, in any other competent jurisdiction.
Section 10.9. Injunctive Relief. The Members acknowledge and agree
that a violation of any of the terms of this Agreement will cause the other
Members and the Company irreparable injury for which an adequate remedy at law
is not available, and if any Member institutes any action or proceeding to
enforce the provisions hereof, any Person against whom such action or proceeding
is brought hereby waives the claim or defense therein that an adequate remedy at
law exists. Accordingly, it is agreed that each of the Members and the Company
will be entitled to an injunction, restraining order or other equitable relief
to prevent breaches of such provisions of this Agreement and to enforce
specifically such provisions hereof in any court of competent jurisdiction, in
addition to any other remedy to which they may be entitled at law or equity,
except as otherwise specifically provided in this Agreement.
Section 10.10. Governing Law. This Agreement shall be governed by
and construed in accordance with the provisions of the Act, and other applicable
laws of the State of Delaware.
52
Section 10.11. Submission to Jurisdiction. Each Member irrevocably
submits to the exclusive jurisdiction of (i) the Supreme Court of the State of
New York, New York County, and (ii) the United States District Court for the
Southern District of New York, for the purposes of any suit, action or other
proceeding arising out of this Agreement or any transaction contemplated hereby.
Each Member agrees to commence any action, suit or proceeding relating hereto
either in the United States District Court for the Southern District of New York
or if such suit, action or other proceeding may not be brought in such court for
reasons of subject matter jurisdiction, in the Supreme Court of the State of New
York, New York County. Each Member irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding arising out
of this Agreement or the transactions contemplated hereby in (A) the Supreme
Court of the State of New York, New York County, or (B) the United States
District Court for the Southern District of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum. Each Member further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such suit, action or other proceeding by the mailing of copies thereof by
mail to such Member at its address set forth in this Agreement, such service of
process to be effective upon acknowledgment of receipt of such registered mail;
provided that nothing in this Section 10.11 shall affect the right of any Member
to serve legal process in any other manner permitted by law. The consent to
jurisdiction set forth in this Section 10.11 shall not constitute a general
consent to service of process in the State of New York and shall have no effect
for any purpose except as provided in this Section 10.11. The Members agree that
a final judgment in any such suit, action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
Section 10.12. Dispute Resolution. Any controversy or claim arising
out of or relating to this Agreement, including but not limited to any breach
hereof, shall be submitted to non-binding mediation pursuant to the resolution
procedures set forth in Section 12.12 of the Formation Agreement.
Section 10.13. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY
WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTERS (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE RELATIONSHIP ESTABLISHED HEREUNDER.
Section 10.14. Notices. All communications hereunder shall be in
writing and shall be deemed to have been duly given if signed by the respective
Persons giving them (in the case of any corporation, the signature shall be by
an appropriate officer thereof) and delivered by hand, or sent by registered
mail, return receipt requested, or nationally recognized courier, or by
facsimile to the following addresses:
If to the Initial Wachovia Member:
Wachovia Corporation
000 Xxxxx Xxxxxxx Xxxxxx
00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxxx X. XxXxxxxx, Xx.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
With a copy to:
Wachovia Corporation
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxx X. Xxxxxxx, Esq.
General Counsel
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
And a copy (which copy shall not constitute notice) to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxx, Esq.
Xxxxxxx Xxxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to the Initial Prudential Member:
The Prudential Insurance Company of America
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxx
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
And a copy (which copy shall not constitute notice) to:
Debevoise & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Telephone: (000) 000-0000
If to any other Member:
(To such addresses reflected in the books and records of the
Company)
54
By written notice to the Company, any Member may change the address to which
notices shall be directed.
Section 10.15. Counterparts. This Agreement may be executed in any
number of counterparts, and delivered by facsimile or otherwise, each of which
shall be deemed an original of this Agreement and all of which together shall
constitute one and the same instrument.
Section 10.16. Interpretation. Captions, headings and titles
contained in this Agreement and the Schedules are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement
or the Schedules. When a reference is made in this Agreement to Articles,
Sections or Schedules, such reference shall be to an Article or Section of or
Schedule to this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." The words "herein,"
"hereof," "hereunder" and words of similar import shall be deemed to refer to
this Agreement as a whole, including the Schedules hereto, and not to any
particular provision of this Agreement. Any pronoun shall include the
corresponding masculine, feminine and neuter forms.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
55
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
[INITIAL WACHOVIA MEMBER]
By:__________________________________
Name:
Title:
[INITIAL PRUDENTIAL MEMBER]
By:__________________________________
Name:
Title:
56
