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CHOICEPARTS, LLC
MEMBERS' AGREEMENT
by and among
CHOICEPARTS, LLC,
ADP, INC.,
CCC INFORMATION SERVICES, INC.
and
THE REYNOLDS AND REYNOLDS COMPANY
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Dated as of May 4, 2000
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS..........................................................2
Section 1.1 Defined Terms..........................................2
ARTICLE II THE BUSINESS.......................................................10
Section 2.1 The Business..........................................10
ARTICLE III OPERATING AGREEMENT; OTHER COMPANY MATTERS........................10
Section 3.1 Certificate and Operating Agreement...................10
Section 3.2 Parties...............................................10
Section 3.3 Inconsistencies Between This Agreement and
the Operating Agreement.........................11
Section 3.4 Certain Restrictions..................................11
Section 3.5 Rights of the Initial Members in an Initial Public
Offering........................................12
Section 3.6 Reorganization of Company to Corporate Form...........13
ARTICLE IV OPERATIONS AND BUSINESS OF THE COMPANY.............................13
Section 4.1 Business Plans........................................13
Section 4.2 Company-Level Debt....................................14
Section 4.4 Confidential Information..............................14
Section 4.5 Public Statements.....................................15
ARTICLE V COMPANY CAPITALIZATION AND FINANCIAL PROVISIONS.....................16
Section 5.1 Funding of the Company................................16
Section 5.2 Loans to the Company..................................17
Section 5.3 Distributions.........................................17
Section 5.4 Management Equity.....................................17
Section 5.5 Future Investors......................................18
ARTICLE VI MANAGEMENT OF THE COMPANY; THE BOARD...............................18
Section 6.1 Generally.............................................18
Section 6.2 Board.................................................18
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ARTICLE VII REPORTS AND FINANCIAL STATEMENTS..................................25
Section 7.1 Reports and Financial Statements; Access..............25
ARTICLE VIII TRANSFERS OF MEMBERSHIP INTERESTS................................27
Section 8.1 Transfers of Membership Interests.....................27
Section 8.2 Preemptive Rights.....................................34
Section 8.3 Other Transfer Matters................................35
ARTICLE IX TERM AND TERMINATION...............................................35
Section 9.1 No Termination of Company.............................35
Section 9.2 Term and Termination of Agreement.....................36
ARTICLE X MISCELLANEOUS PROVISIONS............................................36
Section 10.1 Notices .............................................36
Section 10.2 Disclaimer of Agency ................................38
Section 10.3 Amendment ...........................................38
Section 10.4 Waiver of Consequential Damages .....................38
Section 10.5 Names and Marks .....................................39
Section 10.6 Governing Law .......................................39
Section 10.7 Counterparts ........................................39
Section 10.8 Binding Effect ......................................39
Section 10.9 Severability ........................................40
Section 10.10Captions ............................................40
Section 10.11 Entire Agreement ...................................40
Section 10.12 No Rights in Third Parties .........................40
Section 10.13 No Title to Company Property .......................40
Section 10.14 Further Assurances .................................41
Section 10.15 No Waiver ..........................................41
Section 10.16 Consent to Jurisdiction ............................41
Section 10.17 Waiver of Trial By Jury ............................42
Section 10.18 Specific Performance ...............................42
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MEMBERS' AGREEMENT (as amended from time to time, this "Agreement"), dated
as of May 4, 2000, by and among CHOICEPARTS, LLC, a Delaware limited liability
company (the "Company"), ADP, INC., a Delaware corporation ("ADP"), CCC
INFORMATION SERVICES, INC., a Delaware corporation ("CCC"), and THE REYNOLDS AND
REYNOLDS COMPANY, an Ohio corporation ("Reynolds" and, together with ADP and
CCC, each an "Initial Member" and, collectively, the "Initial Members").
W I T N E S S E T H:
WHEREAS, the Initial Members have formed the Company, subject to the
provisions of the Delaware Limited Liability Company Act by filing a Certificate
of Formation (the "Certificate") with the Secretary of State of the State of
Delaware on April 17, 2000;
WHEREAS, the Company and ADP have entered into that certain Subscription
Agreement (the "ADP Subscription Agreement"), dated as of May 4, 2000, pursuant
to which, among other things, ADP has agreed to contribute to the Company
certain moneys and certain assets pursuant to a separate contribution agreement,
and ADP has agreed to subscribe for interests in the Company;
WHEREAS, the Company and CCC have entered into that certain Subscription
Agreement (the "CCC Subscription Agreement"), dated as of May 4, 2000, pursuant
to which CCC has agreed to contribute to the Company certain moneys and CCC has
agreed to subscribe for interests in the Company;
WHEREAS, the Company and Reynolds have entered into that certain
Subscription Agreement (the "Reynolds Subscription Agreement" and, together with
the ADP Subscription Agreement and the CCC Subscription Agreement, the
"Subscription Agreements"), dated as of May 4, 2000, pursuant to which, among
other things, Reynolds has agreed to contribute to the Company certain moneys
and certain assets pursuant to a separate contribution agreement, and Reynolds
has agreed to subscribe for interests in the Company;
WHEREAS, following the consummation of the transactions contemplated by
the Subscription Agreements, ADP, CCC and Reynolds will be the sole Members of
the Company, with ADP, CCC and Reynolds owning 39.0%, 27.5% and 33.5%,
respectively, of the outstanding membership interests in the Company;
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Initial Members are entering into the Limited Liability Company Operating
Agreement (the "Operating Agreement") which governs certain aspects of the
management and operations of the Company and the conduct of the Company's
business; and
WHEREAS, it is a condition to the consummation of the transactions
contemplated by the Subscription Agreements, that the Company and the Initial
Members enter into the Operating Agreement and that the Initial Members enter
into this Agreement to govern certain additional aspects of the management and
operation of the Company and the conduct of the Company's business.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, desiring to be
legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. Unless otherwise required by the context in
which any capitalized term appears, or unless otherwise specifically defined
elsewhere in this Agreement, capitalized terms used in this Agreement shall have
the meanings set forth below.
"Accepting Party" has the meaning set forth in Section 8.1(d)(ii) hereof.
"ADP" has the meaning set forth in the preamble hereof.
"ADP Subscription Agreement" has the meaning set forth in the recitals
hereof.
"ADP Directors" has the meaning set forth in Section 6.2(a).
"ADP Membership Interest" means the membership interest in the Company
owned by ADP.
"Affected Member" has the meaning set forth in Section 6.2(d)(i) hereof.
"Affiliate" means: (i) with respect to ADP, ADP and any other Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is
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under common control with ADP; (ii) with respect to CCC, CCC and any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with CCC; (iii) with
respect to Reynolds, Reynolds and any other Person that directly, or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with Reynolds and (iv) with respect to any other Member, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is, controlled by or is under common control with such Member.
"Agreement" has the meaning set forth in the preamble hereof.
"Applicable Division" means, with respect to (i) Reynolds, the operations
currently conducted by Reynolds' Automotive Group and (ii) ADP, the operations
currently conducted by either ADP's Dealer Services Group or Claims Solutions
Group, as applicable.
"Benchmark Date" means the date on which at least five hundred (500)
automobile dealers and five hundred (500) RFs have each generated fifteen (15)
transactions (including locating, ordering and confirming orders via the
Company's network and applications, and with respect to which either the buyer
or the seller has paid to the Company a transaction or subscription fee) for
each of two (2) consecutive months.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York, New York are required or authorized by law
or regulation to close.
"Business" has the meaning set forth in Section 2.1 hereof.
"Business Plan" has the meaning set forth in Section 4.1(a) hereof.
"CCC" has the meaning set forth in the preamble to this Agreement.
"CCC Directors" has the meaning set forth in Section 6.2(a).
"CCC Membership Interest" means the membership interests in the Company
owned by CCC.
"CCC Subscription Agreement" has the meaning set forth in the recitals
hereof.
"Certificate" has the meaning set forth in the recitals hereof.
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"Change of Control" means: (a) the transfer of greater than fifty percent
(50%) of the voting interests of a Member (or an Applicable Division of a
Member), other than transfers to Affiliates of such Member or the ultimate
parent entity of such Member, to a single entity or group (as such term is
defined in Rule 13d of the Rules and Regulations promulgated under the
Securities and Exchange Act of 1934, as amended); (b) a sale of all or
substantially all of the assets of CCC or, with respect to ADP and Reynolds, an
Applicable Division of a Member, other than Dispositions to Affiliates of such
Member, or (c) a merger or similar transaction pursuant to which the then
shareholders of a Member, would own less than fifty percent (50%) of the voting
interest of the entity surviving such merger or similar transaction, except,
with respect to a merger or similar transaction involving a Member or an
Applicable Division of a Member, if, upon consummation of such transaction, the
ultimate parent entity of such Member or Applicable Division is the same as
prior to the transaction.
"Company" has the meaning set forth in the recitals hereof.
"Company IPO" has the meaning set forth in Section 3.5.
"Confidential Information" has the meaning set forth in Section 4.4
hereof.
"Controlling Interest" has the meaning set forth in Section 8.1(e)(i)
hereof.
"Controlling Members" has the meaning set forth in Section 8.1(e)(i)
hereof.
"Director" has the meaning set forth in Section 6.2(a) hereof.
"Disposition" means a sale, assignment or conveyance of part or all of the
Membership Interests owned by such Member.
"Drag-Along Offer" has the meaning set forth in Section 8.1(e)(i) hereof.
"Effective Date" means April 17, 2000, the date of execution and delivery
of this Agreement.
"Fair Market Value" means the value of the Membership Interests determined
in accordance with the Valuation Procedure.
"GAAP" means U.S. generally accepted accounting principles.
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"Governmental Person" means any national, state, commonwealth, provincial
or local government, any political subdivision or any governmental, judicial,
public or statutory instrumentality, tribunal, agency (including those
pertaining to health, safety or the environment), authority, body or entity, or
other regulatory bureau, authority, body or entity having legal jurisdiction
over the matter or Person in question.
