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Exhibit 10.22
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
NSP HOLDINGS L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
DATED AS OF FEBRUARY 17, 2000
THE UNITS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
ANY OTHER APPLICABLE SECURITIES LAWS. SUCH UNITS MAY NOT BE SOLD, ASSIGNED,
PLEDGED OR OTHERWISE TRANSFERRED AT ANY TIME WITHOUT EFFECTIVE REGISTRATION
UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER
RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
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TABLE OF CONTENTS
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PAGE(S)
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ARTICLE I.
ORGANIZATIONAL MATTERS....................................................1
1.1 Formation of Company...............................................1
1.2 Limited Liability Company Agreement................................1
1.3 Name...............................................................1
1.4 Purpose............................................................2
1.5 Principal Office; Registered Office................................2
1.6 Term...............................................................2
1.7 No State-Law Partnership...........................................2
ARTICLE II.
MEMBERS; MEMBER UNITS.....................................................2
2.1 Member Units.......................................................2
2.2 Additional Units...................................................4
2.3 Time of Meetings...................................................6
2.4 Notice of Meetings.................................................6
2.5 Voting.............................................................6
2.6 Proxies............................................................6
2.7 Regulatory Compliance Matters......................................6
2.8 Conversion of Common Units in General..............................7
2.9 Conversion of Class B Common Units.................................7
2.10 Conversion Procedure...............................................9
2.11 SBIC Regulatory Provisions........................................10
2.12 Deliveries........................................................11
ARTICLE III.
MANAGERS.................................................................11
3.1 Selection of Managers.............................................11
3.2 Management........................................................12
3.3 Restrictions......................................................13
3.4 Procedures........................................................15
3.5 Designation of Chairman and Officers..............................15
3.6 The Chief Executive Officer.......................................16
3.7 The President.....................................................16
3.8 Vice President....................................................16
3.9 Secretary.........................................................16
3.10 Chief Financial Officer...........................................16
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3.11 Assistant Secretaries and Assistant Treasurers....................17
ARTICLE IV.
CAPITAL..................................................................17
4.1 Initial Capital Contributions.....................................17
4.2 In-kind Capital Contributions.....................................17
4.3 Additional Capital Contributions..................................17
4.4 Interest..........................................................17
4.5 Capital Accounts..................................................17
4.6 Negative Capital Accounts.........................................18
4.7 No Withdrawal.....................................................18
4.8 Company Assets....................................................18
ARTICLE V.
PROFITS, LOSSES AND DISTRIBUTIONS........................................19
5.1 Distributions.....................................................19
5.2 Allocations.......................................................20
5.3 Special Allocations...............................................20
5.4 Tax Allocations...................................................21
5.5 Curative Allocations..............................................22
ARTICLE VI.
BOOKS, RECORDS, ACCOUNTING AND REPORTS...................................23
6.1 Records; Accounting and Notice....................................23
6.2 Fiscal Year.......................................................23
6.3 Transmission of Communications....................................23
ARTICLE VII.
TAX MATTERS..............................................................23
7.1 Preparation of Tax Returns........................................23
7.2 Tax Elections.....................................................23
7.3 Tax Controversies.................................................23
ARTICLE VIII.
NON-COMPETITION..........................................................24
8.1 Noncompete........................................................24
8.2 Nonsolicitation...................................................24
8.3 Enforceability....................................................24
8.4 Reasonable Restrictions...........................................25
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ARTICLE IX.
TRANSFER AND WITHDRAWAL..................................................25
9.1 Restrictions on Transfer of Securities............................25
9.2 Right of First Refusal............................................25
9.3 Sale of the Company...............................................27
9.4 Tag-Along Rights..................................................29
9.5 Termination of Employment.........................................30
9.6 Withdrawal of Members.............................................31
9.7 Legend............................................................32
9.8 Transfer Cost Considerations......................................32
ARTICLE X.
ADMISSION OF MEMBERS.....................................................32
10.1 Substituted Members...............................................32
10.2 Additional Members................................................33
10.3 Optionholders.....................................................33
ARTICLE XI.
INCORPORATION............................................................33
ARTICLE XII.
LIQUIDATION..............................................................33
12.1 Dissolution.......................................................33
12.2 Accounting........................................................34
12.3 Compensation of Trustee...........................................34
ARTICLE XIII.
INDEMNITY................................................................34
13.1 Indemnification...................................................34
ARTICLE XIV.
DEFINITIONS..............................................................35
14.1 Certain Definitions...............................................35
14.2 Other Definitions.................................................43
ARTICLE XV.
MISCELLANEOUS............................................................43
15.1 Wills.............................................................43
15.2 Spousal Consent...................................................43
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15.3 Third-Party Beneficiaries.........................................43
15.4 Designees.........................................................44
15.5 Amendments........................................................44
15.6 Notices...........................................................44
15.7 Waiver of Certain Rights..........................................45
15.8 Entire Agreement..................................................45
15.9 Effect of Waiver or Consent.......................................45
15.10 Creditors.........................................................45
15.11 Indemnification and Reimbursement for Payments on Behalf of
a Member or Holder of Warrants..................................45
15.12 Binding Agreement.................................................46
15.13 Governing Law.....................................................46
15.14 Arbitration.......................................................47
15.15 Descriptive Headings; Interpretation..............................47
15.16 Further Assurances................................................48
15.17 Counterparts......................................................48
15.18 Representations and Warranties of Securityholder..................48
15.19 Representations and Warranties of Company.........................49
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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
NSP HOLDINGS L.L.C.
A DELAWARE LIMITED LIABILITY COMPANY
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this
"AGREEMENT"), entered into and adopted on February 17, 2000 (the "EFFECTIVE
DATE"), by the Members of NSP Holdings L.L.C., a Delaware limited liability
company (the "COMPANY") and the holders of Warrants (as defined herein).
This Agreement amends and restates in its entirety that certain
Limited Liability Company Agreement, dated as of the October 2, 1998, by and
among the Company and its members (the "PRIOR AGREEMENT"). This Agreement shall
become effective upon execution hereof by the holders of a majority of the
Common Voting Units (with Required Approval) (each as defined in the Prior
Agreement).
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE I.
ORGANIZATIONAL MATTERS
1.1 FORMATION OF COMPANY. The Company was formed on September 25,
1998 pursuant to the provisions of the Delaware Act and the provisions of this
Agreement.
1.2 LIMITED LIABILITY COMPANY AGREEMENT. The Members hereby
execute this Agreement for the purpose of establishing the affairs of the
Company and the conduct of its business in accordance with the provisions of the
Delaware Act. The Members hereby agree that during the term of the Company set
forth in SECTION 1.6 the rights and obligations of the Members with respect to
the Company will be determined in accordance with the terms and conditions of
this Agreement and, except where the Delaware Act provides that such rights and
obligations specified in the Delaware Act shall apply "unless otherwise provided
in a limited liability company agreement" or words of similar effect, and such
rights and obligations are set forth in this Agreement, the Delaware Act;
PROVIDED THAT, notwithstanding the foregoing, Section 18-210 of the Delaware Act
shall not apply or be incorporated into this Agreement.
1.3 NAME. The name of the Company shall be "NSP Holdings L.L.C."
The Managers in their sole discretion may change the name of the Company at any
time and from time to time. Notification of any such change shall be given to
all Securityholders. The Company's business may be conducted under its name
and/or any other name or names deemed advisable by the Managers.
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1.4 PURPOSE. The purpose and business of the Company shall be any
business which may lawfully be conducted by a limited liability company formed
pursuant to the Delaware Act.
1.5 PRINCIPAL OFFICE; REGISTERED OFFICE. The principal office of
the Company shall be at 2211 York Road, Suite 215, Oak Brook, Illinois
60523-1887, or such other place as the Managers may from time to time designate.
The Company may maintain offices at such other place or places as the Managers
deem advisable. Notification of any such change shall be given to all Members.
The address of the registered office of the Company in the State of Delaware
shall be c/o The Corporation Trust Company, 1209 Orange Street, Wilmington,
Delaware 19805, and the registered agent for service of process on the Company
in the State of Delaware at such registered office shall be The Corporation
Trust Company.
1.6 TERM. The term of the Company commenced upon the filing of the
Certificate in accordance with the Delaware Act and, shall dissolve on the
earlier of: (a) the entry of a decree of judicial dissolution under Section
18-802 of the Delaware Act and (b) the determination of the Managers with
Required Approval.
1.7 NO STATE-LAW PARTNERSHIP. The Members intend that the Company
not be a partnership (including, without limitation, a limited partnership) or
joint venture, and that no Member be a partner or joint venturer of any other
Member by virtue of this Agreement, for any purposes other than as set forth in
the last sentence of this SECTION 1.7, and neither this Agreement nor any other
document entered into by the Company or any Member relating to the subject
matter hereof shall be construed to suggest otherwise. The Members intend that
the Company shall be treated as a partnership for federal and, if applicable,
state or local income tax purposes, and that each Member and the Company shall
file all tax returns and shall otherwise take all tax and financial reporting
positions in a manner consistent with such treatment.
ARTICLE II.
MEMBERS; MEMBER UNITS
2.1 MEMBER UNITS.
(a) Each Member's interest in the Company, including such Member's
interest, if any, in the capital, income, gains, losses, deductions and expenses
of the Company and the right to vote, if any, on certain Company matters as
provided in this Agreement, shall be represented by "UNITS" (each, individually,
a "UNIT," and any number of Units, including fractions thereof, "UNITS"). Units
shall be comprised of "Common Units" and "Preferred Units". Initially, the Units
shall be comprised of "CLASS A COMMON UNITS," "CLASS B COMMON UNITS," "CLASS C
COMMON UNITS," and "CLASS D COMMON UNITS" and "PREFERRED UNITS". The Managers
may cause the Company to issue to each Member certificates representing the
Units held by such Member.
(b) (i) Whenever this Agreement refers to the "FAIR MARKET
VALUE" of any Securities, such value shall be determined as follows: first, the
Fair Market Value of the Company
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as a going concern shall be determined (excluding the amount of any indebtedness
for borrowed money but including all other liabilities and obligations) in good
faith by the unanimous agreement of the disinterested Managers (or all of the
Managers if no Manager is disinterested) (the "DISINTERESTED MANAGERS"), or
absent such an agreement within 10 days of the commencement of an attempt to
reach an agreement, by an independent, unaffiliated business evaluation expert
appointed by the Disinterested Managers (the "MANAGERS' EVALUATION EXPERT"), who
shall in making such determination be instructed by the Disinterested Managers
to consider all relevant factors including, but not limited to, the most recent
arm's-length transaction, if any, involving any interests in the Company. After
a determination of the Fair Market Value of the Company is made as provided
above, the Fair Market Value of a Security will equal the amount which would be
distributable in respect of such Security (or the Units into which such Security
is exercisable or convertible) if the Company were deemed to have sold all of
its assets and liabilities (other than liabilities in respect of indebtedness
for borrowed money) for such Fair Market Value in cash and then dissolved in
accordance with SECTION 12.1 and assuming that all of the convertible debt and
other convertible securities were repaid or converted (whichever would yield
more cash to the holders of such convertible securities) and all options and
warrants to acquire Securities (whether or not currently exercisable) that have
an exercise price below the Fair Market Value of the Units into which such
Securities are exercisable were exercised and the exercise price therefor paid.
Any Member affected by such valuation (the "CHALLENGING PERSON") may, as the
sole and exclusive means of challenging such valuation, provide a notice of
objection challenging such valuation within 10 days of being notified of the
initial determination of Fair Market Value, and within 90 days after being
notified of the initial determination of Fair Market Value, obtain at its own
expense a valuation of the Fair Market Value of the Company based on the
principles set forth above from another independent, unaffiliated business
evaluation expert (the "SECOND EVALUATION EXPERT"); PROVIDED, HOWEVER, that the
selection of the Second Evaluation Expert shall be subject to the approval of
the Company, which approval shall not be withheld or delayed unreasonably. If
the valuation by the Second Evaluation Expert is not less than ninety percent
(90%) nor more than one-hundred ten percent (110%) of the valuation by the
Disinterested Managers or the Managers' Evaluation Expert (as applicable), the
Fair Market Value shall be the average of the two valuations for purposes of
clause (ii) below. In any other case, the Disinterested Managers or the
Managers' Evaluation Expert (as applicable) and the Second Evaluation Expert
shall select a third, mutually acceptable evaluation expert, who shall perform a
third valuation, the cost of which shall be equally shared by the Company and
the Challenging Person, and the Fair Market Value shall be the average of the
three valuations.
(ii) Notwithstanding anything in this Agreement to the
contrary, the Company shall not be prohibited from consummating any transaction
notwithstanding the fact that the determination of Fair Market Value is required
to be made pursuant to the terms of this Agreement and remains in dispute. If at
the conclusion of the determination of Fair Market Value in accordance with the
foregoing paragraph, the Fair Market Value of any Security is greater by ten
percent (10%) or more than the Security price upon which such transaction was
consummated with respect to such Security (the "SECURITY PRICE DIFFERENCE"), the
Challenging Person (but no other person) will receive from the Company
additional cash, as reasonably determined by the Managers, sufficient to satisfy
the Security Price Difference in respect of any Securities transferred by such
Challenging Person pursuant to such transaction.
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(c) Ownership of a Common Voting Unit by a Member shall entitle
such Member to one vote on any matter voted on by all Members as provided in
this Agreement and/or as required by applicable law. At every meeting of the
Members, each Member shall be entitled to one vote for every Common Voting Unit
held by such Member; provided that unless otherwise required by law, ownership
of a Class B Common Unit, Class D Common Unit or Preferred Unit by a Member
shall not entitle such Member to any voting rights.
(d) The Company shall have the right to redeem all of the
Preferred Units then outstanding in exchange for a note payable by the Company.
Upon such a redemption, each holder of Preferred Units shall be entitled to
receive a note with a principal amount equal to the Redemption Distribution with
respect to such holder's outstanding Preferred Units. Interest on such note
shall accrue and be payable on the same basis as Preferred Yield previously
accrued and was payable on such Preferred Units. Such note shall mature and
become due and payable (together with all accrued and unpaid interest thereon)
on the Scheduled Redemption Date (as defined below) or, if sooner, upon a Sale
of the Company. Such note shall contain terms that are no less favorable to such
holder than the terms of the Preferred Units and shall otherwise be reasonably
acceptable to the holders of a majority of the Preferred Units. The Company
shall redeem all of the outstanding Preferred Units on January 30, 2009 (the
"SCHEDULED REDEMPTION DATE") at a price equal to the Redemption Distribution;
PROVIDED, HOWEVER, that if a Sale of the Company occurs prior to the Scheduled
Redemption Date, the Company shall, simultaneously with the occurrence of such
Sale of the Company, redeem all of the outstanding Preferred Units held by such
holder at a price equal to the Redemption Distribution.
(e) All Common Units issued to employees of the Company or any
Subsidiary thereof for management incentive and/or compensation purposes, other
than Common Units issued pursuant to the Unit Exchange Agreement, dated as of
October 1, 1998, among the Company, Robert A. Peterson, David F. Myers, Jr. and
Robert A. Larsen (the "UNIT EXCHANGE AGREEMENT") shall be issued as "CLASS C
COMMON UNITS".
2.2 ADDITIONAL UNITS.
(a) Additional Units and the interests in the Company represented
by such Units shall be established by the Managers pursuant to the terms of this
Agreement and shall be indicated in the records of the Company.
(b) Subject to SECTIONS 2.2(d) and 3.3(a), the Managers may, in
their discretion, issue additional Units to existing Members and/or to Persons
who are not Members ("OFFERED UNITS"). At least thirty (30) days prior to the
date of the proposed issuance the Managers shall provide written notice to the
Members of the terms of the proposed issuance (the "ISSUANCE NOTICE") and shall
grant to all Members the right (a "PREEMPTIVE RIGHT"), subject to the
limitations set forth below, to subscribe for and, upon consummation of such
issuance, purchase its pro rata share (for each Member, the percentage
determined by dividing the number of Common Units held by such Member divided by
the number of Common Units held by all Members) of each class and type of the
Offered Units to be so issued (the "PRO RATA SHARE") at the same price and on
the same terms as reflected in the Issuance Notice; PROVIDED that with respect
to Offered Units, at the request of any
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Member, the Company shall offer to such Member Units which have no voting rights
(other than required by applicable law) and which are convertible into voting
securities on the same terms as Common Units are convertible into other Common
Units pursuant to SECTION 2.8, but which are otherwise identical to the Offered
Units. Each Member shall be entitled to exercise such Preemptive Right for the
Offered Units by giving written notice to the Managers within fifteen (15) days
after receipt of the Issuance Notice (the "ELECTION NOTICE"). The failure by a
Member to exercise its Preemptive Right within such time period shall be deemed
a waiver by such Member of its Preemptive Right. The delivery of an Election
Notice shall be irrevocable on the Member delivering such Election Notice and
each participating Member shall be bound and obligated to acquire in any such
issuance on the same terms and conditions the number of Units such participating
Member shall have specified in the Election Notice. If any Member does not
purchase its Pro Rata Share within the time period provided, then each of the
Members that has elected to exercise its Preemptive Right shall have the right
to exercise its Pro Rata Share of the unexercised portion of the Offered Units.
As soon as practicable, and in any event within ten (10) days, after the
expiration of the fifteen (15) day period set forth above, the Managers shall
deliver written notice to the Members setting forth the number of Offered Units
such Member is entitled to purchase, the aggregate purchase price and the time
and place of the closing of the transaction.
