EXHIBIT 10.15
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
MARCH 20, 1998
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I -- DEFINITIONS............................................... 1
Section 1.1 Definitions......................................... 1
ARTICLE II -- ORGANIZATION AND GENERAL PROVISIONS...................... 11
Section 2.1 Continuation........................................ 11
Section 2.2 Name................................................ 11
Section 2.3 Term................................................ 12
Section 2.4 Registered Agent and Registered Office.............. 12
Section 2.5 Principal Place of Business......................... 12
Section 2.6 Qualification in Other Jurisdictions................ 12
Section 2.7 Purposes and Powers................................. 12
Section 2.8 Title to Property................................... 13
ARTICLE III -- MANAGEMENT OF THE LLC................................... 13
Section 3.1 Management in General............................... 13
Section 3.2 Management Committee of the LLC..................... 16
Section 3.3 Officers of the LLC................................. 19
Section 3.4 Employees of the LLC................................ 19
Section 3.5 Operation of the Business of the LLC................ 20
Section 3.6 Compensation and Expenses of the Members............ 23
Section 3.7 Other Business of the Manager Member and its
Affiliates..................................... 24
Section 3.8 Non-Manager Members and Non Solicitation
Agreements..................................... 24
Section 3.9 Non Solicitation and Non Disclosure by Non-Manager
Members and Employee Stockholders.............. 24
Section 3.10 Remedies Upon Breach................................ 27
Section 3.11 Repurchase Upon Termination of Employment or
Transfer by Operation of Law................... 28
Section 3.12 No Employment Obligation............................ 33
Section 3.13 Capitalization of Excess Operating Cash Flow........ 33
Section 3.14 Miscellaneous....................................... 33
ARTICLE IV -- CAPITAL CONTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS; DISTRIBUTIONS.................... 34
Section 4.1 Capital Contributions............................... 34
Section 4.2 Capital Accounts; Allocations....................... 35
Section 4.3 Distributions....................................... 38
Section 4.4 Distributions Upon Dissolution; Establishment of a
Reserve Upon Dissolution....................... 40
(i)
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Section 4.5 Proceeds from Capital Contributions and the Sale
of Securities; Insurance Proceeds; Certain
Special Allocations............................ 41
Section 4.6 Federal Tax Allocations............................. 42
ARTICLE V -- TRANSFER OF LLC INTERESTS BY NON-MANAGER MEMBERS;
RESIGNATION, REDEMPTION AND WITHDRAWAL BY NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS........................ 43
Section 5.1 Assignability of Interests.......................... 43
Section 5.2 Substitute Non-Manager Members...................... 45
Section 5.3 Allocation of Distributions Between Assignor and
Assignee; Successor to Capital Accounts........ 45
Section 5.4 Resignation, Redemptions and Withdrawals............ 46
Section 5.5 Issuance of Additional LLC Interests................ 46
Section 5.6 Additional Requirements to Transfer or Issuance..... 47
Section 5.7 Representation of Members........................... 47
ARTICLE VI -- TRANSFER OF LLC INTERESTS BY THE MANAGER MEMBER;
REDEMPTION, REMOVAL AND WITHDRAWAL................................. 48
Section 6.1 Assignability of Interest........................... 48
Section 6.2 Resignation, Redemption, and Withdrawal............. 49
ARTICLE VII -- PUT OF LLC INTERESTS.................................... 49
Section 7.1 Puts................................................ 49
Section 7.2 Election Rights of Non-Manager Members to Receive
AMG Stock...................................... 52
Section 7.3 Registration Rights................................. 54
Section 7.4 Restrictions........................................ 57
Section 7.5 Limitation of Registration Rights................... 58
Section 7.6 Option of Receiving Future Piggyback Registration
Rights......................................... 58
Section 7.7 Calls............................................... 58
ARTICLE VIII -- DISSOLUTION AND TERMINATION............................ 59
Section 8.1 No Dissolution...................................... 59
Section 8.2 Events of Dissolution............................... 59
Section 8.3 Notice of Dissolution............................... 59
Section 8.4 Liquidation......................................... 59
Section 8.5 Termination......................................... 60
Section 8.6 Claims of the Members............................... 60
ARTICLE IX -- RECORDS AND REPORTS...................................... 60
Section 9.1 Books and Records................................... 60
Section 9.2 Accounting.......................................... 60
(ii)
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Section 9.3 Financial and Compliance Reports.................... 60
Section 9.4 Meetings............................................ 61
Section 9.5 Tax Matters......................................... 61
ARTICLE X -- LIABILITY, EXCULPATION AND INDEMNIFICATION................ 62
Section 10.1 Liability........................................... 62
Section 10.2 Exculpation......................................... 62
Section 10.3 Fiduciary Duty...................................... 63
Section 10.4 Indemnification..................................... 63
Section 10.5 Notice; Opportunity to Defend and Expenses.......... 64
Section 10.6 Miscellaneous....................................... 65
ARTICLE XI -- MISCELLANEOUS............................................ 65
Section 11.1 Notices............................................. 65
Section 11.2 Successors and Assigns.............................. 65
Section 11.3 Amendments.......................................... 65
Section 11.4 No Partition........................................ 66
Section 11.5 No Waiver; Cumulative Remedies...................... 66
Section 11.6 Dispute Resolution.................................. 66
Section 11.7 Prior Agreements Superseded......................... 67
Section 11.8 Captions............................................ 67
Section 11.9 Counterparts........................................ 67
Section 11.10 Applicable Law; Jurisdiction........................ 67
Section 11.11 Interpretation...................................... 67
Section 11.12 Severability........................................ 67
Section 11.13 Creditors........................................... 67
EXHIBITS
Exhibit A -- Incentive Program
Exhibit B -- Form of Non Solicitation/Non Disclosure Agreement for
Employee Stockholders
Exhibit C -- Form of Promissory Note for Repurchases
SCHEDULES
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Schedule A -- LLC Points and Capital Contribution
Schedule B -- Model Repurchase Calculation
(iii)
ESSEX INVESTMENT MANAGEMENT COMPANY, LLC
AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
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This Limited Liability Company Agreement (the "Agreement") of Essex
Investment Management Company, LLC (the "LLC" or the "Company") is made and
entered into as of March 20, 1998 (the "Effective Date"), by and among the
persons identified as the Manager Member and the Non-Manager Members on
Schedule A attached hereto as members of the LLC, and the Persons who become
members of the LLC in accordance with the provisions hereof.
WHEREAS, a limited liability company has been formed pursuant to the
Delaware Limited Liability Company Act, 6 Delaware Code Section 18-101, et
seq., as it may be amended from time to time and any successor to such Act
(the "Act"), by filing a Certificate of Formation of the LLC with the office
of the Secretary of State of the State of Delaware on January 12, 1998, and
entering into a Limited Liability Company Agreement of the LLC, dated as of
January 12, 1998; and
WHEREAS, pursuant to the Merger Agreement, Constitution Merger Sub, Inc.
a Massachusetts corporation and a wholly owned subsidiary of Affiliated
Managers Group, Inc. ("Merger Sub"), is being merged with and into Essex
Investment Management Company, Inc., a Massachusetts corporation ("Essex"),
effective as of the Closing (as defined in the Merger Agreement) and the
Members desire to continue the LLC as a limited liability company under the
Act with Essex as Manager Member, and to amend and restate the Limited
Liability Company Agreement of the LLC, dated as of January 12, 1998 in its
entirety.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the
mutual covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I -- DEFINITIONS.
Section 1.1 Definitions. Unless the context otherwise requires, the
terms defined in this Article I shall, for the purposes of this Agreement,
have the meanings herein specified.
"1940 Act" shall mean the Investment Company Act of 1940, as it may be
amended from time to time, and any successor to such act.
"Act" shall have the meaning set forth in the preamble of this Agreement.
"Additional Non-Manager Members" shall have the meaning specified in
Section 5.5.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it may
be amended from time to time, and any successor to such act.
"Affiliate" shall mean, with respect to any person or entity (herein the
"first party"), any other person or entity that directly or indirectly
controls, or is controlled by, or is under common control with, such first
party. The term "control" as used herein (including the terms "controlled
by" and "under common control with") means the possession, directly or
indirectly, of the power to (a) vote twenty-five percent (25%) or more of the
outstanding voting securities of such person or entity, or (b) otherwise
direct the management or policies of such person or entity by contract or
otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as it
may from time to time be amended, supplemented or restated.
"AMG" shall mean Affiliated Managers Group, Inc., a Delaware
corporation, and any successors or assigns thereof.
"AMG Stock" shall have the meaning specified in Section 7.2(a) hereof.
"Asserted Liability" shall have the meaning specified in Section 10.5(a)
hereof.
"Capital Account" shall mean the capital account maintained by the LLC
with respect to each Member in accordance with the capital accounting rules
described in Section 4.2 hereof.
"Capital Contribution" shall mean, as to each Member, the amount of
money and/or the agreed fair market value of any property (net of any
liabilities encumbering such property that the LLC is considered to assume or
take subject to) contributed to the capital of the LLC by such Member.
"Certificate" shall mean the original Certificate of Formation of the
LLC required under the Act, as such Certificate may be amended and/or
restated from time to time.
"Claims Notice" shall have the meaning specified in Section 10.5(a)
hereof.
"Client" shall mean all Past Clients, Present Clients and Potential
Clients, subject to the following general rules: (i) with respect to each
Client, the term shall also include any persons or entities which are known
to the Employee Stockholder to be Affiliates of such Client or persons who
are members of the Immediate Family of such Client or any of its Affiliates;
(ii) with respect to any collective investment vehicle other than an
investment company registered under the Investment Company Act of 1940, as
amended, the term shall also include any investor or participant in such
Client; and (iii) with respect to so-called "wrap programs," both the sponsor
of the program and the underlying participants in the program (or clients who
have selected the LLC or a Controlled Affiliate under their contract with the
sponsor) shall be included as Clients.
"Code" or "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor
thereto, together with all regulations promulgated thereunder.
"Committee Vote" shall have the meaning specified in Section 3.2(b)(iv)
hereof.
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"Controlled Affiliate" shall mean, with respect to a Person, any
Affiliate of such Person under its "control," as the term "control" is
defined in the definition of Affiliate.
"Controlling Person" shall have the meaning specified in Section 7.3(e)
hereof.
"Covered Person" shall mean a Member, any Affiliate of a Member, any
officer, director, shareholder, partner, employee or member of a Member or
any of its Affiliates, or any Officer.
"Earned Performance Fee" shall mean, for each Performance Account, with
respect to a calendar quarter in which any "carried interest," special
performance allocation or other profit allocation or any "performance fee"
(in each case as set forth in the investment contract with, or organizational
document of, a Performance Account) has been definitively allocated to or
earned by the LLC and is no longer subject to any offset or reduction, an
amount equal to the product of (a) that "carried interest" or other profit
allocation or any "performance fee" and (b) the Free Cash Flow Percentage.
"Effective Date" shall have the meaning specified in the preamble of
this Agreement.
"Eligible Person" shall have the meaning specified in Section 3.2(b)(i)
hereof.
"Employee Stockholder" shall mean (a) in the case of a Non-Manager
Member which is an individual, such Non-Manager Member, and (b) in the case
of a Non-Manager Member which is not an individual, that certain employee of
the LLC who is the owner of all the issued and outstanding capital stock of
such Non-Manager Member, and is listed as such on Schedule A hereto,
including such employee after such employee transfers his or her interest in
such Non-Manager member to a Permitted Transferee.
"Employment Agreement" shall have the meaning ascribed thereto in the
Merger Agreement.
"Essex" shall have the meaning specified in the preamble of this
Agreement.
"Fair Market Value" shall mean such fair market value as the Manager
Member may reasonably determine (or, for purposes of Section 4.4 hereof, if
there shall be no Manager Member, the Liquidating Trustee) with the consent
of the Management Committee (which consent shall not be unreasonably
withheld) or, in the absence of such determination and consent, as determined
by an appraiser jointly selected by the Manager Member and the Management
Board.
"For Cause" shall mean, with respect to the termination of an Employee
Stockholder's employment with the LLC, or his removal from the Management
Committee or from his position as an Officer, any of the following:
(a) The Employee Stockholder has engaged in (i) any criminal
offense which is classified as a felony (or its equivalent under the
laws or regulations of any country or political subdivision thereof), or
(ii) any other criminal offense which involves
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a violation of federal or state securities laws or regulations (or
equivalent laws or regulations of any country or political subdivision
thereof), embezzlement, fraud, wrongful taking or misappropriation of
property, theft, or any other crime involving dishonesty and has been
convicted (whether or not subject to appeal) or pled nolo contendere (or
any similar plea) to any criminal offense in connection with or relating
to such act;
(b) The Employee Stockholder has persistently and willfully
failed to perform his or her duties or failed to devote substantially
all of his or her working time to the performance of such duties
(except, in the case of an Employee Stockholder who is a party to an
Employment Agreement or a Non-Solicitation Agreement, as may be
specifically permitted by the terms of such Employment Agreement or a
Non-Solicitation Agreement); or
(c) The Employee Stockholder has (i) engaged in a Prohibited
Competition Activity, (ii) violated or breached any material provision
of his or her Employment Agreement or Non Solicitation Agreement or
(iii) engaged in any of the activities prohibited by Section 3.9 hereof.
"Free Cash Flow" shall mean, for any period, the Free Cash Flow
Percentage multiplied by the Revenues From Operations of the LLC for such
period.
"Free Cash Flow Expenditure" shall have the meaning specified in Section
3.5(a) hereof.
"Free Cash Flow Percentage" shall mean fifty-two percent (52%).
"Governmental Authority" shall mean any foreign, federal, state or local
court, governmental authority or regulatory body.
"Holders" shall have the meaning specified in Section 7.3(a) hereof.
"Immediate Family" shall mean, with respect to any natural person, (a)
such person's spouse, parents, grandparents, children, grandchildren and
siblings and (b) such person's former spouse(s) and current spouses of such
person's children, grandchildren and siblings and (c) estates, trusts,
partnerships and other entities of which substantially all of the interest is
held directly or indirectly by the foregoing.
"Incentive Program" shall mean the Essex Investment Management Company,
LLC Incentive Program in the form attached hereto as Exhibit A. On the
Effective Date, there are the sixty eight (68) LLC Points held by the
Manager Member that are designated as available for transfer pursuant to the
Incentive Program.
"Indebtedness" shall mean, with respect to a Person, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than current trade liabilities incurred
in the ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which is evidenced by a
note,
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bond, debenture or similar instrument, (c) all obligations of such Person
under any financing leases, (d) all obligations of such person in respect of
acceptances issued or created for the account of such Person, (e) all
obligations of such Person under noncompetition agreements reflected as
liabilities on a balance sheet of such Person in accordance with generally
accepted accounting principles, (f) all liabilities secured by any Lien on
any property owned by such Persons even though such Person has not assumed or
otherwise become liable for the payment thereof, and (g) all net obligations
of such Person under interest rate, commodity, foreign currency and financial
markets swaps, options, futures and other hedging obligations.
"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the Manager Member and retained by the LLC.
"Initial Members" shall mean those Persons which are Members on the
Effective Date.
"Initial LLC Points" means, with respect to a Non-Manager Member
(including his (or its) Related Non-Manager Members) and their respective
Permitted Transferees, those LLC Points held by such Non-Manager Member and
his (or its) Related Non-Manager Members in the LLC on the Effective Date,
provided that LLC Points shall cease to be Initial LLC Points from and after
the date on which they are acquired by the Manager Member (or its assignee).
"Initial Put LLC Points" shall have the meaning specified in Section
7.1(d) hereof.
"Intellectual Property" shall have the meaning specified in Section
3.9(d) hereof.
"Investment Management Services" shall mean any services which involve
(a) the giving of advice with respect to the investment and/or reinvestment
of assets or funds (or any group of assets or funds, other than services
provided on an isolated basis without receipt of compensation for such
isolated services, or (b) the management of an investment account or fund (or
portions thereof or a group of investment accounts or funds).
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, restriction, claim, lien (statutory or
other), charge or other security interest or any preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement and any financing lease having substantially the
same economic effect as any of the foregoing).
"Liquidating Trustee" shall have the meaning specified in Section 8.4
hereof.
"LLC" means Essex Investment Management Company, LLC, the limited
liability company heretofore formed and continued under and pursuant to the
Act and this Agreement, as the same may be amended and/or restated from time
to time.
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"LLC Contribution" shall have the meaning ascribed thereto in the Merger
Agreement.
"LLC Contribution Agreement" shall have the meaning ascribed thereto in
the Merger Agreement.
"LLC Interest" means a Member's limited liability company interest in
the LLC, which includes such Member's LLC Points as well as such Member's
Capital Account and other rights under this Agreement and the Act.
"LLC Points" shall mean, as of any date, with respect to a Member, the
number of LLC Points of such Member as set forth on Schedule A hereto, as
amended from time to time in accordance with the terms hereof, and as in
effect on such date.
"LLC Repurchase" shall have the meaning specified in Section 3.11(a)
hereof.
"Maintenance Fees"shall mean, for any period, the product of (a) the
Revenues From Operations for that period minus the Performance Fees for that
period and (b) the Free Cash Flow Percentage.
"Majority Vote" shall mean the affirmative approval, by vote or written
consent, of Non-Manager Members holding a majority of the outstanding Vested
LLC Points then held by all Non-Manager Members.
"Management Committee" shall have the meaning specified in Section
3.2(a) hereof.
"Manager Member" shall mean Essex Investment Management Company, Inc.,
and any Person who becomes a successor Manager Member as provided herein.
"Members" shall mean any Person admitted to the LLC as a "member" within
the meaning of the Act, which includes the Manager Member and the Non-Manager
Members, unless otherwise indicated, and includes any Person admitted as an
Additional Non-Manager Member or a substitute Non-Manager Member pursuant to
the provisions of this Agreement, in such Person's capacity as a member of
the LLC, unless otherwise indicated. For purposes of the Act, the Members
shall constitute one (1) class or group of members.
"Merger Agreement" shall mean that certain Agreement and Plan of
Reorganization dated as of January 15, 1998, as amended, by and among
Affiliated Managers Group, Inc., Merger Sub, Essex Investment Management
Company, Inc. and certain stockholders of Essex Investment Management
Company, Inc., as the same has been amended from time to time.
"NASD" shall have the meaning specified in Section 7.3(d) hereof.
"Net Assets" shall mean, with respect to a Performance Account the
assets in such Performance Account, net of the liabilities of such
Performance Account (if any), on the
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measurement date, with such assets and liabilities valued in accordance with
the valuation rules applicable to the calculation of the Earned Performance
Fee for such Performance Account.
"Non-Manager Member" shall mean any Person who is or becomes a
Non-Manager Member pursuant to the terms hereof, unless otherwise indicated.
"Non Solicitation Agreement" shall have the meaning set forth in Section
3.8 hereof.
"Notice Deadline" shall have the meaning specified in Section 7.1(d)
hereof.
"Notices" shall have the meaning specified in Section 11.1 hereof.
"Officers" shall have the meaning specified in Section 3.3(a) hereof.
"Operating Cash Flow" shall mean, for any period, an amount equal to the
positive difference, if any, between Revenues From Operations of the LLC for
such period and Free Cash Flow for such period.
"Option Exercise" shall have the meaning specified in Section 7.1(c)
hereof.
"Option Put LLC Points" shall have the meaning specified in Section
7.1(d) hereof.
"Past Client" shall mean at any particular time, any Person who at any
point prior to such time had been an advisee or investment advisory customer
of, or recipient of Investment Management Services from, the LLC (including,
without limitation, its predecessor, Essex Investment Management Company,
Inc.) or a Controlled Affiliate of the LLC but at such time is not an advisee
or investment advisory customer or client of, or recipient of Investment
Management Services from, the LLC or a Controlled Affiliate of the LLC.
"Performance Account" shall mean any contract or agreement (including,
without limitation, a partnership or limited liability company or other
similar agreement) pursuant to which the LLC or a Controlled Affiliate of the
LLC provides investment advice, directly or indirectly, and pursuant to which
the LLC or such an Affiliate is or becomes entitled to receive a Performance
Fee.
"Performance Account Adjustment" shall mean, for each Performance
Account, and with respect to a calendar quarter, an amount equal to the sum
for all months in that calendar quarter, of an amount equal to (i) the
Performance Fee which the LLC or a Controlled Affiliate would have been
entitled to if the Net Assets in such Performance Account on the first
business day of the month had increased ten percent (10%) over a twelve (12)
month period due solely to market performance, and assuming that there were
no offsets or other adjustments (whether on account of additions,
withdrawals, historic under performance of the Performance Account (including
so-called "high-water" marks) or otherwise), divided by (ii) twelve (12),
with appropriate adjustments being made for any partial quarter (or other
period) with respect to which a calculation of Performance Account Adjustment
must be made.
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"Performance Fee" shall mean (i) any "carried interest", special
performance allocation or other gain (net of losses) allocated (directly or
indirectly) to the LLC or a Controlled Affiliate (other than allocations that
are made pro-rata based on capital to all partners, members, beneficiaries or
other holders of similar economic interests in the Person), or (ii) any
"performance fee" or other payment based, in whole or in part, on the
investment performance of a Client or Client's account
"Permanent Incapacity" shall mean, with respect to an Employee
Stockholder, that such Employee Stockholder has been permanently and totally
unable, by reason of injury, illness or other similar cause (determined
pursuant to the process set forth in the following sentence) to have
performed his or her substantial and material duties and responsibilities for
a period of three hundred sixty-five (365) consecutive days, which injury,
illness or similar cause (as determined pursuant to such process) would
render such Employee Stockholder incapable of operating in a similar capacity
in the future. The foregoing determination shall be made by a licensed
physician selected by the Manager Member; provided, however, that if the LLC
has purchased lump-sum key-man disability insurance with respect to such
Employee Stockholder, which policy is then in effect, then such determination
shall be made either (i) by an agreement between such physician and a
physician selected by the insurance company with which the LLC has entered
into a lump-sum key-man disability policy with respect to such Employee
Stockholder, or, if the two physicians cannot arrive at an agreement, a third
physician will be chosen by the first two physicians, and the majority
decision of the three physicians will then be binding), or (ii) if the LLC
has entered into a lump-sum key-man disability policy with respect to such
Employee Stockholder, and a different procedure is then required under such
policy, then by using such other procedure as may then be required by such
insurance company.
