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EXHIBIT 3.1
DONJOY, L.L.C.
(A DELAWARE LIMITED LIABILITY COMPANY)
THIRD AMENDED AND RESTATED OPERATING AGREEMENT
JULY 7, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINED TERMS..................................................................... 1
1.1 DEFINED TERMS....................................................................... 1
1.2 INTERPRETATION OF DEFINED TERMS..................................................... 7
ARTICLE II ORGANIZATION..................................................................... 8
2.1 COMPANY NAME AND ADDRESS............................................................ 8
2.2 PURPOSE............................................................................. 8
2.3 PREVIOUS ACTIONS.................................................................... 8
ARTICLE III UNITS........................................................................... 9
3.1 GENERAL............................................................................. 9
3.2 VOTING OF UNITS..................................................................... 9
3.3 PREFERRED DISTRIBUTIONS, LIQUIDATION PREFERENCE..................................... 9
3.4 EVENTS OF NON-COMPLIANCE............................................................ 10
3.5 PAYMENT OF PREFERRED UNITS.......................................................... 11
3.6 COVENANTS APPLICABLE WHILE THE PREFERRED UNITS HAVE UNRETURNED ORIGINAL COST........ 15
3.7 UNIT SPLITS, UNIT DISTRIBUTIONS, ETC................................................ 15
ARTICLE IV MANAGEMENT OF THE COMPANY........................................................ 16
4.1 BOARD OF MANAGERS; VOTING........................................................... 16
4.2 OBSERVER............................................................................ 17
ARTICLE V MEMBERS; REPRESENTATIONS.......................................................... 17
5.1 MEMBERS GENERALLY................................................................... 17
5.2 REPRESENTATIONS WITH RESPECT TO UNITS............................................... 17
5.3 REGULATORY RESTRICTIONS ON FIRST UNION INVESTORS' VOTING RIGHTS..................... 18
5.4 REGULATORY COMPLIANCE BY FIRST UNION................................................ 18
ARTICLE VI CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS.............. 19
6.1 CAPITAL CONTRIBUTIONS............................................................... 19
6.2 CAPITAL ACCOUNTS; ALLOCATIONS....................................................... 20
6.3 DISTRIBUTIONS....................................................................... 23
6.4 LIABILITY FOR RETURN OF CAPITAL..................................................... 23
6.5 ADMINISTRATIVE MATTERS.............................................................. 23
ARTICLE VII TRANSFERABILITY OF THE MEMBERS' INTEREST........................................ 24
7.1 LIMITATIONS ON TRANSFERABILITY OF UNITS............................................. 24
7.2 OTHER PROVISIONS WITH RESPECT TO TRANSFERABILITY OF UNITS........................... 25
ARTICLE VIII ADDITION OF MEMBERS, WITHDRAWAL OF MEMBERS..................................... 25
8.1 ADDITION OF MEMBERS................................................................. 25
8.2 WITHDRAWAL OF MEMBERS............................................................... 25
ARTICLE IX DISSOLUTION OF THE COMPANY; CONTINUATION......................................... 26
9.1 DISSOLUTION OF THE COMPANY.......................................................... 26
9.2 CONTINUATION OF THE COMPANY......................................................... 27
ARTICLE X MISCELLANEOUS..................................................................... 27
10.1 LIMITATION ON LIABILITY............................................................. 27
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10.2 AMENDMENTS.......................................................................... 27
10.3 GOVERNING LAW....................................................................... 27
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SCHEDULES AND EXHIBITS
SCHEDULES
Schedule I - Schedule of Members
EXHIBITS
Exhibit A - Bylaws of the Company
Exhibit B - Certificate of Formation
Exhibit C - Common Certificate
Exhibit D - Preferred Certificate
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THIRD AMENDED AND RESTATED OPERATING AGREEMENT, dated as of July 7,
2000, of DONJOY, L.L.C., a Delaware limited liability company (the "Company"),
among the Company and the parties listed on SCHEDULE I hereto.
The Company was formed as a limited liability company under the
Delaware Limited Liability Company Act, 6 Del. C. Section 18-101 et seq. (the
"Delaware Act") on December 29, 1998 and its affairs and the conduct of its
business established pursuant to an Operating Agreement dated as of December 31,
1998 (the "Original Operating Agreement").
The Original Operating Agreement was amended and restated pursuant
to an Amended and Restated Operating Agreement dated as of June 30, 1999 (as
heretofore amended, the "Amended and Restated Operating Agreement").
The Amended and Restated Operating Agreement was amended and
restated pursuant to a Second Amended and Restated Operating Agreement dated as
of July 30, 1999 (as heretofore amended, the "Second Amended and Restated
Operating Agreement").
The parties hereto desire to amend and restate the Second Amended
and Restated Operating Agreement in accordance with the terms of this Third
Amended and Restated Operating Agreement.
NOW THEREFORE, in consideration of the mutual covenants and
agreements contained in this Agreement, the sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINED TERMS
1.1 DEFINED TERMS.
(a)The defined terms used in this Agreement shall, unless the
context otherwise requires, have the meanings specified in this ARTICLE I:
"Amended and Restated Operating Agreement" shall have the meaning
ascribed to such term in the second paragraph of the preamble to this Agreement.
"Applicable Percentage" shall have the meaning ascribed to such
term in Section 3.5.
"Application Fee" means, with respect to any Preferred Unit, the
application fee paid by the Company to the original holder of such Preferred
Unit under the Preferred Unit Purchase Agreement for such Preferred Unit.
"Bank Indebtedness" shall have the meaning ascribed to such term in
the Indenture.
"Board of Managers" means the board of managers of the Company.
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"Board's Determination" is defined in the definition of Fair Market
Value.
"Bylaws" means the Bylaws of the Company as amended from time to
time and the initial form of which is attached hereto as EXHIBIT A.
"Capital Contribution" means, with respect to any Member, the
amount of capital contributed by such Member to the Company, as determined in
accordance with ARTICLE VI.
"Certificate" has the meaning ascribed to such term in Section
2.3(a).
"Change of Control" shall have the meaning ascribed to such term in
the Indenture.
"Change of Control Notice" shall have the meaning ascribed to such
term in Section 3.5(b).
"Chase" means Chase DJ Partners, LLC, a Delaware limited liability
company.
"Closing Fee" means, with respect to any Preferred Unit, the
closing fee paid by the Company to the original holder of such Preferred Unit
under the Preferred Unit Purchase Agreement for such Preferred Unit.
"Common Certificate" shall have the meaning ascribed to such term
in Section 3.1(c).
"Common Unit" means one common unit of the Company providing to the
holder thereof the rights provided by this Agreement.
"Company" shall have the meaning ascribed to such term in the
caption to this Agreement.
"Cumulated Preferred Return" is defined in the definition of
Unreturned Original Cost.
"Delaware Act" shall have the meaning ascribed to such term in the
first paragraph of the preamble to this Agreement.
"Determination Notice" is defined in the definition of Fair Market
Value.
"DJO" means DJ Orthopedics, LLC, a Delaware limited liability
company and wholly owned subsidiary of the Company.
"Event of Non-Compliance" has the meaning ascribed to such term in
Section 3.4(b).
"Event of Withdrawal of a Member" means, (i) with respect to a
Member that is an entity, the bankruptcy or dissolution of such Member or (ii)
the occurrence of any other similar event that terminates the continued
membership of a Member in the Company.
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"Fair Market Value" shall mean, as of any date of determination,
the Fair Value of each Paid Preferred Unit, determined as follows: At any time
that the Fair Market Value shall be required to be determined hereunder, the
Board of Managers shall make a good faith determination (the "Board's
Determination") of the Fair Value of each Paid Preferred Unit within 30 days of
the delivery by a Member to the Company of an exercise notice with respect to
the Put Right, and the Board of Managers shall provide to the Member with
respect to whose Paid Preferred Unit such determination is being made a written
notice of the Board's Determination which notice shall set forth supporting data
in respect of such calculation (the "Determination Notice"). The Member shall
have 10 days following receipt of the Determination Notice within which to
deliver to the Company a written notice (the "Objection Notice") of an
objection, if any, to the Board's Determination, which Objection Notice shall
set forth the Member's good faith determination (the "Member's Determination")
of the Fair Value of each Paid Preferred Unit. The failure by the Member to
deliver the Objection Notice within such 10-day period shall constitute the
Member's acceptance of the Board's Determination as conclusive. In the event of
the timely delivery of an Objection Notice, the Company and the Member shall
attempt in good faith to arrive at an agreement with respect to the Fair Value,
which agreement shall be set forth in writing within 15 days following delivery
of the Objection Notice. If the Company and the Member are unable to reach an
agreement within such 15-day period, the matter shall be promptly referred for
determination to a regionally or nationally recognized investment banking or
valuation firm (the "Valuer") reasonably acceptable to the Company and the
Member. The Company and the Member will cooperate with each other in good faith
to select such Valuer. The Valuer may select the Board's Determination or the
Member's Determination as the Fair Value or may select any other amount. The
Valuer's selection will be furnished to the Company and the Member in writing
and conclusive and binding upon the Company and the Member. The fees and
expenses of the Valuer shall be borne equally by the Company and the Member with
respect to whose Paid Preferred Units such determination relates.
