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Limited Liability Company Agreement
A _________(STATE) LIMITED LIABILITY COMPANY
EFFECTIVE AS OF _________(M,D,Y)
THE INTERESTS DESCRIBED AND REPRESENTED BY THIS LIMITED
LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE 'ACT' OR ANY APPLICABLE STATE
SECURITIES LAWS ('STATE ACTS') AND ARE RESTRICTED SECURITIES AS
THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES
MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
QUALIFICATION UNDER THE ACT AND APPLICABLE STATE ACTS OR
PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.
TABLE OF CONTENTS
Article 1. DEFINITIONS
Accretion Amount
Act
Affiliate
Agreement
Business.
Business Plan
Capital Account
Capital Contribution.
Certificate of Formation or Certificate
Change of Control
Code.
Common Unit
Company
Company Property.
Confidential Information.
Deficit Capital Account
Depreciation.
Distributable Cash.
Distribution.
Economic Interest
Economic Interest Owner
Entity.
Equity Owner.
Fiscal Year
Gross Asset Value
Holders
IPO
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Intellectual Property Rights.
License Agreement
Majority Interest
Manager
Member.
Membership Interest
FFF.
FFF Options.
FFF Dilutive Units
NII
NII Sale.
Noncompetitive Activity
HHH Partners Domestic.
HHH Partners Overseas.
HHH Partners
Ownership Interest.
Preferred Sale Fee.
Proportionately Dilutive Units.
Put Period.
Put Right
Person.
PreferredtoCommon Conversion Option
Preferred Units
Profits and Losses.
Proportionately
Redemption Price.
Regulations
Reorganization.
Reserves.
Sale or Sell.
Secretary of State.
Selling Equity Owner.
Sharing Ratio
State
Successor Corporation
TwoThirds Interest
Unrecovered Losses.
Voting Interest
Article 2. FORMATION OF COMPANY
Formation
Name.
Principal Place of Business
Registered Office and Registered Agent.
Term. 1
Article 3. BUSINESS OF COMPANY.
Permitted Business.
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Article 4. NAMES AND ADDRESSES OF EQUITY OWNERS
Article 5. RIGHTS AND DUTIES OF MANAGER AND OFFICERS.
Management
Number, Tenure and Qualifications.
Certain Powers of Manager.
Limitations on Authority
Liability for Certain Acts
Manager and Members Have No Exclusive Duty to Company; Noncompetition
Covenant
Bank Accounts.
Indemnity of the Manager, Employees and Other Agents
Resignation.
Removal
Vacancies
Compensation, Reimbursement, Organization Expenses.
Annual Operating Plan
Right to Rely on the Manager.
Officers.
Article 6. RIGHTS AND OBLIGATIONS OF EQUITY OWNERS.
Limitation of Liability
List of Equity Owners
Equity Owners Have No Agency Authority.
Company Books
Priority and Return of Capital
License Agreement
Warrants.
Article 7. MEETINGS OF MEMBERS.
No Required Meetings.
Place of Meetings
Notice of Meetings.
Meeting of all Members.
Record Date
Quorum.
Manner of Acting.
Proxies
Action by Members Without a Meeting
Waiver of Notice.
Article 8. CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS.
Members' Capital Contributions.
Additional Contributions.
Capital Accounts.
Withdrawal or Reduction of Equity Owners' Contributions to Capital.
Article 9. ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS
AND REPORTS.
Allocations of Profits and Losses from Operations
Special Allocations to Capital Accounts
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Credit or Charge to Capital Accounts.
Distributions
Limitation Upon Distributions
Accounting Principles
Interest on and Return of Capital Contributions
Loans to Company.
Accounting Period
Records and Reports
Returns and Other Elections
Tax Matters Partner
Certain Allocations for Income Tax (But Not Book Capital AccountPurposes.
Article 10. TRANSFERABILITY
General
Right of First Refusal and CoSale.
Transferee Not Member in Absence of Consent
Additional Conditions to Recognition of Transferee.
Put Rights.
Sales to Affiliates
Right of First Offer.
Article 11. ISSUANCE OF MEMBERSHIP INTERESTS; OPTIONS;
CONVERSION RIGHTS.
Issuance of Additional Membership Interests to New Members; Right of
First Offer.
FFF Options.
Conversion of Preferred Units to Common Units
Issuance of Common Units (and Options to Acquire Common Units) to
Employees; Dilution
Conversion of Common Units Upon Reorganization.
Part Year Allocations With Respect to New Members
Article 12. DISSOLUTION AND TERMINATION
Dissolution
Effect of Dissolution
Winding Up, Liquidation and Distribution of Assets.
Filing or Recording Statements.
Return of Contribution Nonrecourse to Other Equity Owners
Article 13. MISCELLANEOUS PROVISIONS.
Notices.
Books of Account and Records
Application of State Law
Waiver of Action for Partition
Amendments
Execution of Additional Instruments.
Construction
Effect of Inconsistencies with the Act
Waivers.
Rights and Remedies Cumulative
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Attorneys' Fees.
Severability
Heirs, Successors and Assigns.
Creditors.
Counterparts
Rule Against Perpetuities.
Power of Attorney.
Investment Representations
Representations and Warranties
ERISA Representation and Covenant.
Confidential Information
This Limited Liability Company Agreement is made and entered into effective as of
the _________(M,D,Y), (the 'Effective Date') by and among the Company and each of
the Members whose signatures appear on the signature page hereof (the 'Initial
Members'). In consideration of the mutual covenants herein contained and for other good
and valuable consideration, the Members and the Company (and each person who
subsequently becomes an Equity Owner) hereby agree as follows:
Article 1.
DEFINITIONS
The following terms used in this Agreement shall have the following meanings
(unless otherwise expressly provided herein):
Accretion Amount. Accretion Amount shall mean an amount, computed without
duplication, at the rate of six percent (6%) compounded annually on $1,000 per Preferred
Unit commencing on the Effective Date and ending on the earlier of the date of
dissolution of the Company, the date the Put Option is exercised pursuant to Section
or the date the Preferred Units are converted to Common Units, as appropriate.
Act. Act shall mean the _________(STATE) Limited Liability Company Act, as
amended from time to time.
Affiliate. Affiliate shall mean, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by, or under common control with such Person, and
(ii) any Person owning or controlling ten percent (10%) or more of the outstanding voting
interests of such Person. For purposes of this definition, the term 'controls,' 'is controlled
by,' or 'is under common control with' shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
Agreement. Agreement shall mean this Limited Liability Company Agreement
as originally executed and as amended from time to time.
Business. Business is defined in Section .
Business Plan. Business Plan is defined in Section .
Capital Account. Capital Account as of any given date shall mean the Capital
Account of each Equity Owner as described in Article 8 and maintained to such date in
accordance with this Agreement.
Capital Contribution. Capital Contribution shall mean any contribution to the
capital of the Company in cash or property by an Equity Owner whenever made. 'Initial
Capital Contribution' shall mean the initial contribution to the capital of the Company
pursuant to this Agreement as shown on Exhibit .
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Certificate of Formation or Certificate. The Certificate of Formation or
Certificate shall mean the Certificate of Formation of the Company as filed with the
Secretary of State as the same may be amended from time to time.
Change of Control. Change of Control means (a) any merger or consolidation
to which NII is a party except for a merger in which after giving effect to such merger,
the holders of NII's outstanding capital stock possessing a majority of the voting power to
elect a majority of the surviving corporation's board of directors ('Voting Power')
immediately prior to the merger shall continue to own the surviving corporation's
outstanding capital stock possessing the Voting Power, and (b) any transaction or series
of related transactions in which capital stock representing in excess of 50% of NII's
Voting Power is transferred.
Code. Code shall mean the Internal Revenue Code of 1986, as amended from
time to time.
Common Unit. Common Unit means an Ownership Interest in the Company
which entitles the Equity Owner who holds such Common Unit to the following:
(a) a Proportionate share of the Profits and Losses allocated to all Common Units,
(b) a Proportionate share of the Voting Interests attributable to all Common Units
held by Members, and
(c) such other rights and obligations set forth in this Agreement.
Company. Company shall mean AAA, LLC, a _________(STATE) limited
liability company.
Company Property. All assets (real or personal, tangible or intangible,
including cash) of the Company.
Confidential Information. Confidential Information means any proprietary
information, whether written or oral, pertaining to the business, financial condition,
strategies, plans, policies, clients or customers, inventions, trade secrets, computer
programs, or processes of the disclosing party (i) that is furnished or disclosed by the
disclosing party to the recipient or to the recipient's employees, representatives or agents,
and (A) in the case of written information, is conspicuously marked as proprietary or
confidential, or (B) in the case of information which is provided orally, is stated to be
proprietary or confidential at the time of disclosure and after disclosure is reduced to
writing or other tangible form and delivered within 10 business days in accordance with
this agreement to the party receiving such disclosure. Confidential Information shall not
include any information that (X) is already known to the receiving party at the time of
receipt, as evidenced by written records made prior to such receipt, or (Y) is
independently developed or formulated by the receiving party, or (Z) otherwise is or
becomes generally available to the public through no fault of the receiving party.