"Permitted Transferee" shall mean, with respect to any Non-Manager
Member, its transferees pursuant to the provisions of Sections 5.1(b) and
5.1(c) hereof and, to the extent set forth in any consent of the Manager
Member pursuant to Section 5.1(a), its transferees pursuant to Section 5.1(a)
hereof.
"Person" means any individual, partnership (limited or general),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Potential Client" shall mean, at any particular time, any Person to
whom the LLC (including, without limitation, its predecessor, Essex
Investment Management Company, Inc.) or any of its Controlled Affiliates,
through any of their officers, employees, agents or consultants (or persons
acting in any similar capacity), has, within five years prior to such time,
offered (whether by means of a personal meeting or written proposal) to serve
as investment adviser or otherwise provide Investment Management Services,
but who is not at such time an advisee or investment advisory customer of, or
recipient of Investment Management Services from, the LLC or any of its
Controlled Affiliates. The preceding sentence is meant to exclude form
letters, blanket mailings, cold calls and initial marketing efforts that do
not result in a request by the recipient for further information or a
presentation.
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"Present Client" shall mean, at any particular time, any Person who is
at such time an advisee or investment advisory customer of, or recipient of
Investment Management Services from, the LLC or any of its Controlled
Affiliates.
"Prohibited Competition Activity" shall mean any of the following
activities:
(a) directly or indirectly, whether as owner, part owner, member,
director, officer, trustee, employee, agent or consultant for or on behalf of
any Person other than the LLC or any Affiliate of the LLC: (i) diverting or
taking away any funds or investment accounts with respect to which the LLC or
any Controlled Affiliate of the LLC is performing investment management or
advisory services; or (ii) soliciting any Person to divert or take away any
such funds or investment accounts; or
(b) directly or indirectly, whether as owner, part owner, partner,
member director, officer, trustee, employee, agent or consultant, for or on
behalf of any Person other than the LLC or any Controlled Affiliate of the
LLC, performing any Investment Management Services (provided that an Employee
Stockholder who directly performs Investment Management Services for his or
her own account or a member of his or her Immediate Family without a fee or
other remuneration, shall not be considered to have engaged in a Prohibited
Competition Activity);
"Purchase Date" shall have the meaning specified in Section 7.1(b)
hereof.
"Put" shall have the meaning specified in Section 7.1(a) hereof.
"Put LLC Points" shall have the meaning specified in Section 7.1(d)
hereof.
"Put Notice" shall have the meaning specified in Section 7.1(d) hereof.
"Put Price" shall have the meaning specified in Section 7.1(e) hereof.
"Receipts Account" shall have the meaning specified in Section 4.3(b)
hereof.
"Registrable Securities" shall have the meaning specified in Section
7.3(b) hereof.
"Registration" shall have the meaning specified in Section 7.3(a) hereof.
"Registration Expenses" shall have the meaning specified in Section
7.3(d) hereof.
"Registration Statement" shall have the meaning specified in Section
7.3(a) hereof.
"Related Non-Manager Member" shall mean, with respect to any Non-Manager
Member who is also an employee of the LLC, any member of his Immediate Family
that is a Transferee or Non-Manager Member, which member of the Immediate
Family is not also a full-time employee of the LLC.
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"Repurchase" shall mean a purchase or repurchase of LLC Interests made
pursuant to Section 3.11(a).
"Repurchase Closing Date" shall have the meaning specified in Section
3.11(b) hereof.
"Repurchased Member" shall have the meaning specified in Section 3.11(a).
"Repurchase Price" shall have the meaning specified in Section 3.11(c).
"Retirement" shall mean, with respect to an Employee Stockholder, the
termination by such Employee Stockholder of such Employee Stockholder's
employment with the LLC and its Affiliates: (a) after the date such Employee
Stockholder shall have been continuously employed by the LLC for a period of
fifteen (15) years commencing with the later of the Effective Date or the
date such Employee Stockholder commenced his or her employment with the LLC
(including its predecessor, Essex Investment Management Company, Inc.), as
applicable, and (b) pursuant to a written notice given to the LLC and the
Manager Member not less than one (1) year prior to the date of such
termination. Notwithstanding the foregoing, with respect to Joseph C. McNay,
Stephen R. Clark or Stephen D. Cutler, the term "Retirement" shall mean the
termination by him of his employment with the LLC after the tenth (10)
anniversary of the Effective Date and pursuant to a written notice given to
the LLC and the Manager Member not less than one (1) year prior to the date
of such termination.
"Revenues From Operations" shall mean, for any period, the gross
revenues of the LLC (except as set forth herein), determined on an accrual
basis in accordance with generally accepted accounting principles
consistently applied (but including other income such as interest, dividend
income and gains on the sale of assets); provided, however, that Revenues
From Operations shall be determined without regard to (a) proceeds during
such period from the sale, exchange or other disposition of all, or a
substantial portion of, the assets of the LLC, (b) revenues from the issuance
by the LLC of additional LLC Points, other LLC Interests, or other securities
issued by the LLC, and (c) payments received pursuant to any insurance
policies other than with respect to business interruption insurance.
"SEC" shall mean the Securities and Exchange Commission, and any
successor Governmental Authority thereto.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
"Suspension Period" shall have the meaning specified in Section 7.4(c)
hereof.
"Transfer" shall have the meaning specified in Section 5.1 hereof.
"Unanimous Termination Decision" shall mean a determination with the
prior written consent of the Manager Member and the unanimous vote of the
Management Committee (including any member(s) thereof who may be the subject
of the determination), that an Employee shall be
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terminated from employment by the LLC for any reason (including
unsatisfactory performance) or for no reason.
"Vested LLC Points" shall mean, at any time and with respect to any
Member, the number of LLC Points held by such Member which have vested at
such time, as determined pursuant to an agreement among the LLC, the Manager
Member and such Member in connection with the issuance of such LLC Points.
The number of Vested LLC Points held by each member and the vesting schedule
with respect to LLC Points which are not vested, shall be indicated on
Schedule A hereto, which Schedule shall be updated by the Manager member as
additional LLC Points are issued and/or vest from time to time.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this
Agreement.
ARTICLE II -- ORGANIZATION AND GENERAL PROVISIONS.
Section 2.1 Continuation.
(a) The Members hereby agree to continue the LLC as a limited
liability company under and pursuant to the provisions of the Act, and agree
that the rights, duties and liabilities of the Members shall be as provided
in the Act, except as otherwise provided herein.
(b) Upon the execution of this Agreement or a counterpart of this
Agreement, the Initial Members shall continue as members of the LLC.
(c) The name, LLC Points and Capital Contribution of each Member
(including the agreed value of such Capital Contribution) shall be listed on
Schedule A attached hereto. The Manager Member shall update Schedule A from
time to time as it deems necessary, to accurately reflect the information to
be contained therein. Any amendment or revision to Schedule A shall not be
deemed an amendment to this Agreement. Any reference in this Agreement to
Schedule A shall be deemed to be a reference to Schedule A as amended and in
effect from time to time.
(d) The Manager Member, as an authorized person within the meaning
of the Act, shall execute, deliver and file any certificates required or
permitted by the Act to be filed in the office of the Secretary of State of
the State of Delaware.
Section 2.2 Name. The name of the LLC heretofore formed and
continued hereby is Essex Investment Management Company, LLC. At any time,
the Management Committee may, with the prior consent of the Manager Member,
change the name of the LLC. The business of the LLC may be conducted upon
compliance with all applicable laws under any other name designated by the
Management Committee with the prior written consent of the Manager Member.
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Section 2.3 Term. The term of the LLC commenced on the date the
Certificate was filed in the Office of the Secretary of State of the State of
Delaware and shall continue until the LLC is dissolved in accordance with the
provisions of this Agreement.
Section 2.4 Registered Agent and Registered Office. The LLC's
registered agent and registered office in Delaware shall be The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. At any time, the Manager Member may designate another
registered agent and/or registered office.
Section 2.5 Principal Place of Business. The principal place of
business of the LLC shall be at 125 High Street, Boston, Massachusetts. At
any time, the Management Committee may change the location of the LLC's
principal place of business; provided, however, that if the principal place
of business is to be located outside of Boston, Massachusetts, such action
must be approved by the Manager Member.
Section 2.6 Qualification in Other Jurisdictions. The Management
Committee shall cause the LLC to be qualified or registered (under assumed or
fictitious name if necessary) in any jurisdiction in which the LLC transacts
business or in which such qualification, formation or registration is
required.
Section 2.7 Purposes and Powers. The principal business activity and
purposes of the LLC shall initially be to engage in the investment advisory
and investment management business and any businesses related thereto or
useful in connection therewith. In addition, the LLC shall have the
authority to engage in any other lawful business, purpose or activity
permitted by the Act that is agreed upon in writing by the Manager Member and
the Management Committee. The LLC shall possess and may exercise all of the
powers and privileges granted by the Act or which may be exercised by any
Person, together with any powers incidental thereto, so far as such powers or
privileges are necessary or convenient to the conduct, promotion or
attainment of the business purposes or activities of the LLC, including
without limitation the following powers:
(a) to conduct its business and operations and to have and
exercise the powers granted to a limited liability company by the Act in any
state, territory or possession of the United States or in any foreign country
or jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey,
lease, exchange, transfer or otherwise dispose of, mortgage, pledge, encumber
or create a security interest in all or any of its real or personal property,
or any interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
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(d) to make contracts, including contracts of insurance, incur
liabilities and give guaranties, including without limitation, guaranties of
obligations of other Persons who are interested in the LLC or in whom the LLC
has an interest;
(e) to employ Officers, employees, agents and other persons, to
fix the compensation and define the duties and obligations of such personnel,
to establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
(f) to make donations irrespective of benefit to the LLC for the
public welfare or for community, charitable, religious, educational,
scientific, civic or similar purposes;
(g) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the LLC, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the LLC or any of its
assets;
(h) to indemnify any Person in accordance with the Act and to
obtain any and all types of insurance;
(i) to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, execute, acknowledge or take any other
action with respect to any lease, contract or security agreement in respect
of any assets of the LLC;
(j) to form, sponsor, organize or enter into joint ventures,
general or limited partnerships, limited liability companies, trusts and any
other combinations or associations formed for investment purposes;
(k) to make, execute, acknowledge and file any and all documents
or instruments necessary, convenient or incidental to the accomplishment of
the purposes of the LLC; and
(l) to cease its activities and cancel its Certificate.
Section 2.8 Title to Property. All property owned by the LLC, real
or personal, tangible or intangible, shall be deemed to be owned by the LLC
as an entity, and no Member, individually, shall have any ownership of such
property.
ARTICLE III -- MANAGEMENT OF THE LLC.
Section 3.1 Management in General.
(a) The management and control of the business of the LLC shall be
vested exclusively in the Manager Member, and the Manager Member shall have
exclusive power and authority, in the name of and on behalf of the LLC, to
perform all acts and do all things which,
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in its sole discretion, it deems necessary or desirable to conduct the
business of the LLC; with or without the vote or consent of the Members in
their capacity as such, except as specifically provided in this Agreement.
Members, in their capacity as such, shall have no right to amend or terminate
this Agreement or to appoint, select, vote for or remove the Manager Member,
the Officers or their agents or to exercise voting rights or call a meeting
of the Members, except as specifically provided in this Agreement. No Member
other than the Manager Member shall have the power to sign for or bind the
LLC to any agreement or document in its capacity as a Member, but the Manager
Member may delegate the power to sign for or bind the LLC.
(b) The Manager Member shall, subject to all applicable provisions
of this Agreement and the Act, be authorized in the name of and on behalf of
the LLC: (i) to enter into, execute, amend, supplement, acknowledge and
deliver any and all contracts, agreements, leases or other instruments for
the operation of the LLC's business; and (ii) in general to do all things and
execute all documents necessary or appropriate to conduct the business of the
LLC as set forth in Section 2.7 hereof, or to protect and preserve the LLC's
assets. The Manager Member may delegate any or all of the foregoing powers.
(c) The Manager Member is required to be a Member, and shall hold
office until its resignation in accordance with the provisions hereof. The
Manager Member is a "manager" (within the meaning of the Act) of the LLC.
The Manager Member shall devote such time to the business and affairs of the
LLC as it deems necessary, in its sole discretion, for the performance of its
duties, but in any event, shall not be required to devote full time to the
performance of such duties and may delegate its duties and responsibilities
as provided in Section 3.3.
(d) Any action taken by the Manager Member, and the signature of
the Manager Member (or an authorized representative thereof) on any
agreement, contract, instrument or other document on behalf of the LLC, shall
be sufficient to bind the LLC and shall conclusively evidence the authority
of the Manager Member and the LLC with respect thereto.
(e) Any Person dealing with the LLC, the Manager Member or any
Member may rely upon a certificate signed by the Manager Member as to (i) the
authority of the Manager Member or any Member; (ii) any factual matters
relevant to the affairs of the LLC; (iii) the Persons who are authorized to
execute and deliver any document on behalf of the LLC; or (iv) any action
taken or omitted by the LLC or the Manager Member.
(f) Notwithstanding the foregoing, the Manager Member shall have
no power or authority whatsoever to make investment recommendations to
Clients on behalf of the LLC, to execute or cause the execution of any
transaction in, or exercise any powers with respect to securities or other
instruments or assets held in the accounts of Clients of the LLC, or
determine the terms, timing or other conditions on which any such transaction
may be recommended or executed into.
(g) In addition to, and not in limitation of, the Manager Member's
powers and authority under this Agreement (including without limitation,
pursuant to Section 3.1(a) hereof),
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the Manager Member shall also have the power, in its reasonable discretion
(after consultation with at least one member of the Management Committee to
the extent such prior consultation is feasible), to take any or all of the
following actions whether or not they involve day-to-day operations, business
and activities of the LLC:
(i) any action it deems reasonably necessary or appropriate
to cause the LLC or any Controlled Affiliate of the LLC, or any
officer, employee, member, partner, or agent thereof, to comply
with applicable laws, rules or regulations, or any such action
required by the Manager Member in accordance with its duties
hereunder;
(ii) any action it deems reasonably necessary or appropriate
to coordinate any initiative which involves the LLC (or a
Controlled Affiliate of the LLC) and the Manager Member, AMG and/or
any of their respective Affiliates, but only on such terms and
conditions as the participation of the LLC in such initiative has
been approved by the Management Committee;
(iii) any action it deems necessary or appropriate to
cause the LLC to fulfill its obligations and exercise its rights
under the Merger Agreement;
(iv) any action it deems necessary or appropriate to cause the
LLC to participate in employee benefit plans that are subject to
ERISA or require qualification under Section 401 of the Internal
Revenue Code in order to make the expenses of such plans deductible
and establish or modify the terms of any such plan and any action
necessary or desirable in connection therewith, but only to the
extent that the Manager Member reasonably believes that such
participation or modification is required for the continued
qualification of such plan under Section 401(a) of the Code or to
make the expense by the LLC under such plans deductible or to
comply with ERISA, as the case may be, provided that the Manager
Member's power under this paragraph (iv) shall not impair the
Management Committee's power and authority to establish or modify
any employee benefit arrangement not intended to qualify under
Section 401 of the Code or subject to ERISA (excluding Title I,
Subtitle A and Title I, Subtitle B, Part 1 thereof, to the extent
that the establishment or modification of such arrangement does not
adversely affect the ability of the Manager Member (or any of its
Affiliates) to offer the same or similar employee benefit
arrangements to its similarly situated employees;
(v) any other action that the Manager Member is authorized to
take pursuant to the terms of this Agreement (subject to having
obtained any required Management Committee approval) and any other
action necessary or appropriate to prevent actions that require the
Manager Member's consent pursuant to the terms of this Agreement if
such consent has not then been given.
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Section 3.2 Management Committee of the LLC.
(a) The LLC shall have a Management Committee (the "Management
Committee"). Subject (i) to the specific rights and powers expressly
reserved to the Manager Member in this Agreement (including, without
limitation, in Sections 3.1(g) and 3.5(b) hereof), (ii) to the agreement,
consent or determination of the Manager Member in any circumstances where
such agreement, consent or determination is expressly provided for in this
Agreement and (iii) to the provisions of Section 3.1 to the extent necessary
or appropriate to effectuate the foregoing, the Manager Member hereby
delegates irrevocably, to the greatest extent permitted by applicable law, to
the Management Committee all powers and authority of the Manager Member, in
the name of and on behalf of the LLC, to perform all acts and do all things
necessary or desirable to conduct the business of the LLC. Without in any
way limiting the scope of the foregoing delegation, the Management Committee
shall have the sole and exclusive power and authority to make recommendations
with respect to and to determine which transactions Clients of the LLC shall
enter into (and the time at which, the parties with which and the terms on
which all such transactions shall be entered into and to exercise any rights,
powers and privileges of the LLC with respect to accounts of Clients or any
of the securities or other instruments in accounts of Clients) and shall have
the power and authority to further delegate any or all of the powers and
authorities delegated to it to Officers and employees of the LLC (provided
that any such delegation shall be revocable), and to also include, subject to
Sections 3.1(g) and 3.5(b) hereof, the power and the authority, in the name
of and on behalf of the LLC, to:
(i) determine the use of the Operating Cash Flow as set forth
in Section 3.5(a) below;
(ii) execute such documents and do such acts as are necessary
to register (or provide or qualify for exemptions from any such
registrations) or qualify the LLC under applicable Federal and
state securities laws;
(iii) enter into contracts and other agreements with respect
to the provision of Investment Management Services and execute
other instruments, documents or reports on behalf of the LLC in
connection therewith;
(iv) enter into contracts, agreements and commitments with
respect to the operation of the business of the LLC as are
consistent with the other provisions of this Agreement and the Act;
and
(v) act for and on behalf of the LLC in all matters
incidental to the foregoing and other day-to-day matters.
To effectuate the foregoing, the Management Committee shall have the power
ascribed to the Manager Member in Section 3.1(b) (subject to Sections 3.1(g)
and 3.5(b) hereof) and Section 3.1(d) and Section 3.1(e) hereof to the extent
related thereto.
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(b) The Management Committee shall consist of Non-Manager Members
determined as follows:
(i) The Management Committee shall initially have six (6)
members and shall initially consist of Joseph C. McNay,
Stephen D. Cutler, Stephen R. Clark, Christopher P.
McConnell, R. Daniel Beckham and Colin McNay. The
Management Committee may appoint annually a Secretary
and/or one or more Assistant Secretaries of the
Management Committee. The number of members of the
Management Committee may be increased by the Management
Committee at any time with notice to the Manager Member.
No Person who is not both an active employee or the LLC
and a Non-Manager Member (an "Eligible Person") may be,
become or remain a member of the Management Committee.
(ii) Any vacancy in the Management Committee however occurring
(including a vacancy resulting from the increase in size
of the Management Committee) may be filled by any other
Eligible Person elected by a Committee Vote, provided,
however, that if more than one Non-Manager Member is
available to fill such vacancy, the Manager Member shall
have the right to consent as to which Non-Manager Member
shall fill such vacancy. In lieu of filling any such
vacancy, the Management Committee may determine to reduce
the number of members of the Management Committee, but
not to a number less than three (3).
(iii) Members of the Management Committee shall remain members
of the Management Committee until their resignation,
removal or death. Any member of the Management Committee
may resign by delivering his or her written resignation
to any member of the Management Committee and the Manager
Member. At any time that there are more than three (3)
members of the Management Committee, any member of the
Management Committee may be removed from such position
with or without cause, by the Management Committee acting
by a unanimous vote of the Management Committee (with
such vote being calculated for all purposes as if the
member of the Management Committee whose removal is being
considered were not a member of the Management
Committee), with the prior written consent of the Manager
Member. A Non-Manager Member shall be deemed to have
resigned from the Management Committee and shall no
longer be a member of the Management Committee
immediately upon such Non-Manager Member ceasing to be an
active employee of the LLC or otherwise ceasing to be a
Non-Manager Member, in each case, for whatever reason.
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(iv) At any meeting of the Management Committee, presence in
person or by telephone (or other electronic means) of a
majority of the members of the Management Committee shall
constitute a quorum. At any meeting of the Management
Committee at which a quorum is present, a majority of the
members of the Management Committee may take any action
on behalf of the Management Committee (any such action
taken by such members of the Management Committee being
referred to herein as a "Committee Vote"). In the event
that the Management Committee is deadlocked and unable to
resolve any issue for a period of five days, then the
secretary of the Management Committee shall present the
issue either (x) to the Non-Manager Members to Vote on
such issue and a Majority Vote shall resolve such dispute
or, (y) if determined by a Committee Vote, to the Manager
Member for resolution. Any action required or permitted
to be taken at any meeting of the Management Committee
may be taken without a meeting of the Management
Committee, if (A) a written consent thereto is signed by
all the members of the Management Committee and (B) the
Manager Member has been given a copy of such written
consent not less than forty-eight (48) hours prior to
such action. Notice of the time, date and place of all
meetings of the Management Committee shall be given to
all members of the Management Committee and the Manager
Member at least forty-eight (48) hours in advance of the
meeting. A representative of the Manager Member shall be
entitled to attend each meeting of the Management
Committee. Notice need not be given to any member of the
Management Committee or the Manager Member if a waiver of
notice is given (orally or writing) by such member of the
Management Committee or the Manager Member (as
applicable), before, at or after the meeting. Members of
the Management Committee are not "managers" (within the
meaning of the Act) of the LLC.
(v) Notwithstanding any other provision hereof to the
contrary, the Manager Member shall have full power and
authority at any time in its sole discretion (and without
the consent or approval of the Management Committee or
the Non-Manager Members) to remove, with or without
cause, one or more members of the Management Committee or
to increase the number of members of the Management
Committee and to fill the vacancies created by any such
removal or increase with one or more other Non-Manager
Members, provided that such removal or increase may only
be effected by written notice from the Manager Member to
the LLC, which written notice must expressly reference
this Section of this Agreement.