"Group" means, with respect to a particular Person, such Person and its
Affiliates.
"Initial Members" has the meaning set forth in the preamble hereof.
"Initial Members' Directors" means, collectively, the ADP Directors, the
CCC Directors and the Reynolds Directors.
"Investor" has the meaning set forth in Section 5.5(a).
"LLC Act" means the Delaware Limited Liability Company Act.
"Marketplace" means any system that offers as its primary product or
service the location and ordering of OEM Parts, NonOEM Parts, and/or Salvaged
Parts between automobile retailers, RFs, salvage yards and/or after markets
suppliers.
"Maximum Amount" has the meaning set forth in Section 5.1.(b).
"Member" means the Initial Members and any Person that is admitted as a
member in the Company in accordance with the Operating Agreement and this
Agreement.
"Member Group" means, as to each Member, such Member and its Affiliates.
"Membership Interests" means (i) as to ADP, the ADP Membership Interest,
(ii) as to CCC, the CCC Membership Interest, (iii) as to Reynolds, the Reynolds
Membership Interest or (iv) as to any other Member, the membership interests in
the Company owned from time to time by such Member.
"Newco" has the meaning set forth in Section 3.6 hereof.
"New Interests" has the meaning set forth in Section 8.2 hereof.
"New Rights" has the meaning set forth in Section 8.2 hereof.
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"Non-Controlling Members" has the meaning set forth in Section 8.1(e)(i)
hereof.
"Non-OEM Parts" means new automobile parts manufactured without access to
original equipment manufacturer's specifications.
"Notice of Acceptance" has the meaning set forth in Section 8.1(d)(ii)
hereof.
"OEM Parts" means new automobile parts manufactured with access to
original equipment manufacturer's specifications.
"Offer" has the meaning set forth in Section 8.1(d)(i) hereof.
"Offered Interests" has the meaning set forth in Section 8.1(d)(i) hereof.
"Offer Notice" has the meaning set forth in Section 8.1(d)(i) hereof.
"Offer Price" has the meaning set forth in Section 8.1(d)(i) hereof.
"Operating Agreement" has the meaning set forth in the recitals to this
Agreement.
"Person" means any individual, partnership, corporation, association,
business trust, limited liability company or other entity.
"Phase I Qualified Public Equity Issuance" means an initial public
issuance of equity interests in the Company (or any successor of the Company)
reflecting a market capitalization of the Company (or any successor of the
Company) immediately after such initial public issuance of at least $500,000,000
at the public offering price.
"Phase II Qualified Public Equity Issuance" means an initial public
issuance of equity interests in the Company (or any successor of the Company)
(a) representing not more than twenty percent (20%) of the outstanding equity
interests of the Company (or such successor of the Company) and reflecting a
market capitalization of the Company (or such successor of the Company)
immediately after such initial public issuance of at least $250,000,000 at the
public offering price or (b) reflecting a market capitalization of the Company
(or such successor of the Company) immediately after such initial public
issuance of at least $500,000,000 at the public offering price.
"Prospective Seller" has the meaning set forth in Section 8.1(d)(i)
hereof.
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"Qualified Private Equity Issuance" means a private issuance of equity
interests in accordance with Exhibit A hereto (including warrants to purchase
equity interests, but excluding the issuance of options or restricted stock
pursuant to employee benefits plans) in the Company (or any successor of the
Company) representing not more than ten percent (10%) of the outstanding equity
interests of the Company (or such successor of the Company) and reflecting a
pre-money valuation of the Company (or such successor of the Company) of at
least $100,000,000.
"Qualifying Member" means a Member holding at least ten percent (10%) of
the outstanding Membership Interests.
"Recipient" has the meaning set forth in Section 4.4 hereof.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of May 4, 2000, by and among the Company, ADP, CCC and
Reynolds.
"Reorganization" has the meaning set forth in Section 3.6 hereof.
"Representative" has the meaning set forth in Section 4.4 hereof.
"Reynolds" has the meaning set forth in the preamble to this Agreement.
"Reynolds Subscription Agreement" has the meaning set forth in the
recitals hereof.
"Reynolds Directors" has the meaning set forth in Section 6.2(a).
"Reynold Membership Interest" means the membership interests in the
Company owned by Reynolds.
"RF" has the meaning set forth in Section 2.1.
"Sale Period" has the meaning set forth in Section 8.1(d)(iv) hereof.
"Sale Notice" has the meaning set forth in Section 8.1(e)(ii) hereof.
"Salvaged Parts" means discrete automobile parts obtained from salvaged
vehicles.
"Securities Act" means the Securities Act of 1933, as amended.
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"Subscription Agreements" has the meaning set forth in the recitals
hereof.
"Third Party Purchaser" has the meaning set forth in Section 8.1(d)(iv)
hereof.
"Transfer" means any sale, assignment, conveyance, encumbrance, mortgage
or pledge of any Membership Interests, whether occurring voluntarily or by
operation of law.
"Transferee" has the meaning set forth in Section 8.1(b)(ii) hereof.
"Transferor" has the meaning set forth in Section 8.1(b)(ii) hereof.
"U.S. Tax Code" means the U.S. Internal Revenue Code of 1986, as amended
from time to time.
"U.S. Treasury Regulations" means the regulations issued by the U.S.
Treasury Department pursuant to the U.S. Tax Code.
"Valuation Procedure" means the procedure whereby the Company or a Member
may determine the Fair Market Value of the Membership Interests, which shall
occur as follows:
(a) The non-defaulting Members shall appoint a mutually agreed upon
nationally-recognized investment bank, accounting firm or other valuation
consultant;
(b) Within twenty (20) Business Days such investment bank,
accounting firm or other valuation consultant shall independently determine the
market value of the Membership Interests (the "Fair Market Value"); and
(c) The Company shall be responsible for the fees and expenses of
such investment bank, accounting firm or other valuation consultant.
"Warrant Rights" has the meaning set forth in Section 3.5.
Section 1.2 Interpretation.
(a) Principles of Construction.
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(i) Reference to a given Section, Subsection, Exhibit or Schedule
is a reference to a Section, Subsection, Exhibit or Schedule of this
Agreement, unless otherwise specified. The terms "hereof," "herein,"
"hereto," "hereunder" and "herewith" refer to this Agreement as a whole.
(ii) Except where otherwise expressly provided or unless the
context otherwise necessarily requires: (A) reference to a given
agreement, instrument, statute or regulation is a reference to that
agreement, instrument, statute or regulation as modified, amended,
supplemented and restated from time to time, and, as to a statute or
regulation, any successor statute or regulation, (B) accounting terms have
the meanings given them by GAAP applied on a consistent basis by the
accounting entity to which they refer, (C) references to "dollars" or
"$" shall mean the lawful currency of the U.S., (D) reference to a Person
includes its successors and permitted assigns, (E) references to any term
in this Agreement when used in the singular shall have the same meanings
when used in the plural and vice versa, and (F) "includes" or "including"
means "including, for example and without limitation."
(b) Undertakings Relating to the Company. Whenever any provision hereof
requires (i) the Company to take or omit to take a specified action or (ii) the
Board to approve any matter concerning the Company, such provision shall be
interpreted to mean that the Members shall cause the Company to take or omit to
take such action or cause such matter to be referred to the Board, as
applicable.
ARTICLE II
THE BUSINESS
Section 2.1 The Business. Except as otherwise from time to time determined
by the Board or the Members in accordance with Article VI, as applicable, the
Company shall engage in the business (collectively, the "Business") of creating
and operating an internet and network-based marketplace for the purchase and
distribution of OEM Parts, Non-OEM Parts and Salvaged Parts. This industry-wide
marketplace will, at a minimum, provide (i) automated functionality for
receiving purchase requests and parsing the same to participating retailers of
OEM Parts, Non-OEM Parts and Salvaged Parts and (ii) intelligent and accurate
locating, ordering, confirming and tracking of parts. These services will be
provided among automobile collision repair facilities (both independent
facilities and facilities operated by or in conjunction with automobile
retailers, each an "RF") and parts suppliers (who are either automobile
retailers, salvage yards or after
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market parts suppliers) via (x) an integrated data exchange with systems used by
such parties and/or (y) browser based access. The Company shall also engage in
other value-added services (including, delivery certainty and audit and credit
services) and data warehousing, mining and reporting activities (including the
distribution of data on arms-length terms to the Initial Members and other
Persons).
ARTICLE III
OPERATING AGREEMENT; OTHER COMPANY MATTERS
Section 3.1 Certificate and Operating Agreement. The Certificate was filed
with the Secretary of State of the State of Delaware on April 17, 2000. The
Operating Agreement has been executed and delivered by the parties thereto
concurrently with the execution and delivery of this Agreement.
Section 3.2 Parties. No Person shall be admitted as a Member, or become
the holder of any Membership Interest, through issuance, transfer of Membership
Interests or otherwise unless such Person shall have signed counterparts of this
Agreement and the Operating Agreement or an agreement confirming that such
Person is to be bound by all of the terms and provisions hereof and thereof.
Upon (i) a Transfer permitted by and in compliance with the provisions of
Section 8.1, (ii) a Qualified Private Equity Issuance, (iii) a private issuance
of equity interests in the Company approved pursuant to Section 6.2(b) which is
not a Qualified Private Equity Issuance and (iv) the issuance of Membership
Interests to management pursuant to Section 5.4, the remaining Members shall
execute a written consent in form and substance reasonably satisfactory to such
Members admitting the transferee or the new holder as a Member of the Company,
entitled to all the privileges and subject to all of the obligations of this
Agreement and the Operating Agreement.
