SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ZYMAN GROUP, LLC
SECOND
AMENDED AND RESTATED
OF
ZYMAN
GROUP, LLC
THIS
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
(as
amended, this “Agreement”),
dated
as of January 11, 2008, is made and entered into by and among ZG ACQUISITION
INC.,
a
Delaware corporation (“MDC”),
ZYMAN
COMPANY, INC.,
a
Delaware corporation (“Zyman”);
the
management unitholders signatory hereto (together with any management
unitholders who are admitted as members following the date hereof pursuant
to
Section 2.4, the “Management
Unitholders”
(which
term, for the avoidance of any doubt, shall not include ▇▇▇▇▇▇ ▇▇▇▇▇
(“SZ”));
the
Management Unitholders together with Zyman and MDC collectively referred
to as
the “Members”
and
individually a “Member”),
MDC
PARTNERS INC.,
a
corporation organized under the federal laws of Canada (“MDC
Partners”),
and
ZYMAN
GROUP, LLC,
a
Delaware limited liability company (the “Company”).
Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed to such terms in Article XIII.
WHEREAS,
Zyman
and the Management Unitholders are parties to a Limited Liability Company
Agreement (the “Original
Operating Agreement”);
WHEREAS,
pursuant to the Membership Unit Purchase Agreement dated April 1, 2005 (the
“Purchase
Agreement”),
Zyman
and certain Management Unitholders sold, transferred, conveyed and delivered
to
MDC 30,794,384 Class B Units, which units were, effective upon such transfer,
automatically converted into Class A Units of the Company pursuant to the
terms
of the Original Operating Agreement (the “Purchase
Transaction”),
such
that immediately after giving effect to such transfer, the issued and
outstanding Units of the Company were as set forth on Schedule
2.1;
and
WHEREAS,
in
connection with the Closing of the Purchase Transaction, the Members admitted
MDC as a member, and amended and restated the Original Operating Agreement
in
the form hereof;
WHEREAS,
pursuant to an amendment dated as of January 31, 2006, MDC Partners and Zyman
agreed to amend certain terms and conditions in the Company’s Amended and
Restated Operating Agreement, which amended terms and conditions are reflected
in this Agreement;
WHEREAS,
in
connection with the Company’s (i) acquisition of substantially all of the assets
of Tybrett Co., a Georgia corporation doing business as Core Strategy Group
(“Core
Strategy”)
and
(ii) proposed acquisition of the assets of DMG, Inc. (“DMG”)
on the
date hereof (collectively, the “2008
Acquisitions”),
the
Company and its Board of Managers have determined to authorize and issue
new
Class C units and to further amend this Agreement on the terms and conditions
set forth herein;
NOW,
THEREFORE,
in
consideration of the mutual covenants and agreements set forth in this
Agreement, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Members and the other parties
hereto do hereby agree as follows:
ARTICLE
I
FORMATION
OF LIMITED LIABILITY COMPANY
Section
1.1 Formation.
The
Company was formed as a limited liability company under the laws of the State
of
Delaware by the filing with the Secretary of State of Delaware of the
Certificate of Formation (as may be amended from time to time, the “Certificate”).
Section
1.2 Purpose.
The
Company may engage in any lawful business of every kind and character for
which
a limited liability company may be organized under the Delaware Limited
Liability Company Act (as amended from time to time, the “Act”)
or any
successor statute. The Company shall have all of the powers provided for
a
limited liability company under the Act.
Section
1.3 Offices;
Registered Agent.
The
principal place of business of the Company shall be ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇,
▇.▇., ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other principal place of
business as the Managers (as defined in Section 11.5) may from time to time
determine. The Company may have, in addition to such office, such other offices
and places of business at such locations, both within and without the State
of
Delaware, as the Managers may from time to time determine or the business
and
affairs of the Company may require. The registered agent of the Company in
the
State of Delaware shall be the initial registered agent named in the Certificate
or such other Person (as defined in Section 13.1) as the Managers may designate
from time to time in the manner provided by law.
Section
1.4 Filings
and Foreign Qualification.
Upon
the request of the Managers, the Members shall promptly execute and deliver
all
such certificates and other instruments conforming hereto as shall be necessary
for the Managers to accomplish all filing, recording, publishing and other
acts
appropriate to comply with all requirements for the formation and operation
of a
limited liability company under the laws of the State of Delaware and for
the
qualification and operation of a limited liability company in all other
jurisdictions where the Company shall propose to conduct business.
Section
1.5 Term.
The
Company commenced on the date the Company initially filed its Certificate
with
the Secretary of State of Delaware and shall continue in existence, unless
sooner terminated in accordance with the provisions of this
Agreement.
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ARTICLE
II
MEMBERS;
MEMBERSHIP INTERESTS; UNITS
Section
2.1 Members
and Membership Units.
(a) `The
Company is authorized to issue 31,500,000 Class A Units and 25,000,000 Class
B
Units and the issued Class A Units and Class B Units are allocated among
the
Members as set forth on Schedule
2.1.
Except
as the Board of Managers may otherwise determine, all Units acquired by the
Company from any Member pursuant to Article X hereof or otherwise shall not
be
cancelled but shall constitute authorized but unissued Units. Upon any change
in
the Members or Units, including by reason of the issuance of additional Units,
Schedule
2.1 shall
be
deemed to be updated to reflect such changes and the Members agree to complete
a
revised Schedule
2.1
hereof,
which shall be deemed incorporated into this Agreement as part of this Section
2.1.
(b) The
Company is authorized to issue 1,000,000 Class C Units among the Members
as set
forth on Schedule
2.1, which
Class C Units shall be issued pursuant to the Company’s 2008
Restricted Unit Plan
simultaneously adopted by the Board of Managers. Except as the Board of Managers
may otherwise determine, all Units acquired by the Company from any Member
pursuant to Article X hereof or otherwise shall not be cancelled but shall
constitute authorized but unissued Units. Upon any change in the Members
or
Units, including by reason of the issuance of additional Units, Schedule
2.1 shall
be
deemed to be updated to reflect such changes and the Members agree to complete
a
revised Schedule
2.1
hereof,
which shall be deemed incorporated into this Agreement as part of this Section
2.1.
Section
2.2 Classes
of Units.
(a) Class
A Units.