(c) Upon the expiration of the offering periods described above,
the Company shall be entitled to issue such Offered Units which such Members
have not elected to purchase during the ninety (90) days following such
expiration, at a price that is not less than ninety-five percent (95%) of the
price set forth in the Issuance Notice and on other terms and conditions no more
favorable to the purchasers thereof than those offered to such Members. Any
Offered Units not sold by the Company after such ninety (90) day period must be
reoffered to the Members pursuant to the terms of SECTION 2.2(b).
(d) Anything stated in SECTION 2.2(b) to the contrary
notwithstanding, no Member shall have Preemptive Rights with respect to (i) the
issuance of any Common Units after the date hereof for management incentive
and/or compensation purposes for the benefit of employees as long as the number
of such Units issued after the date hereof does not exceed 5% in the aggregate
of the fully diluted Common Units, (ii) the issuance of up to 42,247 Class A
Common Units and 42,247 Preferred Units (as such amounts may be adjusted to
reflect the effects of Unit splits, Unit dividends and similar events) in
exchange for units of Morning Pride Manufacturing L.L.C. ("MORNING PRIDE") held
by William and Mary Grilliot (the "GRILLIOTS") pursuant to the option agreement,
as amended, between Morning Pride, Norcross Safety Products L.L.C., a Delaware
limited liability company, and the Grilliots (the "OPTION AGREEMENT"), (iii) the
issuance of Class A Common Units and Preferred Units to Claude Roberge, F.Nato
Sergi and Andre Paquette in connection with the acquisition of Arkon Safety
Equipment, Inc. by North Safety Products Ltd. or another Affiliate of the
Company, (iv) Units issued as consideration for an acquisition or joint venture
transaction, (v) Units issued as an "equity kicker" in respect of indebtedness
for borrowed money to persons not affiliated with any Member, or to any Member
or other person that is affiliated with any Member, but only if such affiliate
is receiving more than 50% of the equity so issued, (vi) Units issued upon
exercise of the Warrants, or (vii) Units issued pursuant to a Public Sale. For
all purposes under this Agreement, all outstanding options or warrants or
similar rights to acquire Common Units, issued after the date hereof, owned by
or in favor of management and any Common Units purchased by management
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after the date hereof with the proceeds of loans or bonuses from the Company
shall in all events be deemed issued for management incentive and/or
compensation purposes.
(e) Each Member may delegate its rights and obligations under this
Section2.2 to its Affiliates or among other Members of the group.
2.3 TIME OF MEETINGS. There shall be at least one meeting of the
Members each year, which shall be scheduled by the Managers. Additional meetings
of the Members shall be called by the Managers on the request of Members owning
Common Voting Units representing, in the aggregate, not less than twenty-five
percent (25%) of the total outstanding Common Voting Units. In addition to the
Members, holders of instruments directly or indirectly convertible into or
exercisable for Units, shall be invited to attend (but not vote at) the meetings
of Members; provided, the failure of the Company to invite such holders to any
meeting shall not render invalid any action taken at such meeting or create any
liability on the part of the Company, the Members or the officers and directors
of the Company to any person.
2.4 NOTICE OF MEETINGS. Written notice of any meeting of the
Members shall be given, personally or by facsimile (answerback confirmed), to
each Securityholder not less than three (3) days prior to the meeting, except as
otherwise required by the Delaware Act. Such notice shall state the place, date
and hour of the meeting.
2.5 VOTING. At all meetings of Members, the holders of a majority
of the Common Voting Units entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum for the transaction of business,
except as otherwise provided by the Delaware Act, the Certificate of Formation
or this Agreement. At all meetings, each Member entitled to vote thereat may
vote in person or by proxy, provided such proxy complies with SECTION 2.6. A
majority of the Common Voting Units voted in person or by proxy shall decide any
question brought before such meeting, unless the question or action is one upon
which a different vote is required by express provision of law, the Certificate
of Formation or this Agreement.
2.6 PROXIES. Members who are unable to attend a meeting may appear
and vote by proxy; PROVIDED, HOWEVER, that a proxy shall only be valid if it is
in writing and has been duly executed by the Member. No proxy shall be valid
unless on the face of such proxy it specifically names the individual who shall
be authorized to act on such Member's behalf, which individual must be either a
Manager or another Member. No Member may hold, or act in any capacity pursuant
to, the proxy of more than one Member at any meeting, except that the Managers
of the Company shall not be restricted from voting multiple proxies duly
delivered to the Company. All proxies granted in violation of this SECTION 2.6
shall be void.
2.7 REGULATORY COMPLIANCE MATTERS.
(a) Before the Company shall redeem, purchase or otherwise
acquire, directly or indirectly, or convert or take any action with respect to
the voting rights of, any interest in any Units or any securities convertible
into or exchangeable for any interest in any Units, the Company shall give
written notice of such pending action to the Regulated Members. Upon the written
request of
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any Regulated Member made within 5 days after its receipt of any such notice
stating that after giving effect to such action such Regulated Member would have
a Regulatory Problem, the Company shall defer taking such action for such period
(not to extend beyond 15 days after such Regulated Member's receipt of the
Company's original notice) as such Regulated Member requests to permit it and
its Affiliates to avoid the Regulatory Problem in accordance with this
Agreement.
(b) In the event that any Regulated Member determines that it has
a Regulatory Problem (and obtains and delivers to the Managers an opinion of
counsel (who may be independent counsel or an employee of such Member or an
affiliate of such Member, and who shall be reasonably satisfactory to the
Managers) to such effect, such Regulated Member and its Affiliates shall have
the right to Transfer all or any portion of its Units pursuant to an Exempt
Transfer or otherwise in compliance with SECTION 9.2(a) as if each such person
were a "Transferring Holder" and the Units being proposed to be Transferred were
"Transferred Units", and the Company and the Members shall take all such actions
as are reasonably requested by such Regulated Member to effectuate and
facilitate any Transfer by such Member of any Units of the Company pursuant to
the immediately preceding sentence.
2.8 CONVERSION OF COMMON UNITS IN GENERAL. At any Member's request
at any time, such Member shall have the right to convert and reconvert all or
any portion of any class of Common Units held by such Member into an equal
number of any other class of Common Units; PROVIDED THAT, in the case of a BHCA
Regulated Member the conversion of a Class B Common Unit into another class of
Common Unit shall be made only pursuant to SECTION 2.9; and PROVIDED FURTHER
that, no Member Employee or any of such Member Employee's Family Group shall be
permitted to convert any of its Class C Common Units into any other class of
Common Units.
2.9 CONVERSION OF CLASS B COMMON UNITS.
(a) In connection with the occurrence (or the expected occurrence
as described in (c) below) of any Conversion Event, each holder of Class B
Common Units shall be entitled to convert into an equal number of Class A Common
Units any or all of such holder's Class B Common Units being (or expected to be)
distributed, disposed of or sold in connection with such Conversion Event.
(b) For purposes of this SECTION 2.9, a "CONVERSION EVENT" shall
mean (i) any Public Sale or public offering of securities of the Company
(including a public offering registered under the Securities Act), (ii) any sale
of securities of the Company to a Person or group of Persons (within the meaning
of the U.S. Securities Exchange Act of 1934, as amended (the "1934 ACT")) if,
after such sale, such Person or group of Persons in the aggregate would own or
control securities which possess in the aggregate the ordinary power to elect a
majority of the Company's board of managers (provided that such sale has been
approved by the Company's board of managers, equivalent governing body, or a
committee thereof), (iii) any sale of securities of the Company to a Person or
group of Persons (within the meaning of the 1934 Act) if, after such sale, such
Person or group of Persons in the aggregate would own or control securities of
the Company (excluding any Class B Common Units being converted and disposed of
in connection with such Conversion Event) which possesses in the aggregate the
ordinary power to elect a majority of the Company's board of
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managers or equivalent governing body, (iv) any sale of securities of the
Company to a Person or group of Persons (within the meaning of the 1934 Act) if,
after such sale, such Person or group of Persons would not, in the aggregate,
own, control or have the right to acquire more than two percent (2%) of the
outstanding securities of any class of voting securities of the Company, and (v)
a merger, consolidation or similar transaction involving the Company if, after
such transaction, a Person or group of Persons (within the meaning of the 1934
Act) in the aggregate would own or control securities which possess in the
aggregate the ordinary voting power to elect a majority of the surviving
company's directors or equivalent governors (provided that the transaction has
been approved by the Company's board of managers, equivalent governing body, or
a committee thereof).
(c) Each BHCA Regulated Member holding Class B Common Units shall
be entitled to convert Class B Common Units in connection with any Conversion
Event if such BHCA Regulated Member reasonably believes that such Conversion
Event shall be consummated, and a written request for conversion from any BHCA
Regulated Member holding Class B Common Units to the Company stating such BHCA
Regulated Member's reasonable belief that a Conversion Event shall occur shall
be conclusive and shall obligate the Company to effect such conversion in a
timely manner so as to enable each such BHCA Regulated Member to participate in
such Conversion Event. The Company shall not cancel the Class B Common Units so
converted before the tenth day following such Conversion Event and shall reserve
such Class B Common Units until such tenth day for reissuance in compliance with
the next sentence. If any Class B Common Units are converted into Class A Common
Units in connection with a Conversion Event and such Class A Common Units are
not actually distributed, disposed of or sold pursuant to such Conversion Event,
such Class A Common Units shall be promptly converted back into the same number
of Class B Common Units.
(d) At any BHCA Regulated Member's request at any time in the
event that such BHCA Regulated Member's ownership percentage of ClassA Common
Units is reduced by additional issuances of ClassA Common Units by the Company,
such BHCA Regulated Member shall have the right to convert a number of ClassB
Common Units originally issued to such BHCA Regulated Member (whether then held
by such BHCA Regulated Member or any transferee of such BHCA Regulated Member or
any transferee of any transferee) into a number of Class A Common Units (with
each ClassB Common Unit being convertible into one ClassA Common Unit) such
that, after giving effect to such conversion, the sum of (i) the number of
outstanding Class A Common Units originally issued to such BHCA Regulated Member
(whether then held by such BHCA Regulated Member or any transferee of such BHCA
Regulated Member or any transferee of any transferee) and (ii) the number of
other outstanding voting securities of the Company then held by such BHCA
Regulated Member, constitutes not more than 4.9% of the aggregate voting
securities of the Company.
(e) If at any time Regulation Y promulgated by the Federal Reserve
Board is amended to allow BHCA Regulated Members to hold more than 4.9% of the
aggregate voting securities of the Company, then upon any BHCA Regulated
Member's request, such BHCA Regulated Member shall have the right to convert a
number of Class B Common Units originally issued to such BHCA Regulated Member
(whether then held by such BHCA Regulated Member or any transferee of such BHCA
Regulated Member or
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any transferee of any transferee) into an equal number of Class A Common Units
to the extent permissible at such time under RegulationY.
(f) For purposes of this SECTION 2.9, "originally issued" means
such Class B Common Units which were first issued by the Company to such BHCA
Regulated Member, regardless of whether such Class B Common Units are then held
by such BHCA Regulated Member or any transferee of such BHCA Regulated Member or
any transferee of any transferee.
2.10 CONVERSION PROCEDURE.
(a) Unless otherwise provided in this Agreement, each conversion
of Common Units of one class into Common Units of the other class shall be
effected by (i) delivery to the principal office of the Company a written notice
by the Member holding such Common Units stating that such Member desires to
convert the number of Common Units stated in the notice into Common Units of the
other class (and such statement shall obligate the Company to issue such Common
Units) and (ii), if the Common Units are represented by certificates, surrender
of the certificate or certificates representing the Common Units to be
converted. Unless otherwise provided in connection with any conversion, each
conversion shall be deemed to have been effected as of the close of business on
the date on which such notice has been received and, in the case of Common Units
represented by certificates, such certificate or certificates have been
surrendered, and at such time, the rights of the Member holding the converted
Common Units as such holder shall cease and the Person or Persons in whose name
or names, in the case of uncertificated Common Units being converted into, will
appear in the Company's books and records or, in the case of certificated Common
Units being converted into, the certificate or certificates for shares of Common
Units to be issued upon such conversion, shall be deemed to have become the
holder or holders of record of the Common Units represented thereby.
(b) Promptly after the conversion of Common Units is deemed
effective as set forth in the immediately preceding paragraph, in the case of
uncertificated Common Units, the Company shall promptly reflect such conversion
of Common Units in its books and records and, in the case of certificated Common
Units, the Company shall issue and deliver in accordance with the surrendering
Member's instructions (i) the certificate or certificates for the Common Units
issuable upon such conversion and (ii) a certificate representing any Common
Units which were represented by the certificate or certificates delivered to the
Company in connection with such conversion but which were not converted.
(c) The Company shall not close its books against the transfer of
Common Units in any manner which would interfere with the timely conversion of
any Common Units. The Company shall assist and cooperate with any holder of
Common Units required to make any governmental filings or obtain any
governmental approval prior to or in connection with any conversion of Common
Units hereunder (including, without limitation, making any filings required to
be made by the Company).
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(d) If the Company in any manner subdivides or combines the
outstanding Common Units of one class, the outstanding Common Units of the other
class of Common Units shall be proportionately subdivided or combined in a
similar manner.
2.11 SBIC REGULATORY PROVISIONS
(a) NUMBER OF UNITHOLDERS. As long as any SBIC Holder holds any
Units, the Company shall notify the SBIC Holder (a) at least 15 days prior to
taking any action after which the number of record holders of the Company's
Common Voting Units would be increased from fewer than 50 to 50 or more, and (b)
of any other action or occurrence after which the number of record holders of
the Company's Common Voting Units was increased (or would increase) from fewer
than 50 to 50 or more, as soon as practicable after the Company becomes aware
that such other action or occurrence has occurred or is proposed to occur.
(b) SMALL BUSINESS MATTERS. At any time as any SBIC Holder
reasonably requests, and in any event, as promptly as practicable after the end
of each Fiscal Year, the Company shall deliver to such SBIC Holder a written
statement certified by the Company's Chief Financial Officer describing in
reasonable detail the use of the proceeds of each Financing provided by such
SBIC Holder to the Company and its Subsidiaries. In addition to any other rights
granted hereunder, the Company shall grant each SBIC Holder and the SBA access
to the Company's books and records, and provide any reports and information,
subject in each case to the prior execution of appropriate confidentiality and
nondisclosure agreements, necessary for such SBIC holder to comply with the SBIC
Act and SBIC Regulations, including for the purpose of verifying the use of such
proceeds and verifying the certifications made by the Company in SBA Forms 480
and 652 delivered pursuant to this Agreement and for the purpose of determining
whether the principal business activity of the Company and its Subsidiaries
continues to constitute an eligible business activity (within the meaning of the
SBIC Regulations).
(c) SBIC REGULATORY VIOLATION. Upon the occurrence of an SBIC
Regulatory Violation (as defined below) or in the event that any SBIC Holder
determines in its reasonable good faith judgment that an SBIC Regulatory
Violation has occurred, in addition to any other rights and remedies to which it
may be entitled (whether under this Agreement or any other agreement, the
Certificate or otherwise), such SBIC Holder shall have the right, to the extent
required under SBIC Regulations, to demand the immediate repurchase of all of
the outstanding Units owned by such SBIC Holder at a price equal to the Fair
Market Value of such Units by delivering written notice of such demand to the
Company. The Company shall pay the purchase price for such Units by a cashier's
or certified check or by wire transfer of immediately available funds (unless
any financing agreements to which the Company is subject prevent such payment in
cash, in which case, the Company will pay with a note that shall mature and
become due and payable upon an Sale of the Company, shall bear interest at the
Base Rate and shall be on other terms reasonably designated by the Managers) to
such SBIC Holder within 30 days after the Company's receipt of the demand
notice, and, upon such payment, such SBIC Holder shall deliver the certificates
(if any) evidencing the Units being repurchased duly endorsed for transfer or
accompanied by duly executed forms of assignment.
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For purposes of this Agreement, "SBIC REGULATORY VIOLATION" means,
with respect to any SBIC Holder a change in the principal business activity of
the Company and its Subsidiaries to an ineligible business activity (within the
meaning of the SBIC Regulations), but only if such change occurs within one year
after the date of the initial Financing provided by such SBIC Holder.
(d) ECONOMIC IMPACT INFORMATION. Promptly after the end of each
Fiscal Year, the Company shall, to the extent required to comply with the SBIC
Regulations, deliver to each SBIC Holder a written assessment of the economic
impact of such SBIC Holder's investment in the Company, specifying the full-time
equivalent jobs created or retained in connection with the investment, the
effect of such SBIC Holder's Financing on the revenues and profits of the
Company and its Subsidiaries and on taxes paid by the Company and its employees.
2.12 DELIVERIES. The Company shall deliver to each SBIC Holder as
of, or promptly following, each Financing: (a) duly completed and executed SBA
Forms 480, 652 and Parts A and B of 1031; (b) a written certification from the
Company regarding its intended use of the proceeds of the Financing, and (c) an
acknowledgment (to the extent true and correct) that (x) the Company has been
informed that each SBIC Holder is a federally licensed SBIC under the SBIC Act,
(y) the Company, together with its "affiliates" (as that term is defined in13
CFR Section 121.103), is a "small business concern" within the meaning of the
SBIC Regulations, including 13 CFR Section 121.301, and (z) the information
regarding the Company and its affiliates set forth in SBA Form 480, Form 652 and
Parts A and B of Form 1031 being delivered is, to the Company's knowledge,
accurate and complete. Neither the Company nor any Subsidiary presently engages
in, or shall hereafter engage in, any activities, nor shall the Company or any
Subsidiary use the proceeds of the Financing directly or indirectly for any
purpose, for which an SBIC is prohibited from providing funds by SBIC
Regulations (including 13 CFR Section 107.720).
ARTICLE III.