"Fair Value" shall mean an amount per Paid Preferred Unit
(calculated on a fully diluted basis, including the exercise of all outstanding
warrants, options and other similar rights to purchase Common Units) assuming
that the Company (or DJO and each other Subsidiary) is sold to an unaffiliated
third Person as a going concern; provided that no discount for (i) lack of
liquidity of such Paid Preferred Unit, or (ii) such Paid Preferred Unit's (or
such Paid Preferred Unit holder's) minority position in the Company, shall be
applied.
"First Preferred Unit Purchase Agreement" shall mean the Preferred
Unit Purchase Agreement dated as of June 30 1999, by and among the Company and
the purchasers named therein.
"First Union Entity" shall have the meaning ascribed to such term
in Section 5.3.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (c) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (e) all obligations of such Person incurred,
issued or assumed as the deferred
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purchase price of property or services other than accounts payable incurred and
paid on terms customary in the business of such Person (it being understood that
the "deferred purchase price" in connection with any purchase of property or
assets shall include only that portion of the purchase price which shall be
deferred beyond the date on which the purchase is actually consummated), (f) all
obligations secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (g) all obligations of such Person under forward sales,
futures, options and other similar hedging arrangements (including interest rate
hedging or protection agreements), (h) all obligations of such Person to
purchase or otherwise pay for merchandise, materials, supplies, services or
other property under an arrangement which provides that payment for such
merchandise, materials, supplies, services or other property shall be made
regardless of whether delivery of such merchandise, materials, supplies,
services or other property is ever made or tendered, (i) all guaranties by such
Person of obligations of others and (j) all capitalized lease obligations of
such Person.
"Indenture" means that certain Indenture dated June 30, 1999 among
DJO and DJ Orthopedics Capital Corporation, a Delaware corporation, as issuers,
the Company, as guarantor, and The Bank of New York, as trustee, relating to the
issuers' 12 5/8% Senior Subordinated Notes due 2009.
"Interest" means the ownership interest of a Member in the Company
as represented by such Member's Units, consisting of (i) such Member's right to
receive a portion of distributions, (ii) such Member's right to vote or grant or
withhold consents with respect to Company matters as provided herein or in the
Delaware Act and (iii) such Member's other rights and privileges as provided
herein or in the Delaware Act.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder.
"IPO" shall have the meaning ascribed to such term in Section
3.5(a).
"IRR" means, with respect to any Preferred Unit, the pre-tax,
compounded annual internal rate of return realized thereon, including, as a
return on such Preferred Unit, any (i) Application Fee or Closing Fee paid with
respect to such Preferred Unit, (ii) proceeds from the sale or other disposition
(including a redemption by the Company) of the related Paid Preferred Unit at
the time that payment with respect to such Preferred Unit is made in accordance
with Section 3.5(a), and (iii) cash distributions made by the Company or any
Subsidiary thereof in respect of such Preferred Unit (other than tax
distributions in respect of income allocated to the holder of such Preferred
Unit in respect of the Preferred Return thereon (i.e., distributions pursuant to
Section 6.3(a) with respect to income allocated to such Preferred Unit pursuant
to clause 2 and 3 of Section 6.2(a)(iii)(A)(first)), provided that such tax
distributions in respect of Preferred Return shall be treated for purposes of
the calculation as if the aggregate amount thereof was received on the day such
Preferred Unit became a Paid Preferred Unit).
"Liquidation Event" shall mean any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Company.
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"Majority in Interest of Members" means, at any time, the Members
who hold in the aggregate greater than 50% of the number of Units outstanding at
such time.
"Majority in Interest of Preferred Members" means, at any time, the
Members who hold in the aggregate greater than 50% of the number of Preferred
Units outstanding at such time.
"Management Members" shall have the meaning ascribed to such term
in Section 6.1(a).
"Manager" means a member of the Board of Managers as designated in,
or selected pursuant to, Section 4.1.
"Mandatory Redemption Date" means December 31, 2009.
"Member" shall mean any Person holding a Unit or any Person who
shall be admitted as an additional or substituted Member pursuant to this
Agreement, for so long as they remain Members.
"Members' Agreement" means the Members' Agreement dated as of June
30, 1999, among the Company and certain holders of Units, as amended from time
to time.
"Member's Determination" is defined in the definition of Fair
Market Value.
"Net Profits and Net Losses" means the net taxable income or net
taxable loss of the Company, respectively, as determined for federal income tax
purposes, for each fiscal year of the Company, plus any income that is exempt
from federal income tax and minus expenditures that are not deductible in
computing federal taxable income and not properly chargeable to capital
accounts, in each case to the extent such items are not otherwise taken into
account in computing Net Profits or Net Losses; provided, however, that (i)
items of income, gain, loss and deduction attributable to Section 704(c)
Property shall be determined in accordance with the principles of Treasury
Regulation Section 1.704-1(b)(2)(iv)(g) and (ii) the Net Profits and Net Losses
of the Company shall be computed without regard to the amount of any items of
income, gain, loss or deduction that are specially allocated pursuant to Section
6.2(c)(ii).
"Non-Compliance" shall have the meaning ascribed to such term in
Section 3.4.
"Objection Notice" is defined in the definition of Fair Market
Value.
"Original Operating Agreement" shall have the meaning ascribed to
such term in the first paragraph of the preamble to this Agreement.
"Paid Preferred Unit" has the meaning ascribed to such term in
Section 3.5(d).
"Payment Right" has the meaning ascribed to such term in Section
3.5(b)(iii).
"Person" shall be construed broadly and shall include an
individual, a partnership, a corporation, an association, a joint stock company,
a limited liability company, a trust, a joint
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venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Preferred Certificate" shall have the meaning ascribed to such
term in Section 3.1(c).
"Preferred Contribution Amount" is defined in the definition of
Unreturned Original Cost.
"Preferred Liquidation Preference" shall have the meaning ascribed
to such term in Section 3.3(b).
"Preferred Managers" shall have the meaning ascribed to such term
in Section 3.4(c).
"Preferred Return" shall have the meaning ascribed to such term in
Section 3.3(a).
"Preferred Unit" means one preferred unit of the Company providing
the holder thereof to the rights provided by this Agreement and shall include a
Paid Preferred Unit.
"Preferred Unit Purchase Agreement" shall mean, with respect to any
Preferred Unit, the purchase agreement pursuant to which the Company issued and
sold such Preferred Unit to the initial holder thereof.
"Put Right" has the meaning ascribed to such term in Section
3.5(b)(ii).
"Quarterly Payment Date" has the meaning ascribed to such term in
Section 3.3(a).
"Recapitalization Agreement" shall have the meaning ascribed to
such term in Section 6.1(a).
"Regulatory Requirement" shall have the meaning ascribed to such
term in Section 5.4.
"Related Documents" shall mean each of (i) this Agreement, (ii) any
Preferred Unit Purchase Agreement, and (iii) the Members' Agreement.
"S&N" shall have the meaning ascribed to such term in Section
6.1(a).
"Second Amended and Restated Operating Agreement" shall have the
meaning ascribed to such term in the third paragraph of the preamble to this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"Subsidiary" of any Person means any corporation, association,
partnership, limited liability company or other business entity of which more
than 50% of the total voting power of equity interests (including partnership
interests) entitled (without regard to the
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occurrence of any contingency) to vote in the election of directors,
representatives, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by: (1) such Person, (2) such Person and one
or more Subsidiaries of such Person, or (3) one or more Subsidiaries of such
Person.
"Taxable Amount" is defined in the definition of Taxable Income
Distribution Amount.
"Taxable Income Distribution Amount" means an amount determined as
follows: (1)(A) all taxable income and gains of the Company allocated to a
Member for any calendar year pursuant to the first sentence of Section 6.2(d)
excluding any allocations made pursuant to the second sentence of Section 6.2(d)
(the "Taxable Amount") less (B) an amount (not to exceed the Taxable Amount for
such calendar year) equal to all losses of the Company allocated to such Member
pursuant to the first sentence of Section 6.2(d) in any of the three prior
calendar years that have not been previously subtracted pursuant to this clause
(B) from the Taxable Amount for any prior calendar year, multiplied by (2) forty
four percent (44%).
"Transfer" shall have the meaning set forth in Section 7.1.
"TCW" shall mean DJC, Inc., a Delaware corporation.
"TCW Members" shall mean TCW; TCW/Crescent Mezzanine Trust II; TCW
Leveraged Income Trust II, L.P.; and Crescent/MACH I Partners, L.P.
"Units" means, collectively, the Common Units and Preferred Units
of the Company.
"Unreturned Original Cost" means, with respect to a Preferred Unit
that is not a Paid Preferred Unit, an amount equal to the sum of (i) the amount
of the original capital contribution with respect to such Preferred Unit
("Preferred Contribution Amount"), and (ii) the aggregate amount of all accrued
Preferred Return with respect to such Preferred Unit added to the Unreturned
Original Cost thereof pursuant to Section 3.3(a) ("Cumulated Preferred Return"),
as such amounts shall be equitably adjusted for any splits, distributions,
recapitalizations, reorganizations, reclassifications or combinations of
Preferred Units.
"Valuer" is defined in the definition of Fair Market Value.
1.2 INTERPRETATION OF DEFINED TERMS.
(a)The title of and the section and paragraph headings in this
Agreement are for convenience of reference only and shall not govern the
interpretation of any of the terms or provisions of this Agreement.
(b)The use herein of the masculine, feminine or neuter forms shall
also denote the other forms, as in each case the context may require.
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ARTICLE II
ORGANIZATION
2.1 COMPANY NAME AND ADDRESS.
(a)The name of the Company shall be "DonJoy, L.L.C." or such other
name as the Board of Managers may from time to time hereafter designate.