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Section 3.3 Officers of the LLC. The Management Committee may
designate employees of the LLC as officers of the LLC (the "Officers") as it
deems necessary or desirable to carry on the business of the LLC. Any two or
more offices may be held by the same Person. New offices may be created and
filled by the Management Committee. Each Officer shall hold office until his
or her successor is designated by the Management Committee or until his or
her earlier death, resignation or removal. Any Officer may resign at any
time upon written notice to the LLC and the Manager Member. Any Officer
designated by the Management Committee may be removed from his or her office
(with or without a concurrent termination of employment) (i) For Cause or not
For Cause by the Management Committee (excluding the Person being considered)
or (ii) For Cause by the Manager Member, in each case, at any time subject to
the terms of such Officer's Employment Agreement with the LLC, if any, and
subject to Section 3.1(g) and 3.5(b) hereof. A vacancy in any office
occurring because of death, resignation, removal or otherwise may be filled
by the Management Committee. Any designation of Officers, a description of
any duties delegated to such Officers, and any removal of such Officers by
the Management Committee shall be approved by the Management Committee in
writing, which shall be delivered to the Manager Member. The Officers are
not "managers" (within the meaning of the Act) of the LLC.
Section 3.4 Employees of the LLC.
(a) The terms of employment of any employee of the LLC who is not
a Non-Manager Member (including, without limitation, with respect to the
hiring, promoting, demoting and terminating of such employees), shall be
determined by the Management Committee or such Person or Persons to whom the
Management Committee may delegate such power and authority (subject, in all
instances, to the power of the Management Committee to revoke such delegation
in whole or in part (by a Committee Vote that excludes any Person to whom
such power and authority has been delegated)), subject, in all cases, to
compliance with all applicable laws, rules and regulations and with the
provisions of Section 3.5 hereof. Notwithstanding the foregoing, the Manager
Member may terminate the employment by the LLC of any employee who has
engaged in any activity included in the definition of "For Cause," provided,
however, that (i) the Manager Member may not terminate the employment of any
such employee without having first consulted with the Management Committee
and given written notice to the Management Committee specifying the reasons
for such decision and (ii) the Manager Member may not terminate the
employment of an employee on account of any activity specified in clause (b)
of the definition of "For Cause" without either (A) obtaining the prior
consent of the Management Committee or (B) complying with the provisions of
the following sentence. If the Manager Member and the Management Committee
(excluding the Person whose termination is being considered) cannot, after
good faith efforts, agree with respect to the termination of the employment
of an employee in the circumstances described in clause (b) of the definition
of "For Cause," then such issue shall be finally determined by binding
arbitration in accordance with the provisions of Section 11.6 of this
Agreement, provided, that such arbitration shall take place no later than
fourteen (14) days following the receipt by the Management Committee of
written notice from the Manager Member that the Manager Member desires to
submit such issue to arbitration, and a final decision with respect to such
issue shall be issued within five (5) business days after such arbitration.
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(b) The granting or Transferring of the LLC Interests in
connection with any hiring or promotion of any employee shall be subject to
the terms and conditions set forth in Articles V and VI hereof.
(c) Any Person who is a Non-Manager Member may have his or her
employment with the LLC terminated by the LLC only: (i) in the case of a
termination For Cause, either by the Manager Member or by the Management
Committee (excluding the Person whose termination is being considered), with
the prior written consent of the Manager Member, or (ii) in the case of any
other termination by the LLC, by the Management Committee (excluding for all
purposes the Person whose termination is being considered), with the prior
written consent of the Manager Member.
Section 3.5 Operation of the Business of the LLC.
(a) The Operating Cash Flow of the LLC for any period shall be
used by the LLC to provide for and pay its business expenses and expenditures
as determined by the Management Committee; including, without limitation,
compensation and benefits to its employees (including the Officers) and
expenses and compensation of consultants, vendors and service providers
selected by or pursuant to the authority of the Management Committee.
Without the prior written consent of the Manager Member (which written
consent makes specific reference to this Section 3.5(a)), the LLC shall not
incur (and the Employee Stockholders shall use commercially reasonable
efforts to prevent the LLC from incurring) any expenses or take any action to
incur other obligations, which expenses and obligations exceed the ability of
the LLC to pay or provide for them out of its Operating Cash Flow on a
current or previously reserved basis. Except to the extent otherwise required
by applicable law, the LLC shall only make payments of compensation
(including bonuses) to its employees (including any Officers) out of the
balance of its Operating Cash Flow remaining after the payment (or
reservation for payment) of all the other business expenses and expenditures
for the applicable period and subject to the availability of cash to pay such
other business expenses and expenditures for such period. Any excess
Operating Cash Flow remaining for any fiscal year following the payment (or
reservation for payment) of all business expenses and expenditures may be
used by the LLC in such fiscal year and/or in future fiscal years for any
lawful purpose. Free Cash Flow may be used to provide for and pay the
business expenses of the LLC only to the extent specified in Section 3.5(c)
with respect to key-man life insurance and disability insurance, Section 4.3
with respect to certain extraordinary expenses and as otherwise agreed to in
writing by the Manager Member and the Management Committee (any such use
being referred to herein as a "Free Cash Flow Expenditure").
(b) The LLC shall not do, and the Employee Stockholders and Non
Manager Members shall use commercially reasonable efforts to prevent the LLC
from doing, any of the following without the prior written consent of the
Manager Member (which written consent makes specific reference to this
Section 3.5(b)):
(i) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement
20
or understanding could reasonably be expected to conflict with the
provisions of this Section 3.5;
(ii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding (individually or in
the aggregate) could (A) materially reduce the percentage of
Operating Cash Flow available in the current or future periods or
effect a material reduction in the availability of Free Cash Flow
for distribution by the LLC (directly or in the form of bonuses to
employees) in the current or future periods or (B) have a material
adverse effect on the condition (financial or otherwise),
properties, assets, liabilities, business or prospects of the LLC;
provided, however, that no consent of the Manager Member shall be
required for decisions by the Management Committee in the exercise
of its good faith judgment relating to the commencement,
termination or modification of any agreement for the provision by
the LLC or any of its Controlled Affiliates of Investment
Management Services, including rates and other terms and conditions
with respect to the Investment Management Services, unless such
decision directly or indirectly benefits a Non-Manager Member or a
member of the Immediate Family of a Non-Manager Member to the
detriment of the LLC or the Manager Member;
(iii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding has the effect of
creating a Lien either (A) upon any of the assets of the LLC
(other than Liens securing indebtedness of the LLC incurred to
finance the acquisition of fixed or capital assets (whether
pursuant to a deferred purchase agreement with a vendor, a loan, a
financing lease or otherwise), provided that (1) such Liens shall
be created substantially simultaneously with the acquisition of
such fixed or capital assets, (2) such Liens do not at any time
encumber any property other than property financed by such
indebtedness, (3) the amount of indebtedness secured thereby is not
increased and (4) the principal amount of indebtedness secured by
such Lien shall at no time exceed the purchase price of such
property) or (B) upon any of that portion of the revenues of the
LLC which is included in Free Cash Flow (other than with respect to
permitted Free Cash Flow Expenditures hereunder);
(iv) either (A) take any action (or omit to take any action)
if such action (or omission) could reasonably be expected to result
in termination of the employment (including, without limitation, a
so-called constructive termination under applicable law) by the LLC
of any Employee Stockholder (provided, that the foregoing shall not
impose any limitation on the ability of an Employee Stockholder to
terminate his or her employment with the LLC in accordance with the
provisions hereof) or (B) enter into, amend, modify or terminate
any Employment Agreement or other employment commitment or binding
understanding with respect to employment matters with any
Non-Manager Member or members of the Immediate Family of a
Non-Manager Member or waive any rights of the LLC thereunder;
21
(v) create, incur, assume, or suffer to exist any Indebtedness
of the LLC or its Controlled Affiliates (to the extent such
Indebtedness will be required to be included in the consolidated
balance sheet of the LLC in accordance with generally accepted
accounting principles), except Indebtedness of the LLC incurred to
finance the acquisition of fixed capital assets (whether pursuant to a
deferred purchase agreement with a vendor, a loan, a financing lease
or otherwise) in the amount outstanding at any time not to exceed
$250,000 (which by its terms shall be repaid solely out of Operating
Cash Flow);
(vi) establish or modify any significant compensation arrangement
(other than salary and cash bonuses in the ordinary course) or program
(whether cash or non-cash benefits) applicable to any employee, which
is subject to ERISA, which requires qualification under the Code, or
which otherwise (A) requires the Manager Member or any of its
Affiliates (other than the LLC) to take any action which the Manager
Member in good faith views as being contrary to the interests of the
Manager Member or the interests of any of its Affiliates (other than
LLC) or which it would not take but for the action contemplated by the
LLC or the Employee Stockholders or Officers or (B) prevents the
Manager Member or any of its Affiliates (other than the LLC) from
taking any action which the Manager Member in good faith views as
being in the interest of the Manager Member or any of its Affiliates
(other than the LLC) it would otherwise have been able to take but for
the action contemplated by the LLC or the Employee Stockholders or
Officers (and in addition, each Employee Stockholder will use his or
her commercially reasonable efforts to cause the LLC to give the
Manager Member not less than thirty (30) days prior written notice
before the LLC establishes or modifies any significant compensation
arrangement (other than salary and cash bonuses in the ordinary
course) or program); provided that, for purposes of this paragraph, an
action will not be viewed as adversely affecting the Manager Member's
interests solely because the contributions or benefits payable under
such compensation arrangement or program are paid from Operating Cash
Flow.
(vii) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) containing severance or
termination pay arrangements or which could cause the LLC or the
Manager Member to be liable for termination or severance payments or
other contractual payments upon a termination of any employee's
employment with the LLC;
(viii) enter into any line of business other than the
provision of Investment Management Services;
(ix) establish or modify any plan subject to ERISA; or
(x) (A) take any action which may be taken only by the Manager
Member (with or without the consent of the Management Committee,
Non-Manager Members or the Employee Stockholders), or (B) take any
action
22
which requires the approval or consent of the Manager Member pursuant
to any provision of this Agreement.
(c) The LLC will maintain (and the Employee Stockholders shall use
commercially reasonable efforts to cause the LLC to maintain), in full force and
effect, such insurance as is customarily maintained by companies of similar size
in the same or similar businesses (including, without limitation, errors and
omissions liability insurance), the premiums on which will be paid out of
Operating Cash Flow. The LLC will maintain such key-man life insurance and
disability insurance policies on each Employee Stockholder as the Manager Member
shall deem necessary or desirable, from time to time, and the Employee
Stockholders will use commercially reasonable efforts to effectuate the
foregoing. The LLC will receive the proceeds of the above-referenced insurance
policies, and the Members agree with each other and the LLC that the LLC will
pay the premiums on such key-man life and disability policies, as well as any
reasonable additional insurance policies that the Manager Member deems
necessary, out of Free Cash Flow.
(d) Notwithstanding any of the provisions of this Agreement to the
contrary, all accounting, financial reporting and bookkeeping procedures of the
LLC shall be established in conjunction with policies and procedures determined
under the supervision of the Manager Member. The LLC shall have a continuing
obligation to keep AMG's chief financial officer informed of material financial
developments with respect to the LLC. Notwithstanding any of the provisions of
this Agreement to the contrary, all legal, compliance and regulatory matters of
the LLC shall be coordinated with the Manager Member and/or its Affiliates, and
the LLC's legal compliance activities shall be conducted and established in
conjunction with policies and procedures determined under the supervision of the
Manager Member.
(e) Notwithstanding any of the provisions of this Agreement to the
contrary, the Management Committee and Employee Stockholders of the LLC will
cooperate with the Manager Member and its Affiliates in implementing any
initiative generally involving a number of such Affiliates, but only on such
terms and conditions as the participation of the LLC in such initiative has been
approved by the Management Committee.
Section 3.6 Compensation and Expenses of the Members. The Manager
Member may receive compensation for services provided to the LLC to the extent
approved by the Management Committee. The LLC shall, however, pay and/or
reimburse the Manager Member for all reasonable travel expenses incurred by the
Manager Member or AMG in accordance with Section 9.4 as well as (i) any expenses
incurred by the Manager Member in connection with the operation of the LLC as
approved or directed by the Management Committee or any duly authorized Officer,
(ii) the applicable portion of any expenses incurred by the Manager Member in
connection with any initiative which involves the LLC and/or one or more of the
other Affiliates of the Manager Member or AMG, but only on such terms and
conditions as the participation of the LLC in such initiative has been approved
by the Management Committee, and (iii) any expenses incurred by the Manager
Member in connection with its exercise of its powers under Section 3.1(g) of
this Agreement. Without limiting the generality of the foregoing, the Manager
Member's general overhead items and expenses (including, without limitation,
salaries and rent) shall not be
23
reimbursed by the LLC. Stockholders, officers, directors, Members and agents of
Members may serve as employees of the LLC and be compensated therefor out of
Operating Cash Flow as determined by the Management Committee (or its
delegate(s)) pursuant to Section 3.5(a), subject to the availability of cash
therefor. Except in respect of their provision of services as employees of the
LLC for which they may be compensated out of Operating Cash Flow as contemplated
by the preceding sentence, Non-Manager Members and members of their Immediate
Family may not receive compensation on account of the provision of services to
the LLC.
Section 3.7 Other Business of the Manager Member and its Affiliates.
The Manager Member, AMG and their respective Affiliates may engage,
independently or with others, in other business ventures of every nature and
description, including the acquisition, creation, financing, trading in, and
operation and disposition of interests in, investment managers and other
businesses that may be competitive with the LLC's business. Neither the LLC nor
any of the Non-Manager Members shall have any right in or to any other such
ventures by virtue of this Agreement or the limited liability company created or
continued hereby, nor shall any such activity by the Manager Member, AMG or such
Affiliates be deemed wrongful or improper or result in any liability of the
Manager Member, AMG or such Affiliates. None of the Manager Member, AMG or any
of their Affiliates shall be obligated to present any opportunity to the LLC
even if such opportunity is of such a character which, if presented to the LLC,
would be suitable for the LLC.
Section 3.8 Non-Manager Members and Non Solicitation Agreements. Each
Employee Stockholder and, if there is one, the Non-Manager Member of which it is
a stockholder (its Non-Manager Member), has provided the LLC with either (a) an
Employment Agreement with the LLC, or (b) a Non Solicitation/Non Disclosure
Agreement in form and substance substantially similar to Exhibit B hereto (the
"Non Solicitation Agreement") (and, in the case of any substitute Non-Manager
Member (pursuant to Section 5.2 hereof) or Additional Non-Manager Member (as
defined in Section 5.5 hereof) which is not already bound by a Non Solicitation
Agreement, it shall, prior to and as a condition precedent to becoming a
Non-Manager Member, provide the LLC with such an agreement (together with any
changes or modifications thereto as the Manager Member may deem necessary or
desirable) and such agreements do and shall, at all times, provide that each of
the LLC and the Manager Member shall be entitled to enforce the provisions of
such agreements on its own behalf and that the Manager Member shall be entitled
to enforce the provisions of such agreements on behalf of the LLC.
Section 3.9 Non Solicitation and Non Disclosure by Non-Manager Members
and Employee Stockholders.
(a) Each Non-Manager Member and each Employee Stockholder agrees, for
the benefit of the LLC and the other Members, that such Non-Manager Member and
such Employee Stockholder shall not, while employed by the LLC or any of its
Affiliates, engage in any Prohibited Competition Activity.
(b) In addition to, and not in limitation of, the provisions of
Section 3.9(a) hereto, each Non-Manager Member and each Employee Stockholder
agrees, for the benefit of the LLC and the other Members, that such Non-Manager
Member and such Employee Stockholder
24
shall not, during the period beginning on the date such Non-Manager Member
becomes a Non-Manager Member, and until the date which is two (2) years after
the termination of such Employee Stockholder's employment with the LLC and its
Affiliates, without the express written consent of the Manager Member and the
Management Committee, directly or indirectly, whether as owner, part-owner,
shareholder, partner, member, director, officer, trustee, employee, agent or
consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide Investment Management Services to:
(A) any Person that is a Client of the LLC (as defined herein,
which includes Past, Present and Potential Clients) for whom the
Non-Manager Member or Employee Stockholder provided, directly or
indirectly, in whole or in part, Investment Management Services for
the LLC, or whom the Non-Manager Member or Employee Stockholder
solicited or otherwise had contact with through or on behalf of the
LLC; or
(B) any other Person that is a Client of the LLC (as defined
herein, which includes Past, Present and Potential Clients);
provided, however, that this clause (i) shall not be applicable to clients of
the LLC who are also members of the Immediate Family of the Employee
Stockholder.
(ii) solicit or induce, whether directly or indirectly, any
Person for the purpose (which need not be the sole or primary purpose)
of (A) causing any funds with respect to which the LLC provides
Investment Management Services to be withdrawn from such management,
or (B) causing any Client of the LLC not to engage the LLC or any of
its Affiliates to provide Investment Management Services for any or
additional funds;
(iii) contact or communicate with, in either case in
connection with Investment Management Services, whether directly or
indirectly, any Past, Present or Potential Clients of the LLC;
provided, however, that this clause (iii) shall not be applicable to
clients of the LLC who are also members of the Immediate Family of the
Employee Stockholder; or
(iv) solicit or induce, or attempt to solicit or induce, directly
or indirectly, any employee or agent of, or consultant to, the LLC or
any of its Controlled Affiliates to terminate its, his or her
relationship therewith, hire any such employee, agent or consultant,
or former employee, agent or consultant, or work in any enterprise
involving investment advisory services with any employee, agent or
consultant or former employee, agent or consultant, of the LLC or its
Controlled Affiliates who was employed by or acted as an agent or
consultant to the LLC (or its predecessor Essex Investment Management
Company, Inc.) or its Controlled Affiliates at any time during the two
(2) year period preceding the
25
termination of the Employee Stockholder's employment (excluding for
all purposes of this sentence, secretaries and persons holding other
similar positions).
For purposes of this Section 3.9(b), (x) the term "Past Client" shall be limited
to those past Clients who were advisees or investment advisory customers of, or
recipients of Investment Management Services, directly or indirectly, from, the
LLC (including its predecessor, Essex Investment Management Company, Inc.) and
its Controlled Affiliates at the date of termination of the Employee
Stockholder's employment or at any time during the two (2) years immediately
preceding the date of such termination; and (y) the term "Potential Client"
shall be limited to those Persons to whom an offer was made within two (2) years
prior to the date of termination of the Employee Stockholder's employment.
Notwithstanding the provisions of Sections 3.9(a) and 3.9(b), any Employee
Stockholder may make passive investments in an enterprise which is competitive
with AMG or the LLC the shares or other equity interests of which are publicly
traded provided his holding therein together with any holdings of his Affiliates
and members of his Immediate Family, are less than five percent (5%) in the
aggregate of the outstanding shares or comparable interests in such entity.
(c) Each Member and each Employee Stockholder agrees that any and all
presently existing investment advisory businesses of the LLC and its Controlled
Affiliates (including its predecessor, Essex Investment Management Company,
Inc.), and all businesses developed by the LLC and its Controlled Affiliates,
including by such Employee Stockholder or any other employee of the LLC
(including, without limitation, employees of its predecessor, Essex Investment
Management Company, Inc.), including without limitation, all investment
methodologies, all investment advisory contracts, fees and fee schedules,
commissions, records, data, client lists, agreements, trade secrets, and any
other incident of any business developed by the LLC (or its predecessor, Essex
Investment Management Company, Inc.) or its Controlled Affiliates or earned or
carried on by the Employee Stockholder for the LLC or its predecessor, Essex
Investment Management Company, Inc. or their respective Controlled Affiliates,
and all trade names, service marks and logos under which the LLC or its
Affiliates do business, and any combinations or variations thereof and all
related logos, are and shall be the exclusive property of the LLC or such
Controlled Affiliate, as applicable, for its or their sole use, and (where
applicable) shall be payable directly to the LLC or such Controlled Affiliate.
In addition, each Member and each Employee Stockholder acknowledges and agrees
that the investment performance of the accounts managed by the LLC (and its
predecessor, Essex Investment Management Company, Inc.) was attributable to the
efforts of the team of professionals of the LLC (or its predecessor, Essex
Investment Management Company, Inc., as applicable) and not to the efforts of
any single individual or subset of such team of professionals, and that
therefore, the performance records of the accounts managed by the LLC (and its
predecessor, Essex Investment Management Company, Inc.) are and shall be the
exclusive property of the LLC.
(d) Each Member and each Employee Stockholder acknowledges that, in
the course of performing services hereunder and otherwise (including, without
limitation, for the LLC's predecessor, Essex Investment Management Company,
Inc.), such Member and Employee Stockholder has had, and will from time to time
have, access to information of a confidential or
26
proprietary nature, including without limitation, all confidential or
proprietary investment methodologies, trade secrets, proprietary or confidential
plans, client identities and information, client lists, service providers,
business operations or techniques, records and data ("Intellectual Property")
owned or used in the course of business by the LLC or its Controlled Affiliates.
Each Non-Manager Member and each Employee Stockholder agrees always to keep
secret and not ever publish, divulge, furnish, use or make accessible to anyone
(otherwise than in the regular business of the LLC and its Controlled
Affiliates) any Intellectual Property of the LLC or any Controlled Affiliate
thereof unless such information can be shown to be in the public domain through
no fault of such Non-Manager Member or Employee Stockholder. At the termination
of the Employee Stockholder's services to the LLC, all data, memoranda, client
lists, notes, programs and other papers, items and tangible media, and
reproductions thereof relating to the foregoing matters in the Non-Manager
Member's or Employee Stockholder's possession or control, shall be returned to
the LLC and remain in its possession (except where the return of such items
shall be unreasonable or impractical in relation to the importance or
confidentiality of such items).