MANAGERS
3.1 SELECTION OF MANAGERS.
(a) Except as otherwise required by applicable law or this
Agreement, the business and affairs of the Company shall be managed by the
Managers. The Managers of the Company on the date of this Agreement are Robert
A. Peterson, Edward Levy and David F. Myers, Jr., each of whom shall serve until
his successor is appointed or until his earlier resignation or death or removal
in accordance with this Agreement or any other agreement of the Company which
has been duly adopted by the Managers.
(b) The number of Managers shall be no less than three (3) and no
more than five (5). As long as members of the Argosy Group shall collectively
own at least 15% of the outstanding Common Units and the Company has not
completed an initial public offering, Argosy-Safety Products, L.P. ("Argosy")
shall have the right to appoint three Managers (the "ARGOSY MANAGERS"), one of
which, as of the date of this Agreement shall be David F. Myers, Jr. As long as
members of the Hancock Group shall collectively own at least 15% of the
outstanding Common Units and the
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Company has not completed an initial public offering, the Members holding a
majority of the Common Units held by members of the Hancock Group ("MAJORITY
HANCOCK HOLDERS") shall have the right to appoint one Manager (the "HANCOCK
MANAGER"). The remaining Manager(s) shall be appointed by consent or vote of a
majority of the Common Voting Units.
(c) Subject to SECTION 3.1(d) below, a Manager may be removed,
with or without cause, by the vote of the Members owning at least fifty-one
percent (51%) of the Common Voting Units entitled to appoint or vote for such
Manager.
(d) At any time that the ownership of Units held by members of the
Argosy Group decreases to a level that would no longer entitle Argosy to appoint
the Argosy Managers that had been appointed pursuant to SECTION 3.1(b), the
Argosy Managers shall resign. At any time that the ownership of Units held by
members of the Hancock Group decreases to a level that would no longer entitle
Majority Hancock Holders to appoint the Hancock Manager that had been appointed
pursuant to SECTION 3.1(b), the Hancock Manager shall resign.
(e) Within thirty (30) days after the removal, resignation or
death of any Manager, the Managers then serving shall select one natural person,
who may but need not be a Member, to fill each vacancy created thereby;
PROVIDED, THAT, except as set forth in SECTION 3.1(b) and in the immediately
succeeding sentence, to the extent a Manager has been appointed by Argosy, any
replacement Manager shall be appointed by Argosy and to the extent that a
Manager has been appointed by the Majority Hancock Holders, any replacement
Manager shall be appointed by the Majority Hancock Holders. In the event that
David F. Myers, Jr. ceases to be a Manager for any reason whatsoever, the
replacement Manager for David F. Myers, Jr. appointed by Argosy shall be subject
to the approval of the Majority Hancock Holders so long as the Majority Hancock
Holders are entitled to appoint the Hancock Manager. In addition, the board of
directors or managers of any Subsidiary of the Company shall be composed of
designees chosen in like manner and proportion as the Managers or in such other
manner chosen by the Managers with Required Approval.
(f) Each Member who is a holder of not less than 2.5% of the
Common Units on a fully diluted basis (including Citizens Capital, Inc.) is
entitled to have one representative designated by such Member, at such Member's
sole cost and expense, attend all meetings of the Managers in the capacity of a
nonvoting observer who may participate in discussions and, in this respect,
copies of all notices, minutes, consents, and other materials that the Company
provides to its Managers shall be given to such representative; PROVIDED,
HOWEVER, that such representative shall agree to hold in confidence and trust
and to act in a fiduciary manner with respect to all information so provided;
and, PROVIDED, FURTHER, that the Company reserves the right to withhold any
information and to exclude such representative from any meeting or portion
thereof if access to such information or attendance at such meeting could
adversely affect the attorney-client privilege between the Company and its
counsel or would result in disclosure of trade secrets to such representative or
if such Member or its representative is a direct competitor of the Company.
3.2 MANAGEMENT. The Managers shall, except as otherwise expressly
provided herein or by applicable law, be responsible and have sole authority for
all aspects of the management and direction of the Company and shall have all of
the authorities permitted to be exercised by
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managers under the Delaware Act in furtherance thereof. No Member (other than a
Manager or an Officer) shall have the right, power or authority to act for or on
behalf of the Company. Except as otherwise expressly provided herein or by
applicable law, the vote of a majority of the Managers shall be the act of the
Managers. The Managers shall not meet less often than quarterly. Without
limiting the generality of the foregoing, but subject to the limitations set
forth herein and in applicable law, the authority of the Managers shall include,
but not be limited to:
(a) Employing or otherwise engaging officers of the Company.
(b) Negotiating, approving and executing contracts and incurring
obligations on behalf of the Company outside of the ordinary
course of business.
(c) Supervising the capital structure of the Company and
negotiating, approving and binding the Company to operating
and capital financing arrangements, including capital
assessments and debt and equity financings.
(d) Establishing financial policies, determining distributions,
and overseeing maintenance of the books of account and other
records for the Company.
(e) Delegating to any Members such responsibilities and authority
as may, in the judgment of the Managers, be appropriate.
(f) Overseeing and reviewing compensation.
(g) Admitting additional Members into the Company, and
establishing the terms and conditions applicable thereto.
(h) Reviewing annual operating plans and budgets of the Company.
3.3 RESTRICTIONS. Without first obtaining Required Approval, the
Company shall not:
(a) and shall not permit any Subsidiary to authorize, issue or
enter into any agreement providing for the issuance (contingent or otherwise)
and whether in a public offering registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT") or pursuant to a private placement exempt from
registration thereunder, of any equity securities or any securities or rights
(other than debt securities) convertible into or exercisable or exchangeable for
any equity securities, other than, in the case of the Company, (v) issuances to
a Regulated Member as contemplated hereby, (w) issuances pursuant to SECTION
2.2(d)(i), (ii) or (vii), (x) issuances pursuant to the Unit Exchange Agreement
or (y) issuances of Units to existing Members and any designees permitted
pursuant to SECTION 15.4 following compliance with SECTION 2.2(b) and, in the
case of any Subsidiary, to the parent thereof;
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(b) and shall not permit any Subsidiary to, consolidate or merge
with, or sell, assign, transfer or lease all or substantially all of its assets
in a single transaction or a series of transactions to any person;
(c) permit any Subsidiary to, directly or indirectly, issue,
contingently or otherwise, and whether in a public offering registered under the
Act or pursuant to a private placement exempt from registration thereunder, any
shares representing an equity interest in the Subsidiary, warrants, rights or
options to purchase or acquire an equity interest now or hereafter authorized
for issuance except to the Company or a wholly-owned Subsidiary of the Company;
(d) and shall not permit any Subsidiary to, transfer (other than
in the ordinary course of business) any material assets or property to any
Subsidiary;
(e) acquire, or permit any Subsidiary to acquire, any interest in
any business including any assumption of liabilities, contingent or otherwise,
and whether by a purchase of assets, purchase of stock, merger or otherwise, or
make any loans or advances to any person or entity (other than a Subsidiary)
where the total consideration including the assumption of liabilities and
issuance of stock is, in the aggregate, more than $15,000,000;
(f) declare or pay any dividend or make any distribution on the
Units (other than pursuant to SECTION 5.1(a)), and except in connection with the
repurchase of Class C Common Units from management in which the purchase price
is paid solely by cancellation of amounts owed to the Company under non-recourse
notes from such management, the Company shall not, and shall not cause or, the
extent of its power to do so, permit any Subsidiary to, purchase, redeem or
otherwise acquire or retire for value any of the Units;
(g) make any amendment to the Certificate of Formation of the
Company or this Agreement, or file any resolution of the Managers with the
Secretary of State of the state pursuant to the laws of which the Company is
then organized;
(h) make acquisitions of other than wholly owned subsidiaries or
make any dispositions of the Company's equity interest in any of its material
Subsidiaries other than to a wholly owned subsidiary;
(i) permit any Subsidiary to become subject to, (including,
without limitation, by way of amendment to or modification of) any agreement or
instrument which by its terms would restrict the right of such Subsidiary to
make loans or advances or pay dividends to, transfer property to, or repay any
indebtedness owed to, the Company that would be more restrictive than the
Securities Purchase Agreement, the Note Agreement and the Credit Agreement as in
effect as of the original date thereof;
(j) hire or terminate the employment of the any member of senior
management of the Company;
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(k) except in connection with repurchases or redemptions of Units
as contemplated herein, incur indebtedness for borrowed money in excess of
$5,000,000;
(l) increase the compensation or issue additional equity as
compensation to executive officers of the Company or its Subsidiaries; and
(m) enter into any transaction, whether related to property or
services, with an Affiliate of any Member.
In connection with a merger, sale, consolidation, assignment, transfer or lease
of all or substantially all of the assets of the Company in a single transaction
or a series of related transactions, the surviving entity shall be required to
have bylaws, operating agreements and/or shareholder agreements (as the case may
be) with terms and provisions substantially identical to this Agreement.
3.4 PROCEDURES. The Managers may adopt such rules, regulations and
procedures for the conduct of the Company's business as the Managers, from time
to time, deem appropriate.
3.5 DESIGNATION OF CHAIRMAN AND OFFICERS.
(a) The Managers shall designate one of the Managers to be
Chairman of the Company. The Chairman shall not have any day-to-day operating
responsibilities except for those responsibilities assigned to the Chairman by
Managers constituting a majority of the Managers that includes at least one
Argosy Manager.
(b) The Managers shall elect officers of the Company, including a
Chief Executive Officer, a President, a Secretary and a Chief Financial Officer
of the Company, and may elect or appoint one or more Vice Presidents and such
other officers of the Company as the Managers may determine ("OFFICERS"). No
Officer need be a resident of the State of Delaware or a Member. The Managers
may use descriptive words or phrases to designate the standing, seniority or
area of special competence of the Officers elected or appointed. Any two or more
offices may be held by the same person. All Officers as between themselves and
the Company shall have such authority and perform such duties in the management
of the Company as may be provided in SECTIONS 3.5 through 3.11 or as the
Managers may from time to time determine, and may act on behalf of the Company
in the manner and regarding such matters as is provided for in SECTIONS 3.5
through 3.11 or as may be authorized by the Managers. From time to time the
Managers may establish, increase, reduce or otherwise modify responsibilities of
the Officers of the Company or may create or eliminate offices as the Company
may consider appropriate. The initial Officers of the Company are as follows:
Chief Executive Officer Robert A. Peterson
President Robert A. Peterson
Executive Vice President David F. Myers, Jr.
Executive Vice President-
Sales and Marketing Robert J. Larsen
Secretary DavidF. Myers, Jr.
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Chief Financial Officer David F. Myers, Jr.
(c) The salaries or other compensation, if any, of the Officers
and agents of the Company shall be fixed from time to time by the Managers. Each
Officer elected by the Managers shall serve until his or her successor is duly
elected or, if earlier, until his or her death, resignation or removal in the
manner provided herein. A vacancy in any office because of death, resignation,
removal, or any other cause shall be filled by the Managers.
(d) Any Officer may resign at any time by so notifying the
Managers and the Secretary in writing. Such resignation shall take effect upon
receipt of such notice or at such later time as is therein specified, and unless
otherwise specified, the acceptance of such resignation shall not be necessary
to make it effective. Any Officer elected by the Managers may be removed with or
without cause by the Managers whenever in their judgment the best interest of
the Company shall be served thereby. The election of an individual as an Officer
shall not of itself create a right to continued employment with the Company.
3.6 THE CHIEF EXECUTIVE OFFICER. Subject to the limitations
imposed by the Managers, the Chief Executive Officer shall have general powers
and duties of supervision and direction of the business and employees of the
Company and, in addition, shall have such other powers and duties as the
Managers assign to him or her; and shall see that all orders and resolutions of
the Managers are carried into effect.
3.7 THE PRESIDENT. The President shall have such powers and duties
as the Managers and Chief Executive Officer assigns to him or her.
3.8 VICE PRESIDENT. The Vice President or, if there shall be more
than one, the Vice Presidents, if any, in the order of their seniority or in any
other order determined by the Managers, shall perform, in the absence or
disability of the President, the duties and exercise the powers of the President
and shall have such other powers and duties as the Managers and Chief Executive
Officer assigns to him or her or to them.
3.9 SECRETARY. The Secretary, if present, shall act as secretary
of all meetings of the Members and the Managers; shall keep the minutes thereof
in the proper book or books to be provided for that purpose; shall see that all
notices required to be given by the Company or the Managers are duly given and
served; shall have charge of the books, records and papers of the Company
relating to its organization and management and shall see that the reports,
statements and other documents required by law are properly kept and filed at
the Company's principal office; and shall, in general, perform all the duties as
from time to time may be assigned to him or her by the Managers and the Chief
Executive Officer.
3.10 CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
have charge and custody of, and be responsible for, all funds, securities and
books of the Company; and, in general, perform all the duties as from time to
time may be assigned to him or her by the Managers and the Chief Executive
Officer.
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3.11 ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant
Secretaries and Assistant Treasurers shall perform such duties as shall be
assigned to them by the Secretary or by the Treasurer, respectively, or by the
Managers and the Chief Executive Officer.
ARTICLE IV.
CAPITAL
4.1 INITIAL CAPITAL CONTRIBUTIONS.
(a) Each Member existing as of the date of this Agreement has made
Capital Contributions to the Company in the amount set forth opposite such
Member's name on SCHEDULE A attached hereto. As of the date hereof, the number
and type of Units held by each Member shall be as set forth opposite his or its
name on SCHEDULE A attached hereto. Each Additional Member shall be required to
make a Capital Contribution to the Company and receive therefor Units in the
Company, in cash or in kind and in amounts to be determined by the Managers
pursuant to this Agreement and, if required, agreed to by such Additional
Members prior to his or her admittance into the Company.
(b) No holder of Warrant Units (in their capacity as such) shall
be required to make any Capital Contribution with respect to such Warrant Units.
4.2 IN-KIND CAPITAL CONTRIBUTIONS. Members who, with the consent
of the Managers, have made or will make in-kind Capital Contributions, shall be
solely and personally responsible for any Tax liability that may be imposed upon
them with respect to the sale of the contributed asset by the Company.
4.3 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as otherwise agreed
to in writing by such Member, no Member shall be required to make any Capital
Contribution after such person's admittance as a Member.
4.4 INTEREST. Members are not entitled to the payment of interest
on their capital contributions or on the balance of their Capital Accounts.
4.5 CAPITAL ACCOUNTS. The Company shall maintain a separate
Capital Account for each Unitholder according to the rules of Treasury
Regulation Section 1.704-1(b)(2)(iv). For this purpose, the Company may (in the
discretion of the Managers), upon the occurrence of the events specified in
Treasury Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the
Capital Accounts in accordance with the rules of such regulation and Treasury
Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of Company
property. For purposes of computing the amount of any item of Company income,
gain, loss or deduction to be allocated pursuant to ARTICLE V and to be
reflected in the Capital Accounts, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including any
method of depreciation, cost recovery or amortization used for this purpose);
PROVIDED THAT:
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(i) The computation of all items of income, gain, loss and
deduction shall include those items described in Code Section
705(a)(l)(B) or Code Section 705(a)(2)(B) and Treasury Regulation
Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such
items are not includable in gross income or are not deductible for
federal income tax purposes.
(ii) If the Book Value of any Company property is adjusted
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f), the
amount of such adjustment shall be taken into account as gain or loss
from the disposition of such property.
(iii) Items of income, gain, loss or deduction attributable
to the disposition of Company property having a Book Value that
differs from its adjusted basis for tax purposes shall be computed by
reference to the Book Value of such property.
(iv) Items of depreciation, amortization and other cost
recovery deductions with respect to Company property having a Book
Value that differs from its adjusted basis for tax purposes shall be
computed by reference to the property's Book Value in accordance with
Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(v) To the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Sections 732(d), 734(b) or
743(b) is required, pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis
of the asset) or loss (if the adjustment decreases such basis).
Any references in this Agreement to the Capital Accounts of a Member shall be
deemed to refer to such Capital Account as the same may be increased or
decreased from time to time as set forth herein.
4.6 NEGATIVE CAPITAL ACCOUNTS. No Member shall be required to pay
to any other Member or the Company any deficit or negative balance which may
exist from time to time in such Member's Capital Account (including upon and
after dissolution of the Company).
4.7 NO WITHDRAWAL. Except as expressly provided herein, no Member
shall be entitled to withdraw any part of such Member's Capital Contribution or
Capital Account or to receive any Distribution from the Company.
4.8 COMPANY ASSETS. All Company assets shall be in the name of the
Company, and no Member shall have any rights in any Company assets unless
otherwise specifically agreed to in writing by the Company.
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ARTICLE V.
PROFITS, LOSSES AND DISTRIBUTIONS
5.1 DISTRIBUTIONS.
(a) The Managers may in their sole discretion make Distributions
at any time or from time to time; PROVIDED, HOWEVER, that within fifteen (15)
days after the end of each quarter the Company shall, subject to any
restrictions contained in the financing agreements to which the Company or any
of its Affiliates is a party, make distributions of cash ("TAX DISTRIBUTIONS")
to each holder of Units in an aggregate amount equal to the product obtained by
multiplying such holder's allocable share of the Company's net taxable income
(reduced by such holder's unused losses previously allocated to such holder by
the Company) by a percentage equal to the sum of the maximum marginal federal,
state and local income tax rates applicable to any Member or its partners,
members or stockholders without regard to the tax status or any other tax
liabilities or credits to which a Member may be subject or entitled. Tax
Distributions made to a Member shall be treated as an advance against
Distributions made to such Member pursuant to SECTION 5.1(c); it being
understood, however, that Members shall have no obligation to return any Tax
Distributions received by them except to the extent required by the Delaware
Act.