The
Class A Units shall have the following characteristics: (i) an initial Unit
Capital Account (as defined in Section 7.2(e) hereof), (ii) provisions relating
to transfer as provided in Article X hereof, (iii) entitlement to a share
of
Profits and Losses as set forth in Section 3.3, (iv) entitlement to
distributions as provided in Sections 3.4 and 9.2, (v) entitlement to
allocations of PBT as provided in Section 3.5 and (vi) voting rights equal
to
one vote per Unit.
(b) Class
B Units.
The
Class B Units shall have the following characteristics: (i) an initial Unit
Capital Account (as defined in Section 7.2(e) hereof), (ii) provisions relating
to transfer as provided in Article X hereof, (iii) entitlement to a share
of
Profits and Losses as set forth in Section 3.3, (iv) entitlement to
distributions as provided in Sections 3.4 and 9.2, (v) entitlement to
allocations of PBT as provided in Section 3.5 and (vi) voting rights equal
to
one vote per Unit.
(c) Class
C Units.
The
Class C Units shall have the characteristics, terms and conditions set forth
in
the Company’s “2008
Restricted Unit Plan”
(a
copy
of which is annexed hereto as Exhibit A) and any underlying Restricted Unit
Award Agreement delivered by the Company pursuant to an award of Class C
Units
pursuant to such Restricted Unit Plan. In addition, the Class C Units shall
have
the following additional characteristics: (i) entitlement to a share of Profits
and Losses as set forth in Section 3.6, and (ii) entitlement to distributions
as
provided in Sections 3.6.
3
Section
2.3 Transfer
of Units.
In the
event a Member transfers all or a portion of its Membership Interests in
accordance with Article X hereof, then effective as of the date of the sale
and
subject to compliance with Section 10.1 hereof, such Member shall automatically
cease to be a Member in the Company as to such sold Unit. Except as otherwise
expressly provided herein, upon a transfer of Units permitted by this Agreement,
the transferee shall have all of the rights, powers and duties of the transferor
hereunder with respect to the transferred Units and shall be admitted as
a
Member, the transferee shall sign a counterpart to this Agreement and
Schedule
2.1
shall be
amended as set forth in Section 2.1.
Section
2.4 Additional
Members and Membership Interests.
Subject
to Section 2.3, additional Persons may be admitted to the Company as Members
and
Membership Interests may be created and issued to such Persons on such terms
and
conditions as the Board of Managers shall approve, subject to Section 4.1
hereof. The terms of admission or issuance may specify the creation of different
classes or groups of Members having different rights, powers and duties.
The
creation of any new class or group of Members shall be indicated in an amendment
to this Agreement in accordance with Section 14.4 hereof and such amendment
shall indicate the different rights, powers and duties of the classes or
groups
of Members. Upon admission of a new Member, such Person shall sign a counterpart
to this Agreement and Schedule
2.1
shall be
amended as set forth in Section 2.1.
Section
2.5 Liability
of Member.
Except
as expressly provided under the Act, no Member shall be liable for the debts,
liabilities, contracts or other obligations of the Company, and no Member
shall
be required to make any loans to the Company. Subject to the limitations
and
conditions provided for in Article XI hereof and the Act, the Company shall
indemnify and hold harmless a Member in the event a Member becomes liable,
notwithstanding the preceding sentence, for any debt, liability, contract
or
other obligation of the Company except to the extent expressly provided in
the
preceding sentence.
Section
2.6 Limitations
on Members.
Other
than as specifically provided for in this Agreement, the Purchase Agreement,
an
Employment Agreement entered into pursuant to the Purchase Agreement, or
the
Act, no Member shall: (a) be permitted to take part in the business or control
of the business or affairs of the Company; (b) have any voice in the management
or operation of any Company property; or (c) have the authority or power
to act
as agent for or on behalf of the Company or any other Member, to do any act
which would be binding on the Company or any other Member, or to incur any
expenditures, debts, liabilities or obligations on behalf of or with respect
to
the Company.
Section
2.7 Certification
of Units.
Unless
a majority of the Members of each class of Units otherwise agree, the Company
shall issue certificates to the Members representing the Units held by such
Members. The following provisions shall apply:
4
(a) Certificates
attesting to the ownership of Units in the Company shall be in such form
as
shall be approved by the Managers and shall state that the Company is a limited
liability company formed under the laws of the State of Delaware, the name
of
the Member to whom such certificate is issued and that the certificate
represents limited liability company interests within the meaning of the
Act.
Each such certificate shall be signed by such officers of the Company as
are
approved by the Managers and shall bear a legend in substantially the following
form:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO AN
EXEMPTION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IN ADDITION,
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER
AND OTHER RESTRICTIONS SET FORTH IN THE AMENDED AND RESTATED LIMITED LIABILITY
COMPANY OPERATING AGREEMENT, DATED JANUARY 11, 2008, AMONG ZYMAN GROUP, LLC
AND
ITS MEMBERS (THE “AGREEMENT”) AND MAY NOT BE OFFERED OR SOLD EXCEPT IN
COMPLIANCE WITH SUCH TRANSFER RESTRICTIONS. COPIES OF THE AGREEMENT ARE ON
FILE
WITH THE SECRETARY OF THE LIMITED LIABILITY COMPANY AND ARE AVAILABLE WITHOUT
CHARGE UPON WRITTEN REQUEST THEREFOR. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS
OF
THE AFORESAID AGREEMENT AND THE APPLICABLE RESTRICTIONS UNDER THE
ACT.
(b) The
transfer register or transfer book and blank certificates shall be kept by
the
secretary of the Company or by any transfer agent or registrar approved by
the
Managers for that purpose. The certificates shall be numbered and registered
in
the share or unit register or transfer books of the Company as they are issued.
Except to the extent that the Company shall have received written notice
of an
assignment of any Unit in the Company, the Company shall be entitled to treat
the Person in whose name any certificates issued by the Company stand on
the
books of the Company as the absolute owner thereof, and shall not be bound
to
recognize any equitable or other claim to, or interest in, such Unit on the
part
of any other Person.
(c) Subject
to all provisions herein relating to transfers of Units, if the Company shall
issue certificates in accordance with the provisions of this Section 2.7,
transfers of Units shall be made on the register or transfer books of the
Company upon surrender of the certificate therefor, endorsed by the Person
named
in the certificate or by an attorney lawfully constituted in
writing.