(e) Each Non-Manager Member and each Employee Stockholder
acknowledges that, in the course of entering into this Agreement, the
Non-Manager Member and the Employee Stockholder have had and, in the course of
the operation of the LLC, the Non-Manager Member and Employee Stockholder will
from time to time have, access to Intellectual Property owned by or used in the
course of business by AMG. Each Non-Manager Member and each Employee
Stockholder agrees, for the benefit of the LLC and its Members, and for the
benefit of the Manager Member and AMG, always to keep secret and not ever
publish, divulge, furnish, use or make accessible to anyone (otherwise than at
the Manager Member's request) any knowledge or information regarding
Intellectual Property (including, by way of example and not of limitation, the
transaction structures utilized by AMG) of AMG unless such information can be
shown to be in the public domain through no fault of such Non-Manager Member or
Employee Stockholder. At the termination of the Employee Stockholder's service
to the LLC, all data, memoranda, documents, notes and other papers, items and
tangible media, and reproductions thereof relating to the foregoing matters in
the Non-Manager Member's or Employee Stockholder's possession or control shall
be returned to AMG and remain in its possession.
(f) The provisions of this Section 3.9 shall not be deemed to limit
any of the rights of the LLC or the Members under any of the Employment
Agreements, Non Solicitation Agreements or under applicable law, but shall be in
addition to the rights set forth in each of the Employment Agreements and Non
Solicitation Agreements, and those which arise under applicable law.
Section 3.10 Remedies Upon Breach.
(a) In the event that a Non-Manager Member or its Employee
Stockholder (i) breaches any of the provisions of Section 3.9 hereof, or (ii)
breaches any of the provisions of the Employment Agreement or Non Solicitation
Agreement to which it or he is a party (in each case, including, without
limitation, following the termination of his or her employment with the LLC),
then (A) such Non-Manager Member shall forfeit its right to receive any payment
for its LLC Interests under Section 3.11, although it shall cease to be a
Non-Manager Member in accordance
27
with the provisions of Section 3.11(e), and (B) AMG (or its assignees) shall
have no further obligations under any promissory note theretofore issued to such
Non-Manager Member pursuant to Section 3.11(f).
(b) Each Non-Manager Member and each Employee Stockholder agrees that
any breach of the provisions of Section 3.9 of this Agreement or of the
provisions of the Employment Agreement or Non Solicitation Agreement by such
Non-Manager Member or Employee Stockholder could cause irreparable damage to the
LLC and the other Members. The LLC and/or the Manager Member, shall have the
right to an injunction or other equitable relief (in addition to other legal
remedies) to prevent any violation of a Member's or Employee Stockholder's
obligations hereunder or thereunder.
Section 3.11 Repurchase Upon Termination of Employment or Transfer by
Operation of Law.
(a) In the event that the employment by the LLC of any Employee
Stockholder terminates for any reason, then:
(i) if the termination of the Employee Stockholder occurred
because of the death or Permanent Incapacity of such Employee
Stockholder, the LLC shall purchase and the Non-Manager Member (or the
Non-Manager Member of which such Employee Stockholder was the owner,
as applicable) (as indicated on Schedule A hereto) and his (or its)
Related Non-Manager Members (and their respective Permitted
Transferees, if any) (each a "Repurchased Member") shall sell to the
LLC for cash, LLC Points up to the portion of the Repurchase Price (as
such term is defined in Section 3.11(c) below) which is equal to the
cash proceeds of any key-man life insurance policies or lump-sum
disability insurance policies, as applicable, maintained by the LLC on
the life or health of such Employee Stockholder for the benefit of the
LLC (an "LLC Repurchase"), and
(ii) in each other such case (and, in the case of the death or
Permanent Incapacity of an Employee Stockholder, to the extent the
Repurchase Price exceeds the insurance proceeds described in clause
(i) of this Section 3.11(a) (determined after all such proceeds have
been collected)), AMG shall purchase and the Non-Manager Member (or
the Non-Manager Member of which such Employee Stockholder was the
owner, as applicable) (as indicated on Schedule A hereto) and his (or
its) Related Non-Manager Members (and their respective Permitted
Transferees) (each a "Repurchased Member") shall sell (each a "Manager
Member Repurchase") all (or, in the case of the death or Permanent
Incapacity of an Employee Stockholder, such portion as is not required
to be purchased by the LLC under clause (i) of this Section 3.11(a))
of the LLC Interests held by the Repurchased Member, in each case,
pursuant to the terms of this Section 3.11. For purposes hereof, each
LLC Repurchase and each Manager Member Repurchase together with the
related LLC Repurchase, if any, is referred to as a "Repurchase."
28
(b) The closing of the Repurchase will take place on a date set by
the Manager Member (the "Repurchase Closing Date") which shall be after the last
day of the calendar quarter in which the Employee Stockholder's employment with
the LLC is terminated but which is not more than ninety (90) days after the date
on which the termination of the employment by the LLC of the relevant Employee
Stockholder occurred; provided, however, that (i) if the employment by the LLC
of such Employee Stockholder is terminated because of the death or Permanent
Incapacity of such Employee Stockholder, then the Repurchase Closing Date shall
be a date set by the Manager Member which is as soon as reasonably practicable
after the later of (A) ninety (90) days after the death or Permanent Incapacity,
as applicable, of such Employee Stockholder or (B) thirty (30) days after the
LLC has received the proceeds of all key-man life insurance policies or
disability insurance policies, as applicable, maintained by the LLC on the life
or health of such Employee Stockholder.
(c) The purchase price for the Repurchase (the "Repurchase Price")
shall be determined as follows:
(i) If the Employee Stockholder's employment with the LLC is
terminated because of the death, Permanent Incapacity or Retirement of
the Employee Stockholder or if such Employee Stockholder's employment
with the LLC was terminated by the LLC on such date other than For
Cause and other than upon a Unanimous Termination Decision, then the
Repurchase Price shall equal:
(A) six and three tenths (6.3) times the positive difference,
if any, of (x) the sum of (I) fifty percent (50%) of the LLC's
Maintenance Fees for the twenty-four (24) months ending on the
last day of the calendar quarter in which the termination of
such Employee Stockholder's employment occurs and (II) thirty
three and thirty three one hundredths percent (33.33%) of the
LLC's Earned Performance Fees for the thirty-six (36) months
ending on the last day of the calendar year prior to the
calendar year in which the termination of such Employee
Stockholder's employment occurs minus (y) the amount by which
the actual expenses of the LLC (determined on a basis
consistent with the calculation of Operating Cash Flow)
exceeded the Operating Cash Flow of the LLC (including
previously reserved Operating Cash Flow) during the twelve
(12) months ending the last day of the calendar quarter in
which the termination of such Employee Stockholder's
employment occurs, multiplied by
(B) a fraction, the numerator of which is the number of
Vested LLC Points being purchased in the Repurchase, and the
denominator of which is the number of Vested LLC Points
outstanding on the date of the closing of the Repurchase
(before giving effect to any issuance, redemption or vesting
of LLC Points on such date) (which is intended to be a proxy
for fair market value).
29
(ii) In all other cases, (including, without limitation, the
resignation of an Employee Stockholder or the termination of such
Employee Stockholder For Cause or upon a Unanimous Termination
Decision), the Repurchase Price shall equal:
(A) three and fifteen one-hundredths (3.15) times the
positive difference, if any, of (x) the sum of (I) fifty
percent (50%) of the LLC's Maintenance Fees for the
twenty-four (24) months ending on the last day of the calendar
quarter in which the termination of such Employee
Stockholder's employment occurs and (II) thirty three and
thirty three one hundredths percent (33.33%) of the LLC's
Earned Performance Fees for the thirty-six (36) months ending
on the last day of the calendar year prior to the calendar
year in which the termination of such Employee Stockholder's
employment occurs minus (y) the amount by which the actual
expenses of the LLC (determined on a basis consistent with the
calculation of Operating Cash Flow) exceeded the Operating
Cash Flow of the LLC (including previously reserved Operating
Cash Flow) during the twelve (12) months ending the last day of
the calendar quarter in which the termination of such Employee
Stockholder's employment occurs, multiplied by
(B) a fraction, the numerator of which is the number of
Vested LLC Points being purchased in the Repurchase, and the
denominator of which is the number of Vested LLC Points
outstanding on the date of the closing of the Repurchase
(before giving effect to any issuance, redemption or vesting
of LLC Points on such date);
provided, however, that for any such Repurchase described in
this Section 3.11(c)(ii) prior to the fifth anniversary of the
Effective Date, the Repurchase Price shall equal the Capital
Account which the Repurchased Member would have if the LLC had
sold all its assets for a price equal to three and fifteen
one-hundredths (3.15) times the positive difference, if any,
of (x) the sum of (I) fifty percent (50%) of the LLC's
Maintenance Fees for the twenty-four (24) months ending on the
last day of the calendar quarter in which the termination of
such Employee Stockholder's employment occurs and (II) thirty
three and thirty three one hundredths percent (33.33%) of the
LLC's Earned Performance Fees for the thirty-six (36) months
ending on the last day of the calendar quarter in which the
termination of such Employee Stockholder's employment occurs
minus (y) the amount by which the actual expenses of the LLC
(determined on a basis consistent with the calculation of
Operating Cash Flow) exceeded the Operating Cash Flow of the
LLC (including previously reserved Operating Cash Flow) during
the
30
twelve (12) months ending the last day of the calendar
quarter in which the termination of such Employee
Stockholder's employment occurs, and the gain or loss
therefrom (in excess of the sum of the Members Capital
Accounts on such day without giving effect to any such
allocation) was allocated in accordance with Section 4.2(e)
and 4.2(f) hereof. A sample calculation under this Section
3.11(c)(ii) is attached as Schedule B hereto.
If a Repurchase Price must be determined prior to thirty-six (36) months
after the Effective Date, then the amount of the LLC's Maintenance Fees and
Earned Performance Fees for the portion of the relevant period before the
Effective Date shall be calculated on a pro-forma basis, as if the LLC's
predecessor, Essex Investment Management Company, Inc. had operated under the
provisions of this Agreement but with the resulting Maintenance Fees and Earned
Performance Fees multiplied by the lesser of (x) one (1) or (y) a fraction, the
numerator of which is the sum of the Contract Values of each investment advisory
agreement of Essex Investment Management Company, Inc. (which was not terminated
at or prior to the Closing or the LLC Contribution and was contributed to the
LLC and with respect to which the Client of the LLC gave its Consent to the
transactions contemplated by the Merger Agreement), and the denominator of which
shall be the Base Fees. Capitalized terms used in this paragraph and not
otherwise defined herein shall have the meaning ascribed to such terms in
Section 8.3 of the Merger Agreement.
(d) The rights of AMG, the Manager Member, the LLC and their
assignees hereunder are in addition to and shall not affect any other rights
which AMG, the Manager Member, the LLC or their assigns may otherwise have to
repurchase LLC Interests (including, without limitation, pursuant to any
agreement entered into by a Non-Manager Member or an Additional Non-Manager
Member which provides for the vesting of LLC Points).
(e) On the Repurchase Closing Date, AMG and/or the LLC or their
respective assignees (as applicable) shall pay to the Repurchased Member the
Repurchase Price for the LLC Interests repurchased in the manner set forth in
this Section 3.11, and upon such payment the Repurchased Member shall cease to
hold any LLC Interests, and such Repurchased Member shall be deemed to have
withdrawn from the LLC and shall cease to be a Member of the LLC and shall no
longer have any rights hereunder; provided, however, that the provisions of this
Article III shall continue as set forth in Section 3.11 below. On the
Repurchase Closing Date, the Repurchased Member and the LLC (and if AMG is
purchasing LLC Interests from the Repurchased Member, AMG) (or their assignees)
shall, if AMG so requests, execute an agreement reasonably acceptable to the
Manager Member in which the Repurchased Member represents and warrants to the
Manager Member and/or AMG and/or the LLC, as applicable (or their assignees),
that it has sole record and beneficial title to the Repurchased Interest, free
and clear of any Liens as of the date of the transaction other than those
imposed by this Agreement. Payment of the Repurchase Price shall be made on the
Repurchase Closing Date as follows: (i) in the case of termination of
employment because of death or Permanent Incapacity (to the extent of the
collected proceeds of any disability insurance policies under which the LLC is
the beneficiary upon the permanent incapacity of such Employee Stockholder), by
wire-transfer of immediately available funds to an account designated by the
Repurchased Member at least three (3) business days prior to the
31
Repurchase Closing Date, and (ii) in the case of any other termination of
employment (including a termination of employment because of Permanent
Incapacity to the extent the obligation exceeds the proceeds of any key-man
disability insurance policies described above), (A) in the case of a termination
by the LLC other than For Cause and other than a Unanimous Termination Decision,
on the Repurchase Date; and (B) in the case of any other termination, on the
later to occur of (x) the Repurchase Date or (y) the date which is the first
business day after the fifth anniversary of the Effective Date.
(f) If an Employee Stockholder's employment with the LLC is
terminated because such Employee Stockholder has resigned (other than a
resignation which is included in the definition of "Retirement") or was
terminated For Cause or upon a Unanimous Termination Decision, then, at the sole
discretion of the Manager Member, the payment required by this Section 3.11 may
be made with a promissory note in the form attached hereto as Exhibit C, with an
initial principal amount equal to the Repurchase Price, and the principal of
which promissory note would be paid in four (4) equal annual installments, with
the first installment to be paid on the date Payment of the Repurchase Price
would be required under Section 3.11(e) above (in each case, subject to the
terms and conditions of this Agreement and such note).
(g) AMG may assign and/or delegate any or all of its rights and
obligations under this Section 3.11, in one or more instances, to the Manager
Member; provided, however, that no such assignment or delegation shall relieve
AMG of its obligation to make payment of a Repurchase Price. AMG may, with the
consent of the Management Committee, assign any or all of its rights and
obligations under this Section 3.11, in one or more instances, to the LLC;
provided, that the foregoing limitation shall have no effect on the LLC's
obligation set forth in Section 3.11(a)(i) regarding the use of the proceeds of
a key-man life or disability insurance policy.
(h) In the event that a Non-Manager Member or Employee Stockholder
(or other holder of LLC Points, other than the Manager Member) (i) has filed a
voluntary petition under the bankruptcy laws or a petition for the appointment
of a receiver or makes any assignment for the benefit of creditors, (ii) is
subject involuntarily to such a petition or assignment or to an attachment or
other legal or equitable interest with respect to any of its LLC Interests or,
in the case of an Employee Stockholder which is not a Non-Manager Member, its
interests in the Non-Manager Member which it owns, and such involuntary petition
or assignment or attachment is not discharged within sixty (60) days after its
effective date, or (iii) is subject to a transfer of any of its LLC Interests
or, in the case of an Employee Stockholder which is not a Non-Manager Member,
its interests in the Non-Manager Member which it owns, by court order or decree
or by operation of law, then AMG shall purchase all the LLC Interests held by
such Non-Manager Member (or other holder of LLC Points, other than the Manager
Member) (including the Non-Manager Member through which such Employee
Stockholder holds his or her interest in the LLC) pursuant to the terms of this
Section 3.11 as if such Non-Manager Member was a Repurchased Member with the
purchase price determined pursuant to Section 3.11(c)(ii) and the date of the
closing to take place within thirty (30) days following written notice delivered
by the Manager Member. In order to give effect to clause (iii) of the
foregoing, if any of the interests of a Non-Manager Member in the LLC, or of an
Employee Stockholder in a Non-Manager
32
Member, become subject to transfer (or purport to be or have been transferred)
by a court order or decree or by operation of law, the Non-Manager Member (or
other holder of LLC Points, other than the Manager Member) (whose interest in
the LLC or the interests in which are subject to such transfer) shall cease to
be a Member of the LLC, and the transferee by court order or decree or by
operation of law shall not become a Member, and AMG shall have the right to
purchase from the Non-Manager Member which has ceased to be a Non-Manager
Member, all his, her or its interest in the LLC as set forth in the preceding
sentence.
(i) In the event that a Non-Manager Member is required to sell its
LLC Interests pursuant to the provisions of this Section 3.11, and in the
further event that such Non-Manager Member refuses to, is unable to, or for any
reason fails to, execute and deliver the agreements required by this Section
3.11, the LLC or AMG, as applicable (or their respective assigns) may deposit
the purchase price, if any, therefor (including cash and/or promissory notes)
with any bank doing business within fifty (50) miles of the LLC's principal
place of business, as agent or trustee, or in escrow, for the Non-Manager
Member, to be held by such bank for the benefit of and for delivery to such
Non-Manager Member. Upon such deposit by the LLC or AMG (or their respective
assigns) and upon notice thereof given to the Non-Manager Member (or other
holder of LLC Points, other than the Manager Member), such Non-Manager Member's
LLC Interests shall be deemed to have been sold, transferred, conveyed and
assigned to the LLC or AMG (or their assigns), as applicable, the Non-Manager
Member shall have no further rights with respect thereto (other than the right
to withdraw the payment therefor, if any, held in escrow), and the Manager
Member shall record such transfer or repurchase on Schedule A hereto.
Section 3.12 No Employment Obligation. Each Non-Manager Member and each
Employee Stockholder acknowledges that neither this Agreement nor the provisions
of the Non Solicitation Agreement creates an obligation on the part of the LLC
to continue the employment of an Employee Stockholder with the LLC, and that
such Employee Stockholder, unless he or she is a party to an Employment
Agreement, is an employee at will of the LLC.
Section 3.13 Capitalization of Excess Operating Cash Flow. At any time
the Management Committee reasonably believes that the Operating Cash Flow of the
LLC will exceed the actual expenses of the LLC (taking into account business
conditions at the time and including both a reasonable allowance for executive
compensation increases, and a reasonable allowance for either a loss of business
or a change in margins in the business), at the request of the Management
Committee, representatives of the Manager Member shall meet with the Management
Committee to discuss the extent of such excess and the Management Committee and
the Manager Member shall reasonably and in good faith agree upon the amount of
(if any) such excess. Upon such agreement, the Management Committee and the
Manager Member shall negotiate in good faith for the purpose of determining a
reasonable and appropriate means to permit the Non-Manager Members to utilize
such excess Operating Cash Flow. Subject to such agreement, such means may
include (but shall not be limited to) the following examples: an increase in
the percentage of Revenues from Operations that constitutes Free Cash Flow
(together with the grant of put rights applicable to such adjusted Free Cash
Flow on terms comparable to those set forth in Article VII), the purchase of all
or a portion of any excess by AMG or the Manager Member (or its designee(s))
33
on terms comparable to the terms set forth in Article VII with respect to Puts
or Section 3.10 with respect to Repurchases or any combination of the foregoing.
Section 3.14 Miscellaneous. Each Member and each Employee Stockholder
agrees that the enforcement of the provisions of Sections 3.8, 3.9, 3.10 and
3.11 hereof, and the enforcement of the provisions of the Employment Agreements
and Non Solicitation Agreements are necessary to ensure the protection and
continuity of the business, goodwill and confidential business information of
the LLC for the benefit of each of the Members. Each Member and each Employee
Stockholder agrees that, due to the proprietary nature of the LLC's business,
the restrictions set forth in Section 3.9 hereof and in the Employment
Agreements and the Non Solicitation Agreements are reasonable as to duration and
scope. If any provision contained in this Article III shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Article III. It is the intention of the parties hereto that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time that is not permitted by applicable law, or is any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would then be valid or enforceable under applicable law, such provision shall be
construed and interpreted or reformed to provide for a restriction or covenant
having the maximum enforceable geographic area, time period and other provisions
as shall be valid and enforceable under applicable law.
Each Member and Employee Stockholder acknowledges that the obligations and
rights under Sections 3.8, 3.9, 3.10 and 3.11 and this Section 3.14 shall
survive the termination of the employment of an Employee Stockholder with the
LLC and/or the withdrawal or removal of a Member from the LLC, regardless of the
manner of such termination, withdrawal or removal in accordance with the
provisions hereof and of the relevant Employment or Non Solicitation Agreement.
Moreover, each Member agrees that the remedies provided herein, are reasonably
related to the anticipated loss that the LLC and the Members (including, without
limitation, the Manager Member which would be purchasing LLC Interests from a
Non-Manager Member) would suffer upon a breach of such provisions. Except as
agreed to by the Manager Member, in advance, in a writing making specific
reference to this Article III, no Employee Stockholder or Non-Manager Member
shall enter into any agreement or arrangement which is inconsistent with the
terms and provisions hereof.
ARTICLE IV - CAPITAL CONTRIBUTIONS;
CAPITAL ACCOUNTS AND ALLOCATIONS; DISTRIBUTIONS.
Section 4.1 Capital Contributions.
(a) On the Effective Date, Essex Investment Management Company, Inc.
contributed to the LLC certain of its assets, properties, rights, powers,
privileges and business (and the goodwill associated therewith), and the Members
agree that such Capital Contribution had a value of $100,816,673. On the
Effective Date but following the LLC Contribution (as such term is defined in
the Merger Agreement), the Non-Manager Members will contribute to the LLC
34
certain properties having a value of $213,839 in the aggregate. Except as may
be agreed to in connection with the issuance of additional LLC Points, as
specifically set forth herein, or as may be required under applicable law, the
Members shall not be required to make any further contributions to the LLC.
No Member shall make any contribution to the LLC without the prior consent
of the Manager Member except that Messrs. McNay, Cutler and Clark may contribute
cash in an aggregate amount of up to $500,000 within seven (7) days following
the Effective Date. In addition, the Management Committee shall have the right,
from time to time, to make capital calls on the Non-Manager Members in an
aggregate amount per quarter of not more than the aggregate amount of all
distributions made in the previous quarter, in any such event pro-rata to the
Non-Manager Members' Vested LLC Points, by giving written notice thereof prior
to such capital call. In the event of any such capital call, each Non-Manager
Member shall make prompt payment to the LLC, in accordance with such written
instructions as may be approved by the Management Committee, of cash in the
amount of such additional capital contribution.
(b) No Member shall have the right to withdraw any part of his, her
or its (or their predecessors in interest) Capital Contribution until the
dissolution and winding up of the LLC, except as distributions pursuant to this
Article IV may represent returns of capital, in whole or in part. No Member
shall be entitled to receive any interest on any Capital Contribution made by it
(or its predecessors in interest) to the LLC. No Member shall have any personal
liability for the repayment of any Capital Contribution of any other Member.
Section 4.2 Capital Accounts; Allocations.