Section 3.3 Inconsistencies Between This Agreement and the Operating
Agreement. In the event of an inconsistency between this Agreement and the
Operating Agreement, the terms of this Agreement shall prevail as between the
Members, and the Members shall, as soon as practicable after discovery of such
inconsistency, execute and deliver such amendments to the Operating Agreement as
may be required to reconcile such inconsistency, so long as such amendment is in
accordance with the LLC Act; provided, that, whether or not such inconsistency
is so corrected in the Operating Agreement, the terms of this Agreement shall
prevail. The parties acknowledge and agree that all references in the Operating
Agreement to "a written agreement among all of the Initial Members entered into
from time to time" or similar references are intended, as
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of the date hereof, to be references to this Agreement. The Members shall cause
the Company to perform its obligations under this Agreement, and shall cause
their designated Directors, if any, to act in accordance herewith and in a
manner that causes the Company to perform its obligations under this Agreement.
Section 3.4 Certain Restrictions. Until the twelve-month anniversary of
the Effective Date, no Member (nor any Affiliate of a Member) shall enter into a
sales, marketing and/or promotional agreement with, or make any investment in,
or take any debt or equity position in, any Person (other than the Company)
which owns and/or provides a Marketplace; provided, however, that nothing
contained in this Section 3.4 herein shall preclude (i) ADP (or any Affiliates
of ADP) from entering into arrangements with any Person for the license of,
integration with, or promotion of the ADP EDEN locator and/or the Hollander
Interchange, (ii) any of the Initial Members from facilitating the transfer of
data from its management or estimating systems, entering into any agreement with
respect to such transfer or permitting third parties to disclose such an
agreement, (iii) ADP's proposed non-controlling investment in BBCN, LLC and/or
preclude ADP (or any Affiliate of ADP) from consummating the transactions
contemplated by the existing letter of intent between ADP and BBCN, LLC (i.e.,
the letter of intent which provides for the provision by ADP to BBCN of certain
portal and sales agent services), or (iv) any Member or any Affiliate of any
Member from entering into sales, marketing or promotional agreements with a
third party which owns and/or provides a Marketplace, provided, that, with
respect to clause (iv) only, (A) providing a Marketplace is not such third
party's primary business and (B) such agreement does not relate to such
Marketplace. Notwithstanding any other remedies available pursuant to this or
any other agreement, a breach (which, provided the same is capable of cure, is
not cured within thirty (30) days after written notice thereof) of the
provisions of the previous sentence by any Member shall entitle the
non-breaching Initial Members for a period of thirty (30) days after such breach
(or the expiration of such cure period) is known to them to purchase its
pro-rata (based on the non-breaching Initial Members' relative Membership
Interests) portion of the breaching Member's Membership Interests for an
aggregate purchase price of one dollar ($1.00).
Section 3.5 Rights of the Initial Members in an Initial Public Offering
(a) In connection with an initial public offering of the Company (or
any entity which is the successor to the Company) (a "Company IPO") registered
under the Securities Act, and subject to the approval of the lead underwriter or
underwriters of the Company IPO, the Initial Members shall have the following
rights ("Warrant Rights"):
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(i) ADP shall have the right to purchase in the Company IPO the
lesser of (A) a number of equity securities having a value equal to $3.9
million and (B) 3.9% of the equity securities issued in the Company IPO;
(ii) CCC shall have the right to purchase in the Company IPO the
lesser of (A) a number of equity securities having a value equal to $2.75
million and (B) 2.75% of the equity securities issued in the Company IPO;
and
(iii) Reynolds shall have the right to purchase in the Company IPO
the lesser of (A) a number of equity securities having a value equal to
$3.35 million and (B) 3.35% of the equity securities issued in the Company
IPO.
(b) The Warrant Rights of each Initial Member (x) shall be exercised
by an Initial Member (through a binding commitment to purchase equity
securities in the Company IPO) prior to distribution of the preliminary
prospectus for the Company IPO at which time the Warrant Rights of each
Initial Member if not exercised shall expire and (y) subject to clause
(x), may be assigned or transferred by the Initial Members in whole or in
part without restriction, other than such restrictions under applicable
law.
(c) The price of the equity securities to be purchased pursuant to
the Warrant Rights shall be the price at which such equity securities are
to be first offered to the public as set forth on the cover page of the
final prospectus for the Company IPO (less any underwriting discounts and
commissions) and the closing of such purchase shall be concurrent with the
closing of the Company IPO.
(d) Each Initial Member and any permitted transferee of the Warrant
Rights shall, if so requested by any underwriter's representative in
connection with the Company IPO, agree to a market stand-off undertaking
pursuant to which such Initial Member or transferee would agree not to
sell or otherwise transfer any securities of the Company for the same time
period applicable to directors and officers of the Company, but not
exceeding a period of 180 days after the effective date of the applicable
registration statement.
Section 3.6 Reorganization of Company to Corporate Form. The Members
acknowledge that the Company in its current form is unlikely to be the entity in
which equity interests will be offered to the public in a Company IPO. If, the
Board determines
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that it is necessary or appropriate to reorganize the Company, the parties
hereto agree to take such actions as may be determined by the Board to be
necessary to cause the Company to be reorganized (the "Reorganization") as a
Delaware corporation ("Newco") with equity ownership interests in Newco
consistent with the percentage interests set forth on Schedule 1 of the
Operating Agreement. The parties covenant and agree to enter into a
stockholders' agreement which embodies the terms and conditions of this
Agreement and the rights and obligations of the parties hereto with all
references to the Company being references to Newco, as appropriate, mutatis
mutandis.
ARTICLE IV
OPERATIONS AND BUSINESS OF THE COMPANY
Section 4.1 Business Plans
(a) Board Approval. Contemporaneously herewith, the Initial Members
have developed and approved the Business Plan for the 12-month period following
the Effective Date. Except as otherwise provided in this Section 4.1(a), on or
before December 31 of each year (beginning in 2000), and at other such times as
the Board shall deem appropriate, the Board shall consider and, subject to
Section 6.2(b), vote to approve or reject the one-year business plan setting
forth in reasonable detail the goals and procedures for personnel, technical,
financial (including capital investments), administrative and marketing
activities for the Company for the coming fiscal year, which plan shall include
financial statement projections for such year (such plan as in effect from time
to time, the "Business Plan"). The parties acknowledge that the initial Business
Plan will overlap with the Business Plan for the calendar year 2001 and the
Board shall endeavor to incorporate by March 31, 2001, as appropriate, such
overlap period into the Business Plan for the calendar year 2001. Approval of
the Business Plan shall be governed by Article VI.
(b) Amendments. Material amendments to the Business Plan for the
Company shall be subject to the approval provisions of Article VI.
Section 4.2 Company-Level Debt. The Members agree and acknowledge that
the Company may from time to time establish credit lines, enter into letter of
credit facilities, and issue Company-level debt if the issuance of such debt is
in the best interests of the Company under the circumstances existing at the
time of such proposed debt issuance, as determined by the Board, subject to
Section 6.2(b). The Members agree that the Company shall not, without the
express written consent of all of the Members,
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undertake any financing which requires the provision of security or undertakings
by, or recourse to, any or all of the Members.
Section 4.3 Compliance with Laws. Each of the Members and the Company
shall, and shall use its reasonable efforts to cause each of its Affiliates and
its and its Affiliates' respective officers, directors, employees and agents to,
comply with all laws, rules and regulations applicable to the performance of
each of the Member's and the Company's respective obligations hereunder to be
performed in connection with the conduct of the Business.
Section 4.4 Confidential Information. Any proprietary or confidential
information concerning the Business that is provided by or obtained from the
Company or any Member or their respective Affiliates ("Confidential
Information") that comes into the possession of any Member, the Company or their
respective Affiliates (each, a "Recipient"):
(a) shall, for a period of three (3) years following the date of
disclosure, be held in confidence by the Recipient and, except with the prior
written consent of the disclosing party, shall not be disclosed by the Recipient
to any Person, other than:
(i) to those directors, officers, employees and agents of such
Recipient and its Affiliates ("Representatives") who need to know such
information for purposes related to the interests of such Recipient or its
Affiliates in the Company and the Business; and
(ii) to Persons with whom the Recipient or any of its Affiliates
reasonably expect to consummate a transfer of all or a portion of their
direct or indirect Membership Interests in the Company in accordance with
this Agreement and who enter into confidentiality undertakings with such
Recipient or its Affiliates substantially consistent with this Section
4.4; and
(b) shall not be used by the Recipient or its Affiliates for any purposes
other than purposes related to the interests of such Recipient or its Affiliates
in the Company and the Business.
The foregoing restrictions on the disclosure and use of Confidential
Information shall not apply to Confidential Information that: (a) is previously
known to the Recipient; (b) is obtained by the Recipient on a non-confidential
basis from a third party, provided that the third party, to the knowledge of the
Recipient, is not or was not bound by a
14
confidentiality obligation with respect to such Confidential Information; (c) is
in or becomes part of the public domain through no fault of the Recipient or its
Affiliates or representatives; (d) the Recipient is legally compelled to
disclose; or (e) is necessary to disclose in order to enforce this Agreement. If
it appears that the Recipient may become legally compelled to disclose any
Confidential Information, the Recipient promptly shall consult with the
disclosing party as to the reasons for such compelled disclosure, and shall
afford the disclosing party a reasonable opportunity to obtain a protective
order as to the Confidential Information, and further shall use reasonable
efforts to obtain reliable assurance that the Confidential Information actually
disclosed will be treated confidentially. Each of the Company and the Members
acknowledges that the terms of this Agreement and the Business Plan, as revised
from time to time, shall be considered Confidential Information. A Recipient
shall be responsible for any breach of this Section 4.4 by it or any of its
Representatives.