(b)The principal office of the Company, and such additional offices
as the Board of Managers may determine to establish, shall be located at such
place or places inside or outside the State of Delaware as the Board of Managers
may designate from time to time.
(c)The registered office of the Company in the State of Delaware is
located at 9 East Loockerman Street, Dover, County of Kent, Delaware 19901. The
registered agent of the Company for service of process at such address is
National Registered Agents, Inc.
2.2 PURPOSE.
The purpose of the Company shall be to engage in any lawful
business that may be engaged in by a limited liability company organized under
the Delaware Act, as such business activities may be determined by the Board of
Managers from time to time.
2.3 PREVIOUS ACTIONS.
(a)The Company was formed upon the execution and filing by Sheri
Roberts (such Person being hereby authorized to take such action) with the
Secretary of State of the State of Delaware of a certificate of formation of the
Company (the "Certificate") in the form attached hereto as EXHIBIT B on December
29, 1998.
(b)Upon the execution and delivery of this Agreement by the
requisite parties necessary to amend the Second Amended and Restated Operating
Agreement pursuant to Section 10.2 thereof, the Second Amended and Restated
Operating Agreement shall be amended and restated as set forth herein and this
Agreement shall be in full force and effect.
(c) The parties hereto hereby ratify and confirm the filing of the
Certificate and adopt and approve the Bylaws in the form of EXHIBIT A hereto;
the Bylaws are expressly incorporated by reference into this Agreement, and made
a part hereof.
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ARTICLE III
UNITS
3.1 GENERAL.
(a)The Company shall be authorized to issue from time to time up to
3,000,000 Units, of which 2,900,000 Units shall be designated Common Units and
100,000 Units shall be designated Preferred Units. Such Units may be issued
pursuant to such agreements as the Board of Managers or a committee thereof
shall approve, including pursuant to options or warrants. The Board of Managers
shall have the right and authority to amend this Agreement or the Schedules
hereto to reflect the admission of holders of Units and to reflect the rights of
such holders hereunder.
(b)Except as specifically provided in this Agreement, each Unit,
whether designated as Preferred Unit or Common Unit, shall be identical.
(c)The Company shall issue to each Member who owns Common Units a
limited liability company certificate with respect to such Common Units in the
form attached hereto as EXHIBIT C (a "Common Certificate"), evidencing the
Common Units held by such Member. The Company shall issue to each Member who
owns Preferred Units a limited liability company certificate with respect to
such Preferred Units in the form attached hereto as EXHIBIT D (a "Preferred
Certificate"), evidencing the Preferred Units held by such Member. Each Common
Certificate and Preferred Certificate shall be transferable only on the books of
the Company, to be kept by the Secretary of the Company, on surrender thereof by
the registered holder in person or by attorney, and until so transferred, the
Company may treat the registered holder of a Common Certificate or Preferred
Certificate as the owner of the Interest evidenced thereby for all purposes.
Nothing contained in this Section 3.1 shall authorize or permit any Member to
transfer its Units except as contemplated by ARTICLE VII.
(d)For the purposes of Article 8 in any Uniform Commercial Code,
each Unit of the Company as evidenced by a Common Certificate or Preferred
Certificate shall be deemed to be a security, as such term is defined in any
Uniform Commercial Code.
3.2 VOTING OF UNITS.
Except as otherwise required by applicable law or as set forth herein or
in the Members' Agreement, the holders of the Common Units and the holders of
the Preferred Units shall vote together as a single class on all matters to be
voted on by the Members. Except as otherwise set forth herein, each Unit shall
entitle the holder thereof to one vote.
3.3 PREFERRED DISTRIBUTIONS, LIQUIDATION PREFERENCE.
(a) Distributions. Each Preferred Unit (other than a Paid Preferred
Unit) shall accrue a preferred return in an amount equal to 14.0% per annum
(subject to increase as provided below), multiplied by the Unreturned Original
Cost for such Preferred Unit (such product, the "Preferred Return"). The
Preferred Return with respect to each Preferred Unit shall accrue on a daily
basis from the date of issuance of such Preferred Unit. Each March 31, June 30,
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September 30 and December 31 shall be referred to as a "Quarterly Payment Date".
If the Company shall fail to distribute in cash all of a quarter's accrued
Preferred Return with respect to a Preferred Unit on the applicable Quarterly
Payment Date, then, subject to the last sentence of Section 3.3(a), the
Cumulated Preferred Return for such Preferred Unit shall be increased on such
Quarterly Payment Date by any undistributed amount of Preferred Return. If any
Preferred Unit is outstanding for less than an entire quarter, the accrual of
Preferred Return on such Preferred Unit will be prorated, based on the number of
days such Preferred Unit was outstanding. During an Event of Non-Compliance, the
rate per annum used to calculate the Preferred Return with respect to any
Preferred Unit (other than a Paid Preferred Unit) shall be 16.0% per annum. Cash
distributions to holders of Preferred Units pursuant to Section 6.3(a) with
respect to income allocated pursuant to clause 2 and 3 of Section
6.2(a)(iii)(A)(first) shall not be deemed to be distributions of Preferred
Return for purposes of determining Cumulated Preferred Return pursuant to this
Section 3.3(a).
(b)Liquidation Preference. Upon the occurrence of any Liquidation
Event, the holders of Preferred Units (other than Paid Preferred Units) then
outstanding shall be entitled to receive out of the assets of the Company
legally available for distribution to its Members before any payment shall be
made to the holders of any Common Units or any other security of the Company
junior to the Preferred Units (with respect to rights upon a Liquidation Event,
(i) the Preferred Units (other than the Paid Preferred Units) shall rank senior
to the Common Units and (ii) the Paid Preferred Units will rank pari passu with
the Common Units), a cash distribution in an amount per Preferred Unit (other
than a Paid Preferred Unit) equal to the sum of (x) the Unreturned Original Cost
of such Preferred Unit plus (y) the aggregate amount of all accrued and unpaid
Preferred Return on such Preferred Unit through the date of distribution that
has not been added to the Cumulated Preferred Return less (z) the aggregate
amount of all distributions made pursuant to Section 6.3(a) with respect to
income allocated pursuant to clause 2 and 3 of Section 6.2(a)(iii)(A)(first)
(the "Preferred Liquidation Preference"). If, upon any Liquidation Event, the
assets of the Company available for distribution to its Members shall be
insufficient to pay the holders of Preferred Units (other than Paid Preferred
Units) the full Preferred Liquidation Preference to which they respectively
shall be entitled, the holders of such Preferred Units shall share ratably in
any distribution of assets according to the respective amounts which would be
payable with respect to such Preferred Units held by them upon such distribution
if all amounts payable on or with respect to said Preferred Units were paid in
full. Upon the payment of the full Preferred Liquidation Preference to which all
Preferred Units shall be entitled, each Preferred Unit shall thereafter share
ratably with the Common Units in any further distribution of assets pursuant to
Section 6.3.
3.4 EVENTS OF NON-COMPLIANCE.
(a)Each of the following shall constitute non-compliance hereunder
(each of clauses (i)-(v) below, "Non-Compliance"):
(i) any failure hereunder by the Company to pay or
distribute when required any amounts with respect to the Preferred Units
(other than the Paid Preferred Units) and such failure continues for ten
(10) days after notice from a holder of Preferred Units (other than Paid
Preferred Units);
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(ii)a material breach of any of the representations,
warranties or covenants (other than those referred to in clause (i)
above) in any Related Document that continues thirty (30) days after
notice of such breach has been delivered by a holder of Preferred Units
(other than Paid Preferred Units);
(iii) an event of default under the Bank Indebtedness, the
Indenture, any other Indebtedness having an outstanding principal amount
of $15,000,000 or more, or, in each case, any related document
governing, evidencing or securing the same;
(iv)the Company or any of its Subsidiaries shall (A)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code or any other federal, state or
foreign bankruptcy, insolvency or similar law, (B) consent to the
institution of, or fail to controvert in a timely and appropriate
manner, any such proceeding or the filing of any such petition, (C)
apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any such Person or for
any substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it in any
such proceeding, (E) make a general assignment for the benefit of
creditors, (F) fail generally to pay its debts as they become due or (G)
take any corporate or stockholder action in furtherance of any of the
foregoing; or
(v) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (A) relief in respect of the Company or any of its Subsidiaries,
or of any substantial part of their respective property or assets, under
Title 11 of the United States Code or any other federal, state or
foreign bankruptcy, insolvency or similar law, (B) the appointment of a
receiver, trustee, custodian, sequestrator or similar official for any
such Person or for any substantial part of its property or (C) the
winding-up or liquidation of any such Person, and such proceeding,
petition or order shall continue unstayed and in effect for a period of
60 consecutive days.
(b)After the occurrence of and during the continuation of
Non-Compliance pursuant to clauses (i), (ii) or (iii) of paragraph (a) above,
the holders of a majority of Preferred Units (other than Paid Preferred Units)
may declare by written notice to the Company that an "Event of Non-Compliance"
has occurred. After the occurrence of and during the continuation of
Non-Compliance pursuant to clauses (iv) and (v) of paragraph (a) above, an Event
of Non-Compliance shall occur automatically.
(c)During the existence of an Event of Non-Compliance, holders of a
majority of Preferred Units (other than Paid Preferred Units) shall have the
right to nominate two persons ("Preferred Managers") to the Board of Managers of
the Company (and all Members hereby agree to take all action required to
accomplish the election of such Preferred Managers).