(a) There shall be established for each Member a Capital Account (a
"Capital Account") which, in the case of each Member, shall initially be equal
to the Capital Contribution of such Member as set forth on Schedule A hereto.
(b) The Capital Account of each Member shall be adjusted in the
following manner. Each Capital Account shall be increased by such Member's
allocable share of income and gain, if any, of the LLC (as well as the Capital
Contributions made by a Member after the Effective Date) and shall be decreased
by such Member's allocable share of deductions and losses, if any, of the LLC
and by the amount of all distributions made to such Member. The amount of any
distribution of assets other than cash shall be deemed to be the Fair Market
Value of such assets (net of any liabilities encumbering such property that the
distributee Member is considered to assume or take subject to). Capital
Accounts shall also be adjusted upon the issuance of additional LLC Interests as
set forth in Section 5.5(c) and upon the transfer of LLC Interests as set forth
in Section 5.1.
(c) Subject to Sections 4.2(e), 4.2(g) and 4.5 hereof, all items of
LLC income and gain shall be allocated among the Members' Capital Accounts at
the end of every quarter as follows:
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(i) first, items of income and gain shall be allocated to the
Manager Member in an amount equal to:
(A) the Free Cash Flow for such quarter (net of Free Cash
Flow Expenditures for such quarter) multiplied by a fraction,
(1) the numerator of which is the sum of the number of LLC
Points held by the Manager Member on the first day of such
quarter and (2) the denominator of which is the number of LLC
Points outstanding on the first day of such quarter, plus
(B) the product of (1) the sum of all Performance Account
Adjustments for such quarter, (2) the Free Cash Flow
Percentage, and (3) a fraction, the numerator of which is the
number of LLC Points held by the Manager Member on the first
day of such quarter, and the denominator of which is the sum
of the number of LLC Points outstanding, minus
(C) for each Performance Account that has an Earned
Performance Fee in that quarter, the product of (1) that
Earned Performance Fee, (2) the Free Cash Flow Percentage, and
(3) a fraction, the numerator of which is the number of LLC
Points held by the Manager Member on the first day of such
quarter, and the denominator of which is the number of LLC
Points outstanding on the first day of such quarter; and
(D) only for the last quarter of each fiscal year, if the
sum of all amounts previously subtracted under Section
4.2(c)(i)(C) for that quarter and the three (3) previous
quarters of such fiscal year exceeds the sum of all amounts
previously added under Section 4.2(c)(i)(B) for that quarter
and the three previous quarters of such fiscal year, then plus
the aggregate amount of such excess.
(ii) second, the Manager Member shall be allocated items of
income and gain until the Manager Member has been allocated cumulative
income and gain under this Section 4.2(c)(ii) equal to the cumulative
amount of losses and deductions allocated to the Manager Member under
Sections 4.2(d)(ii) and 4.2(d)(iii), if any;
(iii) third, items of income and gain, if any, shall be
allocated among all Non-Manager Members in accordance with (and in
proportion to) each Non-Manager Member's respective number of Vested
LLC Points on the first day of such quarter, until the aggregate
amount of such items allocated to the Members (including both the
Manager Member and the Non-Manager Members) pursuant to Sections
4.2(c)(i) and 4.2(c)(ii) and this 4.2(c)(iii) for such quarter equal
the aggregate amount of (A) Free Cash Flow (net of Free Cash Flow
Expenditures) for such quarter, and (B) only for the first three
quarters of the fiscal year, if the
36
amount determined under Section 4.2(c)(i)(C) for such quarter exceeds
the amount determined under Section 4.2(c)(i)(B) for such quarter,
then minus the amount of such excess; and
(iv) fourth, items of income and gain, if any, shall be allocated
to the Manager Member in an amount equal to $96,000 per quarter, for
each quarter beginning on or after April 1, 1998 through and including
the quarter ended December 31, 2000; and an additional amount equal to
$22,500 per quarter, for each quarter beginning on or after April 1,
1998 through and including the quarter ended March 31, 1999; and
(v) fifth, items of LLC income and gain shall be allocated among
the Non-Manager Members in accordance with (and in proportion to) each
Non-Manager Member's respective number of Vested LLC Points on the
first day of such quarter until the cumulative aggregate amount of
such items of income and gain allocated to the Non-Manager Members
pursuant to this Section 4.2(c)(v) for such quarter and all prior
quarters in that fiscal year equals the cumulative aggregate amount of
items of deduction and loss allocated to the Non-Manager Members for
such quarter and all prior quarters in that fiscal year pursuant to
the provisions of Section 4.2(d) hereof.
(d) Subject to Sections 4.2(f), 4.2(g) and 4.5, all items of LLC loss
and deduction shall be allocated among the Members' Capital Accounts at the end
of every quarter as follows:
(i) first, all items of LLC loss and deduction for such quarter
shall be allocated among the Non-Manager Members in accordance with
(and in proportion to) their respective numbers of Vested LLC Points
on the first day of such quarter after giving effect to the allocation
of the items of income and gain for such quarter under Section 4.2(c),
until all such Capital Accounts have been reduced to zero (0),
provided that no additional loss or deduction shall be allocated to
any Non-Manager Member once its Capital Account has been reduced to
zero (0);
(ii) second, all items of LLC loss and deduction for such quarter
not allocated to the Non-Manager Members under Section 4.2(d)(i) shall
be allocated to the Manager Member until its Capital Account shall
have been reduced to zero (0); and
(iii) finally, all items of LLC loss and deduction for such
quarter not allocated to the Members under Sections 4.2(d)(i) and
4.2(d)(ii) shall be allocated among all Members in accordance with
(and in proportion to) each Members' respective number of LLC Points
on the first day of such quarter.
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(e) If the LLC has a net gain from any sale, exchange or disposition
of all, or substantially all, of the assets of the LLC, then that net gain shall
be allocated among the Members as follows:
(i) first, gain shall be allocated to the Manager Member until
the Manager Member has been allocated cumulative gain which, together
with income and gain previously allocated to the Manager Member under
Section 4.2(c)(ii) hereof, equals the cumulative amount of losses and
deductions allocated to the Manager Member under Sections 4.2(d)(ii)
and 4.2(d)(iii);
(ii) thereafter, gain shall be allocated between the Manager
Member, on the one hand, and the Non Manager Members, on the other
hand, in accordance with (and in proportion to) their respective
number of LLC Points as of the date of the transaction, and among the
Non Manager Members in accordance with (and in proportion to) their
respective number of Vested LLC Points as of the date of the
transaction.
(f) If the LLC has a net loss from any sale, exchange or other
disposition of all, or substantially all, of the assets of the LLC, then that
net loss shall be allocated between the Manager Member, on the one hand, and the
Non Manager Members, on the other hand, in accordance with (and in proportion
to) their respective number of LLC Points as of the date of the transaction, and
among the Non Manager Members in accordance with (and in proportion to) their
respective number of Vested LLC Points as of the date of the transaction
provided that no additional losses shall be allocated to a Member once its
Capital Account has been reduced to zero (0), unless all Members' Capital
Accounts have then been reduced to zero (0).
(g) In the event that during any calendar quarter (or any fiscal
year) there is any change of Members or LLC Points (whether as a result of the
admission of an Additional Non-Manager Member, the redemption by the LLC of all
(or any portion of) any Non-Manager Member's LLC Points, a transfer of any LLC
Points or otherwise), the following shall apply: (i) such transfer shall be
deemed to have occurred as of the end of the last day of the quarter in which
such change occurred, (ii) the books of account of the LLC shall be closed
effective as of the close of business on the effective date of any such change
as set forth in clause (i) and such fiscal year shall thereupon be divided into
two or more portions, (iii) each item of income, gain, loss and deduction shall
be determined (on the closing of the books basis) for the portion of such fiscal
year ending with the date on which the books of account of the LLC are so
closed, and (iv) each such item for such portion of such fiscal year shall be
allocated (pursuant to the provisions of Sections 4.2(c) and (d) hereof) to
those persons who were Members during such portion of such fiscal year in
accordance with their respective LLC Points during such period.
Section 4.3 Distributions.
(a) Subject to Section 4.4 hereof, from and after the date hereof,
within thirty (30) days after the end of each calendar quarter, the Manager
Member shall, to the extent cash is available therefor, and based on the
unaudited financial statements for such calendar quarter
38
prepared in accordance with Section 9.3 hereof (after approval thereof by the
Manager Member), cause the LLC to:
(i) distribute to the Manager Member an amount equal to the allocations to
the Manager Member pursuant to Section 4.2(c)(i) for such calendar
quarter and any previous calendar quarter to the extent not then
distributed (less the Manager Member's pro-rata portion of any
reservation from Free Cash Flow pursuant to the last sentence of the
second to last paragraph of this Section 4.3(a)), and then
(ii) upon receipt of a Committee Vote, distribute to the Non-Manager
Members (and each Person who was a Non-Manager Member for such
calendar month) an amount equal to (A) the portion of the Free Cash
Flow allocated to such Non-Manager Member pursuant to Section
4.2(c)(iii) for such calendar quarter and any previous calendar
quarter to the extent not then distributed (less each such Person's
pro-rata portion of any reservation from Free Cash Flow pursuant to
the last sentence of the second to last paragraph of this Section
4.3(a)) minus (B) the amount, if any, by which the operating expenses
for the LLC for the calendar quarter exceeded the Operating Cash Flow
of the LLC for such calendar quarter multiplied by a fraction, the
numerator of which is the number of Vested LLC Points held by such
Non-Manager Member, and the denominator of which is the number of
Vested LLC Points held by all the Non-Manager Members, in accordance
with (and in proportion to) their respective number of Vested LLC
Points for such preceding calendar quarter, in each case, if and to
the extent each such Member (and each Person who was a Non-Manager
Member for any portion of any applicable portion of any applicable
calendar quarter) has a positive balance in its Capital Account.
After the end of each fiscal year of the LLC, the Manager Member shall,
based on the audited financial statements prepared in accordance with Section
9.3 hereof, cause the LLC to make a distribution of the remaining Free Cash
Flow, if any, for the preceding fiscal year which was allocated pursuant to
Sections 4.2(c)(i) and 4.2(c)(iii) but not previously distributed in accordance
with the foregoing clauses (i) and (ii) whenever, and to the extent, cash is
available therefor. The Manager Member may, with a Committee Vote, from time to
time, reserve and not distribute portions of Free Cash Flow for LLC purposes;
including, without limitation, to increase the net worth of the LLC, to make
capital expenditures (such as the creation of or investment in a Controlled
Affiliate) or to create a reserve for anticipated repurchases of Vested LLC
Interests; provided, that any such reservation would be made from all Members
pro-rata in proportion to Vested LLC Points, and that such funds shall be
maintained in the Receipts Account (as defined below) pending expenditure
thereof.
Within ninety-five (95) days after the end of each fiscal year of the LLC
(or such earlier date as may be agreed to by the Manager Member with a Committee
Vote, the Manager Member shall, to the extent cash is available therefor, and
based on the audited financial statements prepared in accordance with Section
9.3 hereof, cause the LLC to make a distribution to each Non-Manager Member of
the amount, if any, which was allocated to such Non-Manager Member for the
previous fiscal year pursuant to the provisions of Section 4.5(d).
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(b) To give effect to the foregoing, the LLC shall have two (2) bank
accounts. The first account (the "Receipts Account") shall have as its
authorized signatures such representatives of the LLC and the Manager Member as
the Management Committee and the Manager Member shall deem appropriate or
desirable. All the LLC's receipts shall be paid into the Receipts Account;
provided, however, that on a weekly basis, the LLC shall transfer fifty-two
percent (52%) of receipts paid into this account to a second account (the "Free
Cash Flow Account") which shall have as its authorized signatories such
representatives of the Manager Member and the LLC as the Manager Member shall
deem appropriate or desirable. The Manager Member shall use the Free Cash Flow
Account to make all distributions of Free Cash Flow pursuant to Section 4.3(a)
above and to fund all Free Cash Flow Expenditures. The Manager Member shall
retain in the Free Cash Flow Account any amount which gives rise to the right to
make distributions pursuant to Section 4.3(c) hereof (including, without
limitation, the proceeds of sales of assets, insurance proceeds and the proceeds
of issuance of additional LLC Interests) and shall distribute such amounts in
accordance with the provisions of such Section 4.3(c). The Receipts Account
shall be used by the Management Committee to make all operating expense payments
(including payments of salaries and bonuses) out of Operating Cash Flow.
Within thirty (30) days after the end of each calendar quarter, based on
the unaudited financial statements for such calendar quarter prepared in
accordance with Section 9.3 hereof, and within ninety-five (95) days after the
end of each fiscal year of the LLC, based on the audited financial statements
prepared in accordance with Section 9.3 hereof, the Manager Member and the LLC
shall cause such transfers between the accounts to be made as may be necessary
to reconcile the accounts with the amounts of revenue designated as Operating
Cash Flow and Free Cash Flow and other amounts excluded from the definition of
Revenues From Operations hereunder.
(c) Except as otherwise set forth herein, all other amounts or
proceeds available for distribution, if any, shall be distributed to the Members
at such time as may be determined by the Manager Member; provided that any such
distribution shall be made among the Members (i) if attributable to a sale of
all, or substantially all, of the assets of the LLC, in accordance with (and in
proportion to) in their respective Capital Accounts (as determined immediately
prior to such distribution) until all Capital Account balances have been reduced
to zero, and (ii) if otherwise attributable, between the Manager Member, on the
one hand, and the Non Manager Members, on the other hand, in accordance with
(and in proportion to) their respective number of LLC Points as of the date of
dissolution, and among the Non Manager Members in accordance with (and in
proportion to) their respective number of Vested LLC Points at the time of such
distribution; provided, however, that if a Member makes a Capital Contribution
after the Effective Date, the Manager Member may cause the LLC to make a
priority return of such Capital Contribution.
(d) Notwithstanding any other provision of this Agreement, neither
the LLC, nor the Manager Member on behalf of the LLC, shall make a distribution
to any Member on account of its LLC Interest if such distribution would violate
the Act or other applicable law.
Section 4.4 Distributions Upon Dissolution; Establishment of a Reserve
Upon Dissolution. Upon the dissolution of the LLC, after payment (or the
making of reasonable
40
provision for the payment) of all liabilities of the LLC owing to creditors, the
Manager Member, or if there is none, the Liquidating Trustee appointed as set
forth in Section 8.4 hereof, shall set up such reserves as it deems reasonably
necessary for any contingent, conditional or unmatured liabilities or other
obligations of the LLC. Such reserves may be paid over by the Manager Member or
Liquidating Trustee to a bank (or other third party), to be held in escrow for
the purpose of paying any such contingent, conditional or unmatured liabilities
or other obligations. At the expiration of such period(s) as the Manager Member
or Liquidating Trustee may deem advisable, such reserves, if any (and any other
assets available for distribution), or a portion thereof, shall be distributed
to the Members (i) in accordance with (and in proportion to) the positive
balance (if any) in their respective Capital Accounts (as determined immediately
prior to each such distribution) until all such positive Capital Account
balances have been reduced to zero, and (ii) thereafter, between the Manager
Member, on the one hand, and the Non Manager Members, on the other hand, in
accordance with (and in proportion to) their respective number of LLC Points as
of the date of dissolution, and among the Non Manager Members in accordance with
(and in proportion to) their respective number of Vested LLC Points as of the
date of dissolution. If any assets of the LLC are to be distributed in kind in
connection with such liquidation, such assets shall be distributed on the basis
of their Fair Market Value net of any liabilities encumbering such assets and,
to the greatest extent possible, shall be distributed pro-rata in accordance
with the total amounts to be distributed to each Member. Immediately prior to
the effectiveness of any such distribution-in-kind, each item of gain and loss
that would have been recognized by the LLC had the property being distributed
been sold at Fair Market Value shall be determined and allocated to those
persons who were Members immediately prior to the effectiveness of such
distribution in accordance with Section 4.2(d).
Section 4.5 Proceeds from Capital Contributions and the Sale of
Securities; Insurance Proceeds; Certain Special Allocations.
(a) Capital Contributions made by any Member after the Effective
Date, and other proceeds from the issuance of securities by the LLC may, in the
sole discretion of the Manager Member, be used for the benefit of the LLC
(including, without limitation, the repurchase or redemption of LLC Interests),
or, may be distributed by the LLC, in which case, any such proceeds shall be
allocated and distributed between the Manager Member, on the one hand, and the
Non Manager Members, on the other hand, in accordance with (and in proportion
to) their respective number of LLC Points immediately prior to the date of such
contribution or issuance of securities, and among the Non Manager Members in
accordance with (and in proportion to) their respective number of Vested LLC
Points immediately prior to the date of such contribution or issuance of
securities; it being understood that in the case the proceeds are a note
receivable, any such distribution shall only occur, if at all, upon receipt by
the LLC of any cash in respect thereof.
(b) In the event of the death or Permanent Incapacity of an Employee
Stockholder covered by key-man life or disability insurance, as applicable, the
premiums on which have been paid by the LLC as Free Cash Flow Expenditures, the
proceeds of any such policy shall first be used by the LLC to fund (to the
extent thereof) the Repurchase of LLC Interests from the Employee Stockholder or
Non-Manager Member through which such Employee Stockholder holds or held his or
her interest in the LLC in accordance with Section 3.11 hereof and, if the
proceeds exceed the
41
amounts so required to effect such Repurchase, then the amount of such excess
proceeds may, as determined by the Manager Member with the consent of the
Management Committee, be used for the benefit of the LLC, or, may be distributed
by the LLC, in which case, any such proceeds shall be allocated and distributed
between the Manager Member, on the one hand, and the Non Manager Members, on the
other hand, in accordance with (and in proportion to) their respective number of
LLC Points immediately following the Repurchase of the LLC Interests from such
Non-Manager Member, and among the Non Manager Members in accordance with (and in
proportion to) their respective number of Vested LLC Points immediately
following the Repurchase of the LLC Interests from such Non-Manager Member.
(c) Items of depreciation or amortization (as calculated for book
purposes in accordance with generally accepted accounting principles,
consistently applied) on account of the property of the LLC on the Effective
Date, shall be specially allocated to the Manager Member; provided, however,
that items of depreciation, amortization, loss or deduction (as calculated for
book purposes in accordance with generally accepted accounting principles,
consistently applied) on account of the property contributed to the LLC by
Non-Manager Members as contemplated by the second sentence in Section 4.1(a),
shall be specially allocated among such Non-Manager Members in proportion to
such contribution. All items of depreciation or amortization (as calculated for
book purposes in accordance with generally accepted accounting principles,
consistently applied) on account of property purchased out of Operating Cash
Flow shall be allocated as set forth in Section 4.2(c)(iii), and all items of
depreciation or amortization (as calculated for book purposes in accordance with
generally accepted accounting principles, consistently applied) on account of
property purchased out of Free Cash Flow shall be allocated among the Members in
accordance with their respective numbers of LLC Points on the date the property
was purchased. All items of depreciation, amortization, loss or deduction (as
calculated for book purposes in accordance with generally accepted accounting
principles, consistently applied) on account of expenses and expenditures paid
for with the contribution made by Messrs. McNay, Cutler and Clark as
contemplated by the first sentence of the second paragraph of Section 4.1(a),
shall be specially allocated among Messrs. McNay, Cutler and Clark in accordance
with their proportionate amounts of such contribution.
(d) If, at the end of a fiscal year, (i) the aggregate amount of
items of income and gain allocated to the Non-Manager Members pursuant to the
provisions of Section 4.2(c)(v) equals the aggregate amount of items of
deduction and loss for such fiscal year, and (ii) there are additional items of
income and gain for such fiscal year which are available to be, but have not
been allocated pursuant to the provisions of Section 4.2 hereof, then such
additional items of income and gain (i.e., the unallocated items of income and
gain in excess of the aggregate amount of items of deduction and loss
attributable to such fiscal year) which were not previously allocated shall be
allocated to the Non-Manager Members and in the amounts as may be selected by a
Committee Vote or, if there is no Committee, then by Majority Vote; provided,
that if no determination is made within ninety-five (95) days after the end of a
fiscal year, such items of income and gain shall be allocated among the
Non-Manager Members in proportion to each Non-Manager Member's respective number
of Vested LLC Points as of the end of such fiscal year.
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Section 4.6 Federal Tax Allocations. The Manager Member shall, in its
sole discretion, allocate the ordinary income and losses and capital gains and
losses of the LLC as determined for U.S. Federal income tax purposes (and each
item of income, gain, loss, deduction or credit entering into the computation
thereof), as the case may be, among the Members for tax purposes in a manner
that, to the greatest extent possible: (a) reflects the economic arrangement of
the Members under this Agreement (determined after taking into account the
allocation provisions of Sections 4.2, 4.4 and 4.5 hereof, and the distribution
provisions of Sections 4.3, 4.4 and 4.5 hereof), (b) is consistent with the
principles of Sections 704(b) and 704(c) of the Code and (c) incorporates a
"qualified income offset," a "minimum gain chargeback" and a "partner
nonrecourse debt minimum gain chargeback" as those terms are defined in the
Treasury Regulations under Section 704 of the Code. "Nonrecourse deductions,"
as defined in such Treasury Regulations, shall be allocated among the Members in
accordance with their LLC Points. Deductions attributable to "partner
nonrecourse debt" shall be allocated as provided in such Treasury Regulations.
The Members understand and agree that, with respect to any item of property
(other than cash) contributed (or deemed to be contributed for U.S. federal
income tax purposes) by a Member to the capital of the LLC, the initial tax
basis of such property in the hands of the LLC will be the same as the tax basis
of such property in the hands of such Member at the time so contributed. The
Members further understand and agree that the taxable income and taxable loss of
the LLC is to be computed for Federal income tax purposes by reference to the
initial tax basis to the LLC of any assets and properties contributed by the
Members (and not by reference to the fair market value of such assets and
properties at the time contributed). The Members also understand that, pursuant
to Section 704(c) of the Code, all taxable items of income, gain, loss and
deduction with respect to such assets and properties shall be allocated among
the Members for Federal income tax purposes so as to take account of any
difference between the initial tax basis of such assets and properties to the
LLC and their fair market values at the time contributed, using any method
authorized by the Income Tax Regulations under Section 704(c) and selected by
the Manager Member, in its sole discretion. For purposes of maintaining the
Capital Accounts of the Members, items of income, gain, loss and deduction
relating to any asset or property contributed to the LLC that are required to be
allocated for tax purposes pursuant to Section 704(c) of the Code shall not be
reflected in the Capital Accounts of the Members. Without limiting the
generality of the foregoing, all deductions with respect to the amortization or
depreciation of property contributed to the LLC by a Member shall be allocated
to the contributing member for all (state, foreign and Federal) income tax
purposes and all deductions with respect to the amortization or depreciation of
property purchased out of Operating Cash Flow or Free Cash Flow shall be
allocated in accordance with the provisions of Section 4.5(c) hereof.