Section 4.5 Public Statements. Except as required by applicable laws or
stock exchange regulation, a Member shall not, and shall use its reasonable
efforts to cause its Affiliates not to, release any public statement of a
material nature regarding the Company or the Business without first having
consulted with the Company. The Members shall cooperate in good faith with
respect to the review of all such press releases and other public
communications distributed by either of them relating to the Company or the
Business. The Company may issue such press releases and public statements in
the normal course of its business as its senior officers shall determine to
be necessary or appropriate; provided, however, that if any such release or
statement may reasonably be expected to be adverse to any Member Group of any
Initial Member (so long as such Initial Member is a Qualifying Member), the
Company shall consult and coordinate with the designated public relations
officers of such Member Group at the earliest reasonably practicable time
prior to publishing such release or statement.
ARTICLE V
COMPANY CAPITALIZATION AND FINANCIAL PROVISIONS
Section 5.1 Funding of the Company.
(a) In General. Notwithstanding any other provision of this
Agreement or applicable law, after making its initial capital contribution to
the Company pursuant to the transactions contemplated by the Subscription
Agreements, no Member shall have any obligation to make any additional capital
contribution to the Company, except as provided in Section 5.1(b) or as such
Member may otherwise expressly agree.
15
(b) Additional Capital Commitments of the Initial Members. For the
twelve (12) month period after the Effective Date, pursuant to the commitments
made by each Initial Member under its respective Subscription Agreement as part
of the consideration for the receipt of its initial Membership Interests in the
Company, ADP, Reynolds and CCC shall be obligated to provide to the Company as
additional capital contributions of up to an amount equal to SEVEN MILLION EIGHT
HUNDRED THOUSAND dollars ($7,800,000), SIX MILLION SEVEN HUNDRED THOUSAND
dollars ($6,700,000) and FIVE MILLION FIVE HUNDRED THOUSAND dollars
($5,500,000), respectively. The aggregate amount of such capital contributions
shall not exceed TWENTY MILLION dollars ($20,000,000) (the "Maximum Amount").
The capital contributions contemplated by this Section 5.1(b) shall either be
(i) contributed as equity in fulfillment of such Initial Member's commitments
under its respective Subscription Agreement to make additional capital
contributions as part of the consideration for such Initial Member's initial
Membership Interests or (ii) treated as debt, in each case, as determined by the
Board. Such capital contributions shall not alter the Membership Interests of
the Members set forth on Schedule A to the Operating Agreement. The Board shall,
based on a majority vote, consistent with the Maximum Amount, determine the
amounts and timing of each additional capital contribution (which, if required,
shall be made in no more than four separate contributions). The Board shall give
the Initial Members at least ten (10) days written notice of any required
capital contribution. If any Initial Member shall fail to make an additional
capital contribution requested by the Board in accordance with the terms hereof
when such Initial Member is required to do so, the Board designees of such
non-funding Initial Member shall immediately lose their right to vote on Board
matters and such Member=s vote shall not be required for matters requiring
unanimous approval until such time as such non-funding Initial Member makes its
required capital contribution. If such failure to fund shall continue for a
period of forty-five (45) days past the date of required funding, the
non-defaulting Initial Members shall have the right to purchase all or part (on
a pro-rata basis based on the non-defaulting Initial Members' relative
Membership Interests) of the defaulting Initial Member's Membership Interests at
a purchase price equal to the lower of (i) the Fair Market Value of such
Membership Interest and (ii) the amount paid by such defaulting Initial Member
for such Membership Interest .
Section 5.2 Loans to the Company. Except as may be required pursuant to
Section 5.1(b), no Member, and no Affiliate of any Member, shall be required to
lend any money to or for the benefit of the Company. No Member shall be allowed
to lend any money or extend any credit to or for the benefit of the Company
except where such loan or credit
16
extension has been expressly authorized by the Board. Any such loan or credit
extension authorized by the Board shall be on such terms and conditions as the
Board determines to be fair to and in the best interests of the Company and its
Members.
Section 5.3 Distributions. Distributions to the Members shall be made by
the Company as determined from time to time by the Board, subject to Section
6.2(b), provided, that all such distributions shall be made in accordance with
the terms and conditions of the Operating Agreement.
Section 5.4 Management Equity. The Company shall reserve up to fifteen
percent (15%) percent of its available equity on a fully diluted basis on the
date hereof after giving effect to the issuance of the Membership Interests
contemplated by the Subscription Agreements for issuance to Officers and other
key employees from time to time under such arrangements, contracts or plans as
may be approved by the Board. Such percentage shall not be diluted by additional
capital contributions of the Initial Members pursuant to Section 5.1(b).
Issuance of equity securities or options to employees in excess of the fifteen
percent (15%) threshold will be subject to the Initial Members' pre-emptive
rights pursuant to Section 8.2. The parties hereby agree to include in the terms
and conditions of any options issued to officers and employees provisions
consistent with the last sentence of Section 8.1(e)(i).
Section 5.5 Future Investors
(a) Potential Investors. The Members intend to seek strategic and
financial investors (an "Investor") to benefit the growth, development and
visibility of the Company. A set of guidelines describing characteristics of
potential Investors that shall be used by the Board in identifying such
Investors is attached as Exhibit A hereto.
(b) Rights of Future Investors. In the event an Investor negotiates
"tag-along" rights in connection with such Investor's investment in the Company,
the Members agree to grant to such Investor, in connection with a transfer
pursuant to Section 8.1(d), the right to sell a pro rata portion of its
Membership Interests in the Company (which participation shall ratably reduce
the Membership Interests to be sold by the Prospective Seller) to any Person to
which the Prospective Seller sells its Offered Interests in accordance with
Section 8.1(d). The Members hereby agree to amend this Agreement to reflect such
"tag-along" rights and enter into such customary arrangements, including,
without limitation, providing registration rights agreed upon by the Initial
Members in accordance with Section 6.2 hereof, as are necessary to consummate
such an investment and grant such rights.
17
ARTICLE VI
MANAGEMENT OF THE COMPANY; THE BOARD
Section 6.1 Generally. The overall management of the Company shall be
vested exclusively in the Board. Except as authorized by the Board or as set
forth in this Agreement, (a) no Member shall have any right or authority to take
any action on behalf of the Company or to bind or commit the Company with
respect to third parties or otherwise, and (b) each Member hereby (i)
specifically delegates to the Board its rights and powers to manage and control
the business and affairs of the Company in accordance with the provisions of
Section 18407 of the LLC Act and (ii) revokes its right to bind the Company as
contemplated by the provisions of Section 18402 of the LLC Act.
Section 6.2 Board
(a) Election and Removal of Directors. The Board shall initially be
comprised of six (6) individuals as directors (each a "Director"), two (2) of
whom (the "ADP Directors") shall be elected by ADP, two (2) of whom (the "CCC
Directors") shall be elected by CCC and two (2) of whom (the "Reynolds
Directors") shall be elected by Reynolds. The Members agree that upon (i) hiring
a Chief Executive Officer of the Company, such Chief Executive Officer shall be
appointed to the Board and (ii) an investment in the Company by Investors, each
such Investor shall have the right to appoint one director. The initial
Directors are as follows:
ADP Directors: James B. Benson
S. Michael Martone
CCC Directors: Githesh Ramamurthy
Andrew Janower
Reynolds Directors: Lloyd G. Waterhouse
Gregory M. Collins
Each Director shall hold office until death, disability, resignation or
removal at any time without notice at the pleasure of the Member that elected
such Director. If a vacancy occurs on the Board, the Member that elected such
Director shall give notice of such vacancy to the other Members, and as soon as
practicable after the occurrence of such vacancy shall elect a successor so that
the Board remains fully constituted at all times.
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(b) Meetings and Approval Requirements. The Board's meeting
procedures and approval requirements shall be as follows:
(i) Meetings, Notices and Quorum. The agreement of the
Members with respect to (A) the place and times of regular and specials
meetings of the Board, (B) notice requirements, (C) quorum requirements
and (D) similar procedures is as set forth in the Operating Agreement.
(ii) Majority Approval Requirements. The Board may act either
through the presence of Directors voting at a meeting or by written
consent without a meeting in accordance with the provisions of the
Operating Agreement. Except as otherwise provided in this Section
6.2(b), in the case of actions taken at a meeting, the affirmative vote
of at least a majority of the Directors present in person or by
electronic means, as the case may be, and voting at a duly held meeting
of the Board where a quorum is present shall be necessary for any action
of the Board.
(iii) Approval Requirements Prior to the Benchmark Date. Prior
to the Benchmark Date, the unanimous affirmative vote of all of the
Initial Members' Directors shall be necessary for the following actions:
(A) any amendment to the organizational documents of the
Company adverse to a Member (which shall only include amendments which
diminish a Member's rights with respect to its equity interests or its
voting rights or Board representation rights); provided, that any
amendment to such organizational documents required by an action
described in this Section 6.2(b)(iii) shall be made upon the affirmative
vote required for such action;
(B) sale of all or substantially all the assets of the Company
(which for purposes of this Section 6.2(b)(iii) and Section 6.2(b)(iv)
shall include the Company and/or its subsidiaries taken as a whole);
(C) merger involving the transfer of greater than twenty
percent (20%) of the Membership Interests in the Company;
19
(D) sale of assets of the Company involving assets responsible
for greater than thirty-five percent (35%) of the revenue of the
Company, but less than substantially all the assets of the Company;
(E) prior to the earlier of (x) the Benchmark Date and (y)
twelve (12) months after the Effective Date, a private issuance of
equity interests in the Company which is not a Qualified Private Equity
Issuance, including the issuance of warrants to purchase equity
interests other than an issuance of options or restricted stock pursuant
to employee benefits plans;
(F) other than to refinance existing indebtedness of the
Company, the incurrence of indebtedness by the Company in an aggregate
amount in excess of $10,000,000 per annum (other than as reflected in an
approved Business Plan);
(G) acquisition by the Company, in one or more transactions,
of one or more businesses or assets of third parties involving,
individually or in the aggregate, consideration in excess of $20,000,000
per annum;
(H) capital expenditures by the Company in excess of an
aggregate amount equal to $5,000,000 per annum (other than those
reflected in an approved Business Plan);
(I) investments by the Company in, or loans by the Company to,
third parties in an aggregate amount in excess of $5,000,000 per annum
(other than those reflected in an approved Business Plan);
(J) the dissolution, winding up or bankruptcy of the Company;
(K) appointment or removal of the Company's Chief Executive
Officer;
(L) distributions to Members;
20
(M) entering material new lines of business or exiting
material existing business lines or materially changing the purpose of
the business of the Company;
(N) new transactions between the Company and any Member or
any Affiliate of any Member;
(O) adoption of a Business Plan or material amendment of an
approved Business Plan; and
(P) adoption of, and material amendments to, material
employee benefit plans (including stock option plans and incentive
compensation plans of the Company).