3.5 PAYMENT OF PREFERRED UNITS.
(a) Payments at Option of Company. The Company shall have the
right, at its option, to make payments, in accordance with this Section 3.5(a),
with respect to one or more
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Preferred Units that are not Paid Preferred Units to cause such Preferred Units
to become Paid Preferred Units. The amount of each such payment with respect to
any such Preferred Unit shall be equal to the sum of (A) the Applicable
Percentage for such Preferred Unit multiplied by such Preferred Unit's Preferred
Contribution Amount, plus (B) the amount of the Cumulated Preferred Return, if
any, for such Preferred Unit plus (C) the aggregate amount of all accrued and
unpaid Preferred Return on such Preferred Unit through the date of payment that
has not been added to Cumulated Preferred Return less (D) the aggregate amount
of all distributions made pursuant to Section 6.3(a) with respect to income
allocated to such Preferred Unit pursuant to clause 2 and 3 of Section
6.2(a)(iii)(A)(first). Except as reduced in accordance with the further
provisions of this Section 3.5(a), the "Applicable Percentage" for any Preferred
Unit with respect to any such payment in any period set forth below shall be the
percentage set forth below opposite such period.
Prior to the first anniversary of the original issuance 105%
date of such Preferred Unit
On or after the first anniversary and prior to the 104%
second anniversary of the original issuance date of
such Preferred Unit
On or after the second anniversary and prior to the 103%
third anniversary of the original issuance date of such
Preferred Unit
On or after the third anniversary and prior to the 102%
fourth anniversary of the original issuance date of
such Preferred Unit
On or after the fourth anniversary and prior to the 101%
fifth anniversary of the original issuance date of such
Preferred Unit
On or after the fifth anniversary of the original 100%
issuance date of such Preferred Unit
The Applicable Percentage for each Preferred Unit shall be reduced, but not
below 100%, to the extent necessary so that the amount paid pursuant to this
Section 3.5(a), together with all other payments received with respect to such
Preferred Unit, does not cause the IRR on such Preferred Unit to exceed, (i)
prior to the second anniversary of the date of the original issuance of such
Preferred Unit, 24%, and (ii) after the second anniversary of the date of the
original issuance of such Preferred Unit, 22%. In addition, to the extent the
Company makes any payments pursuant to this Section 3.5(a) from the proceeds of
an initial public offering ("IPO") of its or DJO's equity securities which
results in such securities being listed for trading on a nationally recognized
stock exchange (including the Nasdaq National Market System), then the
Applicable Percentages for up to one-third of the then-outstanding Preferred
Units (other than Paid Preferred Units) shall be reduced, if each such
Applicable Percentage would otherwise exceed 101%, to 101%,
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provided, that, any such reductions shall be made in the order of the original
issuance dates of the then-outstanding Preferred Units (other than Paid
Preferred Units), such that a Unit issued prior to another Unit shall be subject
to reduction before such other Unit. If the Company elects to make payments
under this Section 3.5(a) with respect to fewer than all of the outstanding
Preferred Units that are not then Paid Preferred Units, the Company shall make
such payments with respect to Preferred Units selected ratably among all holders
of Preferred Units that are not Paid Preferred Units, and if the Company is
entitled to make payments with respect to certain Preferred Units from the
proceeds of an IPO in amounts based on a reduced Applicable Percentage as
provided in the immediately preceding sentence, such Preferred Units shall be
selected ratably as aforesaid, provided, that, in such case, such selection
shall first be made on the basis of the original issuance dates of the Preferred
Units (other than Paid Preferred Units), such that a Unit issued prior to
another Unit shall be subject to selection before such other Unit.
(b)Payments at Option of Holder.
(i) Upon a Change of Control, each holder of a Preferred
Unit that is not a Paid Preferred Unit shall have the right to require
the Company to make payments, in accordance with this Section 3.5(b)(i),
with respect to such Preferred Unit in order to cause such Preferred
Unit to become a Paid Preferred Unit. The amount of each such payment
with respect to any such Preferred Unit shall be equal to the sum of (A)
101% multiplied by such Preferred Unit's Preferred Contribution Amount,
plus (B) the amount of the Cumulated Preferred Return, if any, for such
Preferred Unit plus (C) the aggregate amount of all accrued and unpaid
Preferred Return on such Preferred Unit through the date of payment that
has not been added to Cumulated Preferred Return less (D) the aggregate
amount of all distributions made pursuant to Section 6.3(a) with respect
to income allocated to such Preferred Unit pursuant to clause 2 and 3 of
Section 6.2(a)(iii)(A)(first). The Company shall give holders of such
Preferred Units notice (the "Change of Control Notice") of the
occurrence of a Change of Control in accordance with and at the time
required by Section 4.06 of the Indenture. To exercise such option such
holder must send written notice of such election to the Company within
thirty (30) days after such Change of Control Notice. The Company shall
make the payment required by this Section 3.5(b)(i) within thirty (30)
days of receipt of such written notice (or shall notify such holder of
the failure of one or more of the applicable conditions); provided,
however, that such payment shall be conditioned upon (x) the Company's
receipt of any applicable consents required to make such payment (the
Company hereby agrees to use its commercially reasonable efforts to
obtain such consents), and (y) the Company's compliance with applicable
law and documents respecting its Indebtedness; provided, further,
however, that notwithstanding the failure of any of the foregoing
conditions, any such failure to pay shall constitute Non-Compliance
pursuant to Section 3.4(a)(i).
(ii) Each holder of a Paid Preferred Unit (including any
Preferred Unit that becomes a Paid Preferred Unit in accordance with
Section 3.5(b)(i)) shall, upon a Change of Control or after the sixth
anniversary of the date of the original issuance of such Preferred Unit,
have the right (the "Put Right") to require the Company to purchase such
Paid Preferred Unit, by paying to such holder the Fair Market Value of
such Paid Preferred Unit; provided, that, such Put Right shall be
conditioned upon (x) the Company's ability to obtain the financing to
make such payment (the Company hereby
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agrees to use its commercially reasonable efforts to obtain such
financing), (y) the Company's receipt of any applicable consents
required to make such payment (the Company hereby agrees to use its
commercially reasonable efforts to obtain such consents), and (z) the
Company's compliance with applicable law and documents respecting its
Indebtedness. The Put Right may be exercised by any holder of a Paid
Preferred Unit by delivery to the Company of a written exercise notice;
provided, that if the Put Right is triggered by a Change in Control, the
holder of a Paid Preferred Unit may indicate in the notice under Section
3.5(b)(i) that such holder also exercises the Put Right. Within 30 days
of receipt thereof, the Company shall either purchase such Paid
Preferred Unit in accordance with this Section 3.5(b)(ii) (against
receipt of the Preferred Certificate representing such Preferred Unit),
or inform the exercising holder of the failure of one or more of the
applicable conditions. Upon the Company making the payment required by
this Section 3.5(b)(ii), such Paid Preferred Unit shall cease to be
outstanding for any purpose hereunder and shall be cancelled.
(iii) Notwithstanding anything herein to the contrary or any
provision of applicable law that but for this paragraph would treat any
right to require the Company to make payments with respect to one or
more Preferred Units in order to cause such Preferred Units to become
Paid Preferred Units and the Put Right (or any right of each holder of
Preferred Units to any payment upon a Change of Control) (any such
right, a "Payment Right") as an unsubordinated obligation of the
Company, such Payment Right shall be subordinated to the indefeasible
payment in full of the Obligations (as defined in the Credit Agreement
dated as of June 30, 1999 among the Company, DJO, the lenders party
thereto, First Union National Bank, as administrative agent and
collateral agent, and The Chase Manhattan Bank, as syndication agent, as
amended by Amendment No. 1 thereto dated as of May 25, 2000) and all
obligations of the Company under the Indenture and the Senior
Subordinated Notes issued thereunder.
(c)Mandatory Payment.
The Company shall make a payment with respect to each outstanding
Preferred Unit (other than Paid Preferred Units) to cause such Preferred
Unit to become a Paid Preferred Unit on the Mandatory Redemption Date by
distributing to each holder of an outstanding Preferred Unit (other than
Paid Preferred Units) an amount equal to the sum of (A) 100% of such
Preferred Unit's Preferred Contribution Amount plus (B) the amount of
the Cumulated Preferred Return, if any, for such Preferred Unit plus (C)
the aggregate amount of all accrued and unpaid Preferred Return on such
Preferred Unit through the date of payment that has not been added to
Cumulated Preferred Return less (D) the aggregate amount of all
distributions made pursuant to Section 6.3(a) with respect to income
allocated to such Preferred Unit pursuant to clause 2 and 3 of Section
6.2(a)(iii)(A)(first). Such mandatory payment shall be conditioned upon
(i) the Company's receipt of any applicable consents required to make
such payment (the Company hereby agrees to use its commercially
reasonable efforts to obtain such consents), and (ii) the Company's
compliance with applicable law and documents respecting its
Indebtedness; provided that notwithstanding the failure of any of the
foregoing conditions, any such failure to pay shall constitute
Non-Compliance pursuant to Section 3.4(a)(i).
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(d)Effect of Payment.