Deficit Capital Account. Deficit Capital Account shall mean with respect to any
Equity Owner, the deficit balance, if any, in such Equity Owner's Capital Account as of
the end of the Fiscal Year, after giving effect to the following adjustments:
(a) credit to such Capital Account the amount, if any, which such Equity Owner is
obligated to restore under Section (b)(2)(ii)(c) of the Regulations, as well as any
addition thereto pursuant to the next to last sentence of Sections (g)(1) and (i)(5)
of the Regulations, after taking into account thereunder any changes during such year in
partnership minimum gain as determined in accordance with Section (d) of
the Regulations ('Company Minimum Gain') and in any partner nonrecourse debt
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minimum as determined under Section (i)(3) of the Regulations ('Member
Minimum Gain'); and
(b) debit to such Capital Account the items described in Sections
(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
This definition of Deficit Capital Account is intended to comply with the provisions
of Regulations Sections (b)(2)(ii)(d) and , and shall be interpreted
consistently with those provisions.
Depreciation. For each Fiscal Year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such
Fiscal Year, except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal Year, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset Value as
the federal income tax depreciation, amortization, or other cost recovery deduction for
such Fiscal Year bears to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at the beginning of such
Fiscal Year is zero, Depreciation shall be determined with reference to such beginning
Gross Asset Value using any reasonable method selected by the Manager.
Distributable Cash. All cash, whether revenues or other funds received by the
Company, less the sum of the following to the extent paid or set aside by the Company:
(i) all principal and interest payments on indebtedness of the Company and all other sums
paid to lenders; (ii) all cash expenditures incurred incident to the normal operation of the
Company's business; and (iii) Reserves.
Distribution. Any Sale of Company Property from the Company to or for the
benefit of an Equity Owner by reason of such Equity Owner's ownership of an Economic
Interest.
Economic Interest. An Equity Owner's share of one or more of the Profits,
Losses and Distributions pursuant to this Agreement and the Act, including such rights
that the Equity Owner has with respect to any Common Units or Preferred Units held by
it, but shall not include any right to participate in the management or affairs of the
Company, including, the right to vote on, consent to or otherwise participate in any
decision of the Members or Manager.
Economic Interest Owner. The owner of an Economic Interest who is not a
Member.
Entity. Any general partnership (including a limited liability partnership),
limited partnership (including a limited liability limited partnership), limited liability
company, corporation, joint venture, trust, business trust, cooperative or association or
any foreign trust or foreign business organization.
Equity Owner. An Economic Interest Owner or a Member.
Fiscal Year. The taxable year of the Company shall be a calendar year unless
another year is required for federal income tax purposes.
Gross Asset Value. Gross Asset Value means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by an Equity Owner to the
Company shall be the gross fair market value of such asset, as determined by the
contributing Member and the Manager, provided that the initial Gross Asset Values of the
assets contributed to the Company pursuant to Section hereof shall be as set forth in
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Exhibit , and provided further that, if the contributing Member is a Manager, the
determination of the fair market value of any other contributed asset shall require the
consent of the other Members owning a Majority Interest (determined without regard to
the Voting Interest of such contributing Member);
(b) The Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as reasonably determined by the Manager as provided
in Article 11 and as of the following times: (i) the acquisition of an additional interest by
any new or existing Equity Owner in exchange for more than a de minimis contribution
of property (including money); (ii) the Distribution by the Company to an Equity Owner
of more than a de minimis amount of property as consideration for an Ownership Interest;
and (iii) the liquidation of the Company within the meaning of Regulations Section
(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (1) and (ii)
above shall be made only if the Manager reasonably determines that such adjustments are
necessary or appropriate to reflect the relative economic interests of the Equity Owners in
the Company;
(c) The Gross Asset Value of any Company asset Distributed to any Equity Owner
shall be adjusted to equal the gross fair market value of such asset on the date of
Distribution as determined by an independent appraiser selected by the Manager or by
agreement of the Members holding not less 90% of all Voting Interests; and
(d) The Gross Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Section 734(b) or
Section 743(b) of the Code, but only to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to Regulation Section
(b)(2)(iv)(m) and Section and subparagraph (e) under the definition of Profits
and Losses; provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subparagraph (d) of this definition to the extent that the Manager determines that an
adjustment pursuant to subparagraph (b) of this definition is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment pursuant to
this subparagraph (d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (a), (b) or (d) of this definition, then such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to such asset
for purposes of computing Profits and Losses.
Holders. Holders is defined in Section (a).
IPO. IPO shall mean an initial public offering of Company common stock
which shall: (a) be effected by means of a firmcommitment underwriting managed by one
or more nationally recognized investment banking firms; (b) be registered with the
Securities and Exchange Commission under the Securities Act; (c) involve the listing of
the Company common stock on any national securities exchange; and (d) raise gross
proceeds to Company which result in a 'total valuation' of the Company immediately after
the IPO of $75,000,000 or more. For purposes of this definition, 'total valuation' shall be
(i) the initial price per share of the Company's common stock offered to the public times
the total number of shares of the Company's common stock outstanding immediately
after the Closing of the offering, plus (ii) the fair market value (as determined in good
faith by the Manager) of any outstanding securities of the Company which are not
common stock.
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Intellectual Property Rights. Intellectual Property Rights shall mean any (i)
patents, patent applications, patent disclosures and all related continuation,
continuationinpart, divisional, reissue, reexamination, utility model, certificate of
invention and design patents, design patent applications, design registrations and
applications for design registrations, and mask work rights, (ii) trademarks, tradenames,
service marks, trade dress, logos, and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration thereof, (iv)
trade secrets and confidential business information (whether patentable or unpatentable
and whether or not reduced to practice), knowhow, manufacturing and production
processes and techniques, research and development information, and copyrightable
works, (v) other proprietary rights relating to any of the foregoing, and (vi) copies and
tangible embodiments thereof.
License Agreement. License Agreement is defined in Section .
Majority Interest. One or more Voting Interests of Members which taken
together exceed 50% of the aggregate of all Voting Interests.
Manager. Manager shall mean one or more Managers. Specifically, 'Manager'
shall mean FFF, and any Person that succeeds it in that capacity.
Member. Each of the parties who executes a counterpart of this Agreement as a
Member (an 'Initial Member') and each of the parties who may hereafter become a
Member. If a Person is a Member immediately prior to the purchase or other acquisition
by such Person of an Economic Interest, such Person shall have all of the rights of a
Member with respect to such purchased or otherwise acquired Ownership Interest, as the
case may be.
Membership Interest. A Member's entire interest in the Company, including
such Member's Economic Interest and such other rights and privileges that the Member
may enjoy by being a Member.
FFF. FFF shall mean BBB, inc. a _________(STATE) Corporation.
FFF Options. FFF Options is defined in Section (a).
FFF Dilutive Units. FFF Dilutive Units is defined in Section (b).
NII. NII shall mean EEE, Inc., a _________(STATE) Corporation.
NII Sale. NII Sale shall mean: (i) the sale for cash, promissory notes and/or
stock of a corporation (other than NII or an Affiliate of NII immediately before the sale)
of 100 percent of the capital stock of NII and 100% of all options and warrants to acquire
capital stock of NII; or (ii) the merger of NII with or into another corporation (other than
NII or an Affiliate of NII immediately before the sale) pursuant to which 100 percent of
the issued and outstanding capital shares of NII and 100 percent of the options and
warrants to purchase capital stock of NII are exchanged for cash, notes and/or publicly
traded capital stock of the acquiring corporation or an Affiliate of the acquiring
corporation, or (iii) a sale or other disposition of all or substantially all of NII's assets.
The value of the stock received, if any, shall be determined as of the closing of the NII
Sale, based upon the closing price of such stock for the 15 trading days immediately
preceding, and including, the date of closing of the NII Sale.
Noncompetitive Activity. Noncompetitive Activity shall mean either:
(a) Any leisure travel business booked through traditional channels, including by
way of a persontoperson meeting, telephone, facsimile, mail, telephone or EMail
provided that such business was not initiated from a web based contact; or
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(b) Any business travel booked through any means whatsoever, including without
limitation, from a web based contact.
HHH Partners Domestic. HHH Partners Domestic shall mean CCC, ., a
_________(STATE) limited partnership.
HHH Partners Overseas. HHH Partners Overseas shall mean DDD, Ltd., a
Cayman Islands exempt organization.
HHH Partners. HHH Partners shall mean collectively, Och Ziff Partners
Domestic and HHH Partners Overseas.
Ownership Interest. Ownership interest shall mean:
(a) in the case of a Member, the Member's Membership Interest; and
(b) in the case of an Economic Interest Owner, the Economic Interest Owner's
Economic Interest.
Preferred Sale Fee. Preferred Sale Fee shall mean an amount equal to the sum
of the following per Preferred Unit:
(a) $1,000, plus
(b) the Accretion Amount through the closing date of the NII Sale, plus
(c) the lesser of:
(1) The product of: (x) positive remainder, if any, of the sales price per common
share of NII (adjusted as appropriate to taking into account any stock split or other
recapitalization of NII's common stock subsequent to the Effective Date), minus
$,_________, multiplied by (y) _________,and
(2) $,_________.
Proportionately Dilutive Units. Proportionately Dilutive Units is defined in
Section (c).
Put Period. Put Period means any period of time during which the Put Right
may be exercised as set forth in Section .
Put Right. Put Right is defined in Section .
Person. Any individual or Entity, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such 'Person' where the context so permits.
PreferredtoCommon Conversion Option. PreferredtoCommon Conversion
Option is defined in Section (c).
Preferred Units. Preferred Unit means an Ownership Interest in the Company
which entitles the Equity Owner who holds such Preferred Unit to the following:
(a) the Put Right described in Section , and
(b) such other rights set forth in this Agreement.