(iv) Approval Requirements On and After the Benchmark Date. On
and after the Benchmark Date, the unanimous affirmative vote of all of
the Initial Members' Directors shall be necessary for the following
actions:
(A) any amendment to the organizational documents of the
Company adverse to a Member (which shall only include amendments which
diminish a Member's rights with respect to its equity interest or its
voting rights or Board representation rights); provided, that any
amendment to such organizational documents required by an action
described in this Section 6.2(b)(iv) shall be made upon the affirmative
vote required for such action;
(B) sale of all or substantially all of the assets of the
Company; provided, that such unanimous affirmative vote shall not be
required following the fifth year anniversary of the Effective Date;
(C) a merger involving the transfer of greater than forty-nine
percent (49%) of the Company; provided, that such unanimous affirmative
vote shall not be required following the fifth year anniversary of the
Effective Date;
(D) the dissolution, winding up or bankruptcy of the Company.
21
(E) The adoption of a Business Plan or the material amendment
of an approved Business Plan that reflects projected losses for that
calendar year of more than $20,000,000 on a pre-tax basis.
(v) Approval Requirements for Phase I Qualified Public Equity
Issuances and for Phase II Qualified Public Equity Issuances. The
unanimous affirmative vote of all of the Initial Members' Directors
shall be necessary for the following actions:
(A) public issuance of equity interests in the Company which
is not a Phase I Qualified Public Equity Issuance; provided, that
following the earlier of (x) the Benchmark Date and (y) twelve (12)
months after the Effective Date such unanimous affirmative vote
requirement shall be superceded by clause (B) below; and
(B) following the termination of the unanimous affirmative
vote requirements in connection with a Phase I Qualified Public Equity
Issuance as set forth in clause (A) above, the public issuance of
equity interests in the Company which is not a Phase II Qualified
Public Equity Issuance; provided, that such unanimous affirmative vote
shall not be required following the fifth year anniversary of the
Effective Date.
(vi) Approval Requirements for Related-Party Transactions On or
After the Benchmark Date. On or after the Benchmark Date, the
affirmative vote of at least a majority of the disinterested Directors
(as determined pursuant to Delaware law, as if the Company were a
corporation) shall be necessary for the approval of new transactions
between the Company and any Member, any Affiliate of a Member or any
interested Director (as determined pursuant to Delaware law, as if the
Company were a corporation).
(vii) Approval Requirements for Other Significant Actions. The
affirmative vote of a majority of the Initial Members' Directors shall
be required for the following actions:
(A) a Phase I Qualified Public Equity Issuance occurring prior
to the earlier of (x) the Benchmark Date or (y) twelve (12) months
after the Effective Date;
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(B) a Phase II Qualified Public Equity Issuance occurring
after the earlier of the Benchmark Date or twelve (12) months after
the Effective Date;
(C) except as set forth in Section 6.2(b)(iv), 6.2(b)(v) or
6.2(b)(vi), any of the actions described in Section 6.2(b)(iii)
occurring after the Benchmark Date (other than Section
6.2(b)(iii)(E));
(D) a private issuance of equity interests in the Company
which is not a Qualified Private Equity Issuance, including the
issuance of warrants to purchase equity interests, other than the
issuance of options or restricted stock pursuant to employee benefit
plans, occurring after the earlier of the Benchmark Date or twelve
(12) months after the Effective Date;
(E) a merger involving the transfer of less than twenty
percent (20%) of the Membership Interests in the Company,
(F) a Qualified Private Equity Issuance;
(G) the appointment and removal of the Company's Chief
Financial Officer;
(H) the appointment and removal of the auditors of the
Company;
(I) the conversion of the Company to a corporation; and
(J) the appointment and removal of legal counsel to the
Company.
(b) Compliance with Agreement. The Members shall ensure that the directors
appointed by each of them respectively shall discharge their duties as directors
and vote to approve or disapprove matters relating to the activities of the
Company in a manner not inconsistent with the provisions of this Agreement.
23
(c) Change of Control.
(i) Control Notice. Upon the occurrence of a Change of Control
of a Member (or its ultimate parent entity or Applicable Division)
(the "Affected Member"), the Affected Member shall give notice of the
Change of Control to the other Members within ten (10) Business Days
of the occurrence of the Change of Control.
(ii) Effect of a Change of Control on Board Approval
Requirements. Upon the occurrence of a Change of Control, with respect
to all matters requiring the unanimous approval of the Initial
Members' Directors pursuant to Sections 6.2(b)(iii), 6.2(b)(iv) and
6.2(b)(v), the affirmative vote of the Director designees of the
Affected Member shall not be required for a unanimous vote. The
affirmative voting rights of the Affected Member's Board designees
shall not be affected with respect to matters requiring a majority
vote of either the entire Board or the Initial Members= Directors.
ARTICLE VII
REPORTS AND FINANCIAL STATEMENTS
Section 7.1 Reports and Financial Statements; Access.
(a) Quarterly Financial Statements. As soon as practicable following
the close of the first, second, third and fourth fiscal quarters of the Company,
and in any event within thirty (30) days thereafter, commencing with the first
full quarter of calendar year 2000 following the Effective Date, and so long as
the Company (or any successor of the Company) is not a publicly traded entity,
the Board shall cause to be furnished to each Qualifying Member quarterly
unaudited consolidated financial statements for the Company prepared in
accordance with GAAP (but without footnotes and subject to fiscal year-end audit
adjustments and in a format reasonably acceptable to each of the Members),
including (i) a balance sheet showing the Company's financial position as of the
end of such fiscal quarter, (ii) supporting profit and loss statements and (iii)
a statement of income, capital, retained earnings and cash flows for such fiscal
quarter and setting forth a comparison of the actual result for such quarter and
the fiscal year to date with budgeted amounts as set forth in the most recently
approved Business Plan, together with a narrative explanation of the variances.
Notwithstanding the foregoing, so long as the Company (or any successor of the
Company) is not a publicly traded entity, within twelve
24
(12) Business Days (or such shorter period as may be reasonably requested by any
Qualifying Member) after the close of the first, second, third and fourth fiscal
quarters of the Company commencing with the third quarter of calendar year 2000,
upon request of a Qualifying Member, the Board shall cause to be furnished to
each Qualifying Member a summary-level statement of income of the Company for
such fiscal quarter.
(b) Annual Statements. As soon as practicable after the end of each
fiscal year of the Company, and in any event within sixty (60) days after the
end of each fiscal year of the Company commencing with fiscal year 2000, and so
long as the Company (or any successor of the Company) is not a publicly traded
entity, the Board shall cause to be furnished to each Qualifying Member
consolidated financial statements with respect to such fiscal year for the
Company, consisting of (i) a balance sheet showing the Company's financial
position as of the end of such fiscal year, (ii) supporting profit and loss
statements, and (iii) a statement of income, capital, retained earnings and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous fiscal year (other than with respect to the annual
statement for fiscal year 2000) together with a comparison of such statements to
the Business Plan for the most recently completed fiscal year. The annual
financial statements shall be prepared in accordance with GAAP, and shall be
audited in accordance with generally accepted auditing standards and certified
by an independent firm of certified public accountants recommended by the Board
and approved by the Members. The financial statements required to be delivered
pursuant to this Section 7.1(b) also shall be accompanied by (A) a copy of the
auditing firm's annual management letter to the Company, if any, and (B) a
report certified by the Board describing the amount and purpose of any reserves
of the Company (for contingencies or otherwise).
(c) Accountant's Reports. Promptly upon receipt thereof, the Company
shall furnish to each Qualifying Member copies of all other reports, if any,
submitted to the Company by independent public accountants in connection with
any annual or interim audit of the books of the Company and its subsidiaries
made by such accountants.
(d) Litigation Matters. Promptly upon the Company's learning
thereof, the Company shall furnish to each Qualifying Member notice of the
institution or resolution of any suit or administrative proceeding that could be
reasonably expected to have a material adverse impact on the condition
(financial or otherwise), properties, assets, operations, results of operations,
business or rights of the Company or any of its subsidiaries.
(e) Material Events. Promptly upon the Company's learning thereof,
the Company shall furnish to each Qualifying Member notice of any event that has
had,
25
or could reasonably be expected to have, a material adverse impact on the
condition (financial or otherwise), properties, assets, operations, results of
operations, business or rights of the Company or any of its subsidiaries,
including, without limitation, the threat of any material litigation or
investigation with respect to the Company or any of its subsidiaries or any
material disputes with customers.
(f) Other Information. With reasonable promptness, and so long as
the Company (or any successor of the Company) is not a publicly traded entity,
the Board shall deliver to each Qualifying Member such other information and
financial data concerning the Company as such Qualifying Member may reasonably
request. The Company agrees to cooperate fully with any Qualifying Member in
responding to any reasonable request for other information and financial data
made by such Qualifying Member in order to meet in a timely manner such
Qualifying Member's periodic reporting requirements under the Securities
Exchange Act of 1934, as amended.