Following the occurrence of a complete payment pursuant to this
Section 3.5 (other than Section 3.5(b)(ii)) to any Preferred Unit, such
Preferred Unit so paid shall remain outstanding (but the Company may
require the holder thereof to surrender the Preferred Certificate
representing such Preferred Unit so that the Company may mark upon such
Preferred Certificate that such Preferred Unit has been paid) and shall
be deemed a "Paid Preferred Unit"; provided, however, that such Paid
Preferred Unit shall not be entitled to any of the provisions of Section
3.3, 3.4 and 3.5(a) through (d) (other than Section 3.5(b)(ii)) (but
shall be entitled to the rights and obligations associated with each
Common Unit existing immediately after the payment pursuant to and
subject to the terms of this Agreement).
3.6 COVENANTS APPLICABLE WHILE THE PREFERRED UNITS HAVE UNRETURNED ORIGINAL
COST.
(a)Until all Preferred Units have become Paid Preferred Units, the
Company shall not issue any additional Preferred Units and shall not issue any
other equity securities that are senior to or pari passu with such Preferred
Units unless the Company first shall have obtained the affirmative consent of
holders of a majority of all Preferred Units that are not Paid Preferred Units.
(b)Neither the Company nor its Subsidiaries shall incur any
Indebtedness that contains restrictions on the payment of Preferred Return or
the making of payments with respect to Preferred Units (including Paid Preferred
Units) that are materially more restrictive than those contained in the
Indebtedness of the Company and the Subsidiary existing or created on the date
hereof.
(c)Unless the Company shall have paid in full in cash the Preferred
Return for the most recent quarter on the applicable Quarterly Payment Date, the
Company shall not make any distributions to holders of Common Units (or Paid
Preferred Units) other than distributions pursuant to Section 6.3(a).
3.7 UNIT SPLITS, UNIT DISTRIBUTIONS, ETC.
(a)The Company shall not in any manner subdivide (by split,
distribution or otherwise) or combine (by reverse split or otherwise) the
outstanding Preferred Units or Common Units unless all such subdivisions and
combinations shall be payable to the holder of each class of units of the
Company only in Units of such class.
(b)If the Company shall in any manner subdivide (by split,
distribution or otherwise) or combine (by reverse split, combination or
otherwise) the outstanding Common Units, then the outstanding Preferred Units
shall also be subdivided or combined, as the case may be, to the same extent,
and in the same proportion as the Common Units. If the Company shall in any
manner subdivide (by split, distribution or otherwise) or combine (by reverse
split or otherwise) the outstanding Preferred Units, then the outstanding Common
Units shall also be subdivided or combined, as the case may be, to the same
extent, and in the same proportion as the Preferred Units.
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ARTICLE IV
MANAGEMENT OF THE COMPANY
4.1 BOARD OF MANAGERS; VOTING.
(a)Subject to the delegation of rights and powers provided for
herein and the requirements found in the Bylaws, the Board of Managers shall
have the sole right to manage the business of the Company and shall have all
powers and rights necessary, appropriate or advisable to effectuate and carry
out the purposes and business of the Company. The Board of Managers shall
consist of at least nine (9) members as designated from time to time in
accordance with the Members' Agreement but may be increased to eleven (11)
members pursuant to Section 3.4(c) and shall include the super-voting Manager
described in the Bylaws. Any or all Managers may be removed as Managers with or
without cause by the vote of a Majority in Interest of Members, provided,
however, that no Manager may be removed without the consent of the Member or
Members who are entitled to nominate such person as a Manager pursuant to the
Members' Agreement (or Section 3.4(c) as the case may be); provided, further,
however, that any Manager may be removed by the party entitled to nominate such
Manager under the Members' Agreement (or Section 3.4(c) as the case may be), and
the vacancy created by any former Manager of the Board of Managers may be filled
by the party entitled to nominate such former Manager under the Members'
Agreement (or Section 3.4(c) as the case may be).
(b)No Member, by reason of such Member's status as such, shall have
any authority to act for or bind the Company but shall have only the right to
vote on or approve the actions herein specified to be voted on or approved by
such Member.
(c)The officers of the Company shall be elected and removed and
shall perform such functions, as are provided in the Bylaws. The Board of
Managers may appoint, employ, or otherwise contract with such other Persons for
the transaction of the business of the Company or the performance of services
for or on behalf of the Company as it shall determine in its sole discretion.
The Board of Managers may delegate to any officer of the Company or to any such
other Person such authority to act on behalf of the Company as the Board of
Managers may from time to time deem appropriate in its sole discretion.
(d)Except as otherwise provided by the Board of Managers or in the
Bylaws, when the taking of such action has been authorized by the Board of
Managers, any Manager or officer of the Company or any other Person specifically
authorized by the Board of Managers may execute any contract or other agreement
or document on behalf of the Company and may execute and file on behalf of the
Company with the Secretary of State of the State of Delaware any certificates of
amendment to the Company's certificate of formation, one or more restated
certificates of formation and certificates of merger or consolidation and, upon
the dissolution and completion of winding up of the Company, at any time when
there are fewer than two Members, or as otherwise provided in the Delaware Act,
a certificate of cancellation canceling the Company's certificate of formation.
(e) If a vacancy on the Board of Managers is not filled by the
Member or Members entitled to nominate such Manager for such vacant position
under the Members'
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Agreement or Section 3.4(c), as the case may be, within 60 days after such
vacancy occurs, such vacancy may thereafter be filled by a majority of the
Managers then in office. Managers shall serve until they resign, die, become
incapacitated or are removed. Determinations to be made by the Managers in
connection with the conduct of the business of the Company shall be made in the
manner provided in the Bylaws, unless otherwise specifically provided herein.
4.2 OBSERVER BOARD MATERIALS.
(a)The First Union Entities together shall have the right to send
one non-voting observer to each meeting of the Board of Managers; expenses
incurred by such observer to attend such meetings shall be reimbursed by the
Company. In such capacity, such observer shall be provided with all materials,
information and documents the Company provides the Managers when so provided;
provided that such observer shall agree to hold in confidence and trust all
materials, information and documents so provided. Each First Union Entity
acknowledges and such observer shall acknowledge that such materials,
information and documents may contain material nonpublic information within the
meaning of applicable securities law. The Company reserves the right to exclude
such observer from any distribution of materials, information and documents, or
meeting or portion thereof, when receipt thereof or attendance by such observer
could interfere with (i) the attorney-client privilege between the Company (or
the Board of Managers) and its counsel, or (ii) contractual confidentiality
obligations of the Company, in each case, as determined by the Board of Managers
in its reasonable discretion after exercising its reasonable efforts to
otherwise resolve the conflict requiring such action to be taken. The Company
may also exclude such observer in any situation in which a conflict of interest
exists or potentially exists that would require a Manager in a similar situation
to excuse himself.
(b)The Company shall provide to TCW copies of all materials,
information and documents the Company provides the Managers when so provided;
provided that TCW shall hold in confidence and trust all materials, information
and documents provided. TCW acknowledges that such materials, information and
documents may contain material nonpublic information within the meaning of
applicable securities laws.
ARTICLE V
MEMBERS; REPRESENTATIONS
5.1 MEMBERS GENERALLY.
The name and business, mailing or residence address of the Members of
the Company are set forth on SCHEDULE I. SCHEDULE I shall be amended from time
to time to reflect the names and business, mailing or residence address of each
of Persons who shall become Members after the date hereof.
5.2 REPRESENTATIONS WITH RESPECT TO UNITS.
Upon the acquisition of any Units, each Member makes the following
representations and warranties to the Company with respect to such Units:
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(a)Such Member is acquiring the Units for its or his own account,
for investment and not with a view to the distribution thereof or any interest
therein in violation of the Securities Act or applicable state securities laws.
(b)Such Member understands that (i) the Units have not been
registered under the Securities Act or applicable state securities laws by
reason of their issuance by the Company in a transaction exempt from the
registration requirements of the Securities Act and applicable state securities
laws and (ii) the Units must be held by such Member indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from such registration.
(c)Such Member further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
Member) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may afford the basis for
sales of the Units acquired hereunder in limited amounts.
(d)Such Member is an "accredited investor" (as defined in Rule
501(a) of Regulation D promulgated under the Securities Act). The Company has
made available to such Member or its or his representatives all agreements,
documents, records and books that such Member has requested relating to an
investment in the Units which may be acquired by the Member hereunder. Such
Member has had an opportunity to ask questions of, and receive answers from, a
person or persons acting on behalf of the Company, concerning the terms and
conditions of this investment, and answers have been provided to all of such
questions to the full satisfaction of such Member. Such Member has such
knowledge and experience in financial and business matters that it or he is
capable of evaluating the risks and merits of this investment and to suffer a
complete loss of its or his investment.
(e)The execution and delivery of this Agreement by such Member has
been duly authorized.
5.3 REGULATORY RESTRICTIONS ON THE VOTING RIGHTS OF THE FIRST UNION
ENTITIES.
Notwithstanding anything herein to the contrary, in no event
shall (i) any vote, consent, approval or authorization (collectively, for
purposes of this Section 5.3, "consent") hereunder of DJ Investment, LLC or
First Union Capital Partners, LLC, or the successors or assigns of their
respective Interests (other than the TCW Members and their successors and
assigns) (each, a "First Union Entity") be required unless the matter subject to
such consent would "significantly and adversely affect" the Interest of such
First Union Entity, as such terms are used in Section 225.2(q)(2)(i) of
Regulation Y of the Board of Governors of the Federal Reserve System or (ii) any
consent of any First Union Entity be required if the result of such consent
would be to cause the Interest (or any portion thereof) of such First Union
Entity to be considered "voting securities" for purpose of Regulation Y of the
Board of Governors of the Federal Reserve System.