Profits and Losses. Profits and Losses shall mean for each Fiscal Year of the
Company an amount equal to the Company's net taxable income or loss for such year as
determined for federal income tax purposes (including separately stated items) in
accordance with the accounting method and rules used by the Company and in
accordance with Section 703 of the Code with the following adjustments:
(a) Any items of income, gain, loss and deduction allocated to Equity Owners
pursuant to Sections , or shall not be taken into account in computing Profits
or Losses;
(b) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits and Losses (pursuant to this definition)
shall be added to such taxable income or loss;
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(c) Any expenditure of the Company described in Section 705(a)(2)(B) of the Code
and not otherwise taken into account in computing Profits and Losses (pursuant to this
definition) shall be subtracted from such taxable income or loss;
(d) In the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraphs (b) or (c) of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from the disposition of such asset
for purposes of computing Profits and Losses;
(e) Gain or loss resulting from any disposition of any Company asset with respect to
which gain or loss is recognized for federal income tax purposes shall be computed with
reference to the Gross Asset Value of the asset disposed of, notwithstanding that the
adjusted tax basis of such asset differs from its Gross Asset Value;
(f) In lieu of the depreciation, amortization and other cost recovery deductions taken
into account in computing such taxable income or loss, there shall be taken into account
Depreciation for such Fiscal Year; and
(g) To the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Section 734(b) or Section 743(b) of the Code is required pursuant to Section
(b)(2)(iv)(m)(4) of the Regulations to be taken into account in determining Capital
Accounts as a result of a Distribution other than in liquidation of an Ownership Interest,
the amount of such adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes of
computing Profits or Losses.
Proportionately. With respect to Common Units, Proportionately means the
number of Common Units held by an Equity Owner in proportion to the number of
Common Units held by all Equity Owners. With respect to Preferred Units,
Proportionately means the number of Preferred Units held by an Equity Owner in
proportion to the number of Preferred Units held by all Equity Owners.
Redemption Price. Redemption Price means the purchase price paid upon
exercise of the Put Right as set forth in Section .
Regulations. Regulations shall include proposed, temporary and final
regulations promulgated under the Code in effect as of the date of filing the Certificate
and the corresponding sections of any regulations subsequently issued that amend or
supersede such regulations.
Reorganization. Reorganization shall mean the conversion of the Company to a
corporation, an IPO or the sale of all Ownership Interests in the Company.
Reserves. Reserves shall mean, with respect to any fiscal period, funds set aside
or amounts allocated during such period to reserves which shall be maintained in
amounts deemed sufficient by the Manager for working capital and for payment of taxes,
insurance, debt service or other costs or expenses incident to the ownership or operation
of the Company's business.
Sale or Sell. A sale, assignment, exchange or other transfer (whether or not
such transfer is for consideration and, in the case of transfers of Preferred Units or
Common Units, whether or not such transfer is a direct or indirect transfer of such Units).
A Sale shall include a direct pledge, hypothecation or grant of a security interest.
Secretary of State. The secretary of state of the State.
Selling Equity Owner. Any Equity Owner which Sells all or any portion of its
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Ownership Interest.
Sharing Ratio. Sharing Ratio shall be as shown on Exhibit 1.
State. State shall mean the State of _________(STATE).
Successor Corporation. Successor Corporation is defined in Section .
TwoThirds Interest. Two Thirds Interest shall mean one or more Voting
Interests of Members which when taken together exceed % of the aggregate of all
Voting Interests at the time of the determination thereof.
Unrecovered Losses. Unrecovered Losses shall have the meaning set forth in
Section .
Voting Interest. The Voting Interest of a Member shall be determined by
dividing the number of Common Units owned by a Member by the total number of
Common Units held by all Members. As of the date of this Agreement, the Voting
Interests are as shown on Exhibit 1.
Article 2.
FORMATION OF COMPANY
Formation. On _________(M,D,Y), the Company was formed pursuant to the
Act by the execution and delivery of a Certificate of Formation to the Secretary of State
in accordance with and pursuant to the Act. The Company and the Members hereby
forever discharge the organizer, and the organizer shall be indemnified by the Company
and the Member from and against, any expense or liability actually incurred by the
organizer by reason of having been the organizer of the Company.
Name. The name of the Company is AAA, LLC.
Principal Place of Business. The principal place of business of the Company
shall be 84 Inverness Circle East, Englewood, _________(STATE) 80112. The Company
may locate its places of business and registered office at any other place or places as the
Manager may from time to time deem advisable.
Registered Office and Registered Agent. The Company's initial registered office
and the name of the registered agent at such address shall be as set forth in the Certificate.
The registered office and registered agent may be changed from time to time by filing the
address of the new registered office and/or the name of the new registered agent with the
Secretary of State pursuant to the Act.
Term. The term of the Company shall commence with the filing of the
Certificate of Formation and shall continue in existence until it terminates in accordance
with the provisions of this Agreement or the Act.
Article 3.
BUSINESS OF COMPANY
Permitted Business. The business of the Company shall be:
(a) To implement the electronic consumer leisure travel business as such services are
more fully described on identified on Exhibit (the 'Business'), in accordance with the
initial business plan (the 'Business Plan') which is attached as Exhibit ;
(b) To own, operate, expand or Sell the Business, including without limitation
engaging in a Reorganization;
(c) To acquire the assets, stock or other equity interests of other businesses or assets
which are necessary to, or reasonably connected with, the Business;
(d) To invest cash or other assets in other Entities, if such investment is necessary to
or reasonably connected with the Business;
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(e) To exercise all other powers necessary to, or reasonably connected with, the
Business which may be legally exercised by limited liability companies under the Act.
(f) To engage in all activities necessary, customary, convenient or incident to any of
the foregoing.
Article 4.
NAMES AND ADDRESSES OF EQUITY OWNERS
The names and addresses of the Initial Members are as set forth on Exhibit .
The names and addresses of other Equity Owners shall be maintained as provided
under Section .
Article 5.
RIGHTS AND DUTIES OF MANAGER AND OFFICERS
Management. The business and affairs of the Company shall be managed by its
Manager. Except for situations in which the approval of the Members is expressly
required by this Agreement or by nonwaivable provisions of applicable law, the Manager
shall have full and complete authority, power and discretion to manage and control the
business, affairs and properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts and activities customary or incident to the
management of the Company's business. At any time when there is more than one
Manager, any one Manager may take any action permitted to be taken by the Manager,
unless the approval of all of the Managers then appointed is expressly required pursuant
to this Agreement or the Act or unless a majority of the Managers provide written notice
to the remaining Manager(s) prior to such Manager(s) taking a specified action that the
Manager is not authorized to take such action. Unless authorized to do so by this
Agreement or by the Manager, no officer, attorney infact, employee or other agent of the
Company shall have any power or authority to bind the Company in any way, to pledge
its credit or to render it liable pecuniarily for any purpose.
Number, Tenure and Qualifications. The Company shall initially have one (1)
Manager. The number of Managers shall be fixed from time to time by the affirmative
vote of Members holding at least a TwoThirds Interest, but in no instance shall there be
less than one Manager. Each Manager shall hold office until such Manager resigns
pursuant to Section or is removed pursuant to Section . A Manager shall be
appointed by the affirmative vote of Members holding at least a TwoThirds Interest. A
Manager need not be a resident of the State or a Member.
Certain Powers of Manager. Without limiting the generality of Section but
subject to the limitations of Section , the Manager shall have power and authority on
behalf of the Company:
(a) To acquire property from any Person as the Manager may determine. The fact
that a Manager or an Equity Owner is directly or indirectly Affiliated or connected with
any such Person shall not prohibit the Manager from dealing with that Person, provided
that except as otherwise expressly provided in this Agreement (including without
limitation, Section ), the terms of any such dealing are not less favorable to the
Company than could be obtained from an unrelated party; and provided further that
except as expressly provided otherwise in this Agreement, the aggregate fair market
value of any property acquired by the Company from NII or its Affiliates during any
Fiscal Year shall not exceed $50,000 in any Fiscal Year without Oz Domestic's prior
written consent;
14
(b) To borrow money for the Company from banks, other lending institutions, on
such terms as the Manager deems appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in Company Property to secure
repayment of the borrowed sums;
(c) To purchase liability and other insurance to protect the Company's property and
business;
(d) To hold and own any Company real and/or personal properties in the name of the
Company;
(e) To invest any Company funds (by way of example but not limitation) in time
deposits, shortterm governmental obligations, commercial paper or other investments;
(f) To execute on behalf of the Company all instruments and documents, including,
without limitation, checks, drafts, notes and other negotiable instruments; mortgages or
deeds of trust; security agreements; financing statements; documents providing for the
acquisition, mortgage or disposition of Company Property; assignments; bills of sale;
leases; partnership agreements; operating (or limited liability company) agreements of
other limited liability companies; and any other instruments or documents necessary, in
the opinion of the Manager, to the conduct of the business of the Company;
(g) To employ accountants, legal counsel, managing agents or other experts to
perform services for the Company and to compensate them from Company funds;
(h) To enter into any and all other agreements on behalf of the Company, with any
other Person for any purpose (including fulfillment and other contracts with NII and its
Affiliates), in such forms as the Manager may approve provided that except as otherwise
expressly provided in this Agreement the terms of any such dealing are not less favorable
to the Company than are provided by NII or its Affiliates to unrelated third parties;
(i) To execute and file such other instruments, documents and certificates which
may from time to time be required by the laws of the State or any other jurisdiction in
which the Company shall determine to do business, or any political subdivision or agency
thereof, to effectuate, implement, continue and defend the valid existence of the
Company;
(j) To enter into the License Agreement attached hereto as Exhibit (j);
(k) To appoint officers of the Company (subject to Section (a)(1)); and
(l) To do and perform all other acts as may be necessary or appropriate to the
conduct of the Company's business.