(d) The
holder of any certificates issued by the Company shall immediately notify
the
Company of any loss, destruction or mutilation of such certificates, and
the
Managers may cause a new certificate or certificates to be issued to such
holder, in case of mutilation of the certificate, upon the surrender of the
mutilated certificate or, in case of loss or destruction of the certificate,
upon satisfactory proof of such loss or destruction and, if the Managers
shall
so determine, the granting of an indemnity as is approved by the
Managers.
5
ARTICLE
III
CAPITAL
CONTRIBUTIONS; ALLOCATIONS AND DISTRIBUTIONS
Section
3.1 Capital
Account; Capital Contributions.
The
Capital Accounts of each Member shall be computed in accordance with Section
7.2. Notwithstanding the foregoing, the initial Capital Accounts of the Members
shall be set forth as on Schedule 3.1 and adjusted on the same basis as the
initial Capital Accounts were determined to reflect (grossed-up) any additional
payments made by MDC for its interest pursuant to the Purchase
Agreement.
Section
3.2 Withdrawal
and Return of Capital Contribution.
No
Member shall have the right to receive or withdraw its Capital Contribution
except to the extent, if any, that any distribution made pursuant to the
express
terms of this Agreement may be considered as such by law or as expressly
provided for in this Agreement.
Section
3.3 Allocation
of Profits and Losses.
(a) Except
as
otherwise provided in this Section 3.3 and Section 3.6, all Profits and Losses
of the Company (as such terms are defined in Section 13.1 hereof) for any
calendar year shall be allocated and charged to the Members for income tax
purposes (including without limitation the capital account maintenance
regulations under Section 704(b) of the Code) as follows:
(i) Profits
shall be allocated as follows:
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(A)
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First,
pro rata to those Members to whom PBT (as such term is defined
in Section
13.1) for such calendar year and each prior calendar year since
the
Effective Time has been allocated under Section 3.5 until the excess
of
the allocation to each such Member of Profits under this Section
3.3(a)(i)(A) over any allocation to each such Member of Losses
under
Section 3.3(a)(ii)(B) for such calendar years equals the amount
of PBT so
allocated to each such Member during such calendar years;
and
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(B)
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Thereafter,
to the Members in accordance with the number of Units owned by
each.
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(ii) Losses
shall be allocated as follows:
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(A)
|
First,
to the extent that Profits allocated under Section 3.3(a)(i)(B)
over
Losses previously allocated under this Section 3.3(a)(ii)(A) exceed
distributions made in accordance with the number of Units owned
by each
Member under Section 3.4(a)(iv), to the Members in the proportion
in which
such excess was allocated;
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6
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(B)
|
Second,
to the extent that Profits allocated under Section 3.3(a)(i)(A)
over
Losses previously allocated under this Section 3.3(a)(ii)(B) exceed
distributions under Sections 3.4(a)(i), (ii) or (iii), as applicable,
to
the Members in the proportion in which such excess was
allocated;
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(C)
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Third,
to the Members in accordance with the number of Units owned by
each.
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(b) Special
Allocations and Limitations
(1) In
the
event a Member unexpectedly receives in any taxable year any adjustments,
allocations, or distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), or (6) which cause or increase an Adjusted
Capital
Account Deficit (as defined in Section 13.1) of such Member, items of Company
income and gain shall be specially allocated to such Member in such taxable
year
(and, if necessary in subsequent taxable years), in an amount and manner
sufficient to eliminate, to the extent required by the Treasury Regulations,
the
Adjusted Capital Account Deficit of such Member as quickly as possible, provided
that an allocation pursuant to this Section 3.3(b)(1) shall be made only
if and
to the extent that the Members would have an Adjusted Capital Account Deficit
after all the allocations provided for in this Section 3 have been tentatively
made as if this Section 3.3(b)(1) were not in the Agreement.
(2) In
the
event any Member has an Adjusted Capital Account Deficit at the end of any
taxable year which is in excess of the sum of (i) the amount such Member
is
obligated to restore pursuant to any provision of this Agreement and (ii)
the
amount such Member is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5),
the Member shall be specially allocated items of the Company income and gain
in
the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 3.3(b)(2) shall be made only if and to the extent
that
such Member would have an Adjusted Capital Account Deficit in excess of such
sum
after all other allocations provided for in this Article III have been
tentatively made as if Section 3.3(b)(1) hereof and this Section 3.3(b)(2)
were
not in the Agreement.
(3) Notwithstanding
the provisions of Section 3.3(a), in no event shall Losses of the Company
be
allocated to a Member if such allocation would result in such Member’s having an
Adjusted Capital Account Deficit at the end of any taxable year. All Losses
in
excess of the limitation set forth in this Section 3.3(b)(3) shall be allocated
to the Members with positive balances in their Capital Accounts, as a class
pro
rata in proportion to such positive balances.
7
(4) To
the
extent an adjustment to the adjusted tax basis of any Company asset, pursuant
to
Section 734(b) or Section 743(b) of the Code is required, pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(2)
or
Section 1.704-1(b)(2)(iv)(m)(4),
to
be taken into account in determining Capital Accounts as the result of a
distribution to a Member in complete liquidation of such Member’s interest in
the Company, the amount of such adjustment to Capital Accounts shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or
loss
(if the adjustment decreases such basis) and such gain or loss shall be
specifically allocated to the Members in accordance with their interests
in the
Company in the event Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2)
applies, or to the Member to whom such distribution was made in the event
Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4)
applies.
(5) The
allocations set forth in Sections 3.3(b)(1), (2), (3) and (4) (the “Regulatory
Allocations”)
are
intended to comply with certain requirements of Treasury Regulations promulgated
under Section 704 of the Code. The Regulatory Allocations shall be taken
into
account in allocating other Profits, Losses, and items of income, gain, loss,
and deduction to each Member so that, to the extent possible, and to the
extent
permitted by Treasury Regulations, the net amount of such allocations of
other
Profits, Losses, and other items and the Regulatory Allocations to each Member
shall be equal to the net amount that would have been allocated to each Member
if the Regulatory Allocations had not been made.
(6) The
respective interests of the Members in the Profits, Losses, or items thereof
shall remain as set forth above unless changed by amendment to this Agreement
or
by an assignment of a Unit authorized by the terms of this Agreement. Except
as
otherwise provided herein, for tax purposes, all items of income, gain, loss,
deduction, or credit shall be allocated to the Members in the same manner
as are
Profits and Losses; provided, however, that with respect to property contributed
to the Company by a Member, such items shall be shared among the Members
so as
to take into account the variation between the basis of such property and
its
fair market value at the time of contribution in accordance with Section
704(c)
of the Code.