5.4 REGULATORY COMPLIANCE BY FIRST UNION ENTITIES.
Notwithstanding anything herein to the contrary, in the
event that any First Union Entity determines that, by reason of any future
federal or state rule, regulation, guideline,
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order, interpretive release, request or directive (having the force of law and
where the failure to comply therewith would be unlawful) (collectively, a
"Regulatory Requirement"), it is effectively restricted or prohibited from
holding its Interest (or any equity securities distributable to such First Union
Entity in any merger, reorganization, readjustment or other reclassification or
exchange with respect to the Company or any successor thereof) or otherwise
realize upon or receive the benefits intended hereunder, and following such
First Union Entity's exercise of its reasonable best efforts to overcome such
Regulatory Requirement, the Company, the Board of Managers and the Members shall
make all reasonable efforts to take such action as such First Union Entity may
deem to be necessary to permit such First Union Entity to comply with such
Regulatory Requirement. Such action to be taken may include the Company's
authorization or creation of one or more new classes of interest and the
modification or amendment of this Agreement or any other documents or
instruments executed in connection with the limited liability company interests
held by such First Union Entity; and, if compliance with such Regulatory
Requirement can not be satisfied by such efforts, such First Union Entity shall
have the right, subject to Section 7.2(b), to freely sell, exchange or otherwise
transfer all or such part of its Interest as it determines to be necessary
without the consent of the Board of Managers or any other Member to one or more
third parties and such assignee(s), upon the written consent of such First Union
Entity, shall be admitted as a substituted Member(s); provided that
notwithstanding anything to the contrary contained herein, any such transfer may
not and will not cause the Company to be treated as a "publicly traded
partnership" within the meaning of Section 7704(b) of the Code. Each First Union
Entity shall give written notice to the Company, the Board of Managers and the
other Members of any such determination and the action or actions necessary to
comply with such Regulatory Requirement, and the Company, the Board of Managers
and the other Members shall take all steps to comply with such determination as
expeditiously as possible.
ARTICLE VI
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS;
ALLOCATIONS; DISTRIBUTIONS
6.1 CAPITAL CONTRIBUTIONS.
(a)At the time of the closing of the transactions contemplated by
the Recapitalization Agreement dated as of April 29, 1999, among Chase, Smith &
Nephew, Inc. ("S&N") and the Company (the "Recapitalization Agreement"), the
following occurred:
(i) Chase and certain Members listed on SCHEDULE I as
"Management Members" contributed the New Membership Interest Purchase
Price (as defined in the Recapitalization Agreement) to the Company in
exchange for 664,000 Common Units;
(ii)the Company, First Union Investors, Inc. (the
predecessor in interest of DJ Investment, LLC), and CB Capital
Investors, L.P. (the predecessor in interest of CB Capital Investors,
LLC) consummated the transactions contemplated by the First Preferred
Unit Purchase Agreement; and
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(iii) the Company distributed to S&N (1) the Existing
Membership Interest Purchase Price (as defined in (and upon the terms
and conditions set forth in) the Recapitalization Agreement) in partial
redemption of S&N's ownership Interest in the Company (and such redeemed
Units representing such ownership Interest ceased to be outstanding and
any Units representing such ownership Interest assumed the status of
authorized but unissued Units) and (2) 54,000 Common Units in redemption
of the remainder of S&N's prior ownership interests in the Company.
(b)For Federal income tax purposes, the foregoing distribution of
cash to S&N shall be treated as a sale to the Company of an undivided interest
of each of the business assets as set forth more fully in the Recapitalization
Agreement. Moreover, S&N shall be deemed to have contributed to the Company the
remaining interests in the business assets in exchange for Units pursuant to
Section 721 of the Code.
6.2 CAPITAL ACCOUNTS; ALLOCATIONS.
(a)A separate capital account shall be maintained on the books of
the Company for each Member, which shall be adjusted (1) as of December 31 of
each year, (2) immediately prior to the acquisition of any Unit by any Person,
(3) effective as of the date of sale of the Company (whether by way of asset
sale, Unit sale, recapitalization, or merger in which the Members immediately
prior to such transaction shall cease to own a majority of all Units owned by
all Members) and (4) on the date of dissolution of the Company as follows:
(i) the amount of money and the fair market value of
property (net of any liabilities secured by such property that the
Company assumes or takes subject to) contributed by such Member to the
Company shall be credited to such Member's capital account;
(ii)the amount of any distributions (including (A) the fair
market value (as determined by the Board of Managers in good faith) of
property other than cash (net of any liabilities that such Member
assumes or takes subject to) and (B) any distribution in respect of a
payment with respect to Preferred Units in accordance with Section 3.5
hereof) distributed to such Member shall be debited from such Member's
capital account; and
(iii) Net Profits (and any items of income or gain specially
allocated pursuant to Sections 6.2(b)(iii) and 6.2(c)(ii)) incurred by
the Company since the last date on which Net Profits or Net Losses shall
have been allocated to the Members shall be credited to such Member's
capital account and Net Losses (and any items of loss or deduction that
are specially allocated pursuant to Section 6.2(c)(ii)) incurred by the
Company since the last date on which Net Losses or Net Profits shall
have been allocated to the Members shall be debited to such Member's
capital account, which allocations shall be made as follows:
(A) Net Profits (or items of gross income or gain)
shall be allocated, first, to the holders of Preferred Units (other
than Paid Preferred Units) pro rata until the capital account of
each such holder equals an amount equal to
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the sum of (1) the aggregate Preferred Contribution Amount with
respect to all such Preferred Units held by such holder, plus (2)
the aggregate amount of the Cumulated Preferred Return, if any, for
all such Preferred Units held by such holder plus (3) the aggregate
amount of all accrued and unpaid Preferred Return on all such
Preferred Units through the date of allocation that has not been
added to Cumulated Preferred Return less (4) the aggregate amount
of all distributions pursuant to Section 6.3(a) with respect to
income allocated pursuant to clause (2) and (3) through the date of
allocation (with any such allocations being deemed to be applied
first to (1), second to (2), third to (3) and fourth to (4)); and
second, to the holders of all Units pro rata according to their
respective holdings of such Units (except as otherwise required by
Sections 6.2(b)(iii) and 6.2(c)(ii)); and
(B) Net Loss shall be allocated, first, to reverse
allocations made pursuant to clause second of Section
6.2(a)(iii)(A), second, to the holders of Common Units pro rata
according to their respective holdings of such Common Units until
the capital accounts of the holders of Common Units equal zero;
third, 100% to the holders of Preferred Units (other than Paid
Preferred Units) according to their respective holdings of such
Preferred Units until their capital accounts equal zero; and
fourth, to the holders of all Units pro rata according to their
respective holdings of Units (except as otherwise required by
Section 6.2(c)(ii)).
(b)(i) Notwithstanding any provision of this Agreement to the
contrary, upon the date of each exercise of each warrant or option issued by the
Company, each Member's (including the exercising option holder's or warrant
holder's) capital account shall be reallocated (a "Capital Shift") such that
after such Capital Shift the ratio of each Member's (including the exercising
option holder's or warrant holder's) capital account (in the case of a Member
who holds Preferred Units (other than Paid Preferred Units), reduced (but not
below $0) by the aggregate of all amounts in such Member's capital account
attributable to Unreturned Original Cost or to accrued and unpaid Preferred
Return through the date of reallocation) to the aggregate of all Members'
capital account balances (less any amounts attributable to Unreturned Original
Cost or to accrued and unpaid Preferred Return through the date of reallocation
on all Preferred Units) shall be the same as the ratio of the number of Units
owned by each such Member (including the exercising option holder or warrant
holder) to the aggregate number of all Units outstanding.
(ii) Solely for purposes of determining the tax treatment to
the Members, the Company will treat (except as otherwise required by
applicable law) the exercise of a compensatory option, as though the
option holder received a cash payment from the Company in an amount
equal to the difference between the option exercise price and the fair
market value of Units received therefor, and the option holder then
purchased, from the Company for cash, the applicable number of Units at
such fair market value. Any deduction attributable to such deemed cash
payment shall be allocated to the holders of Units immediately before
such payment.
(iii) Notwithstanding anything herein to the contrary, if
the Company engages in any transaction that will lead to a distribution
pursuant to Section 9.1(e)(iv),
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then the holders of Preferred Units shall be specially allocated
additional Net Profits (and, if there are insufficient Net Profits,
items of gross income and gain, including any Net Profits, gross income
or gain from a prior taxable year that may properly be so allocated),
pro rata (in accordance with the number of Preferred Units held by such
holders) such that, to the extent possible, after such allocation the
ratio of each Member's capital account (in the case of a Member who
holds Preferred Units (other than Paid Preferred Units), considering
only the portion of such capital account that exceeds the amount thereof
attributable to Unreturned Original Cost or to accrued and unpaid
Preferred Return through the date of reallocation on all Preferred
Units) to the aggregate of all Members' capital account balances (or, in
the case of Preferred Units (other than Paid Preferred Units), the
applicable portion thereof as aforesaid) shall be the same as the ratio
of the number of Units owned by each such Member to the aggregate number
of all Units outstanding.