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS.
Section 5.1 Assignability of Interests. No interest of a Non-Manager
Member in the LLC may be sold, assigned, transferred, gifted or exchanged, nor
may any Non-Manager Member offer to do any of them (each, a "Transfer"), nor may
any interest in any Non-Manager Member
43
be Transferred, nor may any stockholder in any Non-Manager Member which is not
an individual offer to do any of them, and no Transfer by a Non-Manager Member
or stockholder of a Non-Manager Member shall be binding upon the LLC or any
Non-Manager Member unless it is expressly permitted by this Article V and the
Manager Member receives an executed copy of the documents effecting such
Transfer, which shall be in form and substance reasonably satisfactory to the
Manager Member. The assignee of such interest in the LLC may become a
substitute Non-Manager Member only upon the terms and conditions set forth in
Section 5.2. If an assignee or transferee of an interest of a Non-Manager
Member in the LLC does not become (and until any such assignee or transferee
becomes) a substitute Non-Manager Member, in accordance with the provisions of
Section 5.2, such Person shall not be entitled to exercise or receive any of the
rights, powers or benefits of a Non-Manager Member other than the right to
receive distributions which the assigning Non-Manager Member has sold,
transferred or assigned to such Person in compliance with this Section 5.1. No
Non-Manager Member's interest in the LLC or, in the case of a Non-Manager Member
which is not an individual, none of the direct and indirect interests of a
beneficial owner of such Non-Manager Member, may be Transferred except:
(a) with the prior written consent of the Manager Member, which
consent may be granted or withheld by the Manager Member in its sole discretion
except that the Manager Member may not unreasonably withhold its consent in the
case of a Transfer of less than ten (10%) of the Initial LLC Points held by a
Non-Manager Member to a bona fide charitable organization;
(b) upon the death of such beneficial owner, their interests in the
LLC or in the Non-Manager Member may be Transferred by will or the laws of
descent and distribution (subject, in all cases, to the provisions of Section
3.11 hereof); and
(c) a Non-Manager Member (and its beneficial owners) may Transfer
interests in the LLC or in such Non-Manager Member to individuals described in
clause (a) of the definition of such Non-Manager Member's Immediate Family (or
trusts for their benefit and of which the beneficial owner is the settlor and/or
trustee, provided that any such trust does not require or permit distribution of
such interests).
provided, that in the case of (b) or (c) above, (i) the transferee enters into
an agreement with the LLC agreeing to be bound by the provisions hereof (and if
such transferee is or is becoming an employee of the LLC and is not already a
party to a Non Solicitation Agreement, the transferee enters into a Non
Solicitation Agreement), and (ii) whether or not the transferee enters into such
an agreement, such LLC Interests, and interests in such Non-Manager Member,
shall thereafter remain subject to this Agreement (and, if applicable, the
relevant Non Solicitation Agreement) to the same extent they would be if held by
such Non-Manager Member or beneficial owner, as applicable; provided, however,
that the provisions of Sections 3.8, 3.9 and 3.10 will not apply unless such
Transferee is or is becoming an employee of the LLC or any of its Controlled
Affiliates or is a Controlled Affiliate of any such employee. Notwithstanding
the foregoing, no Non-Manager Member's interest in the LLC may be Transferred
if, giving effect to such Transfer, the total number of Members of the LLC would
exceed one hundred (100) (as determined in accordance with Treasury Regulation
Section 1.7704-1(h)(3), which provides, in general, that under certain
circumstances a Person owning an interest in (A) a partnership for federal
income tax purposes,
44
(B) a "grantor trust," any portion of which is treated as owned by the
grantor(s) or other person(s) under sections 671-679 of the Code, or (C) an "S
corporation" within the meaning of section 1361(a) of the Code (each, a
"flow-through entity") that owns, directly or through other flow-through
entities, an interest in the LLC shall be treated as a Member), unless either
such Transfer is a Transfer described in Treasury Regulation Section 1.7704-1(e)
or such Transfer is pursuant to a Put right under Article VII and the sum of the
percentage interests in profits or capital of the LLC Transferred during the
taxable year of the LLC (other than in Transfers described in Treasury
Regulation Section 1.7704-1(e)) would, taking the Transfer in question into
account and assuming the maximum exercise of the Non-Manager Members' Put rights
under Article VII, exceed ten percent (10%) of the total interests in profits or
capital of the LLC.
For all purposes of this LLC Agreement, any Transfers of LLC Interests
shall be deemed to occur as of the end of the last day of the calendar quarter
in which any such Transfer would otherwise have occurred. Upon any Transfer of
LLC Interests, the Manager Member shall make the appropriate revisions to
Schedule A hereto.
Each time LLC Interests are Transferred (including, without limitation,
additional LLC Points), the Manager Member may, in its reasonable discretion,
elect to revalue the Capital Accounts of all Members. If the Manager Member so
elects, then the Capital Accounts of all the Members shall be adjusted as
follows: (i) the Manager Member shall determine the proceeds which would be
realized if the LLC sold all its assets at such time for a price equal to the
Fair Market Value of such assets, and (ii) the Manager Member shall allocate
amounts equal to the gain or loss which would have been realized upon such a
sale to the Capital Accounts of all the Members immediately prior to such
Transfer in accordance with Section 4.2(d) hereof.
No interests of a Non-Manager Member in the LLC may be pledged,
hypothecated, optioned or encumbered, nor may any interests in a Non-Manager
Member be pledged, hypothecated, optioned or encumbered, nor may any offer to do
any of the foregoing be made without the prior written consent of the Management
Committee and the Manager Member; provided the consent of the Manager Member
will not be unreasonably withheld if the purpose of any such pledge or
encumbrance is to secure financing to enable the Transferee to purchase LLC
Interests from other Non-Manager Members and are subordinated to the
satisfaction of the Manager Member to all other rights of the Manager Member and
all other claims and encumbrances hereunder.
Section 5.2 Substitute Non-Manager Members. No transferee of interests
of a Non-Manager Member shall become a Member except in accordance with this
Section 5.2. The Manager Member may, in its sole discretion, admit as a
substitute Non-Manager Member (with respect to all or a portion of the LLC
Interests held by a Person), any Person that acquires an LLC Interest by
Transfer from another Non-Manager Member pursuant to Section 5.1 hereof, or that
acquires an LLC Interest from the Manager Member pursuant to Section 6.1 hereof.
The admission of an assignee as a substitute Non-Manager Member shall, in all
events, be conditioned upon the execution of an instrument satisfactory to the
Manager Member whereby such assignee becomes a party to this Agreement as a
Non-Manager Member as well as compliance by such assignee with the provisions of
Section 3.8 hereof if such Transferee is or is becoming an employee of the LLC
45
or any of its Controlled Affiliates or is a Controlled Affiliate of any such
employee. Upon the admission of a substitute Non-Manager Member, the Manager
Member shall make the appropriate revisions to Schedule A hereto.
Section 5.3 Allocation of Distributions Between Assignor and Assignee;
Successor to Capital Accounts. Upon the Transfer of an LLC Interest pursuant to
this Article V, distributions pursuant to Article IV shall be made to the Person
owning the LLC Interest at the date of distribution, unless the assignor and
assignee otherwise agree and so direct the LLC and the Manager Member in a
written statement signed by both the assignor and assignee. In connection with
a Transfer by a Member of LLC Points, the assignee shall succeed to a pro-rata
(based on the percentage of such Person's LLC Points transferred) portion of the
assignor's Capital Account, unless the assignor and assignee otherwise agree and
so direct the LLC and the Manager Member in a written statement signed by both
the assignor and assignee and consented to by the Manager Member.
Section 5.4 Resignation, Redemptions and Withdrawals. No Non-Manager
Member shall have the right to resign, to cause the redemption of its interest
in the LLC, in whole or in part, or to withdraw from the LLC, except (a) with
the consent of the Manager Member, (b) as is expressly provided for in Section
3.11 hereof; or (c) as is expressly provided for in Section 7.1 hereof. Upon
any resignation, redemption or withdrawal, the Non-Manager Member shall only be
entitled to the consideration, if any, provided for by Section 3.11 or Section
7.1 hereof, if and to the extent that one of such Sections is applicable. Upon
the resignation, redemption or withdrawal, in whole or in part, by a Non-Manager
Member, the Manager Member shall make the appropriate revisions to Schedule A
hereto.
Section 5.5 Issuance of Additional LLC Interests.
(a) Additional Non-Manager Members (the "Additional Non-Manager
Members" and each an "Additional Non-Manager Member") may be admitted to the LLC
and such Additional Non-Manager Members may be issued LLC Points, only upon
receipt of a Committee Vote and the consent of the Manager Member and upon such
terms and conditions as may be established by the Manager Member with the
consent of Management Committee (including, without limitation, upon such
Additional Non-Manager Member's execution of an instrument satisfactory to the
Manager Member whereby such Person becomes a party to this Agreement as a
Non-Manager Member as well as, in the case of employees of the LLC (or its
Controlled Affiliates or Controlled Affiliates of such employees, such Person's
compliance with the provisions of Section 3.8 hereof).
(b) Existing Non-Manager Members may be issued additional LLC Points
(or other LLC Interests), only by the LLC with the consent of, and upon such
terms and conditions as may be established by, the Management Committee with the
consent of the Manager Member. The Manager Member or its Affiliates (other than
the LLC and its Controlled Affiliates) may only be issued new additional LLC
Points (or other LLC Interests) upon the receipt of a Committee Vote.
(c) Each time additional LLC Interests are issued (including, without
limitation, additional LLC Points), the Capital Accounts of all the Members
shall be adjusted as follows: (i)
46
the Manager Member shall determine the proceeds which would be realized if the
LLC sold all its assets at such time for a price equal to the Fair Market Value
of such assets, and (ii) the Manager Member shall allocate amounts equal to the
gain or loss which would have been realized upon such a sale to the Capital
Accounts of all the Members immediately prior to such issuance in accordance
with Section 4.2(d) hereof.
(d) Upon the issuance of additional LLC Interests, the Manager Member
shall make the appropriate revisions to Schedule A hereto.
(e) Notwithstanding anything in this Agreement to the contrary, (i)
no additional LLC Interests may be issued if, giving effect to such Transfer,
the total number of Members would exceed one hundred (100) as determined in
accordance with Treasury Regulation Section 1.7704-1(h)(3)) and (ii) no LLC
Interests may be issued (A) in a transaction that is required to be registered
under the Securities Act or (B) in a transaction that is not required to be
registered under the Securities Act by reason of Regulation S thereunder unless
the offering and sale of the LLC Interests would not have been required to be
registered under the Securities Act if the LLC Interests had been offered and
sold within the United States.
Section 5.6 Additional Requirements to Transfer or Issuance. As
additional conditions to the validity of (x) any Transfer of a Non-Manager
Member's interest in the LLC (or, in the case of a Non-Manager Member which is
not an individual, the interests of the direct and indirect beneficial owners of
such Non-Manager Member) (pursuant to Section 5.1 above), or (y) the issuance of
additional LLC Interests (pursuant to Section 5.5 above), such Transfer or
issuance shall not: (i) violate the registration provisions of the Securities
Act or the securities laws of any applicable jurisdiction, (ii) cause the LLC to
become subject to regulation as an "investment company" under the 1940 Act, and
the rules and regulations of the SEC thereunder, (iii) result in the termination
of any contract to which the LLC is a party and which individually or in the
aggregate are material (it being understood and agreed that any contract
pursuant to which the LLC provides Investment Management Services is material),
or (iv) result in the treatment of the LLC as an association taxable as a
corporation or as a "publicly traded partnership" for Federal income tax
purposes.
The Manager Member may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel, which expense
shall be borne by the parties to such transaction (and to the extent the LLC is
such a party, shall be paid from Operating Cash Flow).
To the fullest extent permitted by law, any Transfer or issuance that
violates the conditions of this Section 5.6 shall be null and void.
Section 5.7 Representation of Members. Each Member (including each
Additional Non-Manager Member) hereby represents and warrants to the LLC and
each other Member, and acknowledges, that (a) it has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the LLC and making an informed
investment decision with respect thereto, (b) it is able to bear the economic
and financial risk of
47
an investment in the LLC for an indefinite period of time, (c) it is acquiring
an interest in the LLC for investment only and not with a view to, or for resale
in connection with, any distribution to the public or public offering thereof,
(d) the equity interests in the LLC have not been registered under the
securities laws of any jurisdiction and cannot be disposed of unless they are
subsequently registered and/or qualified under applicable securities laws and
the provisions of this Agreement have been complied with, and (e) the execution,
delivery and performance of this Agreement by such Member do not require it to
obtain any consent or approval that has not been obtained and do not contravene
or result in a default under any provision of any existing law or regulation
applicable to it, any provision of its charter, by-laws or other governing
documents or any agreement or instrument to which it is a party or by which it
is bound.
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL
Section 6.1 Assignability of Interest.
(a) Except as set forth in this Section 6.1, without a Committee Vote
the Manager Member's interest in the LLC may not be Transferred; provided,
however, (i) it is understood and agreed that, in connection with the operation
of the business of AMG and the Manager Member (including, without limitation,
the financing of its interest herein and direct or indirect interests in
additional investment management companies), the Manager Member's interest in
the LLC will be pledged and encumbered and lien holders of the Manager Member's
interest shall have and be able to exercise the rights of secured creditors with
respect to such interest, (ii) the Manager Member may Transfer some (but not a
majority) of its LLC Interests to a Person who is not a Member but who is an
Officer or employee of the LLC or who becomes an Officer or employee of the LLC
in connection with such issuance, or a Person wholly owned by any such Person,
provided that such Transferee shall not become a Member unless the Management
Committee has consented thereto, (iii) the Manager Member may sell some (but not
all) of its LLC Interests to existing Non-Manager Members, and (iv) the Manager
Member may sell all or any portion of its LLC Interests to an Affiliate of the
Manager Member which shall thereafter be subject to the provisions contained
herein with respect to the Manager Member. Notwithstanding anything else set
forth herein, the Manager Member may, with a Majority Vote, sell or transfer as
a result of a merger or consolidation all its interests in the LLC in a single
transaction or a series of related transactions, and, in any such case, each of
the Non-Manager Members shall be required to sell or transfer, in the same
transaction or transactions, all their interests in the LLC; provided, that the
price to be received by all the Members shall be allocated among the Members as
follows: (a) an amount equal to the sum of the positive balances, if any, in
positive Capital Accounts shall be allocated among the Members having such
Capital Accounts in proportion to such positive balances, and (b) the excess, if
any, shall be allocated among all Members in accordance with their respective
number of LLC Points at the time of such sale. Upon any of the foregoing
transactions, the Manager Member shall make the appropriate revisions to
Schedule A hereto.
48
(b) In the case of any Transfer upon foreclosure pursuant to
Section 6.1(a)(i) above, each Transferee shall sign a counterpart signature page
to this Agreement agreeing thereby to become either a Non-Manager Member or a
Manager Member (provided, however, that once one such other Transferee elects to
become a Manager Member, no transferee (other than a subsequent Transferee of
such new Manager Member) may elect to be a Manager Member hereunder). If the
transferees pursuant to Section 6.1(a)(i) above receive all the Manager Member's
LLC Interests, and none of such transferees elects to become a Manager Member,
then that shall be deemed to be an event of withdrawal by the Manager Member.
If, however, one of the Transferees elects to become a Manager Member, and
executes a counterpart signature page to this Agreement agreeing thereby to
become a Manager Member, then notwithstanding any other provision hereof to the
contrary, the old Manager Member shall thereupon be permitted to withdraw from
the LLC as Manager Member.
(c) In the case of a transfer pursuant to the penultimate sentence of
Section 6.1(a) above, the Manager Member shall be deemed to have withdrawn, and
its transferee shall be deemed to have become the Manager Member.
Section 6.2 Resignation, Redemption, and Withdrawal. To the fullest
extent permitted by law, except as set forth in Section 6.1, without a prior
Majority Vote, the Manager Member shall not have the right to resign or withdraw
from the LLC as Manager Member. With a prior Majority Vote, the Manager Member
may resign or withdraw as Manager Member upon prior written notice to the LLC.
Without a prior Majority Vote, the Manager Member shall have no right to have
all or any portion of its interest in the LLC redeemed. Any resigned or
withdrawn Manager Member shall retain its interest in the capital of the LLC and
its other economic rights under this Agreement as a Non-Manager Member having
the number of LLC Points and Vested LLC Points held by the Manager Member prior
to its resignation or withdrawal. If a Manager Member who has resigned or
withdrawn no longer has any economic interest in the LLC, then upon such
resignation or withdrawal such Person shall cease to be a Member of the LLC.
ARTICLE VII - PUT OF LLC INTERESTS
Section 7.1 Puts.
(a) Each Non-Manager Member may, at such Non-Manager Member's option,
subject to the terms and conditions set forth in this Section 7.1, cause AMG to
purchase portions of the LLC Points held by such Non-Manager Member in the LLC
(a "Put").
(b) Each Non-Manager Member may, subject to the terms and conditions
set forth in this Agreement, cause AMG to purchase up to ten percent (10%) of
the Initial LLC Points of such Non-Manager Member from such Non-Manager Member
(and/or any Permitted Transferee of such Non-Manager Member), on the last
business day in March (each a "Purchase Date") (but only up to an aggregate of
fifty (50%) of such Non-Manager Member's Initial LLC Points) starting with the
last business day in March, 2003 and ending with the last business day in March,
2012. On any Purchase Date starting with the Purchase Date in March 2003, Mr.
Joseph C. McNay may
49
cause AMG to purchase from Mr. McNay (and/or any Transferee of Mr. McNay
pursuant to the provisions of Section 5.1(b) or 5.1(c) hereof (and, to the
extent set forth in any consent of the Manager Member pursuant to Section
5.1(a), his Transferees pursuant to Section 5.1(a))) a number of LLC Points of
Mr. McNay and such Transferees that is equal to or less than the difference
between the number of LLC Points then held by Mr. McNay and such Transferees and
twenty-five percent (25%) of the greatest total number of Initial LLC Points
issued to Mr. McNay; provided that in the event Mr. McNay exercises his rights
under this sentence, he shall thereafter not be entitled to cause any Puts under
this Section 7.1; provided, however, that the exercise of the rights set forth
in the first sentence of this paragraph shall not be deemed to be an exercise
pursuant to this sentence. On any Purchase Date starting with the Purchase Date
in March 2006, Mr. Stephen Cutler may cause AMG to purchase from Mr. Cutler
(and/or any Transferee of Mr. Cutler pursuant to the provisions of Section
5.1(b) or 5.1(c) hereof (and, to the extent set forth in any consent of the
Manager Member pursuant to Section 5.1(a), his Transferees pursuant to Section
5.1(a))) a number of LLC Points of Mr. Cutler and such Transferees that is equal
to or less than the difference between the number of Initial LLC Points then
held by Mr. Cutler and such Transferees and twenty-five percent (25%) of the
greatest total number of LLC Points issued to Mr. Cutler; provided that in the
event Mr. Cutler exercises his rights under this sentence, he shall thereafter
not be entitled to cause any Puts under this Section 7.1; provided, however,
that the exercise of the rights set forth in the first sentence of this
paragraph shall not be deemed to be an exercise pursuant to this sentence.
(c) Each Non-Manager Member may, subject to the terms and conditions
set forth in this Agreement, cause AMG to purchase a number of LLC Points as is
equal to up to ten percent (10%) of the LLC Points issued to such Non-Manager
Member pursuant to the Incentive Program or upon the exercise of an option
issued pursuant thereto (each such issuance or issuance upon the exercise of an
option, being referred to herein as an "Option Exercise") from such Non-Manager
Member (and/or any Permitted Transferee of such Non-Manager Member), on any five
(5) separate Purchase Dates (but only up to an aggregate of a number of LLC
Points as is equal to fifty percent (50%) of the LLC Points issued in each such
Option Exercise) starting on the first Purchase Date which is at least five (5)
years following the date of each such Option Exercise and ending on the first
Purchase Date which is at least fifteen (15) years following the date of such
Option Exercise.
(d) If a Non-Manager Member desires to exercise its rights under
Section 7.1(b) or 7.1(c) above, it and its Employee Stockholder shall give the
Manager Member, AMG, each other Employee Stockholder and the LLC irrevocable
written notice (a "Put Notice") on or prior to the preceding December 31 (the
"Notice Deadline"), stating that it is electing to exercise such rights and the
number of LLC Points (the "Put LLC Points") to be sold in the Put and whether or
to what extent such Put is a Put of Initial LLC Points (the "Initial Put LLC
Points") or LLC Points issued pursuant to an Option Exercise (together, the
"Option Put LLC Points") and, if Option Put LLC Points, what Option Exercise
they are associated with. Puts in any given calendar year for which Put Notices
are received before the Notice Deadline for that calendar year shall be
completed as follows: AMG shall purchase from each Non-Manager Member (and his
(or its) Related Non-Manager Members) and their respective Permitted Transferees
that number of Put LLC Points as is equal to the sum of (i) the number of
Initial Put LLC Points designated as such in the Put Notice,
50
up to the maximum number permitted by Section 7.1(b) above with respect to that
year and the aggregate number of Initial LLC Points that may be Put by the
Non-Manager Member (and his (or its) Related Non-Manager Members) and their
respective Permitted Transferees, and (ii) the number of Option Put LLC Points
designated as such in the Put Notice, up to the maximum number permitted by
Section 7.1(c) above with respect to the Option Exercise and that year and the
aggregate number of LLC Points that may be put by the Non-Manager Member (and
his (or its) Related Non-Manager Members) and their respective Permitted
Transferees, with respect to the Option Exercise.