(7) The
Capital Accounts of all Members shall be adjusted pursuant to the rules of
Treasury Regulation Section 1.704-1(b)(2)(iv)(f) upon the circumstances set
forth in Treasury Regulation Section 1.704-1(b)(2)(iv)(f)(5). Corresponding
adjustments shall be made as provided for under Treasury Regulation
1.704-1(b)(2), including Section 1.704-1(b)(2)(iv)(g).
(c) Other
Special Allocations.
The
following special allocations shall be made in the following order:
(1) Except
as
otherwise provided in Section 1.704-2(f) of the Treasury Regulations,
notwithstanding any other provision of this Section 3, if there is a net
decrease in Company Minimum Gain (as defined in Section 13.1) during any
fiscal
year, each Member shall be specially allocated items of Company income and
gain
for such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Member’s share of the net decrease in Company Minimum Gain,
determined in accordance with Section 1.704-2(g) of the Treasury Regulations.
Allocations pursuant to the previous sentence shall be made in proportion
to the
respective amounts required to be allocated to each Member pursuant thereto.
The
items to be so allocated shall be determined in accordance with Sections
1.704-2(f)(6) and 1.704-2(j)(2) of the Treasury Regulations. This Section
3.3(c)(1) is intended to comply with the minimum gain chargeback requirement
in
Section 1.704-2(f) of the Treasury Regulations and shall be interpreted
consistently therewith.
8
(2) Except
as
otherwise provided in Section 1.704-2(i)(4) of the Treasury Regulations,
notwithstanding any other provision of this Section 3, if there is a net
decrease in Member Nonrecourse Debt Minimum Gain (as defined in Section 13.1)
attributable to a Member Nonrecourse Debt (as defined in Section 13.1) during
any fiscal year, each Member who has a share of the Member Nonrecourse Debt
Minimum Gain attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall
be
specially allocated items of Company income and gain for such fiscal year
(and,
if necessary, subsequent fiscal years) in an amount equal to such Member’s share
of the net decrease in Member Nonrecourse Debt Minimum Gain attributable
to such
Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(4)
of
the Treasury Regulations. Allocations pursuant to the previous sentence shall
be
made in proportion to the respective amounts required to be allocated to
each
Member pursuant thereto. The items to be so allocated shall be determined
in
accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury
Regulations. This Section 3.3(c)(2) is intended to comply with the minimum
gain
chargeback requirement in Section 1.704-2(i)(4) of the Treasury Regulations
and
shall be interpreted consistently therewith.
(3) Nonrecourse
Deductions (as defined in Section 13.1) for any fiscal year shall be specially
allocated among the Members in proportion to their allocable
Profits.
(4) Any
Member Nonrecourse Deductions (as defined in Section 13.1) for any fiscal
year
shall be specially allocated to the Member who bears the economic risk of
loss
with respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i)(1) of the
Treasury Regulations.
(5) Solely
for purposes of determining a Member’s proportionate share of the “excess
nonrecourse liabilities” of the Company within the meaning of Section
1.752-3(a)(3) of the Treasury Regulations, the Members’ interests in Company
profits are
in
proportion to their allocable Profits, and, for purposes of allocating
Nonrecourse Liabilities (as defined in Section 13.1) of the Company among
the
Members pursuant to Treasury Regulation Section 1.752-3(a)(3), the parties
agree
that each Member’s interest in Company profits shall be in proportion to their
allocable Profits.
(6) To
the
extent permitted by Section 1.704-2(h)(3) of the Treasury Regulations, the
Members shall endeavor to treat distributions of funds as having been made
from
the proceeds of a Nonrecourse Liability (as defined in Section 13.1) or a
Member
Nonrecourse Debt (as defined in Section 13.1) only to the extent that such
distributions would otherwise cause or increase an Adjusted Capital Account
Deficit for any Member.
(7) For
purposes of determining the character (as ordinary income or capital gain)
of
any Profits allocated to the Members pursuant to this Section 3.3, such portion
of Profits that is treated as ordinary income attributable to the recapture
of
depreciation shall, to the extent possible, be allocated among the Members
in
the proportion which (i) the amount of depreciation previously allocated
to each
Member bears to (ii) the total of such depreciation allocated to all Members.
This Section 3.3(c)(7) shall not alter the amount of allocations among the
Members pursuant to this Section 3.3, but merely the character of income
so
allocated.
9
(d) The
Members are aware of the income tax consequences of the allocations described,
and hereby agree to be bound by the provisions of Section 3.3 in reporting
their
respective shares of Company income and loss for income tax
purposes.
(e) It
is the
intention of the Company and its Members that the Company be taxed as a
partnership for all purposes of the Code and similar income tax
laws.
(f) All
matters concerning the valuation of securities, the allocation of profits,
gains
and losses among the Members, including the taxes on those profits, gains
and
losses, and accounting procedures, not specifically and expressly provided
for
by the terms of this Agreement, shall be determined in good faith by the
Managers with regard to their fiduciary duty to the Members, whose determination
in accordance with the terms hereof shall be final, binding and conclusive
upon
all of the Members.
(g) In
connection with the exercise of a Put or a Call with respect to Class B Units
pursuant to Article X hereof, any Profits attributable to such Class B Units
arising after the date of exercise of the applicable Put or Call shall be
allocated to the transferee of such Class B Units so long as the closing
of such
transfer occurs.
Section
3.4 Distributions.
(a) Subject
to the making of the Tax Distributions (as defined in clause (d) below),
to the
extent permitted by the Act, the Company shall make distributions as
follows:
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(i)
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first,
distributions of Class C PBT to the Class C Unit holders in accordance
with Section 3.6 hereof;
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(ii)
|
second,
100% to the holders of the Class A Units in an amount equal to
the sum of
(a) the allocation to such holders of PBT under Section 3.5(a)(i)
for such
calendar year plus (b) the Class A Distribution Shortfall Amount
(as
defined in Section 13.1) for such year;
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(iii)
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third,
following the distribution pursuant to clauses (i) and (ii) above,
100% to
the holders of the Class B Units in an amount equal to the sum
of (a) the
allocation to such holders of PBT under Section 3.5(a)(ii) for
such
calendar year plus (b) the Class B Distribution Shortfall Amount
(as
defined in Section 13.1) for such year;
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(iv)
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fourth,
following the distributions pursuant to clauses (i), (ii) and (iii)
above,
100% to the Members in accordance with any other amounts which
have been
allocated pursuant to either or both of Section 3.5(a) and Section
3.5(b)
and which have not previously been distributed, with any distributions
under this clause (iv) first being applied to the allocation of
PBT for
the earliest year or period for which PBT has been allocated but
has not
been fully distributed (using a first in-first out approach);
and
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10
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(v)
|
fifth,
following distributions pursuant to clauses (i), (ii), (iii) and
(iv)
above, 100% to the members pro rata in accordance with the number
of Units
owned by each.