(c)Notwithstanding any provision of this Agreement to the contrary
but after giving effect to Section 6.2(a)(i), each Member's capital account
shall be maintained and adjusted in accordance with the Code, including (i) the
adjustments permitted or required by Code Section 704(b) (provided that such
adjustment is not reasonably likely to have a material effect on amounts
distributable to any Member pursuant to Section 9.1) and the regulations
promulgated thereunder and (ii) adjustments required to maintain capital
accounts in accordance with the "substantial economic effect test" set forth in
the regulations promulgated under Internal Revenue Code Section 704(b)
(including the "minimum gain chargeback" requirements of Sections 1.704-2(f) and
1.704-2(i)(4), the "qualified income offset" requirements of Section
1.704-1(b)(2)(ii)(d) and the "partner nonrecourse debt" allocations of Treasury
Regulation Sections 1.704-2(c), 1.704-2(i)(2) and 1.704-2(j)(1)).
(d)The Company's ordinary income and losses and capital gains and
losses as determined for Federal income tax purposes (and each item of income,
gain, loss or deduction entering into the calculation thereof) shall be
allocated to the Members in the same proportions as the corresponding "book"
items are allocated pursuant to Sections 6.2(a), (b)(iii), and (c).
Notwithstanding the foregoing sentence, Federal income tax items relating to
"Section 704(c) Property" (as defined in Treasury Regulation Section
1.704-3(a)(3) and including (i) all of the Company's assets deemed to be
contributed pursuant to this Section 6.2 and (ii) any Company property that, at
the election of the Board of Managers, is subject to a revaluation upon the
occurrence of an event specified in Treasury Regulation Section
1.704-1(b)(2)(iv)(f)) shall be allocated among the Members in accordance with
Section 704(c) of the Code taking into account the difference between the fair
market value and the tax basis of such Section 704(c) Property as of the date of
its contribution using the so-called "traditional method with curative
allocations" described in Treasury Regulation Section 1.704-3(c).
(e)Any Member, including any substitute Member, who shall receive
any Units by means of a transfer to it or him of Units of another Member shall
have a capital account that reflects the capital account associated with the
transferred Units.
(f)No Member shall have an obligation to the Company or any Member
to restore a negative or deficit capital account.
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6.3 DISTRIBUTIONS.
Distributions from the Company shall be made in the following order
of priority:
(a) First, (i) within 10 days following the end of each calendar
quarter, the Company will distribute to each Member a cash amount equal to
twenty-five percent (25%) of the Taxable Income Distribution Amount of such
Member for such calendar year as estimated by the Board of Managers; and (ii)
with respect to tax payments to be made with income tax returns filed for a full
calendar year or with respect to adjustments to such returns imposed by the
Internal Revenue Service or other taxing authority, such distribution to Members
shall be equal to the Taxable Income Distribution Amount for each calendar year
minus the aggregate amount distributed for such calendar year as provided in
clause (i) above; provided that in no event shall the Company be obligated to
distribute cash amounts to Members in excess of the aggregate distributions made
to the Company by Subsidiaries of the Company (less any amounts retained by the
Company, which in the Board of Managers sole discretion, are necessary to be
retained by the Company). In the event that the amount determined under clause
(ii) above is a negative amount, the amount of any distributions pursuant to
this Section 6.3(a) in the succeeding calendar year (or if necessary any
subsequent calendar years) shall be reduced by such negative amount.
(b) Second, distributions shall be made, at such times and in such
amounts as the Board of Managers may determine, to the holders of Preferred
Units with respect to the Preferred Return as provided in Section 3.3(a) (but
only to the extent any such distribution has not already been made pursuant to
Section 6.3(a)).
(c) Third, subject to Section 3.6(c) such other distributions of
the Company to holders of Units, whether in cash or in kind, shall be made at
such times and in such amounts as the Board of Managers may determine, and shall
be made to the Members pro rata in accordance with their respective holdings of
Units at the date of distribution.
6.4 LIABILITY FOR RETURN OF CAPITAL.
No Member or Manager shall have any liability for the return of any
Member's Capital Contribution, which Capital Contribution shall be payable
solely from the assets of the Company at the absolute discretion of the Board of
Managers, subject to the requirements of the Delaware Act.
6.5 ADMINISTRATIVE MATTERS.
(a) The Company hereby designates Chase as the "tax matters
partner" for purposes of Code Section 6231 and the regulations promulgated
thereunder. In such capacity, Chase may cause the Company to make any tax
elections that it deems necessary or advisable. Chase shall be reimbursed by the
Company for any expenses incurred in its capacity as tax matters partner.
(b) It is the intention of the Members that the Company shall be
taxed as a "partnership" for federal, state, local and foreign income tax
purposes. The Members shall take all reasonable actions, including the amendment
of this Agreement and the execution of other
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documents, as may reasonably be required in order for the Company to qualify for
and receive "partnership" treatment for federal, state, local and foreign income
tax purposes.
(c) The fiscal year of the Company shall be the calendar year. The
books and records of the Company shall be maintained in accordance with
generally accepted accounting principles and Code Section 704(b) and the
regulations promulgated thereunder.
(d) As to each of the first three fiscal quarters of the Company
and each fiscal year of the Company, the Company shall send to each Member a
copy of (a) the balance sheet of the Company as of the end of the fiscal quarter
or year, (b) an income statement of the Company for such quarter or year, and
(c) a statement showing the amounts distributed by the Company to Members in
respect of such quarter or year. Such financial statements shall be delivered no
later than forty-five (45) days following the end of the fiscal quarter to which
the statements apply, except that the financial statements relating to the end
of the fiscal year shall be delivered no later than ninety (90) days following
the end of such fiscal year.
ARTICLE VII
TRANSFERABILITY OF THE MEMBERS' INTEREST
7.1 LIMITATIONS ON TRANSFERABILITY OF UNITS.
(a) Except as otherwise expressly authorized herein, no Member may
sell, assign, pledge or otherwise transfer or encumber (collectively,
"Transfer") all or any part of its Units or its Interest, and no transferees of
all or any part of the Units or the Interest of a Member shall be admitted as a
substituted Member, without, in either event, having obtained the prior written
consent of a Majority in Interest of the Members (excluding Members that are
transferring Units), which consent may be withheld in their sole discretion, and
without complying with the applicable provisions of the Members' Agreement
applicable to such Units or Interest, as the case may be. Notwithstanding the
preceding sentence, the prior written consent of a Majority in Interest of the
Members shall not be required for a Transfer of Units (i) made in compliance
with Sections 2, 3, 4 and 6, as applicable, of the Members' Agreement or (ii)
that constitutes a pledge of Units by a Management Member to secure a loan by
the Company to such Person. Any Transfer or attempted Transfer of any Units or
Interest in the Company in violation of any of the provisions of this Section
7.1 shall be void, and the Company shall not record such Transfer on its books
or treat any purported transferee of such Units (or Interest) as the owner of
such Units (or Interest) for any purpose. The Board of Managers shall amend
SCHEDULE I hereto from time to time to reflect Transfers made in accordance
with, and as permitted under, this Section 7.1 and the Members' Agreement.
(b) Notwithstanding anything herein to the contrary, but subject to
Section 7.2(b), a holder of a Preferred Unit may freely transfer such Preferred
Unit without the consent of any Member or the Board of Managers and such
assignee(s), upon the written consent of such holder shall be admitted as a
substituted Member; provided, that, such transfer will not cause the Company to
be treated as a "publicly traded partnership" within the meaning of Section
7704(b) of the Code.
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(c) Prior to the Transfer (other than by means of a public
offering) of Units to any Person who is not a party to this Agreement, such
Person shall execute a counterpart to this Agreement and the Members' Agreement
and shall agree to be bound by the terms hereof and thereof.
7.2 OTHER PROVISIONS WITH RESPECT TO TRANSFERABILITY OF UNITS.
(a) Transfer of any Unit shall constitute the Transfer of a
proportionate share of each attribute constituting the Member's Interest
represented by the Unit.
(b) Each Member shall, after complying, or making provision to
comply, with Section 7.1, but prior to any Transfer of Units, give written
notice to the Company of such proposed Transfer. Each such notice shall describe
the manner and circumstances of the proposed Transfer. Upon request by the
Company, the Member delivering such notice shall deliver a written opinion,
addressed to the Company, of counsel for such Member, stating that in the
opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Company) such proposed Transfer does not involve a
transaction requiring registration or qualification of such Units under the
Securities Act or the securities or "blue sky" laws of any state of the United
States. Such Member shall thereupon be entitled to Transfer Units in accordance
with the terms of the notice delivered to the Company, if the Company does not
request such opinion within five days after delivery of such notice, or, if the
Company requests such opinion, and does not reasonably object (based on the
contents of such opinion) to such Transfer within five days after delivery of
such opinion.
ARTICLE VIII
ADDITION OF MEMBERS, WITHDRAWAL OF MEMBERS
8.1 ADDITION OF MEMBERS.
Subject to Section 3.6 and Section 10.2 hereof, the Board of Managers,
with the consent of a Majority in Interest of Members, shall have the right to
amend this Agreement and cause the Company to issue additional Units and to
admit additional Members upon the acquisition of such Units upon such terms and
conditions, at such time or times, and for such Capital Contributions as shall
be determined by the Board of Managers. In connection with Transfers permitted
under this Agreement or the admission of an additional Member, the Board of
Managers shall amend SCHEDULE I hereof to reflect the name and address of the
additional Member. Prior to the admission of any Person as a Member, such Person
shall execute a counterpart to this Agreement and the Members' Agreement and
shall agree to be bound by the terms hereof and thereof.