Limitations on Authority.
(a) Notwithstanding any other provision of this Agreement, the Manager shall not
cause or commit the Company to do any of the following without consulting with the
HHH Partners:
(1) Appoint or elect a president of the Company;
(2) Enter into any agreement for the purchase of stock or of all or substantially all of
the assets of any Person or Entity, or for the merger or consolidation with or into any
Person or Entity if the purchase price is not greater than $,_________; or
(3) Cause the Company to issue additional Common Units, except as provided in
Article 11;
(b) Without the prior written approval of both FFF and Och Ziff Partners, which
approval may not be unreasonably withheld if so requested by the Manager, the Manager
shall not cause or commit the Company to do any of the following:
15
(1) Except as provided in Section (a), (h), (j) and or otherwise
expressly provided in this Agreement, engage in transactions with Affiliates without the
consent of both HHH Partners and FFF;
(2) Issue Preferred Units to any Person other than HHH Partners;
(3) Cause the Company to undergo a Reorganization (subject also to the notice
requirement contained in Section (c));
(4) Enter into any agreement for the purchase of stock or of all or substantially all of
the assets of any Person or Entity, or for the merger or consolidation with or into any
Person or Entity if the purchase price is greater than $,_________; or
(5) The sale of all or substantially all of the Company's assets.
(c) All of HHH Partners' approval rights pursuant to this Section (b) shall
terminate in the event that it exercises the Put Right, and thereafter the Manager shall not
cause or commit the Company to do any of things specified in Section (b) without the
consent of a Majority Interest, which consent may be unreasonably withheld.
Liability for Certain Acts.
(a) Subject only to Section , the Manager does not, in any way, guarantee the
return of the Equity Owners' Capital Contributions or a profit for the Equity Owners from
the operations of the Company.
(b) The Manager shall not be liable to the Company or to any Member for any loss
or damage sustained by the Company or any Member (or successor thereto), except to the
extent, if any, that the loss or damage shall have been the result of gross negligence,
fraud, deceit or willful misconduct.
Manager and Members Have No Exclusive Duty to Company; Noncompetition
Covenant.
(a) Except as expressly provided in Section (b):
(1) The Manager and the Members shall have no exclusive duty to act on behalf of
the Company.
(2) Each Manager and Member may have other business interests and may engage in
other activities in addition to those relating to the Company.
(3) Neither the Company nor any Manager shall have any right, by virtue of this
Agreement, to share or participate in any other investments or activities of any other
Manager or Member.
(4) Neither any Manager nor any Equity Owner shall incur any liability to the
Company or to any of the Equity Owners as a result of engaging in any other business or
venture.
(b) Restriction on Competition.
(1) During the term of the Term of this Agreement, neither the Manager nor the
Members shall directly or indirectly, for their own account or on behalf of or in
conjunction with any other person, company, partnership, corporation, business, group, or
other entity (each, a 'Person'):
(i) engage, as an officer, director, shareholder, owner, partner, joint venturer, or in a
managerial capacity, whether as an employee, independent contractor, consultant,
advisor, or sales representative, in (A) any travel agency business in direct competition
with the Company or (B) any business selling any products or services in direct
competition with the Company;
(ii) call upon any Person who is an employee of the Company or its subsidiaries for
16
the purpose or with the intent of enticing such employee away from or out of the employ
of the Company or its subsidiaries; or
(iii) call upon any Person who or that is, at that time, or has been, within one (1)
year prior to that time, a customer of the Company for the purpose of soliciting or selling
products or services in direct competition with the Company.
(2) The foregoing covenants shall not be deemed to prohibit the Manager or the
Members from acquiring as an investment not more than fifty percent (50%) of the
capital stock of a competing business, so long as the Manager or Member does not
effectively control such business or participate in the day to day management of such
business.
(3) NII further agrees that it will conduct all of its electronic consumer leisure travel
business through the Company.
(4) The restrictions on competition contained in this Section shall not apply to
Noncompetitive Activities. Noncompetitive Activities shall not be deemed to be
competitive with the Company's business, and neither NII nor its Affiliates shall be
restricted in any way from engaging in Noncompetitive Activities:
Bank Accounts. The Manager may from time to time open bank accounts in the
name of the Company, and the Manager shall be the sole signatory thereon, unless the
Manager determine otherwise.
Indemnity of the Manager, Employees and Other Agents.
(a) The Company shall indemnify each Manager and make advances for expenses to
the maximum extent permitted under the Act, except to the extent the claim for which
indemnification is sought results from an act or omission for which the Manager may be
held liable to the Company or a Member under Section (b). The Company shall
indemnify its employees and other agents who are not a Manager to the fullest extent
permitted by law, provided that such indemnification in any given situation is approved
by a Majority Interest.
(b) Expenses (including legal fees and expenses) incurred by a Manager in
defending any claim, demand, action, suit or proceeding subject to subsection (a) above
shall be paid by the Company in advance of the final disposition of such claim, demand,
action, suit or proceeding upon receipt of an undertaking (which need not be secured) by
or on behalf of the Manager to repay such amount if it shall ultimately be finally
determined by a court of competent jurisdiction and not subject to appeal, that the
Manager is not entitled to be indemnified by the Company as authorized hereunder.
Resignation. Any Manager may resign at any time by giving written notice to the
Members. The resignation of any Manager shall take effect upon receipt of notice thereof
or at such later time as shall be specified in such notice; and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it effective.
The resignation of a Manager who is also an Equity Owner shall not affect the Manager's
rights as an Equity Owner.
Removal. At a meeting called expressly for that purpose, all or any lesser
number of Managers may be removed, with or without cause, only with the consent of
Members holding a TwoThirds Interest (inclusive of any Voting Interests held by the
Manager or its Affiliates). The removal of a Manager who is also a Member shall not
affect the Manager's rights as a Member and shall not constitute a withdrawal of a
Member.
17
Vacancies. Any vacancy occurring for any reason in the number of Managers
shall be filled by the affirmative vote of Members holding a TwoThirds Interest
(determined without regard to any Voting Interest owned by a Manager who was
removed pursuant to Section during the preceding 24month period). Any Manager's
position to be filled by reason of an increase in the number of Managers shall be filled by
the affirmative vote of a TwoThirds Interest.
Compensation, Reimbursement, Organization Expenses.
(a) Except as provided in Section (c), the Manager shall not be compensated for
its services to the Company, except as approved by both FFF and HHH Partners. Upon
the submission of appropriate documentation each Member shall be reimbursed by the
Company for reasonable outofpocket expenses incurred on behalf, or at the request, of
the Company.
(b) Upon the submission of appropriate documentation the Company shall reimburse
HHH Partners and NII for their legal expenses reasonably incurred by them in connection
with the formation, organization and capitalization of the Company, including the legal
fees incurred in connection with negotiating and drafting this Agreement and any
ancillary document; provided that such reimbursement shall not exceed $,_________ for
either HHH Partners (collectively) or NII.
(c) NII shall be reimbursed for expenses it incurs in connection with shared services
(including without limitation, ticket fulfillment, payroll, human resources, accounting,
24hour services, facilities, rent, utilities, administrative costs, and third party expenses).
Such reimbursement shall be on a per transaction, per call, per person or other reasonable
basis, provided that the terms of any such reimbursement are not less favorable to the
Company than could be obtained from an unrelated party.
(d) The Manager shall cause the Company to make an appropriate election to treat
the expenses incurred by the Company in connection with the formation and organization
of the Company to be amortized under the 60month period beginning with the month in
which the Company begins business to the extent that such expenses constitute
'organizational expenses' of the Company within the meaning of Code Section 709(b)(2).
Annual Operating Plan. The Manager shall prepare for the approval of the
Members holding a TwoThirds Interest each Fiscal Year (no later than thirty (30) days
prior to the end of the then current Fiscal Year) a business plan ('Annual Operating Plan')
for the next Fiscal Year, setting forth at a minimum the estimated receipts (including
capital calls) and expenditures (capital, operating and other) of the Company in sufficient
detail to provide an estimate of cash flow, capital proceeds and other financial
requirements of the Company for such year. Any such Annual Operating Plan shall also
include such other information or other matters necessary in order to inform the Members
of the Company's business and to enable the Members to make an informed decision with
respect to their approval of such Annual Operating Plan. The Members shall review the
proposed Annual Operating Plan and shall offer any revisions thereto within 30 days.
After the final Annual Operating Plan has been approved by the Members holding a
TwoThirds Interest, the Manager shall implement the Annual Operating Plan and shall be
authorized to make only the expenditures and incur only the obligations provided for
therein (subject to Section (b)). Notwithstanding the foregoing, the Manager may
make any expenditure or incur any obligation, whether or not such expenditure or
obligation is provided for in an Annual Operating Plan, which is the legal obligation of
18
the Company and not within the reasonable control of the Manager (., real or personal
property taxes). If Members holding a TwoThirds Interest are not able to agree on an
Annual Operating Plan for any year, each line item in the Annual Operating Plan for the
prior year shall be increased by the percentage increase in the CPI Index from the first
day for which the previous Annual Operating Plan was in effect to the first day for which
the new Annual Operating Plan is to be in effect. As used herein, 'CPI Index' shall mean
the Consumer Price Index for All Items All Urban Consumers (DPIU) (198284 = 100)
for the United States, as published by the United States Department of Labor's Bureau of
Labor Statistics (the 'Bureau'). Should the Bureau discontinue the publication of the
above index, or publish the index less frequently, or alter the index in some other manner,
then the Manager shall, from time to time, adopt a substitute index or substitute
procedure which reasonably reflects and monitors consumer prices, and the resulting plan
shall be the Annual Operating Plan for the current year. Right to Rely on the
Manager.