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It
is the
intention of the Members that, subject to clause (b) below, the Company shall
generally make Distributions as described in 3.4(a)(i), (ii), (iii) and (iv)
above on a quarterly basis, generally in arrears of no more than 90 days,
based
upon the financial statements and the then-current forecasts prepared in
good
faith by the officers of the Company and its subsidiaries and taking into
account the ongoing capital requirements of the Company. Determinations as
to
the amount of such distributions shall be made by MDC in good faith after
consultation with Zyman. Furthermore, in the event that MDC reasonably
anticipates that, based on the financial statements and then-current forecasts
of the Company and its subsidiaries, the Company will be able to make
distributions in an amount equal to the amount set forth in Section 3.4(a)(i)
and (ii) above during a given calendar year, MDC will in good faith cause
the
Company to make distributions to the holders of the Class B Units towards
the
amount set forth in Section 3.4(a)(iii) prior to the end of such calendar
year,
at such times and in such amounts as MDC may in good faith
determine.
(b) Any
distribution of funds prior to the end of the fiscal year in which such funds
came into possession of the Company (including any Tax Distribution, but
excluding any Accrued Distribution) shall be treated as a non-interest-bearing
loan (a “draw”)
from
the Company to each Member receiving such draw and shall be deemed repaid
by
reducing the amount of each subsequent distribution to the Member receiving
such
draw pursuant to this Section 3.4(b) by the lesser of (i) the entire amount
otherwise distributable to the Member receiving such draw, and (ii) the entire
amount of any unrepaid draws pursuant to this Section 3.4(b). For purposes
of
this clause, a Selling Member (as defined below) and any transferee of such
Selling Member shall be treated as a single Member with respect to the Units
transferred by such Selling Member to such transferee.
(c) All
amounts withheld pursuant to the Code and Tax Regulations or any provision
of
any state or local tax law with respect to any payment, distribution, or
allocation to the Company or the Members shall be treated as amounts distributed
to the Members pursuant to this Section 3.4 for all purposes under this
Agreement. The Managers are authorized to withhold from distributions, or
with
respect to allocations, to the Members and to pay over to any Federal, state,
or
local government any amounts required to be so withheld pursuant to the Code
and
Tax Regulations or any provisions of any other Federal, state, or local law,
and
shall allocate any such amounts to the Members with respect to which such
amount
was withheld. Notwithstanding any other provision in this Agreement, prior
to
the making any such distribution, the Managers in their sole discretion may
require the delivery to the Managers from each or any potential distributee
such
evidence as the Managers may reasonably request evidencing the absence of
any
third-party claims with respect to such potential distribution.
11
(d) Notwithstanding
anything in this Agreement to the contrary, in preference to any other
distributions pursuant to this Section 3.4, the Members shall cause the Company
to distribute cash of the Company to its Members on a quarterly (or other
reasonable) basis equal to the product of (i) each Member’s distributive share
of the Company’s taxable income (determined without regard to the election made
under Section 754 of the Code) for the current year and (ii) the maximum
individual tax rates for federal taxpayers and Georgia taxpayers (the
“Tax
Distributions”);
provided, that, no Member will receive a Tax Distribution unless such Member’s
allocation of the Company’s taxable income exceeds all prior cumulative
allocations of the Company’s taxable losses and provided further that if a
Member receives a Tax Distribution for a particular year that is greater
than
any distribution to which that Member is entitled under Section 3.4(a), that
Member will contribute to the Company an amount equal to the portion of the
aggregate amount of any Tax Distribution(s) received by such Member which
exceed
the amount of tax which is calculated as provided above and is attributable
to
such Member’s allocable share of the Company’s taxable income for such year. For
purposes of Section 3.4(a) hereof, a Tax Distribution shall be deemed to
be a
distribution at the time of such Tax Distribution and shall reduce the amount
of
each subsequent distribution to any Member receiving such Tax Distribution
by
the amount of any such Tax Distribution.
(e) Notwithstanding
anything in this Agreement to the contrary, any PBT which has been allocated
to
the transferred Units of a Selling Member pursuant to Section 3.5(c) shall,
subject to Section 3.4(b), be distributed to such Selling Member in accordance
with Section 3.4(a) as if such Selling Member owned Units.
Section
3.5 Allocation
of PBT.
(a) Subject
to the allocations of Class C PBT set forth in Section 3.6, PBT for purposes
of
this Agreement shall be allocated for each Distribution Period Calendar Year
as
follows:
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(i)
|
first,
100% to the holders of the Class A Units until the holders of Class
A
Units have been allocated the Preferred Return Amount and any Class
A PBT
Shortfall Amount with respect to such Distribution Period Calendar
Year;
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(ii)
|
second,
100% of any remaining PBT after giving effect to the allocations
outlined
in clause (i) above to the holders of Class B Units until the holders
of
Class B Units have been allocated an amount equal to the Class
B Catch-Up
Amount;
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(iii)
|
third,
(x) in the event that the PBT Margin for such Distribution Period
Calendar
Year is at least 30%, 100% of any remaining PBT after giving effect
to the
allocations outlined in clauses (i) and (ii) above to the Members
pro rata
in accordance with the number of Units owned by each Member until
the
Members have been allocated an amount equal to the product of 30%
and the
Revenues for such Distribution Period Calendar Year and any remainder
in
accordance with clause (iv) below and (y) in the event that the
PBT Margin
for such Distribution Period Calendar Year is less than 30%, 100%
of any
remaining PBT after giving effect to the allocations outlined in
clauses
(i) and (ii) above to the Members pro rata in accordance with the
number
of Units owned by each Member; and
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12
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(iv)
|
fourth,
(x) for the first two Distribution Period Calendar Years and the
portion
of the third Distribution Period Calendar Year ending on the second
anniversary of the Effective Time (such date, the “Second
Anniversary”)
100% of any remaining PBT after giving effect to the allocations
outlined
in clauses (i), (ii) and (iii) above to the Members, allocated
25% to the
holders of the Class A Units and 75% to the holders of the Class
B Units
and (y) for the remaining Distribution Period Calendar Years (including
the portion of the third Distribution Period Calendar Year following
the
Second Anniversary), 100% of any remaining PBT after giving effect
to the
allocations outlined in clauses (i), (ii) and (iii) above to the
Members,
allocated 30% to the holders of the Class A Units and 70% to the
holders
of the Class B Units, in each case pro rata in accordance with
the number
of Units of such class owned by each Member.