8.2 WITHDRAWAL OF MEMBERS.
No Member shall have the right to withdraw from the Company except with
the consent of the Board of Managers and upon such terms and conditions as may
be specifically agreed upon between the Company and the withdrawing Member. The
provisions hereof with respect to distributions upon withdrawal are exclusive,
and no Member shall be entitled to claim any further or different distribution
upon withdrawal under Section 18-604 of the Delaware Act or otherwise. This
Section 8.2 shall not apply to Transfers permitted under this Agreement.
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ARTICLE IX
DISSOLUTION OF THE COMPANY; CONTINUATION
9.1 DISSOLUTION OF THE COMPANY.
(a) Subject to the provisions of Section 9.2, the Company shall be
dissolved and its affairs wound up and terminated upon the first to occur of the
following:
(i) December 31, 2030;
(ii) the determination of the Board of Managers and a
Majority in Interest of Members to dissolve the Company; or
(iii) the occurrence of an Event of Withdrawal of a Member
or any other event causing a dissolution of the Company under Section
18-801 of the Delaware Act.
(b) Upon dissolution of the Company, the Company's affairs shall be
promptly wound up in accordance with the provisions of this Section 9.1. The
Company shall engage in no further business except as may be necessary, in the
reasonable discretion of the Board of Managers, to preserve the value of the
Company's assets during the period of dissolution and liquidation.
(c) Distributions to the Members in liquidation may be made in cash
or in kind, or partly in cash and partly in kind, as determined by the Board of
Managers. With respect to distributions in kind, the capital account of each
Member receiving such distribution shall be adjusted as if such distributed
property had been sold at fair market value and the gain or loss on such sale
had been allocated to such Member.
(d) The Net Profits and Net Losses of the Company during the period
of dissolution and liquidation shall be allocated among the Members in
accordance with the provisions of Section 6.2.
(e) The assets of the Company (including, without limitation,
proceeds from the sale or other disposition of any assets during the period of
dissolution and liquidation) shall be applied as follows:
(i) First, to repay any indebtedness of the Company, whether
to third parties or the Members, in the order of priority required by
law;
(ii) Next, to any reserves which the Board of Managers
reasonably deems necessary for contingent or unforeseen liabilities or
obligations of the Company (which reserves when they become unnecessary
shall be distributed in accordance with the provisions of (iii) and
(iv), below);
(iii) Next, subject to and in accordance with Section
3.3(b), to the holders of Preferred Units, to the extent of the
Preferred Liquidation Preference of such Preferred Units held by each
such holder, and
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(iv) Next, to the Members in proportion to their respective
positive capital account balances (after taking into account all
adjustments to the Members' capital accounts required under Section
6.2).
9.2 CONTINUATION OF THE COMPANY.
Notwithstanding the provisions of Section 9.1, the occurrence of an
Event of Withdrawal of a Member shall not dissolve the Company if within 90 days
after the occurrence of such Event of Withdrawal of a Member the business of the
Company is continued by a Majority in Interest of Members remaining after such
Event of Withdrawal.
ARTICLE X
MISCELLANEOUS
10.1 LIMITATION ON LIABILITY.
The debts, obligations and liabilities of the Company, whether arising
in contract, tort or otherwise, shall be solely the debts, obligations and
liabilities of the Company, and no Member or Manager of the Company shall be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member or Manager.
10.2 AMENDMENTS.
This Agreement may be amended only upon the written consent of (i) the
Board of Managers, (ii) a Majority in Interest of Preferred Members, and (iii) a
Majority in Interest of Members; provided, however, that no modification or
amendment shall be effective to reduce the percentage of the Units the consent
of the holders of which is required under this Section 10.2 nor shall any
modification or amendment discriminate against any Member without the consent of
such Member; provided, further, however, that any amendment that would adversely
affect the rights hereunder of any Member, in its capacity as Member, without
similarly affecting the rights hereunder of all Members of the same class, shall
not be effective without such Member's prior written consent.
10.3 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Delaware without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
* * * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
DONJOY, L.L.C.
By: /s/ LESLIE H. CROSS
------------------------------------
Name: Leslie H. Cross
Title: PRESIDENT & CEO
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33
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
CB CAPITAL INVESTORS, LLC
BY: CHASE CAPITAL PARTNERS,
AS INVESTMENT MANAGER
By: /s/ MITCHELL BLUTT
------------------------------------
Name: Mitchell Blutt
Title: General Partner
2
34
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
DJ INVESTMENT, LLC
BY: FIRST UNION INVESTORS, INC.,
AS MANAGER
By: /s/ DAVID F. GRAMS, JR.
------------------------------------
Name: David F. Grams, Jr.
Title: Principal
3
35
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
DJC, INC.
By: /s/ JOHN C. ROCCHIO
------------------------------------
Name: John C. Rocchio
Title: Managing Director
4
36
IN WITNESS WHEREOF, the parties hereto have executed this Third Amended
and Restated Operating Agreement as of the date first above written.
TCW/CRESCENT MEZZANINE TRUST II
BY: TCW/CRESCENT MEZZANINE II, L.P.,
AS GENERAL PARTNER OR MANAGING OWNER
BY: TCW/CRESCENT MEZZANINE, L.L.C.,
ITS GENERAL PARTNER
By: /s/ JOHN C. ROCCHIO
------------------------------------
Name: John C. Rocchio
Title: Managing Director
5
37
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
TCW LEVERAGED INCOME TRUST II, L.P.
BY: TCW INVESTMENT MANAGEMENT
COMPANY, AS INVESTMENT ADVISOR
By: /s/ John C. Rocchio
------------------------------------
Name: John C. Rocchio
Title: Managing Director
BY: TCW (LINC II), L.P.,
AS GENERAL PARTNER
BY: TCW ADVISORS (BERMUDA), LTD.,
AS ITS GENERAL PARTNER
By: /s/ Darryl L. Schall
------------------------------------
Name: Darryl L. Schall
Title: Managing Director
6
38
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
CRESCENT/MACH I PARTNERS, L.P.
BY: TCW ASSET MANAGEMENT COMPANY,
AS PORTFOLIO MANAGER AND AS
ATTORNEY-IN-FACT FOR THE PARTNERSHIP
By: /s/ JOHN C. ROCCHIO
------------------------------------
Name: John C. Rocchio
Title: Managing Director
7
39
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
CHASE DJ PARTNERS, LLC
BY: FAIRFIELD CHASE MEDICAL PARTNERS,
LLC, ITS MANAGING MEMBER
By: /s/ CHARLES T. ORSATTI
------------------------------------
Charles T. Orsatti
Managing Member
8
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IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
LESLIE H. CROSS & DEBORAH L. CROSS
FAMILY TRUST
By: /s/ LESLIE H. CROSS
------------------------------------
Name: LESLIE H. CROSS
Title: CO-TRUSTEE
9
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IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
/s/ MICHAEL R. MCBRAYER
------------------------------------
Michael R. McBrayer
10
42
IN WITNESS WHEREOF, the parties hereto have executed this Third
Amended and Restated Operating Agreement as of the date first above written.
/s/ CYRIL TALBOT III
------------------------------------
Cyril Talbot III
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43
SCHEDULE I -- SCHEDULE OF MEMBERS
MEMBER PREFERRED UNITS COMMON UNITS
- ------ --------------- ------------
CB CAPITAL INVESTORS, LLC 20,427 --
c/o Chase Capital Partners
1221 Avenue of the Americas
New York, NY 10020-1080
Attention: Eric Green
Tel: (212) 899-3400
Fax: (212) 899-3401
DJ INVESTMENT, LLC 6,362 --
301 South College Street
Charlotte, NC 28288-0732
Attention: David F. Grams, Jr
Telephone: (704) 715-1780
Facsimile: (704) 374-6711
DJC, INC. 9,631 --
c/o TCW/Crescent Mezzanine LLC
11100 Santa Monica Blvd., Suite 2000
Los Angeles, CA 90025
Attention: Jim Shevlet
Telephone: (310) 235-5978
Facsimile: (310) 235-5967
TCW/CRESCENT MEZZANINE TRUST II 2,090 --
c/o TCW/Crescent Mezzanine LLC
11100 Santa Monica Blvd., Suite 2000
Los Angeles, CA 90025
Attention: Jim Shevlet
Telephone: (310) 235-5978
Facsimile: (310) 235-5967
TCW LEVERAGED INCOME TRUST II, L.P. 1,004 --
c/o TCW/Crescent Mezzanine LLC
11100 Santa Monica Blvd., Suite 2000
Los Angeles, CA 90025
Attention: Jim Shevlet
Telephone: (310) 235-5978
Facsimile: (310) 235-5967
44
MEMBER PREFERRED UNITS COMMON UNITS
- ------ --------------- ------------
CRESCENT/MACH I PARTNERS, L.P. 670 --
c/o TCW/Crescent Mezzanine LLC
11100 Santa Monica Blvd., Suite 2000
Los Angeles, CA 90025
Attention: Jim Shevlet
Telephone: (310) 235-5978
Facsimile: (310) 235-5967
CHASE DJ PARTNERS, LLC -- 697,995
c/o Chase Capital Partners
1221 Avenue of the Americas
New York, NY 10020-1080
Attention: John Daileader
Tel: (212) 898-3400
Fax: (212) 898-4301
LESLIE H. CROSS & DEBORAH L. CROSS -- 13,517
FAMILY TRUST
MICHAEL R. MCBRAYER -- 3,244
CYRIL TALBOT III -- 3,244
TOTAL: 40,184 718,000
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