(a) Any Person dealing with the Company may rely (without duty of further inquiry)
upon a certificate signed by any Manager as to:
(i) The identity of any Manager or Equity Owner;
(ii) The existence or nonexistence of any fact or facts which constitute a condition
precedent to acts on behalf of the Company by any Manager or which are in any other
manner germane to the affairs of the Company;
(iii) The Persons who are authorized to execute and deliver any instrument or
document of the Company; or
(b) Any act or failure to act by the Company or any other matter whatsoever
involving the Company or any Equity Owner.
Officers. In exercising the authority, powers and rights granted to it under this
Agreement, the Manager may exercise such authority, powers and rights directly or
through officers appointed by the Manager pursuant to the following terms and
conditions.
(a) The Manager at any time and from time to time shall have the authority to
appoint a President, a Chairman, one or more Vice Presidents, a Secretary, a Treasurer
and a Controller. The Manager at any time and from time to time may also appoint such
other officers as it shall deem necessary, including one or more Assistant Vice Presidents,
one or more Assistant Treasurers and one or more Assistant Secretaries, who shall hold
their offices for such terms as shall be determined by the Manager, and shall exercise
such powers and perform such duties as shall be determined from time to time by the
Manager.
(b) The salaries of the officers shall be fixed by the Manager, except that the
Manager may delegate to any officer or officers the power to fix the compensation of any
officer appointed in accordance with the second sentence of (a).
(c) Each officer shall hold office for one (1) year after his or her appointment by the
Manager and until his or her successor is chosen or until his or her earlier resignation,
death, removal or termination of his or her office. Any officer may be removed with or
without cause by the Manager whenever in its judgment the best interests of the
Company would be served thereby. Any officer may resign by giving written notice to
the Manager. The resignation shall be effective upon receipt, or at such time as may be
specified in such notice.
19
(d) The Chairman, when one is appointed, may be declared by the Manager to be the
Chief Executive Officer of the Company and, if so, shall have general and active
management of the business of the Company and shall see that all orders and resolutions
of the Manager are carried into effect. He shall be ex officio a member of all standing
committees, unless otherwise provided in the resolution appointing the same. The
Chairman shall call meetings of the Members and the Manager to order and shall act as
chairman of such meetings.
(e) When no Chairman has been appointed, or if a Chairman has been appointed and
not declared to be the Chief Executive Officer, or in the event of the death or disability of
the Chairman or at his request, the President shall have general and active management of
the business of the Company and shall see that all orders and resolutions of the Manager
are carried into effect. The President shall also have such powers and perform such duties
as are specifically imposed upon him by law and as may be assigned to him by the
Manager or the Chairman. The President shall be ex officio a member of all standing
committees, unless otherwise provided in the resolution appointing such committees. In
the absence of a Chairman serving as Chief Executive Officer, the President shall call
meetings of the Members and the Manager to order and shall act as chairman of such
meetings. If no other officers are appointed, the President shall also have all of the
powers and perform the duties of Secretary and Treasurer.
(f) The Vice Presidents shall perform such duties as are generally performed by vice
presidents of corporations. The Vice Presidents shall perform such other duties and
exercise such other powers as the Manager, the Chairman or the President shall request or
delegate. The Assistant Vice Presidents shall have such powers, and shall perform such
duties, as may be prescribed from time to time by the Manager, the Chairman or the
President.
(g) The Secretary shall attend all meetings of the Manager and all meetings of the
Members and shall record all votes and the minutes of all proceedings in books to be kept
for that purpose. He or she shall give, or cause to be given, any notices required to be
given of any meetings of the Members and of the Manager, and shall perform such other
duties as may be prescribed by the Manager, the Chairman or the President. The Assistant
Secretary or Assistant Secretaries shall, in the absence or disability of the Secretary, or at
the Secretary's request, perform the duties and exercise the powers and authority herein
granted to the Secretary.
(h) The Treasurer shall have charge of and be responsible for all funds, securities,
receipts and disbursements of the Company, and shall deposit or cause to be deposited, in
the name of the Company, all moneys or other valuable effects in such banks, trust
companies, or other depositories as shall from time to time be selected by the Manager.
He or she shall render to the Chairman, the President and the Manager, whenever
requested, an account of the financial condition of the Company, and, in general, he or
she shall perform all the duties incident to the office of treasurer of a corporation, and
such other duties as may be assigned to him or her by the Manager, the Chairman or the
President.
(i) The Manager may appoint a Controller who shall keep or cause to be kept in the
books of the Company provided for that purpose a true account of all transactions, and of
the assets and liabilities, of the Company. The Controller shall prepare and submit to the
Chairman or the President such financial statements and schedules as may be required to
20
keep such officer currently informed of the operations and financial condition of the
Company, and shall perform such other duties as may be assigned by the Manager, the
Chairman or the President.
(j) In case of the absence of any officer of the Company, or for any other reason that
the Manager may deem sufficient, the Manager may delegate, for the time being, any or
all of the powers or duties of such officer to any other officer.
(k) The Manager may authorize any officer or officers, agent or agents, to enter into any
contract or execute and deliver any instrument in the name of and on behalf of the
Company. Such authority may be general or confined to specific instances. No loans shall
be contracted on behalf of the Company and no evidences of indebtedness shall be issued
in its name unless authorized by a resolution of the Manager. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness issued in the
name of the Company shall be signed by the President, or by such officer or officers,
agent or agents of the Company as authorized by the Manager and in such manner as
shall from time to time be determined by written resolution of the Manager.
Article 6.
RIGHTS AND OBLIGATIONS OF EQUITY OWNERS
Limitation of Liability. Except as otherwise provided by the nonwaivable
provisions of the Act or by this Agreement, no Equity Owner shall be liable for an
obligation of the Company solely by reason of being or acting as an Equity Owner.
List of Equity Owners. Upon written request of any Member made in good faith
and for a purpose reasonably related to the Member's rights as Member under this
Agreement (which reason shall be set forth in the written request), the Manager shall
provide a list showing the names, addresses and Ownership Interests of all Equity
Owners. Economic Interest Owners shall have no rights to information under this Section
.
Equity Owners Have No Agency Authority. Except as expressly provided in this
Agreement, the Equity Owners (in their capacity as Equity Owners) shall have no agency
authority on behalf of the Company.
Company Books. In accordance with Section herein, the Manager shall
maintain and preserve, during the term of the Company, and for five (5) years thereafter,
all accounts, books, and other relevant Company documents. Upon reasonable request,
each Member shall have the right, during ordinary business hours, to inspect and copy
such Company documents at the requesting Member's expense.
Priority and Return of Capital. Except as may be expressly provided in Article 9,
no Equity Owner shall have priority over any other Equity Owner, either as to the return
of Capital Contributions or as to Profits, Losses or Distributions; provided, however, that
this Section shall not apply to loans (as distinguished from Capital Contributions)
which an Equity Owner has made to the Company.
License Agreement. Simultaneous with the execution of this Agreement, NII and
the Company shall execute a License Agreement, substantially in the form attached as
Exhibit (j) (the 'License Agreement').
Warrants. Simultaneous with the execution of this Agreement, the Company
shall issue a warrant to purchase an aggregate of _________ Common Units to the HHH
Partners (in proportion to their respective Sharing Ratios) substantially in the form
attached hereto as Exhibit .
21
Article 7.
MEETINGS OF MEMBERS
No Required Meetings. The Members may, but shall not be required to hold any
annual, periodic or other formal meetings. However, meetings of the Members may be
called by any Manager, or by any Member or Members holding at least 10% of the
Voting Interests.
Place of Meetings. The Member or Members calling the meeting may designate
any place within the State as the place of meeting for any meeting of the Members; and
Members holding a TwoThirds Interest may designate any place outside the State as the
place of meeting for any meeting of the Members. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be the principal executive
office of the Company in the State.
Notice of Meetings. Except as provided in Section , written notice stating the
place, day and hour of the meeting and the purpose or purposes for which the meeting is
called shall be delivered not less than ten (10) nor more than fifty (50) days before the
date of the meeting, either personally or by mail, by or at the direction of the Member or
Members calling the meeting, to each Member entitled to vote at such meeting.
Meeting of all Members. If all of the Members shall meet at any time and place,
either within or outside of the State, and consent to the holding of a meeting at such time
and place, such meeting shall be valid without call or notice, and at such meeting lawful
action may be taken.
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 Members entitled to
receive payment of any Distribution, or in order to make a determination of Members for
any other purpose, the date on which notice of the meeting is mailed or the date on which
the resolution 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 ,
such determination shall apply to any adjournment thereof.
Quorum. Members holding at least a Majority Interest, represented in person or
by proxy, shall constitute a quorum at any meeting of Members. In the absence of a
quorum at any such meeting, a majority of the Voting Interests so represented may
adjourn the meeting from time to time for a period not to exceed 60 days without further
notice. However, if the adjournment is for more than 60 days, or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each Member of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum shall be present or represented, any business may
be transacted which might have been transacted at the meeting as originally noticed. The
Members present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal during such meeting of that number of
Voting Interests whose absence would cause less than a quorum.
Manner of Acting. If a quorum is present, the affirmative vote of Members
holding a TwoThirds Interest shall be the act of the Members, unless the vote of a greater
or lesser proportion or number is otherwise required by the Act or by this Agreement.