|
(b) PBT
for
purposes of this Agreement shall be allocated for any Post Distribution Period
Calendar Year to the Members pro rata in accordance with the number of Units
owned by each Member.
(c) Notwithstanding
anything in this Agreement to the contrary, in the event that a Member transfers
any Units (such Member, a “Selling
Member”),
then,
with respect to the calendar year in which such transfer occurred, the Company
shall allocate PBT to such Selling Member’s transferred Units in accordance with
Sections 3.5(a) and 3.5(b) above pro rata based on the number of days elapsed
in
such calendar year from the first day of such calendar year through the date
of
such transfer relative to a 365-day year and pro rata to the transferee based
on
the remainder of the number of days in such calendar year subsequent to the
date
of transfer.
Section
3.6 Allocation
of Profits and Losses; Distributions and PBT to Class C Membership
Units.
(a) For
purposes of this Agreement, 100% of the Class C PBT shall be allocated to
the
Class C Members as follows: 62.5% to ▇▇▇▇▇ ▇▇▇▇▇▇, and upon closing the DMG
transaction, 37.5% to ▇▇▇▇▇ ▇▇▇▇▇.
13
(b) Subject
to the making of Tax Distributions (as defined in Section 3.4(d), to the
extent
permitted by the Act, at the discretion of a majority of the Managers (after
consultation with the CEO of the Company), the Company shall distribute funds
of
the Company to the Class C Members, which distributions shall be made pro
rata
in accordance with such Members' Membership Interests, such that the amount
of
Class C PBT for each calendar (as determined by the Managers based upon the
then
current financial reports of the Company) is distributed to the Class C Members,
subject to a reasonable allocation by the Managers (after consultation with
the
CEO of the Company) for the Company’s operating and capital expenses consistent
with the Company’s then current operating and capital expenditure budget.
Distributions described above shall be made on a quarterly basis, generally
in
arrears and subject to cash availability. The Managers shall use good faith
efforts to make such quarterly distributions as soon as practicable following
the closing of the Company’s books for the applicable calendar quarter, it being
understood that such distributions, if any, will be made not later than 10
days
following the closing of the Company’s books for the applicable calendar
quarter. The Managers, by majority approval, shall have the right to make
additional distribution of funds of the Company in such amounts and at such
times as determined by the Managers.
ARTICLE
IV
MANAGEMENT
Section
4.1 Management
of the Company.
(a) Except
to
the extent otherwise provided for herein, the powers of the Company shall
be
exercised by and under the authority of, and the business and affairs of
the
Company shall be managed under, the direction of the Managers of the Company.
Notwithstanding the foregoing or any other provisions hereof to the contrary,
for as long as Zyman and the Management Unitholders own Class B Units
representing at least 20% of the outstanding Units, the taking of any of
the
actions listed in clauses (i) through (xi) below shall require the consent
of
holders of a majority of the Class B Units and the consent of the holders
of a
majority of Class C Units.
(i) a
sale,
lease or other disposition of all or substantially all of the assets or business
of the Company, except in connection with (x) a sale, lease or other disposition
of all or substantially all of the assets or business or stock of MDC or
MDC
Partners, including pursuant to merger, consolidation, amalgamation or similar
transaction, (an “MDC
Sale”)
or (y)
an MDC Financing (as defined in Section 4.1(f) hereof) or the exercise of
a
default remedy under any agreement entered into in connection with an MDC
Financing;
(ii) a
merger,
consolidation or amalgamation of the Company or any of its subsidiaries with
and
into another Person or of another Person with and into the Company or any
of its
subsidiaries;
(iii) the
authorization or issuance of additional Class A Units, Class B Units, Class
C
Units or other equity ownership interests in, or the granting of any other
rights to participate in the proceeds of the sale of assets of the Company
which
are dilutive to the Class B Unitholders; or the incurring of debt for borrowed
money in excess of the amount provided for in the approved annual operating
budget or capital expenditure budget, except in connection with borrowings
under
the terms and conditions of the MDC Cash Management Program (and in compliance
with Section 4.1(d) below); provided, that the agreement of MDC and holders
of a
majority of the Class B Units or Class C Units shall not be required in
connection with issuances of Units to employees of the Company and its
subsidiaries from time to time so long as such issuances represent in the
aggregate no more than 10% of the fully-diluted Units outstanding; and provided,
further, that no approval shall be required in connection with issuances
of
Units contemplated by this Agreement and the Purchase Agreement;
14
(iv) a
material acquisition by the Company or any of its subsidiaries of the stock,
assets or business of another Person or any investment by the Company of
funds
or other assets in another Person (other than money market investments or
their
equivalent);
(v) except
as
permitted under Section 14.4 hereof, an amendment or modification to the
Certificate or this Agreement;
(vi) the
payment by the Company or any of its subsidiaries of any management fee to
any
Member or one of such Member’s Affiliates;
(vii) a
relocation of the Company’s primary offices outside of the Atlanta metropolitan
area;
(viii) entering
into any business other than, or any transaction outside of, the normal business
activities of the Company and any of its subsidiaries and related activities
other than in connection with a transfer by MDC or any of its Affiliates
of
their respective interests in the Company to another wholly-owned subsidiary
of
MDC Partners;
(ix) the
making of any loan to any employee of the Company or any of its subsidiaries
other than reasonable travel and business expense advances in the ordinary
course and consistent with past practices exceeding $10,000, in the aggregate,
at any one time outstanding, other than any loans contemplated by Article
X
hereof;
(x) any
change in the name of the Company; and
(xi) the
delegation to any Manager or to any committee of the Board of Managers of
the
Company or any subsidiary or to any officer of the Company or any subsidiary
the
power to take any of the actions referred to in the foregoing clauses before
obtaining the authorization required by this Section;
provided
that, notwithstanding anything in the foregoing to the contrary, nothing
in this
clause (a) shall require the consent of the holders of the Class B Units
or
Class C Units in connection with or related to a purchase of Units by the
Company or MDC pursuant to Article X hereof (including, without limitation,
any
incurrence of indebtedness in connection therewith) or any subsequent sale
or
issuance of an equal number of Units, options to purchase an equal number
of
Units or other equity-based awards with respect to an equal number of Units
by
MDC or the Company to any employee, director or consultant of the
Company.