(b) Except as provided elsewhere herein, no Member shall be
entitled to any Distribution in return of a Capital Contribution.
(c) Except as otherwise set forth in SECTIONS 5.1(a), each
Distribution shall be made in the following order and priority:
(i) First, to the holders of Preferred Units, an amount
equal to the aggregate Unpaid Preferred Yield with respect to such holders'
outstanding Preferred Units (including, without limitation, Warrant Preferred
Units) (in the proportion that each holder's share of Unpaid Preferred Yield
bears to the aggregate Unpaid Preferred Yield with respect to all Preferred
Units (including, without limitation, Warrant Preferred Units) outstanding
immediately prior to such Distribution) until each such holder has received
Distributions under this clause(i) in respect of such holder's Preferred Units
(including, without limitation, Warrant Preferred Units) in an amount equal to
the Unpaid Preferred Yield on such holder's outstanding Preferred Units
(including, without limitation, Warrant Preferred Units) immediately prior to
such distribution, and no Distribution or any portion thereof may be made under
any of the other paragraphs below until the entire amount of the Unpaid
Preferred Yield on the outstanding Preferred Units (including, without
limitation, Warrant Preferred Units) immediately prior to such distribution has
been paid in full; and
(ii) Second, to the holders of Preferred Units in an amount
equal to the sum of the aggregate Unreturned Preferred Capital with respect to
such holder's outstanding Preferred Units (including, without limitation,
Warrant Preferred Units) (in the proportion that each holder's share of the
Unreturned Preferred Capital with respect to Preferred Units (including, without
limitation, Warrant Preferred Units) bears to the aggregate amount of Unreturned
Preferred Capital with respect to all such Preferred Units (including, without
limitation, Warrant Preferred Units)
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outstanding immediately prior to such Distribution) until each such holder has
received Distributions under this clause(ii) in respect of such holder's
Preferred Units in an amount equal to the Unreturned Preferred Capital with
respect to such holder's outstanding Preferred Units (including, without
limitation, Warrant Preferred Units) immediately prior to such Distribution, and
no Distribution or any portion thereof may be made under clause (iii) below
until the entire amount of the Unreturned Preferred Capital with respect to the
outstanding Preferred Units (including, without limitation, Warrant Preferred
Units) immediately prior to the time of such Distribution has been paid in full;
and
(iii) Third, to the holders of the Common Units, an amount
equal to the amount of such Distribution that has not been distributed pursuant
to paragraphs (i) and (ii) above (ratably among such holders based upon the
number of outstanding Common Units held by each such holders immediately prior
to such Distribution).
(d) Each Distribution pursuant to SECTION 2.1(d) or SECTION 5.1
shall be made to the Persons shown on the Company's books and records as Members
as of the date of such Distribution; PROVIDED, HOWEVER, that any transferor and
transferee of Units may mutually agree as to which of them should receive
payment of any Distribution under SECTION 2.1(d) or SECTION 5.1(a).
(e) Notwithstanding any provision in this Agreement to the
contrary, including without limitation the provisions of this SECTION 5.1, any
Member may elect, by notice in writing to the Managers or the liquidating
trustee as applicable, to decline the receipt of distributions in kind if the
receipt thereof would cause such Member to be in violation of any applicable law
or regulation, in which event the Managers or liquidating trustee shall use
reasonable efforts to cause the property which would otherwise have been
distributed to such Member to be disposed of and the proceeds of such
disposition to be distributed to such Member, or make other arrangements
approved by such Member.
5.2 ALLOCATIONS. Except as otherwise provided in SECTION 5.3,
Profits and Losses for any Fiscal Year or portion thereof shall be allocated
among the Unitholders in such a manner that, as of the end of such Fiscal Year,
the sum of (i) the Capital Account of each Unitholder, (ii) such Unitholder's
share of Minimum Gain (as determined according to Treasury Regulation Section
1.704-2(g)) and (iii) such Unitholder's partner nonrecourse debt minimum gain
(as defined in Treasury Regulation Section 1.704-2(i)(3)) shall be equal to the
respective net amounts, positive or negative, which would be distributed to them
or for which they would be liable to the Company under the Delaware Act,
determined as if the Company were to (i) liquidate the assets of the Company for
an amount equal to their Book Value and (ii) distribute the proceeds of
liquidation pursuant to SECTION 12.1.
5.3 SPECIAL ALLOCATIONS.
(a) Losses attributable to partner nonrecourse debt (as defined in
Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the manner
required by Treasury Regulation Section 1.704-2(i). If there is a net decrease
during a Taxable Year in partner nonrecourse debt minimum gain (as defined in
Treasury Regulation Section 1.704-2(i)(3)), Profits for such Taxable
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Year (and, if necessary, for subsequent Taxable Years) shall be allocated to the
Unitholders in the amounts and of such character as determined according to
Treasury Regulation Section 1.704-2(i)(4).
(b) Nonrecourse deductions (as determined according to Treasury
Regulation Section 1.704-2(b)(1)) for any Taxable Year shall be allocated to the
Common Unitholders, ratably based upon the number of outstanding Common Units
held by each such Common Unitholder immediately prior to such allocation. Except
as otherwise provided in SECTION 5.3(a), if there is a net decrease in the
Minimum Gain during any Taxable Year, each Unitholder shall be allocated Profits
for such Taxable Year (and, if necessary, for subsequent Taxable Years) in the
amounts and of such character as determined according to Treasury Regulation
Section 1.704-2(f). This SECTION 5.3(b) is intended to be a minimum gain
chargeback provision that complies with the requirements of Treasury Regulation
Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.
(c) If any Unitholder that unexpectedly receives an adjustment,
allocation or distribution described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as
of the end of any Taxable Year, computed after the application of SECTIONS
5.3(a) and 5.3(b) but before the application of any other provision of this
ARTICLE IV, then Profits for such Taxable Year shall be allocated to such
Unitholder in proportion to, and to the extent of, such Adjusted Capital Account
Deficit. This SECTION 5.3(c) is intended to be a qualified income offset
provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted in a manner consistent therewith.
(d) Profits and Losses described in SECTION 4.5(v) shall be
allocated in a manner consistent with the manner that the adjustments to the
Capital Accounts are required to be made pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(j), (k) and (m).
(e) If, and to the extent that, any Unitholder is deemed to
recognize any item of income, gain, loss, deduction or credit as a result of any
transaction between such Unitholder and the Company pursuant to Code Sections
1272-1274, 7872, 483, 482 or any similar provision now or hereafter in effect,
and the Managers determine that any corresponding Profit or Loss of the Company
should be allocated to the Unitholder who recognized such item in order to
reflect the Unitholder's economic interests in the Company, then the Board may
so allocate such Profit or Loss.
5.4 TAX ALLOCATIONS.
(a) The income, gains, losses, deductions and credits of the
Company will be allocated, for federal, state and local income tax purposes,
among the Unitholders in accordance with the allocation of such income, gains,
losses, deductions and credits among the Unitholders for computing their Capital
Accounts; except that if any such allocation is not permitted by the Code or
other applicable law, the Company's subsequent income, gains, losses, deductions
and credits will be allocated among the Unitholders so as to reflect as nearly
as possible the allocation set forth herein in computing their Capital Accounts.
(b) Items of Company taxable income, gain, loss and deduction with
respect to any property contributed to the capital of the Company shall be
allocated among the Unitholders in
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accordance with Code Section704(c) so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its Book Value.
(c) If the Book Value of any Company asset is adjusted pursuant to
the requirements of Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f),
subsequent allocations of items of taxable income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Book Value in the
same manner as under Code Section704(c).
(d) Allocations of tax credits, tax credit recapture, and any
items related thereto shall be allocated to the Unitholders according to their
interests in such items as determined by the Board taking into account the
principles of Treasury Regulation Section1.704-1(b)(4)(ii).
(e) Allocations pursuant to this SECTION 5.4 are solely for
purposes of federal, state and local taxes and shall not affect, or in any way
be taken into account in computing, any Member's Capital Account or share of
Profits, Losses, Distributions or other Company items pursuant to any provision
of this Agreement.
5.5 CURATIVE ALLOCATIONS. The allocations set forth in SECTION 5.3
(the "REGULATORY ALLOCATIONS") are intended to comply with certain requirements
of Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory
Allocations may not be consistent with the manner in which the Unitholders
intend to allocate Profit and Loss of the Company or make Company Distributions.
Accordingly, notwithstanding the other provisions of this ARTICLE V, but subject
to the Regulatory Allocations, income, gain, deduction, and loss shall be
reallocated among the Unitholders so as to eliminate the effect of the
Regulatory Allocations and thereby cause the respective Capital Accounts of the
Unitholders to be in the amounts (or as close thereto as possible) they would
have been if Profit and Loss (and such other items of income, gain, deduction
and loss) had been allocated without reference to the Regulatory Allocations. In
general, the Unitholders anticipate that this will be accomplished by specially
allocating other Profit and Loss (and such other items of income, gain,
deduction and loss) among the Unitholders so that the net amount of the
Regulatory Allocations and such special allocations to each such Unitholder is
zero. In addition, if in any Fiscal Year or portion thereof there is a decrease
in partnership minimum gain, or in partner nonrecourse debt minimum gain, and
application of the minimum gain chargeback requirements set forth in SECTION
5.3(a) or SECTION 5.3(b) would cause a distortion in the economic arrangement
among the Unitholders, the Unitholders may, if they do not expect that the
Company will have sufficient other income to correct such distortion, request
the Internal Revenue Service to waive either or both of such minimum gain
chargeback requirements. If such request is granted, this Agreement shall be
applied in such instance as if it did not contain such minimum gain chargeback
requirement.
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ARTICLE VI.
BOOKS, RECORDS, ACCOUNTING AND REPORTS
6.1 RECORDS; ACCOUNTING AND NOTICE. The Company shall keep, or
cause to be kept, appropriate books and records with respect to the Company's
business, and each Unitholder shall have reasonable access to and be allowed to
visit and inspect any of the properties (including the unprivileged books and
records) of the Company and its subsidiaries, subject to, if the Company
requests, the prior execution of appropriate confidentiality and nondisclosure
agreements. In addition, the Company shall provide to each Unitholder any
quarterly and annual financial statements of the Company and its Subsidiaries
that are provided to its senior lenders. The Company shall also provide to each
Unitholder notice of the acceleration of the unpaid principal amount of
indebtedness for borrowed money with its or its Subsidiaries' senior lenders.
All matters concerning (i) the determination of the relative amount of
allocations and distributions among the Members pursuant to ARTICLES V and (ii)
accounting procedures and determinations, and other determinations not
specifically and expressly provided for by the terms of this Agreement, shall be
determined by the Managers, whose determination shall be final and conclusive as
to all of the Members absent manifest clerical error.
6.2 FISCAL YEAR. The Fiscal Year of the Company shall end on
December 31 of each year or such other annual accounting period as may be
established by the Managers.
6.3 TRANSMISSION OF COMMUNICATIONS. Each Person that owns or
controls Units on behalf of, or for the benefit of, another Person or Persons
shall be responsible for conveying any report, notice or other communication
received from the Managers to such other Person or Persons.
ARTICLE VII.
TAX MATTERS
7.1 PREPARATION OF TAX RETURNS. The Company shall arrange for the
preparation and timely filing of all returns required to be filed by the
Company.
7.2 TAX ELECTIONS. The Taxable Year shall be the Fiscal Year set
forth in SECTION 6.2, unless the Managers shall determine otherwise in their
sole discretion and in compliance with applicable laws. The Managers shall, in
their sole discretion, determine whether to make or revoke any available
election pursuant to the Code. Each Member will upon request supply any
information necessary to give proper effect to such election.
7.3 TAX CONTROVERSIES. David F. Myers, Jr. is hereby designated
the Tax Matters Member and is authorized and required to represent the Company
(at the Company's expense) in connection with all examinations of the Company's
affairs by tax authorities, including resulting administrative and judicial
proceedings, and to expend Company funds for professional services and
reasonably incurred in connection therewith. Each Member agrees to cooperate
with the Company and to do or refrain from doing any or all things reasonably
requested by the Company with respect
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to the conduct of such proceedings. The Tax Matters Member shall keep all
Members fully informed of the progress of any examinations, audits or other
proceedings, and all Members shall have the right to participate in any such
examinations, audits or other proceedings. Notwithstanding the foregoing, the
Tax Matters Member shall not settle or otherwise compromise any issue in any
such examination, audit or other proceeding without first obtaining approval of
the Managers.
ARTICLE VIII.
NON-COMPETITION
8.1 NONCOMPETE. Except with the prior written consent of the
Managers, in their sole discretion, no Member Employee shall, while a Member of
the Company and for twenty-four (24) months following termination of membership
for any reason other than the dissolution, winding up or liquidation of the
Company, be an officer, director, agent, employee, consultant, committee-member
of, or have a direct or indirect five percent (5%) or greater equity interest
in, any business located anywhere in the world, if such business (a
"COMPETITOR") engages in the manufacturing and/or marketing of personal
protection and safety equipment products primarily intended for use in the
workplace, including respiratory equipment, hand protection, hearing protection,
eye, hand, face and foot protection, industrial first aid, fall protection,
high-voltage lineman equipment, eye wash, and dermatological and single-use
applicators for surgical protection.
8.2 NONSOLICITATION. Each Member who is also an employee
acknowledges and agrees such Member will have access to confidential information
of the Company and its Subsidiaries. Therefore, while a Member of the Company
and for a period of twenty four (24) months after the termination of membership
for any reason other than dissolution, winding up or liquidation of the Company,
such Member shall not, without the prior written consent of the Company,
directly or indirectly: (a) call-on, solicit, service, advise or encourage any
customer, prospective customer, partners, vendors, or strategic alliance
participants of the Company or any Subsidiary to withdraw, curtail, or cancel
its business with the Company or any Subsidiary; or (b) employ or retain or
solicit for employment or arrange to have any other person, firm, or other
entity employ or retain or solicit for employment or otherwise participate in
the employment or retention of any employee, prospective employee, consultant or
independent contractor of the Company or any Subsidiary in any business that
provides or offers products or services that are competitive with, are similar
to, or may be used as substitutes for the products and services offered by the
Company or any Subsidiary. Nothing in this Section shall be deemed to prohibit
the acquisition or holding for mere passive investment purposes by such Member
of not more than two percent (2%) of the shares or other securities of a
publicly traded corporation if such securities are regularly traded on a
national securities exchange or over the counter.
8.3 ENFORCEABILITY. The Members intend that this ARTICLE VIII be
enforced to the fullest extent permissible under applicable law and by
injunctive or other appropriate equitable relief. If any portion of this ARTICLE
VIII is found to be unenforceable, the Members intend that the remaining
provisions shall be fully enforced upon their terms.
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8.4 REASONABLE RESTRICTIONS. Each Member agrees that this ARTICLE
VIII is fair and reasonable, and that this ARTICLE VIII will not unfairly or
unreasonably restrict such Member's ability to earn a living or pursue his or
her chosen career or profession.
ARTICLE IX.
TRANSFER AND WITHDRAWAL
9.1 RESTRICTIONS ON TRANSFER OF SECURITIES. The holders of
Securities shall not Transfer any interest in any Securities except for
Transfers (i) with the prior written consent of all of the Disinterested
Managers (which consent may be granted or withheld in their sole discretion),
(ii) within each Member's Family Group, if an individual, or to such Member's
Affiliates or any other Securityholder, if not an individual, (iii) pursuant to
a Public Sale, (iv) pursuant to SECTION 9.4 or 9.5, (v) pursuant to a Sale of
the Company, (vi) pursuant to SECTION 2.7(b) (subject to the limitations
contained therein), SECTION 2.11(c) and SECTION 9.6(b) (subject to any
limitations contained therein) (any such Transfer in (i) through (vi), an
"EXEMPT TRANSFER"), (vii) which are Primary Warrantholder Transfers, or (viii)
pursuant to the other provisions of this ARTICLE IX (including, without
limitation, Secondary Warrantholder Transfers made pursuant to the provisions of
SECTION 9.2; PROVIDED THAT no holder of Securities shall Transfer any interest
in any Class C Common Units within such Member's Family Group so long as any
principal or interest on any promissory note issued by such Member to the
Company for the purchase of Class C Common Units remains unpaid. Any Transfer by
any Member of any Securities or other interest in the Company in contravention
of this Agreement or which would cause the Company to not be treated as a
partnership for U.S. federal income tax purposes shall be void and ineffectual
and shall not bind or be recognized by the Company or any other party. No
purported assignee shall have any right to any profits, losses or distributions
of the Company, and the transferor shall retain all of its rights and
obligations hereunder with respect to the Transfer Securities or other interest
in the Company unless already a Member or until the purported assignee is
admitted as a Member pursuant to SECTION 10.1.
9.2 RIGHT OF FIRST REFUSAL.
(a) GENERAL. Subject in all events to the general restrictions on
Transfers contained in Section 9.1 and except for an Exempt Transfer, a
Securityholder (a "TRANSFERRING HOLDER") that is (or a member of whose Family
Group is) (i) employed by the Company or any Subsidiary may transfer (an
"EMPLOYEE TRANSFER") Class A Common Units and Preferred Units held as of October
2, 1998 (together with any securities issued with respect to such Units by way
of split or dividend or in connection with a combination of securities,
recapitalization, merger, consolidation or other reorganization) or (ii) making
a Secondary Warrantholder Transfer may make such Transfer, in each case only
after first complying with the provisions of this SECTION 9.2. At least 30 days
prior to making any Employee Transfer or Secondary Warrantholder Transfer (the
"ELECTION PERIOD"), the Transferring Holder shall deliver a written notice (the
"OFFER NOTICE") to the Company disclosing in reasonable detail the proposed
number of Securities to be Transferred (the "TRANSFER SECURITIES"), the identity
of the proposed Transferee and the proposed price ("OFFER PRICE") and other
terms and conditions of the Transfer. No Transferring Holder may consummate any
Transfer (other than an
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Exempt Transfer) of such Transfer Securities during the Election Period unless
the parties to such Transfer have been finally determined pursuant to this
SECTION 9.2.