(g) Access. Provided that such visits or inspections are not unduly
burdensome or disruptive, the Company shall permit and cause each of its
subsidiaries to permit each Qualifying Member and such persons as it may
designate, at such Member's expense and upon reasonable prior notice, to visit
and inspect any of the properties of the Company and its subsidiaries, examine
their books and take copies and extracts therefrom, and discuss the affairs,
finances and accounts of the Company and its subsidiaries with their officers,
employees and public accounts (and the Company hereby authorizes such
accountants to discuss with such Members and such designees such affairs,
finances and accounts).
ARTICLE VIII
TRANSFERS OF MEMBERSHIP INTERESTS
Section 8.1 Transfers of Membership Interests.
(a) Generally. No Member may at any time effect any Transfer, except
as follows:
(i) a Member may effect any Transfer with the prior
written consent of the other Members, which consent may be withheld
by each other Member in its sole discretion;
26
(ii) a Member may effect a Disposition to any Affiliate
of such Member, upon compliance with the provisions of Section
8.1(b) and Section 8.1(c) below;
(iii) a Member may pledge or otherwise encumber its
Membership Interests under its debt arrangements; provided, that any
pledgee or security holder which realizes on such pledge or
encumbrance and becomes the holder of Membership Interests shall be
a passive equity holder only, subject to the obligations of this
Agreement (including under Section 5.1), but with no governance,
voting or Board representation rights and no rights under Section
8.1(d) and 8.2;
(iv) at any time after the date that is two (2) years
after the Effective Date, a Member may effect a Disposition to any
Person (other than a Disposition to an Affiliate, which shall be
governed by clause (ii) above), upon compliance with the provisions
of Section 8.1(b) and Section 8.1(d) below;
(v) at any time after the date that is five (5) years
after the Effective Date, a Member may effect a Disposition pursuant
to Section 8.1(e); or
(vi) notwithstanding any other provision of this
Agreement, but subject to any restrictions under Section 3.5(d), the
Registration Rights Agreement or applicable law, a Member may effect
a Disposition to any Person after the completion of a Company IPO.
(b) Conditions and Restrictions on Certain Transfers. In the case of
a Transfer permitted pursuant to Section 8.1(a)(ii) or 8.1(a)(iv), such Transfer
shall be permitted only if:
(i) such Transfer will be accomplished in a non-public
offering exempt from registration and qualification requirements of
all applicable securities laws and regulations;
(ii) such Transfer will not result in the imposition of
a transfer tax on the other Members or the Company, or result in a
termination of the Company pursuant to the provisions of U.S. Tax
Code section 708(b) (or any comparable provision of state, local,
foreign or provincial
27
tax law), unless such transfer tax or the consequences
of such tax termination are indemnified against by the
transferring Member (the "Transferor") or its transferee
(the "Transferee") in a manner reasonably acceptable to
the non-transferring Members; provided that the Members
shall cooperate in good faith, at the request of the
Member proposing the Transfer, to structure such
Transfer in a manner that does not give rise to any such
transfer tax or tax termination;
(iii) such Transfer will not result in or
cause any material defaults under, any material breaches
of any material obligations contained in, or any
material failures of material conditions contained in,
any agreements to which the Company is a party, which
agreements, individually or in the aggregate, are
material to the Business;
(iv) other than in connection with a
Transfer to another Member pursuant to Section 8.2(d),
the Transferor effecting any such Transfer holds the
non-transferring Members harmless from all reasonable
out-of-pocket costs and expenses (including reasonable
attorneys' fees) incurred by the non-transferring
Members in order to complete the Transfer; and
(v) the Transferee in connection with a
Disposition shall have entered into a legally binding
commitment in form and substance reasonably satisfactory
to the non-transferring Members to be bound by this
Agreement and the Operating Agreement from and after the
date such Transferee becomes a Member.
(c) Dispositions to Affiliates. Any Disposition to an
Affiliate shall be permitted only if (i) the Transferor has given
ten (10) Business Days' prior written notice to the other Members
identifying and providing relevant information about such Affiliate
and (ii) the Transferor has complied with the applicable provisions
of Section 8.1(b).
(d) Duty of First Offer.
(i) If any Member intends to offer (an "Offer") to
any Person other than an Affiliate of such Member all or
part of such Member's Membership Interest (which part
shall be at least twenty percent (20%) of such Member's
initial Membership Interest), such Member (the
"Prospective Seller") shall provide the other Members
written notice of
28
such Offer (an "Offer Notice"). The Offer Notice shall set forth the
portion of the Prospective Seller's Membership Interests with
respect to which the Prospective Seller intends to make such Offer
(the "Offered Interests") and the price and other material terms
upon which the Prospective Seller intends to sell the Offered
Interests (the "Offer Price").
(ii) The receipt of an Offer Notice by the other
Members from a Prospective Seller shall constitute an offer by such
Prospective Seller to sell to each other Member the Offered
Interests at the Offer Price. Such offer shall be open for 20 days
after receipt of such Offer Notice by the other Members. During such
20-day period, each other Member shall have the right to accept such
offer as to all but not less than all of its pro-rata portion of the
Offered Interests (with such other Members having the option to
purchase at the Offer Price all Membership Interests not purchased
by the other Members) by giving a written notice of acceptance (the
"Notice of Acceptance") to the Prospective Seller and a copy of the
Notice of Acceptance to each other Member prior to the expiration of
such 20day period (any other Member so accepting such offer being an
"Accepting Party"). Any other Member's rejection of the Prospective
Seller's offer shall only be binding if such other Member has
written notice of each of the other Members' final decision to
accept or reject the Prospective Seller's offer.
(iii) If the Accepting Parties have agreed, in the
aggregate, to purchase all, but not less than all, of the Offered
Interests, the consummation of any such purchase by and sale to each
such Accepting Party shall take place on such date, not later than
30 days after receipt of the Notice of Acceptance received by the
Prospective Seller, as such Accepting Party and the Prospective
Seller shall select. Upon the consummation of such purchase and
sale, the Prospective Seller shall (A) deliver to the Accepting
Party written instruments of transfer with respect to the Offered
Interest in form satisfactory to such Accepting Party duly executed
by the Prospective Seller, and (B) shall assign all its rights under
this Agreement and the Operating Agreement with respect to the
Offered Interest purchased and sold pursuant to an instrument of
assignment reasonably satisfactory to such Accepting Party.
(iv) If the other Members do not elect to purchase all
of the Membership Interests offered by the Prospective Seller during
the 20-day offer period, then the Prospective Seller shall have a
120-day period (the "Sale Period") following the 20-
29
day offer period to enter into a binding agreement to sell all such
Membership Interests to a third party (a "Third Party Purchaser") at
a price at or higher than the Offer Price. If the Prospective Seller
enters into a binding agreement to sell such Membership Interests to
a Third Party Purchaser during the Sale Period, the Prospective
Seller thereafter shall have an additional 60-day period following
the execution of such binding agreement to close such sale.
(v) In the event that each other Member shall have
received an Offer Notice from a Prospective Seller but the
Prospective Seller shall have received a Notice of Acceptance from
only one Accepting Party, the other Member which has elected not to
purchase its pro rata share of the Offered Interests from the
Prospective Seller may elect within 20 days after its receipt of a
copy of the Notice of Acceptance to sell a pro rata portion of its
Membership Interests at the Offer Price to the Accepting Party. Such
sale by such other Member shall ratably reduce the Offered Interests
to be sold to the Accepting Party by the Prospective Seller.
(vi) Anything in this Section 8.1(d) to the contrary
notwithstanding, the provisions of this Section 8.1(d) will not be
applicable to Transfers of Membership Interests made pursuant to and
in compliance with Section 8.1(e).
(e) Drag-Along Rights.
(i) Following the fifth anniversary of the Effective
Date, if Members holding greater than fifty percent (50%) of the
outstanding Membership Interests (the "Controlling Members") shall
propose to sell, directly or indirectly, all of their Membership
Interests in the Company (the "Controlling Interest"), in any
transaction or series of related transactions, to any Person or
Persons (a "Drag-Along Offer"), the Controlling Members may, at
their option, require each of the other Members (the
"Non-Controlling Members") to sell all of the Membership Interests
owned or held by the Non-Controlling Members to such Person or
Persons for the same pro-rata consideration (based on such Member's
Membership Interests in the Company, assuming the conversion or
exercise of all outstanding options, warrants or other convertible
securities) and otherwise on the same terms and conditions upon
which the Controlling Mem-
30
bers sell their Membership Interests (a "Drag-Along Sale"). In the
Drag-Along Sale, all Members holding securities convertible into
Membership Interests shall either (A) exercise such securities prior
to the consummation of the Drag-Along Sale and participate in such
sale as Members holding such Membership Interests or (B) upon the
consummation of the Drag-Along Sale, receive in exchange for such
securities consideration equal to the amount determined by
multiplying (1) the same pro-rata consideration (based on such
Member's Membership Interests in the Company) received by the
Members in connection with the Drag-Along Sale less the exercise
price per percentage of the outstanding Membership Interests by (2)
the percentage of Membership Interests represented by such rights.