(b) As
long
as this Agreement is in full force and effect, the Company shall keep on
file at
its principal office a copy of this Agreement. The Company shall make such
copy
available to any Member during normal business hours and upon reasonable
advance
written notice.
15
(c) As
long
as this Agreement is in full force and effect, the Company and the Members
agree
that they shall cause any and all subsidiaries of the Company to comply with
the
provisions of this Section 4.1 to the extent such provisions are applicable
to
such subsidiary.
(d) The
parties hereto further agree that the operations of the Company and its
subsidiaries shall be conducted (i) to participate in the overall cash
management and banking program of MDC Partners as set forth on Schedule
4.1(d)
hereto
(the “MDC
Cash Management Program”),
and
(ii) to comply on a timely basis with the financial reporting and budgeting
procedures, as well as internal controls over financial reporting, of MDC
Partners as from time to time in effect, which procedures require the approval
of an annual operating budget, capital expenditure budget and cash flow
projections and require management of operating companies to seek approval
prior
to material deviations from such budgets. If any Affiliate of MDC Partners
(other than the Company or any of its subsidiaries) fails to meet its
obligations under the MDC Cash Management Program, then MDC Partners shall
satisfy such obligations to the extent that such Affiliate failed to do so.
(e) The
parties hereto further agree that the Company shall hereby adopt, and shall
take
appropriate steps to cause the employees of the Company to comply with, the
Code
of Conduct of MDC Partners, as the same may be amended from time to
time.
(f) Notwithstanding
anything to the contrary contained in this Agreement, in consideration for
the
payment of the Purchase Price under Section 2.1 of the Purchase Agreement
and
for other good and valuable consideration, the parties hereto hereby (i)
agree
that MDC Partners and/or any of its Affiliates, in connection with its or
any of
its Affiliates’ current or future credit facilities, debt offerings (including,
without limitation, senior, subordinated or mezzanine debt issued in a public
offering or a Regulation S or Rule 144A private placement) or any other debt
agreements, shall be entitled to: (w) pledge or grant a security interest
in or
otherwise have a lien placed upon MDC’s Membership Interests; (x) pledge or
grant a security interest in or otherwise have a lien placed upon the assets
and
properties of the Company and/or its subsidiaries; (y) assign all of its
rights,
benefit, title and interest in the Company and distributions therefrom,
including, without limitation, all rights and claims pursuant to and under
any
Put or Call to, or to an agent or representative on behalf of, its bank or
lender or group of banks or group of lenders or holders of its other senior
debt
(as applicable and collectively, the “Lender”);
and
(z) have the Company and/or its subsidiaries provide guarantees and such
other
ancillary security and related documentation as reasonably required by the
Lender from time to time (the items in (w), (x), (y) and (z) being collectively
referred to as an “MDC
Financing”);
and
(ii) consent unconditionally to (x) the granting of all security and the
execution of all documents required in connection with an MDC Financing and
the
enforcement thereof, where applicable, by the Lender; and (y) any transaction
by
which the Lender becomes the absolute legal and beneficial owner of any
Membership Interests which have been pledged or assigned by it.
16
(g) MDC
Partners shall cause sufficient working capital to be made available to the
Company as shall be determined by the Board of Managers to be reasonably
necessary to execute upon its approved annual operating and capital expenditure
budgets, but in no event shall MDC Partners or any of its Affiliates be required
to fund losses of the Company or any of its subsidiaries. Such working capital
shall be provided to the Company on terms consistent with the MDC Cash
Management Program and accordingly, neither MDC nor any of its Affiliates
shall
be required to provide working capital in the event that the consolidated
cash
balance of the Company in the MDC Cash Management Program is
negative.
(h) The
Company shall comply with all applicable federal, state and local laws and
the
Company shall provide reasonable assistance to MDC and its Affiliates in
their
compliance with all applicable federal, state and local laws, including without
limitation, the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002, as amended
from
time to time. The Company shall use its reasonable best efforts to undertake
the
actions recommended in the 404 Report (as defined in the Purchase
Agreement).
Section
4.2 Authority
of Managers.
Except
as set forth below, unless specifically authorized by a resolution duly adopted
by the Managers, no Manager, solely in his capacity as a Manager, shall have
the
authority or power to act as agent for or on behalf of the Company or any
other
Manager, to do any act which would be binding on the Company or any other
Manager, to incur any expenditures on behalf of or for the Company, or to
execute, deliver and perform any agreements, acts, transactions or other
matters
on behalf of the Company.
Section
4.3 Number
and Qualifications of Managers.
As long
as Zyman owns Class B Units in the Company, there shall be five Managers
of the
Company, of which MDC shall be entitled to appoint three (3) Managers and
Zyman
shall be entitled to appoint two (2) Managers, one of whom shall be ▇▇▇▇▇▇
▇▇▇▇▇
(each Manager appointed by Zyman must be a full-time employee of the Company
or
one of its subsidiaries) and, in the event that ▇▇▇▇▇▇ ▇▇▇▇▇ no longer serves
in
the capacity as “Founder” of the Company, and for so long as the Management
Unitholders own at least 5% of the outstanding Units, the Management Unitholders
shall be entitled to appoint one Manager. No decrease in the number of Managers
shall have the effect of shortening the term of any incumbent Manager. None
of
the Managers need be Members of the Company or residents of the State of
Delaware. The current designees of MDC are ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
and
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇. The other Managers shall be ▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇.
Upon
closing of the proposed DMG acquisition, the Board of Managers shall be
increased to seven (7) Managers, and ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ (additional
MDC
designee) will be added to the Board.
Section
4.4 Election
and Term of Service.