(b) COMPANY'S RIGHTS. The Company may elect to purchase all or any
portion of the Transfer Securities at the Offer Price and on the terms specified
in the Offer Notice by delivering written notice of such election (and
specifying the number of Transfer Securities if any, it has elected to purchase)
to the Transferring Holder within 10 days of receipt of the Offer Notice.
(c) INVESTORS RIGHTS. If the Company has not elected to purchase
all of the Transfer Securities within such 10 day period, the Transferring
Holder shall deliver a written notice reoffering (the "REOFFER NOTICE") the
remaining Transfer Securities to the Investors on the same terms as disclosed in
the Offer Notice, and the Investors may elect to purchase all or any portion of
the remaining Transfer Securities at the Offer Price and on the terms specified
in the Reoffer Notice by delivering written notice of such election (and
specifying the number of Transfer Securities, if any, it has elected to
purchase) to the Company within 10 days after receipt of the Reoffer Notice.
Each of the Investors shall be entitled to purchase its pro rata share of each
type of Transfer Securities based on such Investor's ownership of such type of
Transfer Securities. If all of the securities offered to the Investors are not
fully subscribed by such Investors after such initial offer, the remaining
securities shall be reoffered in the same manner by the Transferring Holder to
such Investors which have elected to purchase their full allotment, except that
such Investors must exercise their purchase rights within 5 days after receipt
of such reoffer.
(d) OTHER MEMBERS' RIGHTS. If the Investors have not elected to
purchase all of the Transfer Securities pursuant to SECTION 9.2 (c), the
Transferring Holder shall deliver a written notice reoffering (the "FINAL
NOTICE") the remaining Transfer Securities to the other Securityholders on the
same terms as disclosed in the Offer Notice. Each of the other Securityholders
shall be entitled to purchase its pro rata share of each type of the remaining
Transfer Securities based on such Securityholder's fully-diluted ownership or
rights to acquire such types of remaining Transfer Securities by delivering
written notice of such election (and specifying the number of Transfer
Securities, if any, it has elected to purchase) to the Company within 5 days
after receipt of the Final Notice. If all of the securities offered to the other
Securityholders are not fully subscribed by such Securityholders after such
initial offer, the remaining securities shall be reoffered in the same manner by
the Transferring Holder to such Securityholders which have elected to purchase
their full allotment, except that such Securityholders must exercise their
purchase rights within 5 days after receipt of such reoffer.
(e) GENERAL. If the Company, the Investors and the other Members
have collectively elected to purchase all of the Transfer Securities from the
Transferring Holder, the Transfer of such Transfer Units shall be consummated as
soon as practical after the delivery of the election notices, but in any event
within 15 days after the expiration of the Election Period. Notwithstanding the
foregoing, in the event that the Members, the Investors and the Company have not
collectively elected to purchase all of the Transfer Units, the Transferring
Holder may, within 90 days after the expiration of the Election Period, Transfer
such Transfer Units to the Transferee identified in the Offer Notice at a price
no less than the price specified in the Offer Notice and on other terms no more
favorable to the Transferee than offered to the Company, the Investors or the
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other Securityholders in the Offer Notice, the Reoffer Notice or the Final
Notice, as applicable. The purchase price for such Units shall be payable solely
in cash at the closing of the transaction.
9.3 SALE OF THE COMPANY.
(a) If the Managers (with Required Approval) approve a Sale of the
Company (the "APPROVED COMPANY SALE"), the Securityholders will consent to and
raise no objections against the Approved Company Sale. If the Approved Company
Sale is structured as a (i) merger or consolidation, each Securityholder shall
waive any dissenters rights, appraisal rights or similar rights in connection
with such merger or consolidation or (ii) sale of Securities, each holder of
Securities shall agree to sell all or, if the structure of the transaction
requires otherwise (i.e., a leveraged recapitalization), substantially all of
his Securities and rights to acquire Securities on the terms and conditions
approved by the Managers (with Required Approval). Each Securityholder shall
take all necessary or desirable actions (other than, except as provided in
clause (e) below, incurring any liability) in connection with the consummation
of the Approved Company Sale as requested by the Company. At least thirty (30)
days prior to the proposed closing date of any Approved Company Sale, the
Managers shall use commercially reasonable best efforts to give to each
Securityholder written notice of the material terms of the proposed Approved
Company Sale (which material terms may be set forth in a draft of the purchase
and sale agreement with respect to such Approved Company Sale) and statement
that the Managers, the members of the Hancock Group and the members of the
Argosy Group are intending to participate in the Approved Company Sale and
intend to exercise their rights under this SECTION 9.3. An executed version of a
purchase and sale agreement shall be delivered to each Securityholder within a
commercially reasonable time period after execution of such agreement and an
Approved Company Sale shall be consummated within 150 days after the execution
of a purchase and sale agreement therefor. Upon request, the Managers shall
provide any Securityholder with a calculation of the anticipated consideration
to be paid to such Securityholder in such Approved Company Sale. Notwithstanding
the foregoing, in connection with and as part of any Approved Company Sale, the
Company shall use commercially reasonable efforts to Transfer all of the
outstanding shares of capital stock of CNIC in lieu of the Units of Company
owned by CNIC for the same aggregate consideration that CNIC would have received
had it transferred all of its Units in the Company.
(b) The obligations of the holders of Securities with respect to
the Approved Company Sale are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Company Sale, each holder
of each type of Securities participating in the Approved Company Sale shall
receive the same form of consideration and the same portion of consideration
such holder would have received if the aggregate consideration had been
distributed by the Company in complete liquidation pursuant to the rights and
preferences set forth in this Agreement (but without the Company paying any
amounts in such liquidation with respect to any obligations that are being
assumed by the buyer in connection with such Approved Company Sale); and (ii) if
any holders of a type of Securities are given an option as to the form and
amount of consideration to be received, each holder of such type of Securities
shall be given the same option; PROVIDED that if any holder of Warrant Units
exercises rights pursuant to Section 5 of the Warrant Agreement or otherwise
becomes entitled to receive consideration with respect to its Warrant Units
which is different in form or amount than other Securityholders, the obligations
of each other Securityholder
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shall be as if the holders of Warrant Units did not hold Securities; PROVIDED
FURTHER that if the capital stock of CNIC is Transferred in accordance with the
last sentence of SECTION 9.3(a), the obligation of each other Securityholder
shall be as if CNIC Transferred the Units of the Company and distributed the
proceeds to its shareholders (with it being understood that the shareholders of
CNIC shall bear the pro rata share of any obligations that CNIC would have been
required to assume if it had sold Units of the Company.
(c) If the Company or any of the holders of the Securities enter
into any negotiation or transaction for which Rule506 (or any similar rule then
in effect) promulgated by the Securities Exchange Commission may be available
with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), each holder of Securities will, at the
request of the Company, appoint either a purchaser representative (as such term
is defined in Rule501) designated by the Company, in which event the Company
will pay the fees of such purchaser representative, or another purchaser
representative (reasonably acceptable to the Company), in which event such
holder will be responsible for the fees of the purchaser representative so
appointed.
(d) All holders of Securities (other than holders of Warrant
Units) will bear their pro rata share (based upon their share of the proceeds
received) of the costs of any sale of Securities pursuant to an Approved Company
Sale to the extent such costs are incurred for the benefit of all such holders
of Securities and are not otherwise paid by the Company or the acquiring party.
Costs incurred by the holders of Securities (other than holders of Warrant
Units) on their own behalf will not be considered costs of the Approved Company
Sale. All expenses and costs of the holders of Warrant Units incurred in
complying with the provisions of this SECTION 9.3 shall be for the account of
and paid by the Company; PROVIDED that any holder of Warrant Units that holds
Securities which are not Warrant Units shall be required to bear its pro rata
share of costs and expenses in accordance with the first two sentences of this
SECTION 9.3(d).
(e) In connection with an Approved Company Sale, the holders of
the Securities may be required to make representations or warranties regarding
such holder to enter into and consummate such sale and providing the purchaser
with good and marketable title to the Securities being sold by such holder, free
and clear of all liens created by such holder. In addition, any such holder may
be required to provide indemnification with respect to the breach of any
representations, warranties or covenants regarding the Company contained in the
agreements relating to such sale. Any such indemnification liability of a holder
described in the preceding sentence shall be several only, and not joint, and
shall not in any event exceed such holder's pro rata share (based on the
proceeds to be received by all of the Securityholders participating in such
sale) of any such liability or exceed the proceeds received by such holder in
such Approved Company Sale.
(f) In the event that the consideration received by the
Securityholders in connection with an Approved Company Sale is something other
than cash or Freely Tradeable Securities (or cash held in an escrow account as
security for indemnification obligations of the Securityholders incurred in
connection with such Approved Company Sale), prior to consummation of such Sale
of the Company, the holders of Warrants shall be entitled to exercise rights
they may have pursuant to Section 5 of the Warrant Agreement. No Approved
Company Sale may be
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consummated unless prior to or contemporaneously therewith the Company shall
have paid in full in cash the Put Option Price for each Warrant Unit with
respect to which a holder of a Warrant Unit shall have given a Put Notice under
said SECTION 5 prior to such closing (or placed cash in escrow, to be released
upon final determination of the Put Option Price, for the benefit of each holder
of a Warrant Unit who shall have given a Put Notice under said SECTION 5 prior
to such closing, an amount not less than that amount which each such holder and
the Company believe is reasonably likely to be the least Put Option Price) for
each such Warrant Unit.
9.4 TAG-ALONG RIGHTS. If any Investor (the "TRANSFERRING
INVESTOR") desires to Transfer all or any portion of any of its Securities to
any Person(s) (other than pursuant to another Exempt Transfer), it must first
deliver to all of the other Securityholders (the "OTHER SECURITYHOLDERS") a
written notice (the "SALE NOTICE") in which the prospective Transferring
Investor states the price and other material terms and conditions on which they
propose to effect such Transfer of such Securities, or portion thereof, and the
identity of the proposed Transferee(s). Such notice shall be delivered not less
than 30 days prior to the closing of the proposed Transfer. Each Other
Securityholder to whom such a Sale Notice is required to be given may within 15
days following receipt of the Sale Notice, give to the Company and the
Transferring Investor a written notice ("TAG-ALONG NOTICE") indicating that it
desires to participate in such Transfer. If any Other Securityholders have
elected to participate in such Transfer, each of the Transferring Investor and
such Other Securityholders will be entitled to sell in the contemplated
Transfer, at the same price and on the same terms and conditions, a number of
Securities of each type of Securities contemplated as being Transferred (or
Warrants to acquire such Securities) equal to the product of (A)the quotient
determined by dividing the number of Securities of such type owned by such
person by the aggregate number of Securities of such type (or Warrants to
acquire such Securities) owned by the Transferring Investor and the Other
Securityholders participating in such Transfer and (B)the number of units of
such type of Securities (or Warrants to acquire such Securities) to be sold in
the contemplated Transfer. Notwithstanding the foregoing, (x) in the event that
the Transferring Investor intends to Transfer more than one type of Securities
(or Warrants to acquire such Securities), the Other Securityholders
participating in such Transfer shall be required to sell in the contemplated
Transfer a pro rata portion of each type of Securities (or Warrants to acquire
such Securities) contemplated as being Transferred (to the extent such Other
Securityholders own any Securities (or Warrants to acquire such Securities) of
such other type), which portion shall be determined in the manner set forth
immediately above, (y) the purchase price being paid on account of Preferred
Units (or Warrants to acquire such Preferred Units) shall be allocated among the
Transferring Investors transferring Preferred Units (or Warrants to acquire such
Preferred Units) on the basis of the amount of Unreturned Preferred Capital and
Unpaid Preferred Yield with respect to such Preferred Units (or Warrants to
acquire such Preferred Units) and (z) the consideration to be received by any
holder of Warrants or other rights to acquire Common Units or Preferred Units
participating in such sale that has not exercised the right to acquire Common
Units or Preferred Units shall be after giving effect to the exercise price
therefor. No Transfer pursuant to this SECTION 9.4 shall be considered an Exempt
Transfer unless the Transferring Investor has complied with the terms of this
SECTION 9.4. All expenses and costs of any Transfer pursuant to this SECTION 9.4
(other than fees and expenses of counsel to any holder of Warrant Units) shall
be for the account of and paid by the Other Securityholders (other than holders
of Warrant Units) participating in such Transfer;
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PROVIDED that any holder of Warrant Units that holds Securities which are not
Warrant Units shall be required to bear its pro rata share of costs and expenses
in accordance with this sentence.
9.5 TERMINATION OF EMPLOYMENT.
(a) In the event the employment of a Member who is also an
employee of the Company (or any Subsidiary thereof) is terminated for any
reason, if the promissory notes evidencing such loans are still outstanding, the
disposition of all Units acquired by such employee with the proceeds of loans
from the Company (or any Subsidiary thereof) shall, to the extent such
provisions conflict with the provisions of this SECTION 9.5, be determined by
the provisions of the documents pursuant to which such loans were made
(including promissory notes of such employee payable to the Company (or any
Subsidiary thereof) and resolutions of Managers of the Company authorizing such
loans).
(b) Except as provided in SECTION 9.5(a) above, in the event a
Member who is also an employee of the Company (or any Subsidiary thereof)
voluntarily terminates his employment for any reason within two years of the
date of being admitted as a Member, the Company shall have the right to purchase
all or any portion of the Class C Common Units held by such Member and such
Member's Family Group at the Purchase Price (as defined below) by delivering
written notice to such Member within sixty (60) days after the termination of
employment. If the Company has not exercised its right to purchase by delivering
the notice set forth in the immediately preceding sentence or has not purchased
all of the Class C Common Units held by such Member, the other Members shall
have the right to purchase (pro rata on the basis of the number of Common Units
held by all Members electing to purchase), all or any portion of the Class C
Common Units held by such Member or such Member's Family Group that were not
purchased by the Company at the Purchase Price by delivering written notice to
such Member within 75 days after termination of employment. "PURCHASE PRICE"
shall mean with respect to any Class C Common Units held by such Member or such
Member's Family Group, the lower of (i)such Member's original cost of such Class
C Common Units plus a return of ten percent (10%) per annum or (ii)the Fair
Market Value of such Class C Common Units (which Fair Market Value shall in no
event be lower than the quotient of the unpaid amounts of principal and interest
on all notes issued by such Member to the Company for the purchase of Class C
Common Units divided by the number of Class C Common Units held by such Member
and such Member's Family Group). In the event that (x) the Company or the other
Members do not elect to purchase any Class C Common Units pursuant to this
SECTION 9.5(b) or (y) more than two years have passed since the date of such
Member's admittance as a member, such Class C Common Units may be held by such
Member and such Member's Family Group subject to the terms of this Agreement or
may be transferred by the Member and such Member's Family Group upon compliance
with the other provisions of ARTICLE IX.
(c) Except as provided in SECTION 9.5(a) above, in the event a
Member who is also an employee of the Company (or any Subsidiary thereof)
involuntarily terminates his or her employment for any reason (including,
without limitation, death or disability) or upon a material breach by the
Company of his or her employment agreement with the Company (whether or not such
employment or agreement exists on the date hereof), the Company shall have the
right to purchase all or any portion of the Class C Common Units held by such
Member and such Member's Family
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Group at Fair Market Value (or at the lower of cost or Fair Market Value, if
such Member is terminated for Cause) by delivering written notice to such Member
within sixty (60) days after the termination of employment. If the Company has
not exercised its right to purchase by delivering the notice set forth in the
immediately preceding sentence or has not purchased all of the Class C Common
Units held by such Member and such Member's Family Group, the other Members
shall have the right to purchase (pro rata on the basis of the number of Common
Units held by all Members electing to purchase) all or any portion of the Class
C Common Units held by such Member or such Member's Family Group that were not
purchased by the Company at Fair Market Value (or at the lower of cost or Fair
Market Value, if such Member is terminated for Cause) by delivering written
notice to such Member within 75 days after termination of employment.
Notwithstanding the foregoing, at such Member's option, unless such Member is
terminated for Cause, such Member may elect to defer the sale of his or her
Class C Common Units (and the determination of Fair Market Value) to the date
which is the one year anniversary of his or her termination of employment. For
the purposes of this SECTION 9.5, the reasonable expense of second and third
valuations, if any, made pursuant to SECTION 2.1(b)(i) shall be borne by the
Company. In the event that the Company and the other Members do not elect to
purchase any Class C Common Units pursuant to this SECTION 9.5, such Class C
Common Units may be held by such Member and such Member's Family Group subject
to the terms of this Agreement or may be transferred by the Member and such
Member's Family Group upon compliance with the other provisions of this ARTICLE
IX.
(d) For purposes of this SECTION 9.5, Units owned by a Member
shall include all options, rights and warrants to acquire Class C Common Units
of the Company owned by such Member (provided that the Fair Market Value thereof
in all events shall be net of any exercise price thereof); provided that, to the
extent of any inconsistency, the terms contained in the documents pursuant to
which such options, rights or warrants were granted shall govern.
9.6 WITHDRAWAL OF MEMBERS.
(a) Except as otherwise provided in SECTION 9.6(b), no
Securityholder shall have the power or right to withdraw or otherwise resign
from the Company except, simultaneous with the Transfer of all of a
Securityholder's Securities in a Transfer permitted by this Agreement and, if
such Transfer is to a Person that is not a Securityholder, the admission of such
person or entity as a Securityholder pursuant to SECTION 10.1.