(ii) The Controlling Members shall provide a written
notice (the "Sale Notice") of the Drag-Along Sale to each of the
Non-Controlling Members not later than the twentieth Business Day
prior to the proposed consummation of the sale contemplated by the
Drag-Along Offer. The Sale Notice shall contain written notice of
the exercise of the Controlling Members' rights pursuant to this
Section 8.1(e), setting forth the consideration to be paid by such
Person or Persons and the other material terms and conditions of the
Drag-Along Offer. Within fifteen (15) Business Days following the
date the Sale Notice is given, each of the Non-Controlling Members
shall deliver to the Controlling Members (A) written instruments of
transfer in form reasonably satisfactory to the Controlling Members
executed by the Non-Controlling Member, and (B) such other
documents, certificates, resolutions, or other instruments as may be
reasonably necessary to sell or otherwise dispose of such Membership
Interest pursuant to the terms of the Drag-Along Offer. Each
Non-Controlling Member shall consent to and raise no objections to
the Drag-Along Sale and, upon request by the Controlling Members,
shall waive any appraisal or dissenters' rights in respect of such
Drag-Along Sale, and take all other actions reasonably necessary or
desirable to cause the consummation of such Drag-Along Sale on the
terms proposed by the Controlling Members, including, without
limitation, (i) if the Drag-Along Sale is structured as a sale of
Membership Interests, each Non-Controlling Member will sell all of
its Membership Interests and rights to acquire Membership Interests
on the terms and conditions approved by the Controlling Members,
(ii) if the Drag-Along Sale is structured as a merger or
consolidation, each Non-Controlling Member will vote in favor
thereof and will not exercise any dissenters' rights of appraisal it
may have under
31
any applicable law and (iii) if the Drag-Along Sale is structured as
a sale of all or substantially all of the assets of the Company,
each Non-Controlling Member will vote in favor thereof and, if
applicable, will vote in favor of the subsequent dissolution and
liquidation of the Company.
(iii) Promptly after the consummation of the sale of the
Membership Interests of the Controlling Members and the
Non-Controlling Members to such Person or Persons pursuant to the
Drag-Along Offer, the Controlling Members shall remit to each of the
Non-Controlling Members the pro rata portion of the total sales
price attributable to the Membership Interests of such
Non-Controlling Members sold pursuant thereto less a pro-rata
portion of the reasonable out-of-pocket costs and expenses
(including reasonable attorneys= fees) incurred by the Controlling
Members in connection with such sale.
(iv) If, at the end of the 75day period following the
giving of the Sale Notice, the Controlling Members shall not have
completed the sale of all the Controlling Interest and the
Membership Interests transferred to the Controlling Members pursuant
to Section 8.1(e)(ii), the Controlling Members shall return to the
Non-Controlling Members the documents delivered to the Controlling
Members pursuant to Section 8.1(e)(ii)(A) and 8.1(e)(ii)(B).
(v) Except as expressly provided in this Section
8.1(e), the Controlling Members shall have no obligation to any
Non-Controlling Member with respect to the sale or other disposition
of any Membership Interests owned by such Non-Controlling Member in
connection with this Section 8.1(e). Anything herein to the contrary
notwithstanding, the Controlling Members shall have no obligation to
any Non-Controlling Member to sell or otherwise dispose of any
Controlling Interest pursuant to this Section 8.1(e) or as a result
of any decision by the Controlling Members not to accept or
consummate any Drag-Along Offer or sale with respect to the
Controlling Interest (it being understood that any and all such
decisions shall be made by each of the Controlling Members in its
sole discretion). No Non-Controlling Member shall be entitled to
make any Transfer of Membership Interests directly to any Person
pursuant to an Offer (it being understood that all such Transfers
shall be made only on the terms and pursuant to the procedures set
forth in this Section 8.1(e)).
32
Nothing in this Section 8.1(e) shall affect any of the obligations
of any of the Members under any other provision of this Agreement.
(vi) No Non-Controlling Member shall be required to
make any representations and warranties to any Person or Persons in
connection with the sale made pursuant to the Drag-Along Offer
except as to (A) good title and the absence of liens with respect to
such Non-Controlling Member's Membership Interests, (B) the
corporate or other existence of such Non-Controlling Member and (C)
the authority for and the validity and binding effect of, and
absence of any conflicts under the charter documents and materials
agreements of, such Non-Controlling Member as to, any agreements
entered into by such Non-Controlling Member in connection with such
sale. Each Member shall be obligated to agree to join in any
indemnification to which the Controlling Members agree on the same
terms as agreed to by the Controlling Members; provided, that the
liability of any Non-Controlling Member with respect to such
indemnification shall not exceed the amount of the net proceeds from
such Drag-Along Sale.
(vii) Anything in this Section 8.1(e) to the contrary
notwithstanding, the provisions of this Section 8.1(e) shall not be
applicable (A) to any sale of Membership Interests pursuant to a
Company IPO or (B) at any time after a Company IPO.
Section 8.2 Preemptive Rights.
(a) Except as otherwise provided in Section 8.2(c), if the Company
authorizes the offer or sale to any Person of membership interests or other
equity securities in the Company ("New Interests") or of options or rights to
acquire New Interests ("New Rights"), then the Company will first offer to each
Initial Member a fraction (equal to such Initial Member's Membership Interest in
the Company) of such New Interests or New Rights. Each Initial Member shall be
entitled to purchase all or a portion of the New Interests or New Rights offered
to it at the same price and on the same terms and conditions as such New
Interests or New Rights are to be offered to any other Persons. Each Initial
Member must exercise its purchase rights hereunder within 20 days after written
notice from the Company describing in reasonable detail the New Interests or New
Rights being offered, the purchase price thereof, the payment terms thereof and
such Initial Member's percentage allotment.
33
(b) During the 120 days following the expiration of the offering
period described above, the Company shall be free to sell any New Interests or
New Rights that the Initial Members have not elected to purchase on terms and
conditions no more favorable to the purchasers thereof than those offered to the
Initial Members. If any New Interests or New Rights are not sold during such
120-day period in accordance with this Section 8.2(b), then the provisions of
this Section 8.2 shall automatically and immediately be reinstated, and shall
automatically and immediately reapply to the offer or sale of such New Interests
or New Rights.
(c) The provisions of this Section 8.2 shall not apply to (i) the
issuance and sale, in accordance with Section 5.4, to employees, officers or
managers of the Company of New Interests or New Rights representing up to
fifteen percent (15%) of the outstanding Membership Interests in the Company as
of the Effective Date, (ii) the issuance and sale of New Interests in an initial
public offering of equity interests in the Company (or any successor to the
Company) registered under the Securities Act, (iii) the issuance and sale of New
Interests to one or more Investors in financings prior to a Company IPO in an
aggregate amount equal to up to ten percent (10%) of the fully diluted
outstanding membership interests in the Company (or any successor to the
Company) or (iv) the issuance or sale of any New Interests or New Rights in an
equity-for-equity acquisition. The provisions of this Section 8.2 shall
terminate upon a Company IPO.
(d) The rights of a Member under this Section 8.2 may be waived in
writing in any specific instance by any Member.
Section 8.3 Other Transfer Matters.
(a) Member Consent to Transfers. Upon request of any Member
effecting a Transfer permitted by and in compliance with the provisions of
Section 8.1, the other Members shall execute a written consent in form and
substance reasonably satisfactory to such other Members, admitting the
Transferee as a member of the Company, entitled to all the privileges and
subject to all the obligations of this Agreement and the Operating Agreement
approving such permitted Transfer. The Members acknowledge that an award of
damages for failure to comply with the foregoing covenant would not be an
adequate remedy for the Member attempting to effect a permitted Transfer, and
accordingly expressly authorize such Member to bring an action against the
non-transferring Members to compel the specific performance by such
non-transferring Members of their obligations to execute a written consent as to
such permitted Transfer.
34
(b) Prohibited Transfers. Any purported Transfer that is not made in
accordance with this Article VIII shall be null and void ab initio.
ARTICLE IX
TERM AND TERMINATION
Section 9.1 No Termination of Company. Except as expressly provided in
this Agreement, no Member shall or shall seek to dissolve, terminate or
liquidate the Company, and no Member shall petition a court for the partition,
dissolution, termination or liquidation of the Company or its property. Each of
the Members hereby irrevocably waives any and all rights that it may have to
maintain an action to partition Company property or to compel any sale or
transfer thereof.
Section 9.2 Term and Termination of Agreement. This Agreement shall
continue in full force and effect until the earliest to occur of (a) termination
by unanimous written consent of the Members, (b) the date on which all
Membership Interests are held by a single Person, (c) the final dissolution and
completion of winding up of the Company in accordance with this Agreement and
the Operating Agreement, or (d) a Company IPO; provided that this Agreement
shall continue in force thereafter solely with respect to 4.4, 10.1, 10.4 and
10.6. The Company shall dissolve and commence winding up upon the earliest to
occur of (a) the unanimous written consent of the Members and (b) the happening
of any event that makes it unlawful or impossible to carry on the Business.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Notices. Any notice, demand, offer, or other instrument
required or permitted to be given pursuant to this Agreement shall be in writing
signed by the party giving such notice and shall, to the extent reasonably
practicable, be sent by telecopy, and if not reasonably practicable to send by
telecopy, then by hand delivery, overnight courier, telegram or certified mail
(return receipt requested), to the other parties at the addresses set forth
below:
If to the Company:
ChoiceParts, LLC
35
25 Northwest Point
Elk Grove Village, Illinois 60007
Facsimile: (253) 390-9121
Attention: Chief Executive Officer
If to ADP:
c/o ADP, Inc.
1950 Hassell Road
Hoffman Estates, Illinois 60195
Facsimile: (847) 781-9873
Attention: Group President
with a copy to:
ADP, Inc.
One ADP Boulevard
Roseland, NJ 07068
Facsimile: (973) 974-3399
Attention: General Counsel
If to CCC:
CCC Information Services, Inc.
World Trade Center Chicago
444 Merchandise Mart
Chicago, IL 60654
Facsimile: (312) 527-5888
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2100
Chicago, IL 60606
Facsimile: (312) 407-0411
Attention: Peter C. Krupp, Esq.
36
If to Reynolds:
The Reynolds and Reynolds Company
115 South Ludlow Street
Dayton, OH 45402
Facsimile: (937) 485-4123
Attention: General Counsel
with a copy to:
Shearman & Sterling
555 California Street, Suite 2000
San Francisco, CA 94104-1522
Facsimile: (415) 616-1199
Attention: Christopher D. Dillon, Esq.