Unless otherwise expressly provided herein, Members who have an interest (economic or
otherwise) in the outcome of any particular matter upon which the Members vote or
22
consent may vote or consent upon any such matter and their Voting Interest, vote or
consent, as the case may be, shall be counted in the determination of whether the
requisite matter is approved by the Members.
Proxies. At all meetings of Members, a Member who is qualified to vote may
vote in person or by proxy executed in writing by the Member or by a duly authorized
attorneyinfact. Such proxy shall be filed with the Manager before or at the time of the
meeting. No proxy shall be valid after eleven months from the date of its execution,
unless otherwise provided in the proxy.
Action by Members Without a Meeting. Action required or permitted to be taken
at a meeting of Members may be taken without a meeting if the action is evidenced by
one or more written consents or approvals describing the action taken and signed by
Members holding sufficient Voting Interests, as the case may be, to approve such action
had such action been properly voted on at a duly called meeting of the Members. Action
taken under this Section is effective when Members with the requisite Interests or
Voting Interests, as the case may be, have signed the consent or approval, unless the
consent specifies a different effective date. The record date for determining Members
entitled to take action without a meeting shall be the date the first Member signs a written
consent.
Waiver of Notice. When any notice is required to be given to any Member, a
waiver thereof in writing signed by the person entitled to such notice, whether before, at,
or after the time stated therein, shall be equivalent to the giving of such notice. Article 8.
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
Members' Capital Contributions. Not later than three days after each of the
parties has executed this Agreement and delivered an executed copy of same to the
Manager, each Equity Owner shall contribute such amount as is set forth in Exhibit
hereto as its share of the Initial Capital Contribution.
Additional Contributions. Except as set forth in Section , no Equity Owner
shall be required to make any Additional Capital Contributions. To the extent
unanimously approved by the Manager, from time to time, the Equity Owners may be
permitted to make additional Capital Contributions if and to the extent they so desire, and
if the Manager determines that such additional Capital Contributions are necessary or
appropriate in connection with the conduct of the Company's business (including without
limitation, expansion or diversification). In such event, the Equity Owners shall have the
opportunity (but not the obligation) to participate in such additional Capital Contributions
proportionate to their Sharing Ratios.
Capital Accounts.
(a) A separate Capital Account shall be maintained for each Equity Owner. Each
Equity Owner's Capital Account shall be increased by (1) the amount of money
contributed by such Equity Owner to the Company; (2) the fair market value of property
contributed by such Equity Owner to the Company (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to under
Section 752 of the Code); (3) allocations to such Equity Owner of Profits; and (4) any
items in the nature of income and gain which are specially allocated to the Equity Owner
pursuant to Sections and . Each Equity Owner's Capital Account shall be
decreased by (1) the amount of money Distributed to such Equity Owner by the
Company; (2) the fair market value of property Distributed to such Equity Owner by the
23
Company (net of liabilities secured by such Distributed property that such Equity Owner
is considered to assume or take subject to under Section 752 of the Code); (3) any items
in the nature of deduction and loss that are specially allocated to the Equity Owner
pursuant to Sections and ; and (4) allocations to such Equity Owner of Losses.
(b) Without limiting the other rights and duties of a transferee of an Ownership
Interest pursuant to this Agreement, in the event of a permitted sale or exchange of an
Ownership Interest in the Company, (1) the Capital Account of the transferor shall
become the Capital Account of the transferee to the extent it relates to the transferred
Ownership Interest in accordance with Section (b)(2)(iv) of the Regulations; and
(2) the transferee shall be treated as the transferor for purposes of allocations and
distributions pursuant to Article 9 to the extent that such allocations and distributions
relate to the transferred Ownership Interest.
(c) Subject to Section , upon liquidation of the Company, liquidating
Distributions shall be made in accordance with the positive Capital Account balances of
the Equity Owners, as determined after taking into account all Capital Account
adjustments for the Company's taxable year during which the liquidation occurs.
Liquidation proceeds shall be paid in accordance with Section and Section (b).
The Company may offset damages for breach of this Agreement by any Equity Owner
whose interest is liquidated (either upon the withdrawal of the Equity Owner or the
liquidation of the Company) against the amount otherwise Distributable to such Equity
Owner. Subject to Section , no Equity Owner shall have any obligation to restore all or
any portion of a deficit balance in such Equity Owner's Capital Account.
Withdrawal or Reduction of Equity Owners' Contributions to Capital.
(a) An Equity Owner shall not receive a Distribution of any part of its Capital
Contribution to the extent such Distribution would violate
Section .
Article 9.
ALLOCATIONS, INCOME TAX,DISTRIBUTIONS, ELECTIONS AND
REPORTS
Allocations of Profits and Losses from Operations. Except as provided in
Sections and Section , and Article 11, the Profits and Losses for each Fiscal Year
shall be allocated as follows:
(a) Losses shall be allocated as follows:
(1) First, to the HHH Partners pro rata in accordance with their respective Common
Units until the total Unrecovered Losses (as defined in Section (b)(1)) allocated
pursuant to this Section (a)(1) equals $,_________;
(2) Thereafter, to the Equity Owners Proportionately in accordance with their
Common Units.
(b) Profits shall be allocated as follows:
(1) First, to each Equity Owner which previously has been allocated Losses pursuant
to Section (a) which have not been fully offset by allocations of Profit pursuant to this
Section (b)(1), Section , Section and Section ('Unrecovered Losses')
until the total amount of Profits allocated to each such Equity Owner pursuant to this
Section (b)(1), Section , Section and Section is equal to the total amount
of Losses which have been allocated to such Equity Owner pursuant to Section (a).
Profits allocated pursuant to this Section (b)(1) shall be allocated to the Equity
24
Owners in proportion to their respective Unrecovered Losses; and
(2) Second, to the holders of the Common Units, Proportionately.
Special Allocations to Capital Accounts. Notwithstanding Section hereof:
(a) In the event that any Equity Owner unexpectedly receives any adjustments,
allocations or Distributions described in Sections (b)(2)(ii)(d)(4), (5), or (6) of the
Regulations, which create or increase a Deficit Capital Account of such Equity Owner,
then items of Company income and gain (consisting of a pro rata portion of each item of
Company income, including gross income, and gain for such year and, if necessary, for
subsequent years) shall be specially allocated to such Equity Owner in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the Deficit
Capital Account so created as quickly as possible. It is the intent that this Section (a)
be interpreted to comply with the alternate test for economic effect set forth in Section
(b)(2)(ii)(d) of the Regulations.
(b) The Losses allocated pursuant to Section hereof shall not exceed the
maximum amount of Losses that can be so allocated without causing any Member to
have a Deficit Capital Account at the end of any Fiscal Year. In the event that some, but
not all, of the Members would have Deficit Capital Accounts as a consequence of an
allocation of Losses pursuant to Section hereof, the limitation set forth in the
preceding sentence shall be applied on a Member by Member basis so as to allocate the
maximum permissible Losses to each Member
under Section (b)(2)(ii)(d) of the Regulations. All Losses in excess of the
limitation set forth in this Section (b) shall be allocated to the Members in
proportion to their respective positive Capital Account balances, if any, and thereafter to
the Members in accordance with their interests in the Company as determined by the
Manager in their reasonable discretion. In the event that any Equity Owner would have a
Deficit Capital Account at the end of any Fiscal Year which is in excess of the sum of
any amount, if any, that such Equity Owner is obligated to restore to the Company under
Section (b)(2)(ii)(c) of the Regulations and such Equity Owner's share of
Company Minimum Gain as defined in Section (g)(1) of the Regulations (which is
also treated as an obligation to restore in accordance with Section (b)(2)(ii)(d) of
the Regulations), the Capital Account of such Equity Owner shall be specially credited
with items of Company income (including gross income) and gain in the amount of such
excess as quickly as possible.
(c) Notwithstanding any other provision of this Section , if there is a net decrease
in the Company Minimum Gain as during a Fiscal Year, then the Capital Accounts of
each Equity Owner shall be allocated items of income (including gross income) and gain
for such Fiscal Year (and if necessary for subsequent Fiscal Years) equal to that Equity
Owner's share of the net decrease in Company Minimum Gain. This Section (c) is
intended to comply with the minimum gain chargeback requirement of Section of
the Regulations and shall be interpreted consistently therewith. If in any Fiscal Year that
the Company has a net decrease in the Company Minimum Gain, if the minimum gain
chargeback requirement would cause a distortion in the economic arrangement among the
Equity Owners and it is not expected that the Company will have sufficient other income
to correct that distortion, the Manager may in their discretion (and shall, if requested to
do so by a Member) seek to have the Internal Revenue Service waive the minimum gain
chargeback requirement in accordance with Section (f)(4) of the Regulations.
25
(d) Notwithstanding any other provision of this Section except Section (c), if
there is a net decrease in Member Minimum Gain attributable to a Member Nonrecourse
Debt during any Company Fiscal Year, each Member who has a share of the Member
Minimum Gain as of the beginning of the Fiscal Year shall be specially allocated items of
Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) equal to such Member's share of the net decrease in Member Minimum Gain
attributable to such Member Nonrecourse Debt. A Member's share of the net decrease
in Member Minimum Gain shall be determined in accordance with Section (i)(4)
of the Regulations; provided, however, that a Member shall not be subject to this
provision to the extent that an exception is provided by Section (i)(4) of the
Regulations and any Revenue Rulings issued with respect thereto. Any Member
Minimum Gain allocated pursuant to this provision shall consist of first, gains recognized
from the disposition of Company property subject to the Member Nonrecourse Debt, and,
second, if necessary, a pro rata portion of the Company's other items of income or gain
(including gross income) for that Fiscal Year. This Section (d) is intended to comply
with the minimum gain chargeback requirement in Section (i)(4) of the
Regulations and shall be interpreted consistently therewith.