(b) Notwithstanding any provision of this Agreement to the
contrary, any Member may elect, upon written notice to the Managers, to withdraw
from the Company, or make a partial withdrawal any time in the manner herein
provided, if such Member shall obtain and deliver to the Managers an opinion of
counsel (who may be independent counsel or an employee of such Member or an
affiliate of such Member, and who shall be reasonably satisfactory to the
Managers) that such Member has a Regulatory Problem or will have a Regulatory
Problem if such Member were to continue as a Member or if such partial
withdrawal were not effected. Upon such withdrawal, the Company shall repurchase
such withdrawing Member's Units at the lower of Fair Market Value upon the date
of such withdrawal and Fair Market Value upon a Sale of the Company, assuming
that such Units were still outstanding, with a subordinated note that shall
mature and become due and payable
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on the fifth day following a Sale of the Company, shall be non-interest bearing,
and shall otherwise have terms reasonably designated by the Managers.
9.7 LEGEND. In the event that certificates representing the Units
are issued, such certificates will bear the following legend:
"THE UNITS REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON
_______________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE
SECURITIES LAWS ("STATE ACTS") AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
STATE ACTS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE TRANSFER
OF THE UNITS REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
CONDITIONS SPECIFIED IN THE LIMITED LIABILITY COMPANY AGREEMENT, DATED
AS OF FEBRUARY17, 2000 GOVERNING THE ISSUER (THE "COMPANY") AND BY AND
AMONG ITS MEMBERS, AS SUCH MAY BE AMENDED FROM TIME TO TIME. A COPY OF
SUCH CONDITIONS SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER HEREOF
UPON WRITTEN REQUEST AND WITHOUT CHARGE."
9.8 TRANSFER COST CONSIDERATIONS. Any capital gains, income,
transfer, gift or other taxes imposed upon any transferor or transferee as a
result of any conveyance of any interest in the Company shall be exclusively the
responsibility of the person upon whom such tax is imposed; the Company shall
have no responsibility whatsoever for such tax. In the event that any tax,
expense (including legal and accounting fees) or cost is incurred by or imposed
upon the Company as a result of any conveyance of an interest in the Company,
except as a result of the Company's issuing or purchasing any interest in the
Company, the Member conveying such interest shall indemnify, or cause the
transferee to indemnify, the Company for such tax, expense or cost.
ARTICLE X.
ADMISSION OF MEMBERS
10.1 SUBSTITUTED MEMBERS. In connection with the permitted transfer
of a Unit, the transferee shall become a Substituted Member on the effective
date of such transfer, which effective date shall not be earlier than the date
of compliance with the conditions to such transfer (without the Managers or any
Member consent unless one of the conditions to such transfer is that Managers or
Member consent is required for the admission of such transferee, in which case
such consent must first be obtained), and such admission shall be shown on the
books and records of the Company.
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10.2 ADDITIONAL MEMBERS. Notwithstanding anything contained herein
to the contrary, a Person may be admitted to the Company as an Additional Member
and issued Units only upon furnishing to the Managers (a) a letter of
acceptance, in form satisfactory to the Managers, of all the terms and
conditions of this Agreement, and (b) such other documents or instruments as may
be reasonably necessary or appropriate to effect such Person's admission as a
Member. Such admission shall become effective on the date that such conditions
have been satisfied.
10.3 OPTIONHOLDERS. Except in the case of the holders of the
Warrants as otherwise set forth herein, no person or entity that holds
securities (including, without limitation, options, warrants or rights)
exercisable, exchangeable or convertible into Units ("OPTIONHOLDER") shall have
any rights with respect to such Units until such person or entity is actually
issued Units upon such exercise, exchange or conversion and, if such person or
entity is not then a Member, is admitted as a Member pursuant to SECTION 10.2.
Each Optionholder that is also a Member agrees to be bound by all of the
obligations of an Optionholder set forth herein, including, without limitation,
those set forth in SECTION 9.3.
ARTICLE XI.
INCORPORATION
If at any time the Managers (with Required Approval) approve the incorporation
(whether by merger, exchange, contribution, a combination of the foregoing or
otherwise) of the Company (whether in connection with a public offering of any
of the equity securities of the Company to be registered under the Securities
Act or otherwise), each Securityholder, each holder of rights to acquire units
and the Company will take all necessary or desirable actions in connection with
the incorporation of the Company and, if applicable, the consummation of such
registered offering approved by the Managers, subject to SECTION 3.3(a). Without
limiting the generality of the foregoing, each holder of Securities hereby
waives any dissenters rights, appraisal rights or similar rights in connection
with any such incorporation of the Company and transactions entered into in
connection therewith. The incorporation of the Company will be effected in such
a manner so that, immediately thereafter, either (i) each Securityholder holds
common stock having an aggregate value equal to the Fair Market Value of all of
the Securities held by such Securityholder immediately prior to such
incorporation or (ii) each Securityholder receives one or more classes of
capital stock that, to the fullest extent possible, maintain and contain terms
reflecting, the relative rights and preferences of the Securities previously
held by such Securityholder. In no event shall the provisions of this Article XI
abrogate or otherwise modify the rights or obligations, if any, of the holders
of the Warrants and the Warrant Units as set forth in the Warrant Agreement and
the holders of Securities as set forth in the Registration Rights Agreement.
ARTICLE XII.
LIQUIDATION
12.1 DISSOLUTION. Upon dissolution of the Company, the assets of
the Company shall be liquidated by the Managers (or a Liquidating Trustee
appointed by the Managers, which may
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be a Member) as promptly as possible, but in an orderly and businesslike manner
so as not to involve undue sacrifice, and will apply and distribute the proceeds
thereof in the following priority, unless otherwise required by applicable law:
(a) to pay all creditors of the Company, in the order of priority
provided by law; and
(b) after the payment of all debts, liabilities and obligations of
the Company, to distribute to the Members their respective shares of the
remaining assets, if any pursuant to SECTION 5.1(c).
12.2 ACCOUNTING. Within one hundred eighty (180) days after
completion of final distributions, the Managers or Liquidating Trustee shall
cause to be prepared by a firm of certified public accountants a statement
setting forth the assets and liabilities of the Company as at the date of
dissolution, which statement shall be furnished to all of the Members.
12.3 COMPENSATION OF TRUSTEE. The Liquidating Trustee, if engaged,
shall be entitled to receive reasonable compensation.
ARTICLE XIII.
INDEMNITY
13.1 INDEMNIFICATION. Every person (and the heirs, executors and
administrators of such person) who is or was a Securityholder, Manager, officer,
employee or agent of the Company or of any other company, including another
company, partnership, joint venture, trust or other enterprise which such person
serves or served as such at the request of the Company shall be indemnified by
the Company against all judgments, payments in settlement (whether or not
approved by court), fines, penalties and other reasonable costs and expenses
(including fees and disbursements of counsel) imposed upon or incurred by such
person in connection with or resulting from any action, suit, proceeding,
investigation or claim, whether civil, criminal, administrative, legislative or
other (including any criminal action, suit or proceeding in which such person
enters a plea of guilty or nolo contendere or its equivalent), or any appeal
relating thereto which is brought or threatened by any other person,
governmental authority or instrumentality (herein called a "THIRD-PARTY ACTION")
and in which such person is made a party or is otherwise involved by reason of
his or her being or having been such Securityholder, Manager, officer, employee,
or agent or by reason of any action or omission, or alleged action or omission
by such person in his or her capacity as such Securityholder, Manager, officer,
employee or agent if either (a) such person is wholly successful, on the merits
or otherwise, in defending such third-party action or (b) in the judgment of a
court of competent jurisdiction or, in the absence of such determination, in the
judgment of the Managers of the Company, such person acted in good faith and in
what he or she reasonably believed to be the best interest of the Company or
such other company and, in addition, in any criminal action, had no reasonable
cause to believe that his or her conduct was unlawful. In case such person is
successful, on the merits or otherwise, in defending part of such action, or, in
the judgment of such a court or the Managers, has met the applicable standard of
conduct specified in the preceding sentence with
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respect to part of such action, he or she shall be indemnified by the Company
against the judgments, settlement payments, fines, penalties, and other costs
and expenses attributable to such part of such action.
The foregoing rights of indemnification shall be in addition to any
rights which any such Securityholder, Manager, officer, employee or agent may
otherwise be entitled.
In any case in which, in the judgment of the Managers, any such
Member, Manager, officer or employee will be entitled to indemnification under
the foregoing provisions of this ARTICLE XIII, such amounts as they deem
necessary to cover the reasonable costs and expenses incurred by such person in
connection with the action, suit, proceeding, investigation or claim prior to
final disposition thereof may be advanced to such person upon receipt of an
undertaking by or on behalf of such person to repay such amounts if it is
ultimately determined that he or she is not so entitled to indemnification.
ARTICLE XIV.
DEFINITIONS
14.1 CERTAIN DEFINITIONS. For the purpose of this Agreement, the
following terms have the meanings set forth below:
"ADDITIONAL MEMBER" means a Person admitted to the Company as a Member
pursuant to Section10.2.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any
Unitholder, the deficit balance, if any, in such Unitholder's Capital Account as
of the end of the relevant Taxable Year, after giving effect to the following
adjustments:
(i) Credit to such Capital Account any amounts which such
Unitholder is obligated to restore pursuant to any provision of this Agreement
or is deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Regulations and shall be interpreted consistently therewith.
"AFFILIATE" of any Person means any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person in
question.
"ARGOSY GROUP" means Argosy, Canadian Imperial Bank of Commerce, CIBC
WMV Inc., CIBC WMC Inc., CIBC Wood Gundy Ventures, Inc., Co-Investment Merchant
Fund 2, L.L.C.,
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any other Person designated as such pursuant to this definition, and each of
their respective Affiliates, successors, and, to the extent that the assignor
designates such assignee as a member of the "Argosy Group" by notifying the
Company and the Securityholders, assigns.
"BASE RATE" means a rate per annum equal to the United States
corporate base rate announced by the Canadian Imperial Bank of Commerce from
time to time, changing when and as such rate changes.
"BHCA REGULATED MEMBER" means any Member which is subject to
Regulation Y of the Federal Reserve Board.
"BOOK VALUE" means, with respect to any Company property, the
Company's adjusted basis for federal income tax purposes, adjusted from time to
time to reflect the adjustments required or permitted by Treasury Regulation
Section 1.704-1(b)(2)(iv)(d)-(g).
"CAPITAL ACCOUNT" means the capital account maintained for a Member
pursuant to Section 4.5.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents, promissory
obligations or the Fair Market Value of other property which a Member
contributes or is deemed to have contributed to the Company pursuant to
SECTION 4.1.
"CAUSE" means, with respect to any Member who is an employee of the
Company (or any Subsidiary thereof), such Member's (i) embezzlement or
misappropriation of funds, (ii) conviction of a felony involving moral
turpitude, (iii) commission of a material act of dishonesty, fraud, or deceit,
(iv) breach of any material provisions of any employment agreement with the
Company (or any Subsidiary thereof) to which he is a party, (v) habitual or
willful neglect of his duties, (vi) breach of fiduciary duty to the Company (or
any Subsidiary thereof) involving personal profit or (vii) material violation of
any other duty to the Company (or any Subsidiary thereof) or its Members imposed
by law or by the Managers.
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time. All references herein to sections of the Code shall
include any corresponding provision or provisions of succeeding law to the
extent the Managers determines that any such amendments do not adversely affect
the relative economic interests of the Members hereunder.
"CERTIFICATE" means the Company's certificate of formation filed with
the Delaware Secretary of State.
"CNIC" means Caravelle Norcross Investment Corporation, a Delaware
corporation.
"COMMON UNITS" means, collectively, the Class A Common Units, ClassB
Common Units, ClassC Common Units and Class D Common Units.
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"COMMON VOTING UNITS" means all of the Common Units other than the
Class B Common Units and the Class D Common Units.
"COMPETITOR" shall have the meaning ascribed to it in SECTION 9.1.
"CREDIT AGREEMENT" means that Credit Agreement, dated October 2, 1998,
among Norcross Safety Products L.L.C., North Safety Products Corp., Morning
Pride Manufacturing L.L.C. and each of the other signatories thereto, as the
same has been and may be amended, modified, supplemented or waived from time to
time.
"DEEMED PREFERRED UNIT AMOUNT" means, in respect of any Warrant
Preferred Unit, an amount equal to the quotient of (a) the aggregate deemed
capital amounts for all Warrant Preferred Units for all Warrantholders set forth
on SCHEDULE B hereto divided by (b) the aggregate number of Warrant Preferred
Units for all Warrantholders set forth on SCHEDULE B.
"DEEMED PREFERRED YIELD" means, with respect to any Warrant Preferred
Unit and Unreturned Preferred Capital in respect thereof, an amount accruing on
such Unreturned Preferred Capital, on a daily basis, at the rate of 10% per
annum, compounded on the last day of June and December of each year on (a) such
Unreturned Preferred Capital plus (b) such amounts which shall have accrued for
all prior semi-annual periods.
"DELAWARE ACT" means the Delaware Limited Liability Company Act, 6
Del.L. Section 18-101, ET.SEQ., as it may be amended from time to time, and any
successor to the Delaware Act.
"DISTRIBUTION" means each distribution made by the Company to a
Member, whether in cash, property or securities of the Company and whether by
liquidating distribution, redemption, repurchase or otherwise; PROVIDED THAT
none of the following shall be a Distribution: (a) any redemption or repurchase
by the Company of any securities, and (b) any recapitalization or exchange of
securities of the Company, and any subdivision (by Unit split or otherwise) or
any combination (by reverse Unit split or otherwise) of any outstanding Units.
"EFFECTIVE DATE" shall have the meaning ascribed to it in the
Preamble.
"EXEMPT TRANSFER" shall have the meaning ascribed to it in SECTION
9.1.
"FAMILY GROUP" means a Member's spouse and descendants (whether
natural or adopted) and any trust, partnership or corporation or similar entity
created by or at the direction of a Member for the benefit of either the Member
or the Member's spouse and/or descendants and any Affiliates of the foregoing.
"FINANCING" means the purchase of Units by the SBIC Holder(s)
hereunder from time to time.
"FISCAL YEAR" means the Company's annual accounting period established
pursuant to SECTION 6.2.
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"FREELY TRADEABLE SECURITIES" means securities: (i) which are of a
class (a) of securities issued or fully guaranteed by the United States of
America or any agency thereof and entitled to the full faith and credit of the
United States of America, for which price quotations are routinely quoted and
for which, in the opinion of the Required Warrantholders, there is a ready
liquid market; or (b) both registered pursuant to either Section 12(b) or
Section 12 (g) of the 1934 Act and either listed on a national securities
exchange or on the NASDAQ national market and (ii) which may be resold
immediately in the public markets by each holder of Warrants or Units issued
upon exercise of the Warrants without requirement of further registration under
the Securities Act.
"HANCOCK" means John Hancock Life Insurance Company, a Massachusetts
mutual life insurance company or its successors.
"HANCOCK GROUP" means Hancock, Hancock Mezzanine Partners L.P. any
other Person designated as such pursuant to this definition, and each of their
respective Affiliates, successors, and, to the extent that the assignor
designates such assignee as a member of the "Hancock Group" by notifying the
Company and the Securityholders, assigns.
"INDEPENDENT THIRD PARTY" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Company's
Common Units on a fully-diluted basis (a "5% OWNER"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for
the benefit of any such 5% Owner and/or such other persons.
"INVESTOR" means a member of the Argosy Group or a member of the
Hancock Group and "INVESTORS" means, collectively, members of the Argosy Group
and members of the Hancock Group.
"LOSSES" means items of Company loss and deduction determined
according to SECTION 4.5.
"MEMBER" means each of the members named on SCHEDULE A attached hereto
and any Person admitted to the Company as a Substituted Member or Additional
Member; but only so long as such Person is shown on the Company's books and
records as the owner of one or more Units.
"MEMBER EMPLOYEE" means any Member who is or at any time was an
employee of the Company or any Subsidiary.
"NON-HANCOCK AFFILIATE" shall have the meaning ascribed to it in the
Note Agreement.
"NOTE AGREEMENT" means that certain Note Agreement, dated as of the
date hereof, by and among the Company, Morning Pride Manufacturing L.L.C.,
Norcross Safety Products L.L.C. and the other parties signatory thereto, as the
same has been amended, modified, supplemented or waived from time to time.
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"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"PREFERRED YIELD" means, with respect to each Preferred Unit
(excluding a Warrant Preferred Unit), the amount accruing on such Preferred Unit
on a daily basis, at the rate of 10% per annum, compounded on the last day of
June and December of each year, on (a) the Unreturned Preferred Capital of such
Preferred Unit plus (b) Unpaid Preferred Yield thereon, for all prior
semi-annual periods. In calculating the amount of any Distribution to be made
during a period, the portion of a Preferred Unit's Preferred Yield for such
portion of such period elapsing before such Distribution is made shall be taken
into account.
"PRIMARY WARRANTHOLDER TRANSFER" means any Transfer of a Warrant or
Warrant Unit other than a Secondary Warrantholder Transfer.
"PROFITS" means items of Company income and gain determined according
to Section4.5.
"PUBLIC SALE" means any sale of Securities to the public pursuant to
an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule144 (or any
similar provision then in effect) adopted under the Securities Act.
"PURCHASERS" means each of the persons named in Annex 1 to the Warrant
Agreement, together with their respective successors and assigns.