Each party may change the place to which notice shall be sent or delivered
or specify one additional address to which copies of notices may be sent, in
either case by similar notice sent or delivered in like manner to the other
parties. Without limiting any other means by which a party may be able to prove
that a notice has been received by the other party, a notice shall be deemed to
be duly received: (a) if sent by hand, overnight courier or telegram, the date
when duly delivered at the address of the recipient; (b) if sent by certified
mail, the date of the return receipt; or (c) if sent by telecopy, upon receipt
by the sender of an acknowledgment or transmission report generated by the
machine from which the telecopy was sent indicating that the telecopy was sent
in its entirety to the recipient's telecopy number.
Section 10.2 Disclaimer of Agency. This Agreement does not create any
relationship beyond the scope set forth herein, and except as otherwise
expressly provided herein or in the Operating Agreement, this Agreement shall
not constitute any of the Members or the Company the legal representative or
agent of any other, nor shall any Member or the Company have the right or
authority to assume, create or incur any liability or obligation, express or
implied, against, in the name of or on behalf of any other Member or the
Company, as applicable.
Section 10.3 Amendment. Any amendment, modification or supplement of or to
this Agreement or the Operating Agreement shall require the written consent of
each Initial Member; provided, however, that the Initial Members shall promptly
consent to amendments to this Agreement or the Operating Agreement in
furtherance of the transactions contemplated hereby, including, without
limitation, those that reflect (A) the
37
consummation of a Reorganization pursuant to Section 3.6, (B) changes in the
rights of the Members in accordance with Section 5.5(b) pursuant to the
admission of an Investor, (C) changes in the relative interests of the Members
in the Company upon the consummation of a transfer of Membership Interests
permitted pursuant to Section 8.1 or (D) changes in the relative interests of
the Members in the Company upon the consummation of a sale of New Interests or
New Rights pursuant to Section 8.2.
Section 10.4 Waiver of Consequential Damages. Notwithstanding any
provision in this Agreement to the contrary, no Member or any Affiliate thereof
shall be liable to any other Member or to the Company or to their respective
Affiliates under this Agreement or the Operating Agreement for consequential,
incidental, special, indirect or punitive damages of any nature, including lost
profits or revenues, the cost of capital or lost business opportunity. The
Members intend that the waivers and disclaimers of liability, releases from
liability, and limitations and apportionments of liability expressed herein
shall apply, whether in contract or in tort, even in the event of the
application of strict liability or in the event of the fault or negligence (in
whole or in part) of or breach of contract by a Member or its Affiliate released
or whose liability is waived, disclaimed, limited, apportioned or fixed, and
shall extend to such Member's Affiliates and its and their constituent partners,
shareholders, directors, officers, employees, representatives and agents. The
Members also intend and agree that such provisions shall continue in full force
and effect notwithstanding the termination, suspension, cancellation or
rescission of this Agreement or the Operating Agreement or the dissolution and
termination of the Company.
Section 10.5 Names and Marks. No Member Group shall have any right to use
any name, trade name, trademark, service mark or other description (a) of any
other Member Group without the prior written consent of such other Member or its
Affiliates, as applicable or (b) of the Company without the prior written
consent of the other Members, and nothing contained in this Agreement shall be
construed to grant or confer any such consent. The Company shall not have any
right to use any name, trade name, trademark, service mark or other description
of any of the Member Groups without the prior written consent of the affected
Member Group.
Section 10.6 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REFERENCE
TO THE PRINCIPLES AND POLICIES OF CONFLICTS OF LAW OF SUCH STATE.
Section 10.7 Counterparts. The parties may execute this Agreement in two
or more counterparts, which shall, in the aggregate, be signed by all the
parties, and each
38
counterpart shall be deemed an original instrument as against
any party hereto who has signed it.
Section 10.8 Binding Effect. This Agreement shall be binding on all
successors and assigns of the parties and inure to the benefit of the respective
successors and permitted assigns of the parties, except to the extent of any
express contrary provision in this Agreement.
Section 10.9 Severability. If any provision of this Agreement is invalid
or unenforceable, the balance of this Agreement shall remain in full force and
effect, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted, so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon any such determination that any provision
of this Agreement is invalid or unenforceable, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
Section 10.10 Captions. Titles or captions of Sections or Articles
contained in this Agreement are inserted only as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
Section 10.11 Entire Agreement. This Agreement, the Operating Agreement,
and any agreement, document or schedule attached hereto or thereto or referred
to herein or therein, constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, of the parties with
respect to the subject matter hereof. Any oral representations or modifications
concerning this instrument shall be of no force or effect unless contained in a
subsequent written modification signed by the party to be charged.
Section 10.12 No Rights in Third Parties. The provisions of this Agreement
are for the exclusive benefit of the parties and their respective successors and
permitted assigns. This Agreement is not intended to benefit or create rights in
any other Person, including any liquidator, trustee or creditor acting on behalf
of the Company. No such creditor or any other Person shall have any rights under
this Agreement (or any other Agreement to which the Members are parties),
including rights with respect to enforcing the payment of capital contributions,
unless specifically set forth herein or therein.
39
Section 10.13 No Title to Company Property. All property owned by the
Company, whether real, personal or mixed, and whether tangible or intangible,
shall be deemed to be owned by the Company as an entity, and no Member,
individually, shall have any ownership interest or title in such property except
indirectly through such Member's ownership of Membership Interests.
Section 10.14 Further Assurances. Each of the Members agrees to, and to
cause its Affiliates to, promptly take such further actions and execute and
deliver such further documents (including, without limitation, amendments to
this Agreement, the Operating Agreement and the Registration Rights Agreement)
as are reasonably necessary or expedient or as may reasonably be requested by
the other Members, in each case, to effect (i) the transactions contemplated by
this Agreement, the Operating Agreement and the Registration Rights Agreement
and (ii) actions taken by the Board which are consistent with the terms and
provisions of this Agreement and the Operating Agreement.
Section 10.15 No Waiver. Any failure of a party to enforce any of the
provisions of this Agreement or to require compliance with any of its terms at
any time during the pendency of this Agreement shall in no way affect the
validity of this Agreement, or any part hereof, and shall not be deemed a waiver
of the right of such party thereafter to enforce any and each such provision.
Section 10.16 Consent to Jurisdiction. Without limiting the provisions of
Article X hereof, the parties agree that any legal proceeding by or against any
party or with respect to or arising out of this Agreement may be brought in or
removed to the United States District Court for the Southern District of New
York or the courts of the State of New York, in The City of New York, as the
party or parties instituting such legal action or proceeding may elect. By
execution and delivery of this Agreement, each party irrevocably and
unconditionally submits to the exclusive jurisdiction of such courts and to the
appellate courts therefrom. The parties irrevocably consent to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified airmail, postage
prepaid, to the such Member at the address specific in Section 10.1.
Any such service of process shall be effective five (5) Business Days
after mailing, or, if hand-delivered, upon delivery. Nothing herein shall affect
the right to serve process in any other manner permitted by applicable law. The
parties hereby waive any right to stay or dismiss any action or proceeding under
or in connection with this Agreement brought before the foregoing courts on the
basis of (a) any claim that it is not personally subject to the jurisdiction of
the above-named courts for any reason, or that it or any of its property is
immune from the above-described legal process, (b) that such
40
action or proceeding is brought in an inconvenient forum, that venue for the
action or proceeding is improper or that this Agreement may not be enforced in
or by such courts, or (c) any other defense that would hinder or delay the levy,
execution or collection of any amount to which any party is entitled pursuant to
any final judgment of any court having jurisdiction.
Section 10.17 Waiver of Trial By Jury. THE PARTIES HERETO HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE THE RIGHT TO TRIAL BY JURY IN CONNECTION
WITH ANY CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Section 10.18 Specific Performance. The parties hereto agree that
irreparable damage may occur in the event that any of the provisions of this
Agreement are not performed in accordance with their specific terms or are
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in the United States
District Court for the Southern District of New York or the courts of the State
of New York, in The City of New York, this being in addition to any other remedy
to which they are entitled at law or in equity.
[Remainder of page intentionally left blank]
41
IN WITNESS WHEREOF, the parties hereto have executed this Members'
Agreement as of the date first written above.
CHOICEPARTS, LLC
By: /s/ Peter J. Largen
---------------------------------
Name: Peter J. Largen
Title: Vice President
ADP, INC.
By: /s/ S. Michael Martone
---------------------------------
Name: S. Michael Martone
Title: President, Dealer Services Group
CCC INFORMATION SERVICES, INC.
By: /s/ Githesh Ramamurthy
---------------------------------
Name: Githesh Ramamurthy
Title: President & CEO
THE REYNOLDS AND REYNOLDS COMPANY
By: /s/ Thomas W. Baird
---------------------------------
Name: Thomas W. Baird
Title: Vice President
Exhibit A to
Members' Agreement
PRIVATE ISSUANCE GUIDELINES
The Members will seek strategic and financial partners who can provide the
Company with one or more of the following benefits: (i) expertise in the
Internet business-to-business environment, (ii) strategic relationships in the
auto parts procurement market, or (iii) enhanced ability to recruit high caliber
senior executives and employees. Examples of such financial partners include,
but are not limited to, Kleiner Perkins Caufield & Byers, General Atlantic
Partners, Sequoia Partners, Greylock Capital, Benchmark Capital, ICG and CMGI.
Examples of such strategic partners include, but are not limited to: (w) car
buying services such as Carpoint, Carsdirect.com, autobytel and Microsoft, (x)
OEM manufacturers such as Ford, Chrysler and General Motors, (y) other parts
manufacturers and/or wholesalers/distributors and (z) other parts supply chain
constituents including insurance companies and/or data providers (such as Bell &
Howell).
For clarity, the names listed above are intended as examples only and
shall not be construed to constrain the ability of a majority of the Board to
determine the specific identity of any additional investor, pursuant to the
terms of this Agreement; provided, that such investors are deemed by such a
majority to be consistent with the guidelines above.
1