(e) Items of Company loss, deduction and expenditures described in Section
705(a)(2)(B) of the Code which are attributable to any nonrecourse debt of the Company
and are characterized as partner nonrecourse deductions under Section (i) of the
Regulations shall be allocated to the Equity Owners' Capital Accounts in accordance with
said Section (i) of the Regulations.
(f) Beginning in the first taxable year in which there are allocations of 'nonrecourse
deductions' (as described in Section (b) of the Regulations), such deductions shall
be allocated to the Equity Owners in the same manner as Loss is allocated for such
period.
(g) To the extent that an adjustment to the adjusted tax basis of any Company asset
pursuant to Section 734(b) or 743(b) of the Code is required pursuant to Section
(b)(2)(iv)(m)(2) or (b)(2)(iv)(m)(4) of the Regulations, to be taken into
account in determining Capital Accounts as the result of a Distribution to an Equity
Owner in complete liquidation of its Ownership Interest, the amount of such adjustment
to Capital Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss
shall be specially allocated to the Equity Owners in accordance with their interests in the
Company in the event Section (b)(2)(iv)(m)(2) of the Regulations applies, or to the
Equity Owner to whom such Distribution was made in the event Section
(b)(2)(iv)(m)(4) of the Regulations applies.
(h) Any income, gain, loss or deduction realized by the Company as a direct or
indirect result of the issuance of an interest in the Company by the Company to an Equity
Owner (the 'Issuance Items') shall be allocated among the Equity Owners so that, to the
extent possible, Capital Accounts of the Equity Owners with respect to each their
Common Units (., determined without regard to the portion of an Equity Owner's
Capital Account which is determined with reference to such Equity Owner's Preferred
Units) is Proportionate.
Credit or Charge to Capital Accounts. Any credit or charge to the Capital
Accounts of the Equity Owners pursuant to Sections (a), (b), (c), (d), (e),
26
(f) and (g) ('Regulatory Allocations') hereof shall be taken into account in
computing subsequent allocations of Profits and Losses pursuant to Section , so that
the net amount of any items charged or credited to Capital Accounts pursuant to Section
and the Regulatory Allocations hereof and this Section shall to the extent
possible, be equal to the net amount that would have been allocated to the Capital
Account of each Equity Owner pursuant to the provisions of this Article 9 if the special
allocations required by the Regulatory Allocations hereof had not occurred.
Distributions. Except as provided in Sections (c) (with respect to liquidating
Distributions), Section with respect to the Put Right, and Section (with respect to
limitations on Distributions), the Manager shall Distribute Distributable Cash to the
Equity Owners not less frequently than quarterly as follows:
(a) Distributions made before the dissolution of the Company shall be to the holders
of the Common Units, Proportionately.
(b) Distributions made after the dissolution of the Company shall be to the Equity
Owners in accordance with their positive Capital Accounts, provided, however, that all
liquidating distributions shall be made first to the Holders who hold Preferred Units at the
time of dissolution, if any, until such Holders have received a liquidating distribution
equal to $,_________ per Preferred Unit plus the Accretion Amount.
Limitation Upon Distributions. No Distribution shall be made if such
Distribution would violate the Act.
Accounting Principles. For financial reporting purposes, the Company shall use
accounting principles applied in accordance with generally accepted accounting
principles using the accrual method of accounting, unless the Company is required to use
a different method of accounting for federal income tax purposes, in which case that
method of accounting shall be the Company's method of accounting.
Interest on and Return of Capital Contributions. No Member shall be entitled to
interest on its Capital Contribution or to return of its Capital Contribution, except as
otherwise specifically provided for herein.
Loans to Company. Nothing in this Agreement shall prevent any Member from
making secured or unsecured loans to the Company by agreement with the Company.
Accounting Period. The Company's accounting period shall be the Fiscal Year.
Records and Reports. At the expense of the Company, the Manager shall
maintain records and accounts of all operations and expenditures of the Company as
follows:
(a) At a minimum the Company shall keep at its principal place of business the
following records:
(1) A current list of the full name and last known business, residence, or mailing
address of each Equity Owner and Manager, both past and present;
(2) A copy of the Certificate of Formation of the Company and all amendments
thereto, together with executed copies of any powers of attorney pursuant to which any
amendment has been executed;
(3) Copies of the Company's federal, state, and local income tax returns and reports,
if any, for the four (4) most recent Fiscal Years;
(4) Copies of the Company's currently effective written Agreement, copies of any
writings permitted or required with respect to an Equity Owner's obligation to contribute
cash, property or services, and copies of any financial statements of the Company for the
27
three (3) most recent Fiscal Years;
(5) Minutes of every annual, special meeting and court ordered meeting;
(6) Any written consents obtained from Members for actions taken by Members
without a meeting.
(b) The Company shall cause the preparation and distribution to each Member of the
following reports on the activities and financial position of the Company, which reports
shall be prepared in accordance with generally accepted accounting principles
consistently applied:
(1) Within 30 days after the end of each of the first three quarters, (A) balance sheet
as of the end of such quarter, and (B) a detailed statement of income or loss both for the
quarterly period just ended and with respect to the second and third quarters, for the
period commencing with the first day of the Fiscal year and ending on the last day of the
respective quarter ('YearToDate).
(2) Within 60 days after the end of each Fiscal Year, (A) a balance sheet as of the
end of such Fiscal Year, and (B) a detailed statement of income or loss for such Fiscal
Year.
(3) The Company shall also provide audited financial statements to each Member no
later than 75 days after the end of each Fiscal Year.
Returns and Other Elections.
(a) Subject to Section (b), the Manager shall cause the preparation and timely
filing of all tax returns required to be filed by the Company pursuant to the Code and all
other tax returns deemed necessary and required in each jurisdiction in which the
Company does business. Copies of such returns, or pertinent information therefrom, shall
be furnished to the Equity Owners within a reasonable time after the end of the Fiscal
Year.
(b) With respect to any income tax returns required to be filed by the Company, the
Manager shall provide HHH Partners Domestic and its authorized representatives with
copies of such completed tax returns and any applicable work papers on or prior to the
fifteenth day of the third month following the close of the Company's taxable year, and
HHH Partners Domestic and its authorized representatives shall have the right to review
such tax returns prior to their filing. The Manager and HHH Partners Domestic agree to
consult and resolve in good faith any issues arising as a result of the review of such tax
returns by HHH Partners Domestic or its authorized representatives and to mutually
consent to their filing. If the Manager and Och Ziff Partners Domestic agree as to the
contents of such returns, then the Manager shall file such returns as soon as practicable
thereafter. In the event the parties are unable to resolve any dispute prior to the first day
of the fourth month following the close of the Company's taxable year, the parties shall
jointly select an independent accounting firm to resolve any issue in dispute as promptly
as possible. If such accounting firm is unable to make a determination with respect to any
disputed issue prior to the due date (including extensions) for filing the tax returns in
question, then the Manager may file such tax returns on the due date (including
extensions) therefor without such determination having been made and without HHH
Partners Domestic's consent. Notwithstanding the filing of such tax returns, the
accounting firm mutually selected by the parties to resolve the dispute shall make a
determination with respect to any disputed issues, and the Company shall file amended
tax returns consistent with such determination if the determination of the accounting firm
28
is inconsistent with the manner in which such disputed matter was reported on the tax
return.
(c) All elections permitted to be made by the Company under federal or state laws
shall be made by the Manager in its sole discretion; provided, however, that the Manager
shall make any tax election requested by Members owning a Majority Interest.
Tax Matters Partner.
(a) FFF is hereby designated the Tax Matters Partner ('TMP') as defined in Section
6231(a)(7) of the Code. The TMP and the other Members shall use their reasonable
efforts to comply with the responsibilities outlined in Sections 6221 through 6233 of the
Code (including any Regulations promulgated thereunder), and in doing so shall incur no
liability to any other Member.
(b) Except as expressly authorized by this Agreement, the TMP shall not make any
decision or take any action without the prior authorization of Members holding a
Majority Interest.
(c) The TMP shall cause the HHH Partners to be treated as 'notice partners' within
the meaning of Section 6231(a)(8) of the Code. The TMP shall notify the HHH Partners
regarding, and the HHH Partners shall have the right to participate in, (i) any
administrative or judicial proceeding relating to the determination of partnership items at
the Company level, and (ii) any discussions with the Internal Revenue Service relating to
any Member related tax matters. In addition, the TMP shall provide the HHH Partners, if
they so request, with copies of notices, correspondence, work papers, documents or such
other relevant tax related information as such Member reasonably may request. The TMP
shall from time to time upon request of an Och Ziff Partner confer, and cause the
Company accountants and tax attorneys to confer, with such HHH Partner and its
attorneys and accountants on any matters relating to a Company tax item, return or
election. The TMP and the HHH Partners shall attempt in good faith to agree upon (i) the
filing of any amended income tax returns, (ii) any proposed extension of the statute of
limitations, (iii) the initiation and conduct of any administrative or judicial contest of any
disputed issue with the IRS and (iv) any proposed settlement or compromise of any
disputed issue.
(d) Subject to Section (c), the TMP shall not, except with the prior approval of
Members holding a Majority Interest, (i) initiate any action or proceeding or file any
pleading, (ii) compromise or settle any issue, (iii) extend any statute of limitations, or (iv)
take any action contemplated by Sections 6222 through 6232 of the Code.