"PUT OPTION PRICE" shall have the meaning given to such term in the
Warrant Agreement.
"REDEMPTION DISTRIBUTION" means, with respect to any Preferred Unit at
any time, an amount equal to the sum of aggregate Unpaid Preferred Yield on such
Preferred Unit and Unreturned Preferred Capital on such Preferred Unit at such
time.
"REGISTRATION RIGHTS AGREEMENT" means the Amended and Restated
Registration Rights Agreement, dated as of the date hereof, by and among the
Company and the other signatories thereto (as the same may be amended, modified,
supplemented or waived from time to time).
"REGULATED MEMBER" means any Member that provides satisfactory
evidence to the Company that such Member's investment is subject to regulation
by a governmental authority (excluding securities laws), including a BHCA
Regulated Member and an SBIC Holder.
"REGULATORY PROBLEM" means any transaction, circumstance or situation
whereby (A) a Regulated Member and such Regulated Member's Affiliates would own,
control or have power over a greater quantity of securities of any kind issued
by the Company or any other entity than are
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permitted under any requirement of any governmental authority, or would cause
such Regulated Member to not be able to hold an investment in or provide
financing to the Company in compliance with any applicable requirement of any
governmental authority, or (B) it has been asserted by any governmental
regulatory agency (or such Regulated Member believes that there is a risk of
such assertion) that such Regulated Member and its Affiliates are not entitled
to hold the Units held by such Regulated Member or exercise any significant
right with respect to the Units held by such Person or provide financing to the
Company in compliance with any applicable requirement of any governmental
authority.
"REQUIRED APPROVAL" means the approval of each of (i) members of the
Argosy Group holding a majority of the Class A Common Units held by members of
the Argosy Group or, in lieu thereof, a majority of the Argosy Managers and (ii)
members of the Hancock Group holding a majority of the Class A Common Units held
by members of the Hancock Group or, in lieu thereof, the Hancock Manager.
"REQUIRED WARRANTHOLDER APPROVAL" means, at any time, the written
approval of the Required Warrantholders at such time.
"REQUIRED WARRANTHOLDERS" means, at any time, the holders (other than
the Company or any Non-Hancock Affiliate or Subsidiary) of sixty-six and
two-thirds percent (66-2/3%) of the Warrant Units at such time (excluding any
Warrant Units held directly or indirectly by the Company or any Non-Hancock
Affiliate or any Subsidiary). For purposes of this definition, holders of
Warrants at any time shall be deemed to be holders of the Units that are at such
time issuable upon exercise in full of such Warrants, whether or not such
holders are then entitled so to exercise such Warrants pursuant to the terms
thereof. For purposes of this definition, in the event that any Non-Hancock
Affiliate shall at any time acquire any Warrants, each holder of Warrants (other
than Warrants held by the Company, any Subsidiary of the Company, or any
Affiliate of the Company) shall be deemed to hold an additional number of
Warrant Units equal to the product of (a) the number of Warrant Units held by
such Non-Hancock Affiliate times (b) a fraction, the numerator of which is the
number of Warrant Units held by such holder and the denominator of which is the
aggregate number of Warrant Units of all holders of Warrants (other than
Warrants held by the Company, any Subsidiary of the Company or any Affiliate of
the Company).
"SALE OF THE COMPANY" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) equity securities of the Company constituting a majority
of the residual equity of the Company (whether by merger, consolidation, or sale
or transfer of the Common Units or otherwise) or (ii) all or substantially all
of Company's assets determined on a consolidated basis.
"SBA" means the United States Small Business Administration, and any
successor agency performing the functions thereof.
"SBIC" means a Small Business Investment Company licensed by an SBA
under the SBIC Act.
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"SBIC ACT" means the Small Business Investment Act of 1958, as
amended.
"SBIC Holder" means any member which is an SBIC.
"SBIC REGULATIONS" means the SBIC Act and the regulations issued by
the SBA thereunder, codified at Title 13 of the Code of Federal Regulations ("13
CFR"), Parts 107 and 121.
"SECONDARY TRANSFER LIMIT" means, in respect of any Warrant Units
which are the subject of any Transfer, an amount equal to one-third (1/3) of the
total number of Warrant Units into which the Warrants issued to the original
holder of such Warrant Units could have been exercised as of the date of the
original issuance of such Warrants; PROVIDED that in determining such total
number, equitable adjustments shall be made to reflect Unit splits,
combinations, dividends, reclassifications, recapitalizations, mergers and
consolidations applicable to Units in general made after the date of such
original issuance.
"SECONDARY WARRANTHOLDER TRANSFER" means a Transfer of a Warrant or
Warrant Unit (a) to a Competitor or (b) if the number of Warrant Units which are
the subject of such Transfer is less than the Secondary Transfer Limit in
respect of such Warrant Units.
"SECURITIES" means (i) the Units and (ii) the Warrants.
"SECURITIES PURCHASE AGREEMENT" means collectively those separate
Securities Purchase Agreements, each dated as of the date hereof, among Norcross
Safety Products L.L.C., North Safety Products Inc., Morning Pride Manufacturing
L.L.C. and each of the other signatories thereto, as it may be amended,
modified, supplemented or waived from time to time.
"SECURITYHOLDER" means any owner of one or more Securities as
reflected on the Company's books and records.
"SUBSIDIARY" means, with respect to any Person, (i)a corporation a
majority of whose capital stock with voting power, under ordinary circumstances,
to elect directors is at the time, directly or indirectly, owned by such Person
and/or by one or more Subsidiaries thereof or (ii)any other Person (other than a
corporation), including without limitation a joint venture, in which such
Person, and/or one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least a majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other persons performing
similar functions). For purposes of this definition, any directors' qualifying
shares or investments by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"SUBSTITUTED MEMBER" means a Person that is admitted as a Member to
the Company pursuant to Section10.1.
"TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility,
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environmental, communications, real or personal property, capital stock,
license, payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation, deficiencies,
penalties, additions to tax, and interest attributable thereto) whether disputed
or not.
"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
"TRANSFER" means any sale, transfer, assignment, pledge, mortgage,
exchange, hypothecation, grant of a security interest or other direct or
indirect disposition or encumbrance of an interest (including, without
limitation, by operation of law) or the acts thereof, but explicitly excluding
the exercise of any Warrant into Units, and conversions of one class of Common
Unit to another class of Common Unit. The terms "TRANSFEREE," "TRANSFERRED," and
other forms of the word "TRANSFER" shall have correlative meanings.
"TREASURY REGULATIONS" means the regulations promulgated by the United
States Department of the Treasury pursuant to and in respect of provisions of
the Code. All references herein to sections of the Treasury Regulations shall
include any corresponding provision or provisions of succeeding, similar,
substitute, proposed or final Treasury Regulations to the extent the Managers
determine that any such amendments and succeeding regulations do not adversely
affect the relative economic interests of the Members hereunder.
"TYPE" of Unit means a Preferred Unit or a Common Unit, as the case
may be.
"UNIT EXCHANGE AGREEMENT" means the Unit Purchase and Exchange
Agreement, dated October 2, 1998, among the Company, Argosy-Safety Products,
L.P., John Hancock Mutual Life Insurance Company, CIBC Wood Gundy Ventures,
Inc., Co-Investment Merchant Fund, L.L.C., Hancock Mezzanine Partners L.P.,
Citizens Capital, Inc., Continental Illinois Venture Corp., Caravelle Investment
Fund, L.L.C., CIBC Oppenheimer Corp. and Randolph Street Partners II.
"UNITHOLDER" means any owner of one or more Units as reflected on the
Company's books and records.
"UNPAID PREFERRED YIELD" of any Preferred Unit means, as of any date,
an amount equal to the excess, if any, of (a) the aggregate Preferred Yield or,
in the case of a Warrant Preferred Unit, Deemed Preferred Yield, accrued on such
Preferred Unit for all periods prior to such date, over (b)the aggregate amount
of prior Distributions made by the Company that constitute payment of Preferred
Yield on such Preferred Unit or Deemed Preferred Yield on such Warrant Preferred
Unit.
"UNRETURNED PREFERRED CAPITAL" means, with respect to a Preferred
Unit, the excess, if any, of (a) (i) if such Preferred Unit is a Warrant
Preferred Unit, the Deemed Preferred Unit Amount in respect to such Warrant
Preferred Unit or (ii) if such Preferred Unit is not a Warrant Preferred Unit,
the Capital Contribution made in exchange for or on account of such Unit over
(b) all Distributions made by the Company on account of such Warrant Preferred
Unit or Preferred Unit
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after all Unpaid Preferred Yield on account of such Warrant Preferred Unit or
Preferred Unit shall have been paid in full.
"WARRANT AGREEMENT" means that certain Warrant Agreement, dated as of
the date hereof, by and among the Company and the other parties signatory
thereto (as the same may be amended, modified, supplemented or waived from time
to time).
"WARRANT PREFERRED UNIT" means a Preferred Unit issuable or issued
pursuant to the exercise of any Warrant.
"WARRANT UNITS" means the following, without duplication, (a) Units
that have been issued upon the exercise of any Warrant and Units issued to the
Warrantholders, or any of them, from time to time, and (b) any Units that are
issuable upon the exercise of the Warrants. Holders of Warrants at any time
shall be deemed to be holders of Warrant Units described in clause (b) of this
definition that are at such time issuable upon exercise in full of such
Warrants, whether or not such holders are then entitled so to exercise such
Warrants pursuant to the terms thereof.
"WARRANTHOLDER" means each holder of Warrants and Warrant Units.
"WARRANTS" means those certain Warrants to acquire Class A Common
Units and Preferred Units, dated as of the date hereof, issued by the Company
pursuant to the Warrant Agreement.
14.2 OTHER DEFINITIONS. Capitalized terms used herein but not
defined in SECTION 14.1 have the meaning given such term in the Section where
such term is first defined in this Agreement.
ARTICLE XV.
MISCELLANEOUS
15.1 WILLS. Each Member who is a natural person agrees to execute a
will which shall contain a direction and authorization to his or her personal
representative, executor or administrator to comply with the provisions of this
Agreement and to sell his or her Units, as the case may be, in accordance with
this Agreement; PROVIDED, HOWEVER, that the failure of any such Member to do so
shall not affect the validity or enforceability of this Agreement.
15.2 SPOUSAL CONSENT. Each married Member, and each such Member
who, subsequent to the date hereof, marries or remarries, shall concurrently
with his or her execution hereof deliver to the Managers the written consent of
his or her spouse, substantially in the form attached hereto as SCHEDULE C;
PROVIDED, HOWEVER, that the failure of any such Member to do so shall not affect
the validity or enforceability of this Agreement.
15.3 THIRD-PARTY BENEFICIARIES. This Agreement is not intended to
nor will it confer upon any other person (other than the parties hereto) any
rights or remedies; and this
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Agreement is binding upon and is solely for the benefit of the parties hereto
and their respective successors, legal representatives and assigns.
15.4 DESIGNEES. Any rights granted to any Member of the Argosy
Group may be delegated to any other Member of the Argosy Group and any rights
granted to any Member of the Hancock Group may be delegated to any other Member
of the Hancock Group.
15.5 AMENDMENTS.
(a) This Agreement may be amended only by the affirmative vote of
a majority of the Common Voting Units (with Required Approval) or, as the result
of an issuance or transfer permitted by this Agreement, by the Managers;
PROVIDED THAT, no amendment or modification pursuant to this SECTION 15.5 that
would adversely affect holders of one class of Securities in a manner different
than holders of any other class of Securities (as the case may be) shall be
effective against the holders of such class of Securities without the prior
written consent of holders of at least a majority of Securities of such class so
adversely affected thereby, or, in the case of the Warrant Units, Required
Warrantholder Approval; PROVIDED FURTHER THAT, no amendment or modification
pursuant to this SECTION 15.5 that would adversely affect a holder of one class
or type of Securities in a manner different than the other holders of the same
class or type of Securities shall be effective against such holder without the
prior written consent of such holder; PROVIDED FURTHER that, no amendment or
modification of SECTIONS 2.7, 2.8, 2.9 or 2.10 shall be effective without the
prior written consent of all Regulated Members affected thereby and no amendment
or modification of SECTIONS 2.11 or 2.12 shall be effective without the prior
written consent of all of the SBIC Holders; and PROVIDED FURTHER that no
amendment or modification pursuant to this SECTION 15.5 that would affect the
rights of a Member or group of Members specifically granted such rights by name
shall be modified without that Member's (or a majority of that group of
Members') consent. Notwithstanding the foregoing, (i) no amendment or
modification of the provisions of, or the defined terms used in, SECTION
2.2(d)(vi), SECTION 4.1(b), SECTION 9.1, SECTION 9.2, the last sentence of
ARTICLE XI or SECTION 15.5, shall be effective against any holder of Warrant
Units without Required Warrantholder Approval.
(b) In the event that any amendment is to be made to SECTION 9.8
hereof, the foregoing required vote must include the votes of all affected
employee Members and terminated employee Members. The Managers shall not enter
into any other agreement that would have the effect of amending the provisions
of this Agreement without the foregoing required vote.
(c) For purposes of this SECTION 15.5, Warrant Units shall be
deemed a separate class or type of Securities.
15.6 NOTICES. Except as expressly set forth to the contrary in this
Agreement, all notices, requests or consents provided for or permitted to be
given under this Agreement must be in writing and shall be deemed delivered:
(a)upon delivery if delivered in person; (b) upon transmission if sent via
telecopier, with a confirmation copy sent via overnight mail, PROVIDED THAT
confirmation of such overnight delivery is received; or (c)one (1) business day
after deposit with a national overnight courier PROVIDED THAT confirmation of
such overnight delivery is received. All
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notices, requests and consents to be sent to a Member or Securityholder must be
sent to or made at the address given for that Member on SCHEDULE A or, in the
case of the holders of Warrant Units, at the address provided for in the Warrant
Agreement or such other address as that Member or Securityholder may specify by
notice to the other Members. Any notice, request, or consent to the Company or
the Managers must be given to the Managers at the following address:
NSP Holdings L.L.C.
2211 York Road, Suite 215
Oak Brook, Illinois 60523-1887
Attention: Robert A. Peterson
Telecopy: (630) 572-8231
Whenever any notice is required to be given by law, the Certificate or this
Agreement, a written waiver thereof, signed by the Person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
15.7 WAIVER OF CERTAIN RIGHTS. Each Member irrevocably waives any
right it may have to demand any distributions or withdrawal of property from the
Company or to maintain any action for dissolution of the Company or for
partition of the property of the Company.
15.8 ENTIRE AGREEMENT. Except as provided in the Securities
Purchase Agreement, the Note Agreement, the Warrant Agreement and the
Registration Rights Agreement, this Agreement constitutes the entire agreement
of the Members and their affiliates relating to the Company and supersedes all
prior contracts or agreements with respect to the Company, whether oral or
written.
15.9 EFFECT OF WAIVER OR CONSENT. A waiver or consent, express or
implied, to or of any breach or default by any Person in the performance by that
Person of its obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Person of the
same or any other obligations of that Person with respect to the Company.
Failure on the part of a Person to complain of any act of any Person or to
declare any Person in default with respect to the Company, irrespective of how
long that failure continues, does not constitute a waiver by that Person of its
rights with respect to that default until the applicable statute-of-limitations
period has run.
15.10 CREDITORS. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditors of the Company or any of its
Affiliates, and no creditor who makes a loan to the Company or any of its
Affiliates may have or acquire (except pursuant to the terms of a separate
agreement executed by the Company in favor of such Creditor) at any time as a
result of making the loan any direct or indirect interest in Company Profits,
Losses, Distributions, capital or property other than as a secured creditor.
15.11 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF OF A
MEMBER OR HOLDER OF WARRANTS.
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(a) If the Company is obligated to pay any amount to a
governmental agency or body or, as directed by a court of competent jurisdiction
or a governmental agency or body, to any other Person because of the status of a
Member or holder of Warrants or otherwise specifically attributable to a Member
or holder of Warrants (including, without limitation, federal withholding taxes
with respect to foreign partners, state personal property taxes, state
unincorporated business taxes, etc.), then such Member or holder of Warrants
(the "INDEMNIFYING PERSON) shall indemnify the Company in full for the entire
amount paid (including, without limitation, any interest, penalties and expenses
associated with such payment). At the option of the Managers, the amount to be
indemnified may be charged against the Capital Account of the Indemnifying
Person, and, at the option of the Managers, either:
(i) promptly upon notification of an obligation to
indemnify the Company, the Indemnifying Person shall make a cash payment to the
Company equal to the full amount to be indemnified (and the amount paid shall be
added to the Indemnifying Person's Capital Account, if any, but shall not be
deemed to be a Capital Contribution hereunder); or
(ii) the Company shall reduce subsequent Distributions
which would otherwise be made to the Indemnifying Person until the Company has
recovered the amount to be indemnified (provided that the amount of such
reduction shall be deemed to have been distributed for all purposes of this
Agreement, but such deemed Distribution shall not further reduce the
Indemnifying Person's Capital Account, if any).
(b) The obligation of a Member or holder of Warrants to make
contributions to the Company under this SECTION 15.11 shall survive the
termination, dissolution, liquidation and winding up of the Company and for
purposes of this SECTION 15.11, the Company shall be treated as continuing in
existence. The Company may pursue and enforce all rights and remedies it may
have against each Member or holder of Warrants under this SECTION 15.11,
including instituting a lawsuit to collect such contribution with interest
calculated at a rate equal to the Base Rate plus six percentage points per annum
(but not in excess of the highest rate per annum permitted by law).
15.12 BINDING AGREEMENT. Subject to the restrictions on transfers
and encumbrances set forth in this Agreement, this Agreement shall inure to the
benefit of and be binding upon the undersigned Persons and their respective
legal representatives, successors, and assigns.