(e) The purchase price for a Put (the "Put Price") shall be an amount
(which is intended to be a proxy for fair market value) equal to (i) six and
three tenths (6.3) times the positive difference, if any, of (x) the sum of (I)
fifty percent (50%) of the LLC's Maintenance Fees for the twenty-four (24)
months ending on the last day of the calendar quarter in which the closing of
the Put occurs and (II) thirty three and thirty three one hundredths percent
(33.33%) of the LLC's Earned Performance Fees for the thirty-six (36) months
ending on the last day of the calendar year prior to the calendar year in which
the Put occurs minus (y) the amount by which the actual expenses of the LLC
(determined on a basis consistent with the calculation of Operating Cash Flow)
exceeded the Operating Cash Flow of the LLC (including previously reserved
Operating Cash Flow) during the twelve (12) months ending on the last day of the
calendar quarter prior to the date of the closing of such Put (in each case
determined by reference to the most recent financial statements with respect to
the applicable period supplied to the Manager Member pursuant to Section 9.3)
multiplied by (ii) a fraction, the numerator of which is the number of Vested
LLC Points to be purchased from such Non-Manager Member on the Purchase Date and
the denominator of which is the number of LLC Points outstanding on the Purchase
Date before giving effect to any Puts, Calls or any issuances or redemptions of
LLC Points on such date. Notwithstanding the foregoing, if the Non-Manager
Member exercising a Put has made an election contemplated in Section 7.2 then
the "Put Price" shall be (i) the product of percentage of Vested LLC Points
being Put by such Non-Manager Member to which such election does not apply, and
the Put Price calculated in the foregoing sentence with respect to all LLC
Points being Put by such Non-Manager Member, plus (ii) the number of shares of
AMG Stock resulting from the calculation set forth in Section 7.2(c) upon such
election.
(f) In the case of any Put, the Put Price shall be paid by AMG (or,
if AMG shall have assigned its obligation to the Manager Member or the LLC
pursuant to paragraph (h) below, the Manager Member or the LLC) (or their
respective assigns) on the relevant Purchase Date by wire transfer or certified
check issued to such Non-Manager Member, in each case, against delivery of such
documents or instruments of transfer as may reasonably be requested by AMG, the
Manager Member or the LLC, as applicable, and in each case including
representations that at the effective time of such transfer the transferring
Non-Manager Member is the record and beneficial owner of the LLC Interests being
Put, free and clear of any Liens other than those imposed by this Agreement.
(g) Notwithstanding any other provision of this Section 7.1 to the
contrary, no purchase by AMG pursuant to this Section 7.1 (or, upon assignment
of any of AMG's obligations to the Management Member or the LLC pursuant to
paragraph (h) hereof, purchase by the Manager
51
Member or redemption by the LLC) shall occur if it would result in the Manager
Member and AMG (taken together) owning, directly or indirectly, in excess of
eighty percent (80%) of the LLC Points outstanding after giving effect to any
such sale or redemption. If some, but not all, of the LLC Points which
Non-Manager Members have requested be purchased can be so purchased without the
Manager Member's and AMG's (taken together) ownership, directly or indirectly,
exceeding eighty percent (80%) of the outstanding LLC Points, then AMG or the
Manager Member shall purchase, or shall assign their obligations to the LLC, and
the LLC shall redeem, LLC Points from the Non-Manager Members having Put LLC
Interests in proportion to the LLC Points then held by such Non-Manager Members
up to the maximum extent that would not cause the Manager Member and AMG (taken
together) to own, directly or indirectly, in excess of eighty percent (80%) of
the outstanding LLC Points (in each case, subject to the maximum amount set
forth in Sections 7.1(b) and 7.1(c) hereof).
(h) AMG may assign and/or delegate any or all of its rights and
obligations to purchase LLC Points under this Section 7.1, in one or more
instances, to the Manager Member; provided that no such assignment or delegation
shall relieve AMG of its obligation to make the payment for a Put as required by
this Section 7.1. The Manager Member may, only with a Majority Vote, assign any
or all of its rights and obligations to purchase LLC Points under this Section
7.1, in one or more instances, to the LLC.
(i) In the case of any Put, as of any Purchase Date, the Non-Manager
Member shall cease to hold the LLC Points purchased on the Purchase Date, and
shall cease to hold a pro-rata portion of such Non-Manager Member's Capital
Account (which shall have been transferred to AMG (or, upon assignment of any of
AMG's obligations to the Management Member or the LLC pursuant to paragraph (h)
hereof, transferred to the Manager Member or canceled by the LLC)) and shall no
longer have any rights with respect to such portion of its LLC Interests.
Section 7.2 Election Rights of Non-Manager Members to Receive AMG Stock.
(a) The Non-Manager Member exercising a Put or with respect to whom a
Call is exercised (as contemplated by Section 7.7. hereof) may elect to request
that AMG pay up to one-half (50%) of the LLC Points being Put by such
Non-Manager Member (or being Called from such Non-Manager Member) to be paid for
by AMG in shares of AMG's Common Stock, $.01 par value per share (the "AMG
Stock") in accordance with the provisions of this Section 7.2. If a Non-Manager
Member makes the request set forth in Section 7.2(a), AMG may, in its sole
discretion, elect by written notice (the "Election Notice") to such Non-Manager
Member within ten (10) days after receiving such Non-Manager Member's request to
make the payment for the Put or Call as contemplated by the succeeding
provisions of this Section 7.2, or may, in lieu thereof, pay an amount in cash
as is equal to the Number of Shares of AMG Stock such Non-Manager Member is
entitled to receive pursuant to the calculation set forth below, multiplied by
AMG's Average Stock Price, calculated as set forth below.
(b) An election under this Section 7.2 must be made by the
Non-Manager Member at least sixty (60) days prior to the relevant Purchase Date,
by giving written notice to the
52
LLC, AMG and the Manager Member of such election, which election, once made,
shall be irrevocable without the prior written consent of AMG.
(c) The number of shares of AMG Stock to be issued upon exercise of
the Put or Call (as applicable) shall be determined in accordance with the
following formula:
Number of
Shares of AMG Stock = FCF x Percentage Put/Called x AMG's EBITDA Multiple x .75
---------------------------------------------------------
AMG's Average Stock Price
Where:
FCF = an amount equal to (x) the sum of (I) fifty
percent (50%) of the LLC's Maintenance
Fees for the twenty-four (24) months
ending on the last day of the calendar
quarter in which the Put or Call (as
applicable) occurs and (II) thirty three
and thirty three one hundredths percent
(33.33%) of the LLC's Earned Performance
Fees for the thirty-six (36) months ending
on the last day of the calendar year prior
to the calendar year in which the Put or
Call (as applicable) occurs minus (y) the
amount by which the actual expenses of the
LLC (determined on a basis consistent with
the calculation of Operating Cash Flow)
exceeded the Operating Cash Flow of the
LLC (including previously reserved
Operating Cash Flow) during the twelve
(12) months ending on the last day of the
calendar quarter prior to the date of the
closing of such Put or Call (as
applicable) (in each case determined by
reference to the most recent financial
statements with respect to the applicable
period supplied to the Manager Member
pursuant to Section 9.3)
Percentage Put/Called = a fraction, the numerator of which is the
number of Vested LLC Points to be purchased
from the Non-Manager Member on the Purchase
Date, and the denominator of which is the
number of LLC Points outstanding on the
Purchase Date before giving effect to any
Puts, Calls or any issuances or redemptions
of LLC Points on such date.
AMG's EBITDA Multiple = a fraction, the numerator of which is (a) the
number of shares of AMG Stock issued and
outstanding immediately prior to the closing
of the Put or Call (as applicable),
multiplied by AMG's Average Stock Price, plus
(b) the long-term indebtedness (including the
current
53
portion thereof) of AMG as of the
date of its most recent public
financial reports prior to the
closing of the Put or Call (as
applicable), and the denominator of
which is AMG's earnings before
interest, taxes, depreciation and
amortization for the twelve (12)
month period ending on the last day
of the calendar quarter prior to the
date of the closing of the Put or
Call (as applicable).
Notwithstanding the foregoing, AMG's
EBITDA Multiple shall be calculated
giving pro-forma effect to any
investments or other similar
transactions consummated (or which
AMG became contractually obligated to
consummate) rpior to the closing of
the Put or Call (as applicable), in
each case, as calculated in good
faith by the Manager Member.
AMG's Average Stock Price = the average (arithmetic mean) Stock
Price of AMG Stock during the forty (40)
trading days prior to the date of the
closing of the Put or Call (as
applicable). The term "Stock Price"
shall mean the closing price for each
day for the AMG Stock which shall be the
last sale price or, in the case no such
sale takes place on such day, the
average of the closing bid and asked
prices in either case as reported in the
principal consolidated transaction
reporting system with respect to
securities listed on the principal
national securities exchange on which
the AMG Stock is listed or admitted to
trading; or, if not listed or admitted
to trading on any national securities
exchange, the last quoted price (or, if
not so quoted, the average of the last
quoted high bid and low asked prices) in
the over-the-counter market, as reported
by NASDAQ or such other system then in
use; or, if on any such date no bids are
quoted by any such organization, the
average of the closing bid and asked
prices as furnished by a professional
market maker making a market in such
security reasonably selected by the
Board of Directors of AMG.
In the event that there is any stock
split (or reverse stock split), stock
dividend or other similar event, equit-
able and appropriate adjustments shall
be made in the application of the fore-
going calculation of AMG's Average Stock
Price to take account of such event.
54
Section 7.3 Registration Rights.
(a) If at any time or times AMG shall determine to file a
registration statement ("Registration Statement") (which excludes a registration
on Form S-8 (or its then equivalent form) or a registration statement filed
solely to implement an employee benefit plan, a transaction under Rule 145 or to
which any other similar rule of the SEC under the Securities Act is applicable
or registration statement on a form not available for registering securities for
sale to the public) other than on Form S-4 (or its then equivalent form) and
other than with respect to securities to be issued solely in connection with any
acquisition of any securities or assets of any entity or business, then AMG will
give written notice thereof to the Non-Manager Members which are holders of
Registrable Securities (as hereinafter defined) then outstanding (the "Holders")
at least twelve (12) days prior to the filing of a registration statement with
the SEC, and, subject to the terms and conditions of this Section 7.3, will use
commercially reasonable efforts to effect the registration under the Securities
Act (a "Registration") of all Registrable Securities which the Holders request
in a writing delivered to AMG within ten (10) days after the notice given by
AMG. AMG shall have the right to postpone or withdraw any Registration without
any obligation to any Holder.
(b) For the purposes of this Section 7.3, the term "Registrable
Securities" shall mean (i) any AMG Stock held by a Non-Manager Member which was
acquired by such Non-Manager Member pursuant to the Merger Agreement, (ii) any
AMG Stock held by a Non-Manager Member which was acquired by such Non-Manager
Member pursuant to the provisions of Section 7.2 above, and (iii) and any equity
securities issued or issuable with respect to the AMG Stock described in clauses
(i) or (ii) of this Section 7.3(b) by way of a stock dividend or stock split or
in connection with a combination of shares.
(c) Whenever under the preceding provisions of this Section 7.3, AMG
is required hereunder to register Registrable Securities, AMG agrees that it
shall also do the following:
(i) use commercially reasonable efforts to prepare diligently
for filing with the SEC a Registration Statement and such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary for the duration of such
Registration;
(ii) use commercially reasonable efforts to maintain the
effectiveness of any Registration Statement pursuant to which any of the
Registrable Securities are being sold on a delayed or continuous basis
under Rule 415 (or any successor or similar rule) under the Securities Act
(other than a registration statement in connection with an underwritten
offering) until the earlier of (A) the completion of the distribution of
all Registrable Securities offered pursuant thereto or (B) ninety (90) days
after the effective date of such Registration Statement, provided that if a
Suspension Period (as defined below) has occurred during the pendency of a
Registration, AMG shall in good faith use reasonable efforts to extend the
effectiveness of such Registration so that there are ninety (90) days
during which such Registration is effective and a Suspension Period is not
in effect; and
55
(iii) furnish to each selling Holder such copies of each
preliminary and final prospectus and such other documents as such Holder
may reasonably request to facilitate the public offering of its Registrable
Securities in accordance with customary practices.
(d) All reasonable expenses incident to AMG's performance of or
compliance with this Section 7.3, including SEC and securities exchange or
National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, fees and expenses of compliance with securities or blue sky laws,
printing expenses, fees and disbursements of counsel for AMG and its independent
certified public accountants incurred in connection with each registration
hereunder (excluding any fees or disbursements of counsel for the Holders, or
any underwriting fees, discounts or commissions attributable to the sale of
Registrable Securities, which shall be borne by each applicable Holder) (all
such included expenses being herein called "Registration Expenses"), will be
borne by AMG; provided, however, that if AMG is not selling securities in such
offering, then each Holder shall bear a portion of such expenses equal to such
expenses multiplied by a fraction, the numerator of which is the number of
shares sold by such Holder and the denominator of which is the total number of
shares sold in the offering.
(e) (i) Incident to any registration statement referred to in this
Section 7.3(e), and subject to applicable law, AMG will indemnify each
underwriter, each Holder of Registrable Securities so registered, and each
person controlling any of them ("Controlling Person") against all claims,
losses, damages and liabilities, including legal and other expenses
reasonably incurred in investigating or defending against the same, arising
out of any untrue statement of a material fact contained therein, or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or arising out of
any violation by AMG of the Securities Act, any other federal securities
laws, any state securities or "blue-sky" laws or any rule or regulation
thereunder in connection with such registration, except insofar as the same
may have been caused by an untrue statement or omission based upon
information furnished to AMG by or on behalf of such underwriter, Holder or
Controlling Person expressly for use therein, and with respect to such
untrue statement or omission in the information furnished to AMG by or on
behalf of such underwriter, Holder or Controlling Person, such underwriter,
Holder or Controlling Person so providing such information to AMG (or on
whose behalf such information was so provided) will indemnify AMG, its
directors and officers, and the other underwriters, Holders and Controlling
Persons against any losses, claims, damages, expenses or liabilities to
which any of them may become subject to the same extent.
(ii) If the indemnification provided for in this Section 7.3(e) from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
or expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified parties in connection with
the actions which resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified parties shall be
determined by
56
reference to, among other things, whether any action in question, including
any untrue or alleged untrue statement of a material fact, has been made
by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include any
reasonable legal or other fees or expenses reasonably incurred by such
party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 7.3(e) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 7.3(e)(ii), no
Holder shall be required to contribute any amount in excess of the amount by
which the total price at which the Registrable Securities of such Holder were
offered to the public exceeds the amount of any damages which such Holder has
otherwise been required to pay by reason of such untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 7.3(e), the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Section 7.3(e)(i) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 7.3(e)(ii).
Section 7.4 Restrictions. Notwithstanding anything herein to the
contrary, the parties agree as follows:
(a) In the event that in connection with an underwritten public
offering, the managing underwriter(s) shall in good faith impose a limitation on
the number of securities which may be included in such Registration for
marketing purposes, AMG shall not be required to register Registrable Securities
in excess of such limitation, provided that the reduction in the number of
securities which may be included in such Registration to comply with such
limitation is imposed pro rata (based either (as determined by AMG, in its sole
discretion) on relative number of securities held or relative number of
securities sought to be included in such Registration) with respect to the
Holders and all managers of companies providing Investment Management Services
in which AMG may invest after the date hereof and which have so-called
incidental or piggyback registration rights (it being understood that such
limitation may be imposed as to all holders of such securities and the Holders
prior to the imposition of any limitation on other holders of AMG securities).
(b) If requested in writing by the managing underwriter(s), if any,
of any underwritten public offering of AMG Stock, each Non-Manager Member and
each Employee Stockholder (and their respective Permitted Transferees) agrees
not to offer, sell, contract to sell or otherwise dispose of any shares of AMG
Stock (or any securities convertible into or exchangeable for AMG Stock) except
as part of such underwritten public offering within thirty (30) days before or
one hundred and eighty (180) days after the effective date of the registration
statement filed with respect to said offering.
57
(c) Following the effectiveness of a Registration (including, without
limitation a Registration for sale on a delayed or continuous basis under Rule
415 under the Securities Act), each Holder and each Employee Stockholder agrees
not to effect any sales of AMG Stock after they have received notice from AMG to
suspend sales as a result of the commencement of any Suspension Period. Each
Holder may recommence effecting sales of AMG Stock following further notice to
such effect from AMG, which shall be given by AMG not later than five (5)
business days after the conclusion of each Suspension Period. For purposes
hereof, a "Suspension Period" shall mean the pendency or occurrence of an event
that would make it impractical or inadvisable (i) to cause a Registration
Statement to remain in effect or (ii) to permit the sale of AMG Stock by Holders
and by limited partners, members or management employees of other entities in
which AMG is a general partner or manager member (without prejudice to any
particular holder), and shall include, without limitation, pending negotiations
relating to, or consummation of, a transaction or the pendency or occurrence of
any other event that would require additional disclosure of material information
by AMG in a registration statement as to which AMG has a bona fide business
purpose for preserving confidentiality or which renders AMG unable to comply
with applicable legal requirements.
Section 7.5 Limitation of Registration Rights. Notwithstanding the
foregoing, AMG shall not be required to effect a Registration of Registrable
Securities under this Agreement if, in the written opinion of counsel for AMG,
the Holders of Registrable Securities may then sell all the Registrable
Securities proposed to be sold without registration under the Securities Act.
Section 7.6 Option of Receiving Future Piggyback Registration Rights.
Notwithstanding any provisions of this Section 7, if AMG offers to any Person
engaged in the business of providing Investment Management Services in which AMG
may invest pursuant to an acquisition or investment transaction closing after
the date hereof any form of piggyback registration rights ("New Registration
Rights"), AMG agrees that at each such occasion it shall provide Holders of
Registrable Securities with the option of either retaining the registration
rights then in force for such Registrable Securities or replacing such
registration rights with the New Registration Rights, subject to the limitation
set forth in Section 7.5.
Section 7.7 Calls.
(a) The Manager Member may, subject to the terms and conditions set
forth in this Section 7.2, cause any or all of Joseph C. McNay, Stephen R. Clark
and Steven D. Cutler to sell portions of the LLC Interests held by each such
Non-Manager Member in the LLC (each a "Call").
(b) The Manager Member may cause each of the Non-Manager Members set
forth in Section 7.7(a) above (and any Transferee thereof) to sell up to five
percent (5%) of the highest total number of LLC Points held by such Non-Manager
Member at any time, to the Manager Member on any Purchase Date (but only up to
an aggregate of fifteen percent (15%) of the highest total number of LLC Points
held by such Non-Manager Member at any time), starting with the first Purchase
Date which is after the sixth (6th) anniversary of the Effective Date.
(c) If the Manager Member desires to exercise its rights under
Section 7.7(b), it shall give each Non-Manager Member and the LLC irrevocable
written notice (a "Call Notice") on
58
or prior to the immediately preceding Notice Deadline, stating that it is
electing to exercise such rights, the Non-Manager Member with respect to whom
the Call is being exercised and the number of LLC Points to be purchased in the
Call.
(d) The purchase price for a Call (the "Call Price") shall be an
amount (which is intended to be a proxy for fair market value) equal to (i)
seven and nine-tenths (7.9) times the positive difference, if any, of (x) fifty
percent (50%) of the sum of (I) the LLC's Maintenance Fees for the twenty-four
(24) months ending on the last day of the calendar quarter prior to the date of
the closing of such Call and (II) thirty three and thirty three one hundredth
percent (33.33%) of the LLC's Earned Performance Fees for the thirty-six (36)
months ending on the last day of the calendar year prior to the date of the
closing of such Call minus (y) the amount by which the actual expenses of the
LLC (determined on a basis consistent with the calculation of Operating Cash
Flow) exceeded the Operating Cash Flow of the LLC (including previously reserved
Operating Cash Flow) during the twelve (12) months ending on last day of the
calendar quarter prior to the date of the closing of such Call (in each case
determined by reference to the most recent financial statements with respect to
the applicable period supplied to the Manager Member pursuant to Section 9.3)
multiplied by (ii) a fraction, the numerator of which is the number of LLC
Points to be purchased from such Non-Manager Member pursuant to such Call on the
Purchase Date and the denominator of which is the number of LLC Points
outstanding on the Purchase Date before giving effect to any Puts, Calls or any
issuances or redemptions of LLC Points on such date. Notwithstanding the
foregoing, if a Non-Manager Member with respect to whom a Call is exercised has
made an election contemplated in Section 7.2 then the "Call Price" shall be (i)
the product of the percentage of LLC Points being Called from such Non-Manager
Member to which such election does not apply, and the Call Price calculated in
the foregoing sentence with respect to all LLC Points being Called from such
Non-Manager Member, plus (ii) the number of shares of AMG Stock resulting from
the calculation set forth in Section 7.2(c) upon such election.
(e) As of any Purchase Date, the Non-Manager Member (and its
Transferees to the extent applicable) selling LLC Points under this Section 7.2
shall cease to hold the LLC Interests purchased on the Purchase Date, and shall
cease to hold a pro-rata portion of such Non-Manager Member's Capital Account
and shall no longer have any rights with respect to such portion of its LLC
Interests.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
Section 8.1 No Dissolution. The LLC shall not be dissolved by the
admission of Additional Non-Manager Members or substitute Non-Manager Members or
substitute Manager Members in accordance with the Act and the provisions of this
Agreement.
Section 8.2 Events of Dissolution. The LLC shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) a date designated in writing by the holders of a majority of the
then outstanding Vested LLC Points; or
59
(b) upon the entry of a decree of judicial dissolution under Section
18-802 of the Act.
Section 8.3 Notice of Dissolution. Upon the dissolution of the LLC, the
Manager Member shall promptly notify the Members of such dissolution.