Notwithstanding the foregoing, the TMP shall not without the prior written approval of
the HHH Partners enter into a settlement agreement which binds the HHH Partners
pursuant to Section 6224(c)(3) of the Code. The HHH Partners shall have the maximum
rights permitted by law to elect not to be bound by the TMP in any administrative or
judicial matter and, at the request of the HHH Partners, the TMP shall cooperate fully
with the HHH Partners in making any such election.
(e) An HHH Partner may engage legal counsel, certified public accountants, or
others in its own behalf at its sole cost and expense. The provisions of this Section
shall survive the termination of the Company or the termination of any Member's interest,
and shall remain binding on the Members for a period of time necessary to resolve with
the Internal Revenue Service any and all matters whether in an administrative or judicial
proceeding regarding the federal income taxation of the Company for any open tax year
29
or years.
Certain Allocations for Income Tax (But Not Book Capital Account) Purposes.
(a) In accordance with Section 704(c)(1)(A) of the Code and Section
(b)(2)(i)(iv) of the Regulations, if a Member contributes property with an initial
Gross Asset Value that differs from its adjusted basis at the time of contribution, income,
gain, loss and deductions with respect to the property shall, solely for federal income tax
purposes (and not for Capital Account purposes), be allocated among the Equity Owners
so as to take account of any variation between the adjusted basis of such property to the
Company and its Gross Asset Value at the time of contribution pursuant to the traditional
method under Section (b) of the Regulations.
(b) All recapture of income tax deductions resulting from Sale or disposition of
Company property shall be allocated to the Equity Owners to whom the deduction that
gave rise to such recapture was allocated hereunder to the extent that such Equity Owner
is allocated any gain from the Sale or other disposition of such property.
Article 10.
TRANSFERABILITY
General.
(a) Except as otherwise specifically provided herein, no Equity Owner shall have the
right to Sell the Equity Owner's Ownership Interest.
(b) Subject to: (i)the Put Right (defined in Section ), (ii) Section , (iii)
Section , and (iv) a Reorganization of the Company pursuant to the terms of this
Agreement, no Equity Owner shall have the right to Sell that Equity Owner's Ownership
Interest for a period of 24 months following the Effective Date of this Agreement without
the unanimous written consent of all Members, which may be unreasonably withheld.
(c) Each Equity Owner hereby acknowledges the reasonableness of the restrictions
on Sale of Ownership Interests imposed by this Agreement in view of the Company
purposes and the relationship of the Equity Owners. Accordingly, the restrictions on Sale
contained herein shall be specifically enforceable.
(d) In the event that any Equity Owner pledges or otherwise encumbers any of its
Ownership Interest as security for repayment of a liability, any such pledge or
hypothecation shall be made pursuant to a pledge or hypothecation agreement that
requires the pledgee or secured party to be bound by all the terms and conditions of this
Article 10, and shall require the prior unanimous written consent of all Members.
Right of First Refusal and CoSale.
(a) Upon the expiration of the 24month period described in Section (b) above,
subject to Sections and , and provided that an IPO has not occurred, an Equity
Owner which desires to sell all or any portion of its Ownership Interest to a third party
purchaser other than a Member shall obtain from such third party purchaser ('Third Party
Purchaser') a bona fide written offer to purchase such interest, stating the terms and
conditions upon which the purchase is to be made and the consideration offered therefor
('Third Party Offer'). The Selling Equity Owner shall give written notification ('Notice of
Sale') to the Company and the other Equity Owners who are Members (the 'Remaining
Members'), by certified mail or personal delivery, of its intention to so Sell such
Ownership Interest (the 'Offered Interest'). The Notice of Sale shall be accompanied by a
copy of the Third Party Offer. If any portion of the purchase price offered by such third
party purchaser consists of consideration other than cash or a promissory note ('Noncash
30
Consideration'), then: the Notice of Sale also shall be accompanied by a good faith
estimate by the Selling Equity Owner of the fair market value of the Noncash
Consideration ('Purchase Price').
(b) The Remaining Members shall have the option ('Buy Option') to purchase all,
but not less than all, of the Offered Interest, on a basis pro rata to the Sharing Ratios of
the Remaining Members exercising such option pursuant to this Section (b). The Buy
Option may be exercised by one or more of the Remaining Members by giving written
notification ('Buy Notice') to the Selling Equity Owner within thirty (30) days after
receiving the Notice of Sale (the 'Option Period'). Each Remaining Member who timely
gives a Buy Notice ('Buying Member') shall purchase such portion of the Offered Interest
which is equal to the relative Sharing Ratios of all of the Buying Members. Subject to
Section (d), if there are no Buying Members, the Buy Option shall terminate and at
any time within ninety (90) days following the expiration of the Option Period, the
Selling Equity Owner shall be entitled to consummate the Sale of the Offered Interest to
the Third Party Purchaser or one or more of its Affiliates upon terms no less favorable
than are set forth in the Third Party Offer.
(c) If there is at least one Buying Member (i) the Buying Members shall designate
the time, date and place of closing, provided that the date of closing shall be within thirty
(30) days after the receipt of the Buy Notice, and (ii) at the closing, the Buying Members
shall purchase, and the Selling Equity Owner shall Sell, the Offered Interest for an
amount equal to the lesser of (i) the Purchase Price, or (ii) the amount of the Selling
Equity Owner's Capital Account plus a six percent (6%) annualized rate of return
accruing on the excess of any Capital Contributions (including the agreed value of any
capital contributions) over the amount of any distributions to such Equity Owner pursuant
to Section (a) in the case of Common Units proposed to be sold and pursuant to
Section (b) in the case of Preferred Units proposed to be sold, calculated from the
dates of such respective Capital Contributions and distributions. The Buy Option shall be
exercised in accordance with such other terms and conditions set forth in the Third Party
Offer.
(d) CoSale Right. To the extent that the Buy Option is not exercised by the
Remaining Members, each Remaining Member shall have the right (the 'CoSale Right'),
exercisable upon written notice to the Company within fifteen (15) business days after
the expiration of the Option Period, beginning with the day following the expiration
thereof, to participate in such Selling Equity Owner's sale of Offered Interest pursuant to
the specific terms and conditions of such Notice of Sale. To the extent a Remaining
Member exercises such CoSale Right in accordance with the terms and conditions set
forth below, the Offered Interest which Selling Equity Owner may sell pursuant to such
Notice of Sale shall be correspondingly reduced. The CoSale Right of each Remaining
Member shall be subject to the following terms and conditions.
(1) Calculation. Each Remaining Member may participate in the sale of the Offered
Interest on a basis pro rata to the Sharing Ratios of the Selling Equity Owner and the
Remaining Members exercising such Co Sale Right.
(2) Delivery of Certificates. Each Remaining Member participating in the CoSale
Right may effect its participation in the sale by delivering to the Selling Equity Owner for
transfer to the Third Party Purchaser one or more certificates, properly endorsed for
transfer, which represent the interests, which such Remaining Member elects to sell.
31
(e) A Sale of an Offered Interest pursuant to this Section , shall be subject to
Sections and .
Transferee Not Member in Absence of Consent.
(a) Except as provided in this Section (a) and Section , if Members holding
TwoThirds of the Voting Interests (including the Voting Interest of the Member
proposing to Sell its Ownership Interest) do not approve by written consent the proposed
Sale of the Selling Equity Owner's Ownership Interest to a transferee which is not a
Member immediately prior to the Sale, then the proposed transferee shall have no right to
participate in the management of the business and affairs of the Company or to become a
Member. Such transferee shall be merely an Economic Interest Owner. No Sale of a
Member's Membership Interest (including any Sale of the Economic Interest or any other
Sale which has not been approved as provided herein) shall be effective unless and until
written notice (including the name and address of the proposed transferee and the date of
such Sale) has been provided to the Company and the nontransferring Members.
(b) Upon and contemporaneously with any Sale of a Member's Ownership Interest,
the Selling Equity Owner shall cease to have any residual rights associated with the
Ownership Interest transferred to the transferee.
Additional Conditions to Recognition of Transferee.
(a) If a Selling Equity Owner Sells an Ownership Interest to a Person who is not
already a Member, as a condition to recognizing one or more of the effectiveness and
binding nature of such Sale (subject to Section above), the remaining Members may
require the Transferring Equity Owner and the proposed successorininterest to execute,
acknowledge and deliver to the Manager such instruments of transfer, assignment and
assumption and such other certificates, representations and documents, and to perform all
such other acts which the Manager may deem necessary or desirable to accomplish any
one or more of the following:
(1) constitute such successorininterest as an Equity Owner;
(2) confirm that the proposed successorininterest as an Economic Interest Owner, or
to be admitted as a Member, has accepted, assumed and agreed to be subject and bound
by all of the terms, obligations and conditions of this Agreement, as the same may have
been further amended (whether such Person is to be admitted as a new Member or will
merely be an Economic Interest Owner);
(3) preserve the Company after the completion of such Sale, under the laws of each
jurisdiction in which the Company is qualified, organized or does business;
(4) maintain the status of the Company as a partnership for federal tax purposes; and
(5) assure compliance with any applicable state and federal laws, including
securities laws and regulations.
(b) Any Sale of an Ownership Interest and admission of a Member in compliance
with this Article 10 shall be deemed effective as of the last day of the calendar month in
which the remaining Members' consent thereto was given.
The Selling Equity Owner hereby indemnifies the Company and the remaining Members
against any and all loss, damage, or expense (including, without limitation, tax lia