15.13 GOVERNING LAW. THIS AGREEMENT IS GOVERNED BY AND SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the event
of a direct conflict between the provisions of this Agreement and any provision
of the Certificate or any mandatory provision of the Act, the applicable
provision of the Certificate or the Act shall control. If any provision of this
Agreement or the application thereof to any Person or circumstance is held
invalid or unenforceable to any extent, the remainder of this Agreement and the
application of that provision to other Persons or circumstances is not affected
thereby and that provision shall be enforced to the greatest extent permitted by
law.
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15.14 ARBITRATION.
(a) The parties acknowledge that the expeditious and equitable
settlement of disputes arising under this Agreement is to their mutual
advantage. To that end, the parties agree to use their best efforts to resolve
all differences of opinion and to settle all disputes through joint cooperation
and consultation. Any dispute, alleged breach, interpretation, challenge or
disagreement whatsoever arising out of this Agreement (or any other agreement to
the extent incorporated herein by reference) that the parties are unable to
settle within sixty (60) days, as set forth in the preceding sentence, shall be
resolved by final and binding arbitration before a single arbitrator selected
and serving under the Commercial Arbitration Rules of the American Arbitration
Association. The arbitration shall be held in Wilmington, Delaware unless
another location is mutually agreed upon by the parties to such arbitration.
Such arbitration shall be the exclusive remedy hereunder. The decision of the
arbitrator may, but need not, be entered as judgment in accordance with the
provisions of the laws of Delaware. If this Arbitration provision is for any
reason held to be invalid or otherwise inapplicable to any dispute, the parties
hereto agree that any action or proceeding brought with respect to any dispute
arising under this Agreement, or to interpret or clarify any rights or
obligations arising hereunder, shall be maintained solely and exclusively in the
United States Federal Courts, venued in Wilmington, Delaware.
(b) Anything set forth in the foregoing paragraph notwithstanding,
the Securityholders agree that the exclusive procedure for resolving disputes
over the determination of Fair Market Value shall be as set forth in SECTION
2.1(b) of this Agreement. Except as specifically provided otherwise in the
Warrant Agreement, all Securityholders and the Company shall be bound by the
determination of Fair Market Value made in accordance therewith. Accordingly,
the Securityholders agree that no arbitration, or action or proceeding in any
court or other tribunal, shall be brought with respect to any dispute over the
determination of Fair Market Value.
(c) In no event shall the provisions of the Securities Purchase
Agreement, the Note Agreement or the Warrant Agreement be subject to the
foregoing provisions of this SECTION 15.14.
15.15 DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. Whenever required by the context, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. The use of the word "including" in this
Agreement shall be by way of example rather than by limitation. Reference to any
agreement, document or instrument means such agreement, document or instrument
as amended or otherwise modified from time to time in accordance with the terms
thereof, and if applicable hereof. Without limiting the generality of the
immediately preceding sentence, no amendment or other modification to any
agreement, document or instrument that requires the consent of any Person
pursuant to the terms of this Agreement or any other agreement will be given
effect hereunder unless such Person has consented in writing to such amendment
or modification. Wherever required by the context, references to a Fiscal Year
shall refer to a portion thereof. The use of the words "or," "either" and "any"
shall not be exclusive. The parties hereto have participated jointly in the
negotiation and
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drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties hereto, and no presumption or burden of proof shall arise
favoring or disfavoring any party by virtue of the authorship of any of the
provisions of this Agreement. Wherever a conflict exists between this Agreement
and any other agreement, except as otherwise provided in this Agreement, this
Agreement shall control but solely to the extent of such conflict.
15.16 FURTHER ASSURANCES. In connection with this Agreement and the
transactions contemplated hereby, each Securityholder shall execute and deliver
any additional documents and instruments and perform any additional acts that
may be necessary or appropriated to effectuate and perform the provisions of
this Agreement and those transactions.
15.17 COUNTERPARTS. This Agreement may be executed in any number of
counterparts with the same effect as if all signing parties had signed the same
document. All counterparts shall be construed together and constitute the same
instrument.
15.18 REPRESENTATIONS AND WARRANTIES OF SECURITYHOLDER. In
connection with any Capital Contribution for which a Securityholder receives
Units hereunder or any other transaction hereunder in which a Securityholder
receives Units, such Securityholder represents and warrants to the Company that:
(a) The Units to be acquired by such Securityholder pursuant to
this Agreement will be acquired for such Securityholder's own account and not
with a view to, or intention of, distribution thereof in violation of any
applicable securities laws, and the Units will not be disposed of in
contravention of any such laws.
(b) In the case of a Securityholder that is a natural person, such
Securityholder is a director, executive officer, or general partner of the
Company or in the case of a Securityholder that is an entity, such
Securityholder is an organization described in Section501(c)(3) of the Internal
Revenue Code of 1986, as amended, a corporation, limited liability company or
partnership, or a Massachusetts or similar business trust, which entity was not
formed for the specific purpose of making an investment in the Company and has
total assets in excess of $5,000,000.
(c) Such Securityholder is sophisticated in financial matters and
is able to evaluate the risks and benefits of the investment in the Units.
(d) Such Securityholder is able to bear the economic risk of his
investment in the Units for an indefinite period of time because the Units have
not been registered under any applicable securities laws and, therefore, cannot
be sold unless subsequently registered under all applicable securities laws or
an exemption therefrom is available.
(e) Such Securityholder has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the offering of Units
and has had full access to such other information concerning the Company as he
has requested and each such Securityholder is making the investment
independently of, and without reliance on, all other Securityholders.
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(f) This Agreement constitutes the legal, valid and binding
obligation of such Securityholder, enforceable in accordance with its terms, and
the execution, delivery and performance of this Agreement by such Securityholder
does not and will not conflict with, violate or cause a breach of any agreement,
contract or instrument to which such Securityholder is a party or any judgment,
order or decree to which such Securityholder is subject.
15.19 REPRESENTATIONS AND WARRANTIES OF COMPANY. In connection with
any Capital Contribution for which a Securityholder receives Units or any other
transaction hereunder in which a Securityholder receives Units, the Company
represents and warrants to such Securityholder that:
(a) ORGANIZATION; POWER AND AUTHORITY. The Company is a limited
liability company, duly formed, validly existing and in good standing under the
Delaware Limited Liability Company Act. The Company is not qualified as a
foreign limited liability company in any jurisdiction. The Company has all
requisite power and authority to own or hold under lease the properties it
purports to own or hold under lease, to transact the business it proposes to
transact, to execute and deliver this Agreement and the Units and to perform the
provisions hereof and thereof except where the failure to hold such power or
authority would not have a material adverse effect on the Company and its
subsidiaries taken as a whole.
(b) AUTHORIZATION. This Agreement and the issuance of the Units
have been duly authorized by the Company, and this Agreement constitutes the
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, subject, in the case of enforcement, to
bankruptcy, fraudulent transfer, reorganization, moratorium and other laws of
general applicability relating to creditor's rights and to general equity
principles. Upon issuance, the Units will be validly issued and fully paid to
the extent payment has been made in full. The issuance of the Units hereunder is
not subject to any preemptive rights which have not been waived.
(c) OWNERSHIP. SCHEDULE D is a complete and correct list of direct
and indirect subsidiaries of the Company. Each subsidiary of the Company is a
corporation or limited liability company, duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
formation and is duly qualified as a foreign corporation or limited liability
company in each jurisdiction in which the failure to be so qualified would have
a material adverse effect on the Company and its subsidiaries taken as a whole.
Each such subsidiary has the power and authority to own or hold under lease the
properties it purports to own or hold under lease and to transact the business
it transacts and proposes to transact except where the failure to hold such
power or authority would not have a material adverse effect on the Company and
its subsidiaries taken as a whole.
(d) COMPLIANCE WITH LAWS; CONFLICTS. The execution, delivery and
performance by the Company of this Agreement and the issuance of the Units will
not (i) contravene, result in a breach of or constitute a default under, or
result in the creation of any lien in respect of any property of the Company or
any subsidiary under the organizational documents of any of them or under any
material instrument or agreement to which they are parties or by which their
respective properties are bound, or (ii) conflict with or result in the breach
of any of the terms or provisions of any order, judgment, decree or ruling of
any court or governmental authority applicable to the Company or any
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of its subsidiaries or violate any provision of any statute or other rule or
regulation of any governmental authority applicable to the Company or any of its
subsidiaries, except those contraventions, breaches, defaults, creations of
liens or other requirements described above which would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(e) GOVERNMENTAL AUTHORIZATIONS. No consent, approval or
authorization of, or registration with any governmental authority is required in
connection with the execution, delivery or performance by the Company of the
Agreement or the issuance of the Units, other than compliance with applicable
state and federal securities laws, and except where the failure to obtain such
consents, approvals, authorizations, or registrations would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(f) PRIVATE OFFERING. Assuming the accuracy of the representations
contained in Section 15.18 hereof, the Company has not violated any state or
federal securities laws in connection with the offer and sale of the Units in
the manner contemplated by this Agreement and registration under the Securities
Act is not required.
(g) USE OF PROCEEDS. Neither the Company nor any subsidiary owns
or has any present intention of acquiring any "margin stock" as defined in
Regulation U (12 CFR Part 221) of the Board of Governors of the Federal Reserve
System ("margin stock"). None of the proceeds of the sale of the Units will be
used, directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any margin stock or for the purpose of
maintaining, reducing or retiring any indebtedness which was originally incurred
to purchase or carry any stock that is currently a margin stock or for any other
purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U.
(h) INDEBTEDNESS. The Company has made available to the Members
true, complete and correct copies of each of the material agreements for
indebtedness for borrowed money to which the Company and its subsidiaries are
party (the "CREDIT AGREEMENTS") and all other instruments and agreements
executed in connection therewith and which are in effect on the date hereof.
(i) STATUS UNDER CERTAIN STATUTES. The Company is not required to
be registered as an "investment company" under the Investment Company Act and is
not subject to regulation under the Public Utilities Holding Company Act.
(j) CREDIT AGREEMENTS. To the best of the Company's knowledge, the
representations and warranties made by the Company or an Affiliate contained in
the Credit Agreements were true and correct in all material respects when made.
(k) SOLVENCY. After giving effect to the transactions contemplated
hereby, to the best of the Company's knowledge, as of the date hereof, the
aggregate fair saleable value of the assets of the Company on a consolidated
basis exceeds the amount required to pay its non-contingent liabilities
(assuming all of its debt is refinanced at maturity).
-50-
<Page>
(l) VIOLATIONS OF CERTAIN LAWS. Neither the sale of the Units by
the Company hereunder nor its use of the proceeds thereof will violate the
Trading with the Enemy Act, as amended, or any of the foreign assets control
regulations of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive order relating
thereto.
* * * * *
-51-
<Page>
CONNECTICUT GENERAL LIFE
INSURANCE COMPANY
By: CIGNA Investments, Inc.
(authorized agent)
By: /s/ Edward Lewis
-----------------------------
Its: EDWARD LEWIS
MANAGING DIRECTOR
-----------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
LIFE INSURANCE COMPANY OF
NORTH AMERICA
By: CIGNA Investments, Inc.
(authorized agent)
By: /s/ Edward Lewis
-----------------------------
Its: EDWARD LEWIS
MANAGING DIRECTOR
-----------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
JOHN HANCOCK LIFE INSURANCE
COMPANY
By: /s/ Daniel C. Budde
-----------------------------
Its: Daniel C. Budde
-----------------------------
Managing Director
[Signature Page to Limited Liability Company Agreement]
<Page>
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: /s/ Daniel. C. Budde
------------------------------
Its: Authorized Signatory
[Signature Page to Limited Liability Company Agreement]
<Page>
INVESTORS PARTNER LIFE
INSURANCE COMPANY
By: /s/ Daniel C. Budde
------------------------------
Its: Daniel C. Budde
------------------------------
AUTHORIZED SIGNATORY
[Signature Page to Limited Liability Company Agreement]
<Page>
SIGNATURE 3 LIMITED
By: John Hancock Life Insurance
Company, as Portfolio Advisor
By: /s/ Daniel C. Budde
------------------------------
Its: Daniel C. Budde
------------------------------
Managing Director
[Signature Page to Limited Liability Company Agreement]
<Page>
SIGNATURE 4 LIMITED
By: John Hancock Life Insurance
Company, as Portfolio Advisor
By: /s/ Daniel C. Budde
------------------------------
Its: Daniel C. Budde
------------------------------
Managing Director
[Signature Page to Limited Liability Company Agreement]
<Page>
HANCOCK MEZZANINE PARTNERS L.P.
By: Hancock Mezzanine Investments LLC
Its: General Partner
/s/ Daniel C. Budde
-----------------------------------
By: John Hancock Life Insurance
Company
Its: Investment Advisor
[Signature Page to Limited Liability Company Agreement]
<Page>
PPM AMERICA SPECIAL
INVESTMENTS CBO II, L.P.
By: PPM AMERICA, INC., its Attorney in
Fact
By: /s/ Levoyd E. Robinson
-------------------------------
Name: Levoyd E, Robinson, CFA
------------------------------
Its: Senior Managing Director
------------------------------
[SIGNATURE PAGE TO LIMITED LIABILITY COMPANY AGREEMENT]
<Page>
PPM AMERICA SPECIAL
INVESTMENTS FUND, L.P.
By: PPM AMERICA, INC., its Attorney in
Fact
By: /s/ Levoyd E. Robinson
-------------------------------
Name: Levoyd E, Robinson, CFA
------------------------------
Its: Senior Managing Director
------------------------------
[SIGNATURE PAGE TO LIMITED LIABILITY COMPANY AGREEMENT]
<Page>
AMERICAN GENERAL LIFE INSURANCE COMPANY
AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY
THE FRANKLIN LIFE INSURANCE COMPANY
AMERICAN GENERAL ANNUITY INSURANCE COMPANY
By: /s/ C. Scott Inglis
-----------------------------
Its: C. SCOTT INGLIS
INVESTMENT OFFICER
-----------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
ALLSTATE LIFE INSURANCE
COMPANY
By: /s/ [ILLEGIBLE]
------------------------------
Its: [ILLEGIBLE]
------------------------------
By: /s/ David Walsh
------------------------------
Its:
------------------------------
Authorized Signatories
[Signature Page to Limited Liability Company Agreement]
<Page>
J.H. WHITNEY MAZZANINE FUND, L.P.
By: Whitney GP, L.L.C.
By: /s/ Joseph Corrabino
------------------------------
Name: Joseph Corrabino, Jr.
A Managing Member
[Signature Page to Limited Liability Company Agreement]
<Page>
HMI Inc.
By: /s/ [ILLEGIBLE]
------------------------------
Its:
------------------------------
[ILLEGIBLE
[Signature Page to Limited Liability Company Agreement]
<Page>
RANDOLPH STREET PARTNERS II
By: /s/ [ILLEGIBLE]
------------------------------
Its:
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
[SEAL]
CONTINENTAL CASUALITY COMPANY
By: /S/ [ILLEGIBLE]
----------------------------
Its: Vice President
[Signature Page to Limited Liability Company Agreement]
<Page>
Argosy-Safety Products L.P.
By: /s/ [ILLEGIBLE]
------------------------------
Its:
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
/s/ Robert A. Peterson
-----------------------------------
Robert A. Peterson
[Signature Page to Limited Liability Company Agreement]
<Page>
/s/ David F. Myers.
-----------------------------------
David F. Myers. Jr.
[Signature Page to Limited Liability Company Agreement]
<Page>
/s/ Robert J. Larsen
-----------------------------------
Robert J. Larsen
[Signature Page to Limited Liability Company Agreement]
<Page>
CITIZENS CAPITAL, INC.
By: /s/ [ILLEGIBLE]
------------------------------
Its: Managing Director
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
CONTINENTAL ILLINOIS VENTURE
CORP.
By: /s/ Marcus D. Wedner
------------------------------
Its: Marcus D. Wedner
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
Caravelle Investment Fund, L.L.C.
By: /s/ Caravelle Advisors, LLC
------------------------------
Its: Investment Manager and
Attorney in Fact
/s/ [ILLEGIBLE]
Executive Director
[Signature Page to Limited Liability Company Agreement]
<Page>
/s/ William Grilliot
-----------------------------------
William Grilliot
[Signature Page to Limited Liability Company Agreement]
<Page>
/s/ Mary Grilliot
-----------------------------------
Mary Grilliot
[Signature Page to Limited Liability Company Agreement]
<Page>
CIBC WMC Inc.
By: /s/ [ILLEGIBLE]
------------------------------
Its: MANAGING DIRECTOR
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
Caravelle Norcross Investment Corporation
By: /s/ [ILLEGIBLE]
------------------------------
Its: President
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
ALLIANCE INVESTMENT
OPPORTUNITIES FUND, L.L.C.
By: Alliance Investment Opportunities
Management, L.L.C.
Its: Managing Member
By: Alliance Capital Management. L.P.
Its: Managing Member
By: Alliance Capital Management
Corporation
Its: General Partner
By: /s/ [ILLEGIBLE]
------------------------------
Its: SENIOR VICE PRESIDENT
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
Co-Invest Merchant Fund 2 L.L.C.
By: /s/ [ILLEGIBLE]
------------------------------
Its:
------------------------------
[Signature Page to Limited Liability Company Agreement]
<Page>
ALBION ALLIANCE MAZZANINE FUND.
L.P.
By: /s/ U. Peter Cummeson
------------------------------
Its: U. PETER CUMMEESON
------------------------------
SENIOR VICE PRESIDENT
[Signature Page to Limited Liability Company Agreement]