Section 8.4 Liquidation. Upon the dissolution of the LLC, the Manager
Member, or if there is none, the Person or Persons approved by the holders of
more than fifty percent (50%) of the Vested LLC Points then outstanding
(including the Person that was the Manager Member) shall carry out the winding
up of the LLC (in such capacity, the "Liquidating Trustee"), shall immediately
commence to wind up the LLC's affairs; provided, however, that a reasonable time
shall be allowed for the orderly liquidation of the assets of the LLC and the
satisfaction of liabilities to creditors so as to enable the Members to minimize
the normal losses attendant upon a liquidation. The Members shall continue to
share in allocations and distributions during liquidation in the same
proportions, as specified in Article IV hereof, as before liquidation. The
proceeds of liquidation shall be distributed as set forth in Section 4.4 hereof.
Section 8.5 Termination. The LLC shall terminate when all of the assets
of the LLC, after payment of or due provision for all debts, liabilities and
obligations of the LLC, shall have been distributed to the Members in the manner
provided for in Section 4.4 and the Certificate shall have been canceled in the
manner required by the Act.
Section 8.6 Claims of the Members. The Members and former Members shall
look solely to the LLC's assets for the return of their Capital Contributions
and Capital Accounts, and if the assets of the LLC remaining after payment of or
due provision for all debts, liabilities and obligations of the LLC are
insufficient to return such Capital Contributions or Capital Accounts, the
Members and former Members shall have no recourse against the LLC or any other
Member (including, without limitation, the Manager Member).
ARTICLE IX - RECORDS AND REPORTS.
Section 9.1 Books and Records. The Officers and the Members shall cause
the LLC to keep complete and accurate books of account with respect to the
operations of the LLC, prepared in accordance with generally accepted accounting
principles, using the accrual method of accounting, consistently applied. Such
books shall reflect that the interests in the LLC have not been registered under
the Securities Act, and that the interests may not be sold or transferred
without registration under the Securities Act or exemption therefrom and without
compliance with Article V or Article VI of this Agreement. Such books shall be
maintained at the principal office of the LLC in Boston or at such other place
as the Manager Member shall determine.
Section 9.2 Accounting. The LLC's books of account shall be kept on the
accrual method of accounting, or on such other method of accounting as the
Manager Member may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each LLC fiscal year and shall be maintained for each fiscal year in a manner
consistent with the generally accepted accounting principles and with the
principles and/or policies of AMG
60
applied consistently with respect to its Controlled Affiliates. The taxable
year of the LLC shall be the twelve months ending December 31 or such other
taxable year as the Manager Member may designate, with the advice of the
Independent Public Accountants.
Section 9.3 Financial and Compliance Reports. The LLC shall, and each of
the Non-Manager Members and each of the Employee Stockholders who is a member of
the Management Committee shall use all commercially reasonable efforts to cause
the LLC to, furnish to the Manager Member each of the following:
(a) Within ten (10) days after the end of each month and each fiscal
quarter, an unaudited financial report of the LLC, which report shall be
prepared in accordance with generally accepted accounting principles using the
accrual method of accounting, consistently applied (except that the financial
report may (i) be subject to normal year-end audit adjustments which are neither
individually nor in the aggregate material and (ii) not contain all notes
thereto which may be required in accordance with generally accepted accounting
principles) and shall be certified by the most senior financial officer of the
LLC to have been so prepared, and which shall include the following:
(i) Statements of operations, changes in members' capital and
cash flows for such month or quarter, together with a cumulative income
statement from the first day of the then-current fiscal year to the last
day of such month or quarter;
(ii) a balance sheet as of the last day of such month or quarter;
and
(iii) with respect to the quarterly financial report, a
detailed computation of Free Cash Flow for such quarter.
(b) Within fifteen (15) days after the end of each fiscal year of the
LLC, audited financial statements of the LLC, which shall include statements of
operations, changes in members' capital and cash flows for such year and a
balance sheet as of the last day thereof, each prepared in accordance with
generally accepted accounting principles, using the accrual method of
accounting, consistently applied, certified by the Independent Public
Accountants.
(c) If requested by the Manager Member, within twenty-five (25) days
after the end of each calendar quarter, the LLC's operating budget for each of
the next four (4) fiscal quarters, in such form and containing such estimates as
may be requested by the Manager Member from time to time, certified by the most
senior financial officer of the LLC.
(d) If requested by the LLC, copies of all financial statements,
reports, notices, press releases and other documents released to the public.
(e) As promptly as is reasonably possible following request by the
Manager Member from time to time, such financial, operations, performance or
other information or data as may be requested.
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Section 9.4 Meetings.
(a) The LLC and its Officers shall hold such regular meetings at the
LLC's principal place of business with representatives of the Manager Member as
may be reasonably requested by the Manager Member from time to time. These
meetings shall be attended (either in person or by telephone) by such members of
the Management Committee, Officers and other employees of the LLC as may be
requested by the Manager Member or any of the Officers.
(b) At each meeting, the Officers and other employees of the LLC
shall discuss such matters regarding the LLC and its performance, operations
and/or budgets as may be reasonably requested by the Manager Member, and each of
the attendees (whether in person or by telephone) at such meeting shall have the
right to submit proposals and suggestions regarding the LLC, and the attendees
at the meeting shall, in good faith, discuss and consider such proposals and
suggestions.
Section 9.5 Tax Matters.
(a) The Manager Member shall cause to be prepared and filed on or
before the due date (or any extension thereof) Federal, state, local and foreign
tax or information returns required to be filed by the LLC. The Manager Member,
to the extent that LLC funds are available, shall cause the LLC to pay any taxes
payable by the LLC (it being understood that the expenses of preparation and
filing of such tax returns, and the amounts of such taxes, are to be treated as
operating expenses of the LLC to be paid from Operating Cash Flow); provided
that the Manager Member shall not be required to cause the LLC to pay any tax so
long as the Manager Member or the LLC is in good faith and by appropriate legal
proceedings contesting the validity, applicability or amount thereof and such
contest does not materially endanger any right or interest of the LLC and
adequate reserves therefor have been set aside by the LLC. Neither the LLC nor
any Employee Stockholder or Non-Manager Member shall do anything or take any
action which would be inconsistent with the foregoing or with the Manager
Member's actions as authorized by the foregoing provisions of this Section
9.5(a). Each Non-Manager Member shall cooperate with Manager Member in causing
the LLC to make an election under Section 754 of the Code with respect to its
fiscal year ended on the Effective Date. Upon the agreement of the Management
Committee and the Manager Member, the LLC will use commercially reasonable
efforts to cause an election under Section 754 of the Code to be made by
investment funds in which it holds an interest as a manager or general partner.
(b) The Manager Member shall be the tax matters partner for the LLC
pursuant to Sections 6221 through 6233 of the Code.
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION.
Section 10.1 Liability. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the LLC solely by reason of being a Covered Person.
62
Section 10.2 Exculpation.
(a) No Covered Person shall be liable to the LLC or any other Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the LLC
and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that a Covered Person
shall be liable for any such loss, damage or claim incurred by reason of any
action or inaction of such Covered Person which constituted fraud, gross
negligence, willful misconduct or a breach of this Agreement, the Merger
Agreement or, in the case of a Non-Manager Member or Employee Stockholder, the
Non Solicitation Agreement to which he, she or it is a party.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the LLC and upon such information, opinions, reports
or statements presented to the Covered Person by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the LLC of such Covered Person.
Section 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to the LLC
or to any Member, a Covered Person acting under this Agreement shall not be
liable to the LLC or to any Member for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Manager Member and any other
Member, or (ii) whenever this Agreement or any other agreement contemplated
herein or therein provides that the Manager Member shall act in a manner that
is, or provides terms that are, fair and reasonable to the LLC or any Member,
the Manager Member shall resolve such conflict of interest, take such action or
provide such terms, considering in each case the relative interest of each party
(including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. The resolution, action or term so made, taken or
provided by the Manager Member shall not constitute a breach of this Agreement
or any other agreement contemplated herein or of any duty or obligation of the
Manager Member at law or in equity or otherwise unless the Managing Member did
not act in good faith.
(c) Whenever in this Agreement the Manager Member is permitted or
required to make a decision (i) in its "discretion" or under a grant of similar
authority or latitude, the Manager Member shall be entitled to consider such
interests and factors as it desires, including its own interests, and shall have
no duty or obligation to give any consideration to any interest of or factors
affecting the LLC or any other Person, or (ii) in its "good faith" or under
another express standard,
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the Manager Member shall act under such express standard and shall not be
subject to any other or different standard imposed by this Agreement or other
applicable law.
(d) Wherever in this Agreement a factual determination is called for
and the applicable provision of this Agreement does not indicate what party or
parties are to make the applicable factual determination, and/or the applicable
standard to be used in making the factual determination, such determination
shall be made by the Manager Member in the exercise of reasonable discretion.
Section 10.4 Indemnification. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
LLC for any loss, damage or claim (including any amounts paid in settlement of
any such claims) including expenses, fines, penalties and counsel fees and
expenses incurred by such Covered Person by reason of any act or omission
performed or omitted by such Covered Person in good faith on behalf of the LLC
and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that no Covered
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Covered Person by reason of any action or inaction of
such Covered Person which constituted fraud, [gross] negligence, willful
misconduct or a breach of this Agreement, the Merger Agreement or, in the case
of the Non-Manager Member or Employee Stockholder, the Non Solicitation
Agreement to which he, she or it is a party; provided, however, that any
indemnity under this Section 10.4 shall be provided out of and to the extent of
LLC assets only, and no Member or Covered Person shall have any personal
liability to provide indemnity on account thereof.
Section 10.5 Notice; Opportunity to Defend and Expenses.
(a) Promptly after receipt by any Covered Person from any third party
of notice of any demand, claim or circumstance that, immediately or with the
lapse of time, would reasonably be expected to give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that could reasonably be expected to
result in any loss, damage or claim with respect to which the Covered Person
might be entitled to indemnification from the LLC under Section 10.4, the
Covered Person shall give notice thereof (the "Claims Notice") to the LLC;
provided, however, that a failure to give such notice shall not prejudice the
Covered Person's right to indemnification hereunder except to the extent that
the LLC is actually prejudiced thereby. The Claims Notice shall describe the
Asserted Liability in such reasonable detail as is practicable under the
circumstances, and shall, to the extent practicable under the circumstances,
indicate the amount (estimated, if necessary) of the loss or damage that has
been or may be suffered by the Covered Person.
(b) The LLC may elect to compromise or defend, at its own expense and
by its own counsel, any Asserted Liability; provided, however, that if the named
parties to any action or proceeding include (or could reasonably be expected to
include) both the LLC and a Covered Person, or more than one Covered Persons,
and the LLC is advised by counsel that representation of both parties by the
same counsel would be inappropriate under applicable standards of professional
conduct, the Covered Person may engage separate counsel at the expense of the
LLC. If the LLC elects to compromise or defend such Asserted Liability, it
shall within twenty (20) business days (or sooner,
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if the nature of the Asserted Liability so requires) notify the Covered Person
of its intent to do so, and the Covered Person shall cooperate, at the expense
of the LLC, in the compromise of, or defense against, such Asserted Liability.
If the LLC elects not to compromise or defend the Asserted Liability, fails to
notify the Covered Person of its election as herein provided, contests its
obligation to provide indemnification under this Agreement, or fails to make or
ceases making a good faith and diligent defense, the Covered Person may pay,
compromise or defend such Asserted Liability all at the expense of the Covered
Person (in accordance with the provisions of Section 10.5(c) below). Except as
set forth in the preceding sentence, neither the LLC nor the Covered Person may
settle or compromise any claim over the objection of the LLC or the Manager
Member; provided, however, that consent to settlement or compromise shall not be
unreasonably withheld. In any event, the LLC and the Covered Person may
participate at their own expense, in the defense of such Asserted Liability. If
the Covered Person chooses to defend any claim, the Covered Person shall make
available to the LLC any books, records or other documents within its control
that are necessary or appropriate for such defense, all at the expense of the
LLC.
(c) If the LLC elects not to compromise or defend an Asserted
Liability, or fails to notify the Covered Person of its election as above
provided, then, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any Asserted
Liability, shall, from time to time, be advanced by the LLC prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
the LLC of an undertaking by or on behalf of the Covered Person to repay such
amount if it shall be determined that the Covered Person is not entitled to be
indemnified as authorized in Section 10.4 hereof. The LLC may, if the Manager
Member deems it appropriate, require any Covered Person for whom expenses are
advanced, to deliver adequate security to the LLC for his or her obligation to
repay such indemnification.
Section 10.6 Miscellaneous.
(a) The right of indemnification hereby provided shall not be
exclusive of, and shall not affect, any other rights to which a Covered Person
may be entitled. Nothing contained in this Article X shall limit any lawful
rights to indemnification existing independently of this Article X.
(b) The indemnification rights provided by this Article X shall also
inure to the benefit of the heirs, executors, administrators, successors and
assigns of a Covered Person and any officers, directors, partners, shareholders,
employees and Affiliates of such Covered Person (and any former officer,
director, member, shareholder or employee of such Covered Person, if the loss,
damage or claim was incurred while such person was an officer, director, member,
shareholder or employee of such Covered Person). The Manager Member may extend
the indemnification called for by Section 10.4 to non-employee agents of the
LLC, the Manager Member or its Affiliates.
ARTICLE XI - MISCELLANEOUS.
Section 11.1 Notices. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement ("Notices") shall
be in writing, signed by the Person or Persons giving such notice, request,
election, consent or demand and shall be delivered personally or
65
by confirmed facsimile, or sent by registered or certified mail, or by
commercial courier to the other Members, at their addresses set forth on the
signature pages hereof or on Schedule A hereto, or at such other addresses as
may be supplied by written notice given in conformity with the terms of this
Section 11.1. All Notices to the LLC shall be made to the Manager Member at the
address set forth on the signature pages hereof or on Schedule A hereto, with a
copy (which shall not constitute notice) to the President of the LLC at the
principal offices of the LLC. The date of any such personal or facsimile
delivery or the date of delivery by an overnight courier or the date five (5)
days after the date of mailing by registered or certified mail, as the case may
be, shall be the date of such notice.
Section 11.2 Successors and Assigns. Subject to the restrictions on
transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Members, their respective successors, successors-in-title,
heirs and assigns, and each and every successors-in-interest to any Member,
whether such successor acquires such interest by way of gift, purchase,
foreclosure or by any other method, and each shall hold such interest subject to
all of the terms and provisions of this Agreement.
Section 11.3 Amendments. No amendments may be made to this Agreement
without the prior written consent of (i) the Manager Member and (ii) a vote of
the Non-Manager Members owning of record two-thirds of the outstanding LLC
Points then held by all Non-Manager Members, and, with respect to Sections 3.9,
and 3.11 and Article VII and Article XI hereof, AMG; provided, however, that,
without the vote, consent or approval of any other Member, the Manager Member
shall make such amendments and additions to Schedule A hereto as are required by
the provisions hereof; and, provided further, that the Manager Member may amend
this Agreement to correct any printing, stenographic or clerical errors or
omissions.
Section 11.4 No Partition. No Member nor any successor-in-interest to
any Member, shall have the right while this Agreement remains in effect to have
the property of the LLC partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the LLC partitioned, and
each Member, on behalf of himself, his successors, representatives, heirs and
assigns, hereby waives any such right. It is the intent of the Members that
during the term of this Agreement, the rights of the Members and the Employee
Stockholders and their successors-in-interest, as among themselves, shall be
governed by the terms of this Agreement, and that the right of any Member or
successors-in-interest to assign, transfer, sell or otherwise dispose of his
interest in the LLC shall be subject to the limitations and restrictions of this
Agreement.
Section 11.5 No Waiver; Cumulative Remedies. The failure of any Member
to insist upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure continues,
shall not be a waiver of such Member's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation hereunder, shall constitute a
consent or waiver to or of any other breach or default in the performance of the
same or any other obligation hereunder. The rights and remedies provided by
this Agreement are cumulative and the use of any one right or remedy by any
party shall not preclude or waive its right to use any or all other remedies.
Said rights and remedies are given in addition to any other rights the parties
may have by law, statute, ordinance or otherwise.
66
Section 11.6 Dispute Resolution. The parties agree that any and all
disputes, claims, or controversies arising out of or relating to this Agreement,
the Employment Agreements, the Non Solicitation Agreements, the Incentive
Program or any Promissory Note for Repurchase shall be resolved by binding
arbitration in accordance with the applicable rules of the American Arbitration
Association. The arbitration shall be held in Massachusetts before a single
arbitrator selected in accordance with Section 12 of the American Arbitration
Association Commercial Arbitration Rules who shall have substantial business
experience in the investment advisory industry, and shall otherwise be conducted
in accordance with the American Arbitration Association Commercial Arbitration
Rules. The parties covenant that they will participate in the arbitration in
good faith and that they will share equally its costs except as otherwise
provided herein. The provisions of this Section 11.6 shall be enforceable in
any court of competent jurisdiction, and the parties shall bear their own costs
in the event of any proceeding to enforce this Agreement except as otherwise
provided herein. The arbitrator may in his or her discretion assess costs and
expenses (including the reasonable legal fees and expenses of the prevailing
party) against any party to a proceeding. Any party unsuccessfully refusing to
comply with an order of the arbitrators shall be liable for costs and expenses,
including attorneys' fees, incurred by the other party in enforcing the award.
The parties may proceed to any court to obtain relief that is solely equitable
in nature and for which no adequate remedy is available at law or to enforce
arbitration decisions rendered in accordance with procedures set forth in this
Section 11.6.
Section 11.7 Prior Agreements Superseded. This Agreement and the
schedules and exhibits hereto supersede the prior understandings and agreements
among the parties with respect to the subject matter hereof and thereof.
Section 11.8 Captions. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
Section 11.9 Counterparts. This Agreement may be executed in a number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Members notwithstanding that all Members have not
signed the same counterpart.
Section 11.10 Applicable Law; Jurisdiction. This Agreement and the rights
and obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Delaware,
without applying the choice of law or conflicts of law provisions thereof. Each
of the parties hereby consents to personal jurisdiction, service of process and
venue in the federal or state courts sitting in The Commonwealth of
Massachusetts for any claim, suit or proceeding arising under this Agreement to
enforce any arbitration award or obtain equitable relief and hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in such state court or, to the extent permitted by law, in such
federal court. Each of the parties hereby irrevocably consents to the service
of process in any such action or proceeding by the mailing by certified mail of
copies of any service or copies of the summons and complaint and any other
process to such party at the address specified in Section 11.1 hereof. the
parties agree that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions.
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Section 11.11 Interpretation. All terms herein using the singular shall
include the plural; all terms using the plural shall include the singular; in
each case, the term shall be as appropriate to the context of each sentence.
Throughout this Agreement, nouns, pronouns and verbs shall be construed as
masculine, feminine and neuter, whichever shall be applicable.
Section 11.12 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
Section 11.13 Creditors. None of the provisions of this Agreement shall
be for the benefit of or enforceable by any creditor of (i) any Member, (ii) any
Employee Stockholder or (iii) the LLC, other than a Member who is also a
creditor of the LLC.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF the Initial Non-Manager Members and the Manager Member
have executed and delivered this Amended and Restated Limited Liability Company
Agreement as of the day and year first above written.
MANAGER MEMBER
Name and Signature Address
ESSEX INVESTMENT c/o Affiliated Managers Group, Inc.
MANAGEMENT COMPANY, INC. Two International Place
23rd Floor
Boston, MA 02110
By:/s/ Nathaniel Dalton
----------------------------------
Name: Nathaniel Dalton
Title:
NON-MANAGER MEMBERS
Name and Signature Address
/s/ Joseph C. McNay
- ---------------------------------
Joseph C. McNay c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Stephen D. Cutler
- ---------------------------------
Stephen D. Cutler c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Stephen R. Clark
- ---------------------------------
Stephen R. Clark c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Roy L. Beane
- ---------------------------------
Roy L. Beane c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ R. Daniel Beckham
- ---------------------------------
R. Daniel Beckham c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Pamela S. Cutrell
- ---------------------------------
Pamela S. Cutrell c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Donald V. Dougherty
- ---------------------------------
Donald V. Dougherty c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Malcolm MacColl
- ---------------------------------
Malcolm MacColl c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Christopher P. McConnell
- ---------------------------------
Christopher P. McConnell c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ David J. McDonald
- ---------------------------------
David J. McDonald c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Colin S. McNay
- ---------------------------------
Colin S. McNay c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Hamilton Mehlman
- ---------------------------------
Hamilton Mehlman c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Kimberly A. Molino
- ---------------------------------
Kimberly A. Molino c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Ryen G. Munro
- ---------------------------------
Ryen G. Munro c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ A. Davis Noble
- ---------------------------------
A.Davis Noble c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
/s/ Susan P. Stickells
- ---------------------------------
Susan P. Stickells c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110
ACKNOWLEDGMENT
The undersigned is executing this Agreement solely to acknowledge and agree
to be bound by the provisions of Section 3.11, Article VII and the relevant
provisions of Article XI hereof.
AFFILIATED MANAGERS GROUP, INC.
Two International Place
23rd Floor
Boston, MA 02110
By: Nathaniel Dalton
--------------------------------
Name: Nathaniel Dalton
Title: Senior Vice President
SCHEDULE A
Member LLC Points Capital Contribution
Essex Investment
Management Company, Inc. 680 $100,816,673.00
Joseph C. McNay 70 7.00
Stephen D. Cutler 20 2.00
Stephen R. Clark 20 2.00
Roy L. Beane 13 1.30
R. Daniel Beckham 16 1.60
Pamela S. Cutrell 13 1.30
Donald V. Dougherty 13 1.30
Malcolm MacColl 13 1.30
Christopher P. McConnell 16 1.60
David J. McDonald 13 1.30
Colin S. McNay 26 2.60
Hamilton Mehlman 13 1.30
Kimberly A. Molino 13 1.30
Ryen G. Munro 13 1.30
A.Davis Noble 13 1.30
Susan P. Stickells 13 1.30
Unvested 22 2.20
TOTAL 1000 $100,848,673.00
Addresses
Essex Investment Management Company, Inc.
c/o Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Each of the above individuals can be contacted at:
c/o Essex Investment Management Company, LLC
125 High Street
Boston, MA 02110