At each
annual meeting of Members held in accordance with this Agreement, the Members
may elect Managers to serve until the next succeeding annual meeting. Subject
to
Section 4.3, the individuals receiving the greatest number of votes (determined
by number of Units cast in favor) shall be the Managers. Cumulative voting
for
the election of Managers shall not be permitted. Each Manager elected shall
serve as Manager for the term for which he is elected and until his successor
shall have been elected by the Members and qualified or until his earlier
death,
resignation, retirement, disqualification or removal in accordance with this
Agreement.
17
Section
4.5 Removal;
Filling of Vacancies.
As long
as ▇▇▇▇▇▇ ▇▇▇▇▇ is the Chief Executive Officer or the Management Unitholders
own
at least 5% of the outstanding Units, only MDC can remove and replace its
appointed Managers and only Zyman or the Management Unitholders, as the case
may
be, can remove and replace its or their respective appointed Managers. Following
such time as SZ ceases to be Chief Executive Officer of the Company and the
Management Unitholders cease to own at least 5% of the outstanding Units,
the
Members by the required vote as set forth in Section 5.5 shall be entitled
to
remove any Manager and to elect for the unexpired term of such Manager so
removed another individual. Upon the resignation, retirement or death of
any of
the Managers of the Company, subject to Section 4.3, the Members by the required
vote as set forth in Section 5.5, shall be entitled to elect another Person
for
the unexpired term of such Manager.
Section
4.6 Place
of Meetings.
Meetings of the Managers, annual, regular or special, may be held either
in
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, unless otherwise agreed to by the Managers
(including, for as long as ▇▇▇▇▇▇ ▇▇▇▇▇ is the Chief Executive Officer of
the
Company, at least one Manager appointed by MDC and one Manager appointed
by
Zyman).
Section
4.7 Annual
Meetings.
Annual
meetings of the Managers, of which no notice shall be required, shall be
held at
the discretion of the Managers immediately following the annual meeting of
Members for the purpose of designating officers of the Company and the
transaction of any other business.
Section
4.8 Regular
Meetings.
The
Managers shall notify each of the Members of regular meetings of the Managers,
which meetings shall be held no less frequently than quarterly on the last
business day of each fiscal quarter or at such times and places as may be
fixed
from time to time by resolution adopted by the Managers. Except as otherwise
provided by statute, any and all business may be transacted at any regular
meeting. The Managers shall be given reasonable notice of the date, time
and
place of any scheduled regular meeting.
Section
4.9 Special
Meetings.
Special
meetings of the Managers may be called by any Manager on not less than
forty-eight hours’ notice to each Manager, either personally or by mail
(overnight service), email, telephone, facsimile or similar communication.
Only
business within the purpose or purposes described in the notice of special
meeting of Managers may be conducted at the meeting.
Section
4.10 Quorum
of and Action by Managers.
At all
meetings of the Managers the presence of a majority of the number of Managers
fixed by or in the manner provided by this Agreement shall be necessary and
sufficient to constitute a quorum for the transaction of business. Unless
otherwise specifically required by law or this Agreement, the act of a majority
of Managers present at a meeting at which a quorum is present shall be the
act
of the Managers; provided that such majority includes the affirmative vote
of
one MDC Manager. If a quorum shall not be present at any meeting of the
Managers, the Managers present may adjourn the meeting to another time by
giving
reasonable notice of the date, time and place of the adjourned meeting to
all
Managers. At any such adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted at the meeting
as
originally convened.
18
Section
4.11 Approval
or Ratification of Acts or Contracts by Members.
The
Managers, in their discretion, may submit any act or contract for approval
or
certification at any annual meeting of the Members, or at any special meeting
of
the Members called for the purpose of considering any such act or contract,
and
subject to the provisions of Section 4.1(a), any act or contract that shall
be
approved or ratified by the holders of a majority of the Units entitled to
vote
thereon or such greater percentage as may be provided by any other applicable
provision of this Agreement shall be as valid and binding upon the Company
and
upon all the Members as if it shall have been approved or ratified by every
Member of the Company.
Section
4.12 Action
Without a Meeting.
Subject
to Section 4.1(a), any action required or permitted to be taken at any meeting
of the Managers may be taken without a meeting, with prior notice of such
contemplated action to each of the Managers (with no requirement to provide
copies to any additional persons described in Section 14.1 or otherwise),
and
without a vote, if a consent or consents in writing, setting forth the action
so
taken, shall be signed by the minimum number of Managers that would have
been
required to approve such action at a meeting and the writing or writings
are
filed with the minutes of proceedings of the Managers. A telegram, telex,
cablegram, an email or similar transmission by a Manager, or a photographic,
photostatic, facsimile or similar reproduction of a writing signed by a Manager,
shall be regarded as signed by the Manager for purposes of this Section
4.12.
Section
4.13 Telephone
Meetings.
Any
Manager may participate in any meeting of Managers by using conference telephone
or similar communications equipment by means of which all individuals
participating in the meeting can hear each other, and participation in a
meeting
pursuant to this Section shall constitute presence in person at such
meeting.
Section
4.14 Interested
Managers and Officers.
No
contract or transaction between the Company and one or more of its Managers
or
between the Company and any other Person in which one or more of its Members,
Managers or officers are shareholders, partners, members, directors, managers
or
officers, or have a financial or equity interest, shall be void or voidable
solely for this reason, or solely because the Manager is present at or
participates in the meeting of the Managers which authorizes the contract
or
transaction, or solely because his or their votes are counted for such purpose,
if: (i) all material facts as to the relationship or interest and as to the
contract or transaction are disclosed or are known to the Managers, and the
Managers in good faith authorize the contract or transaction by the affirmative
vote of a majority of the disinterested Managers, even though the disinterested
Managers be less than a quorum; (ii) the material facts as to the relationship
or interest and as to the contract or transaction are disclosed or are known
to
the Members entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of a majority of the disinterested
holders of Units entitled to vote thereon or such greater percentage as may
be
provided by any other applicable provision of this Agreement; or (iii) the
contract or transaction is fair as to the Company as of the time it is
authorized, approved or ratified by the Managers or the Members.
Section
4.15 Manager’s
Compensation.
No
Manager shall be entitled to receive any compensation for attendance at meetings
of the Managers or otherwise serving as a Manager. Nothing in this Agreement
shall be construed to preclude any Manager from serving the Company in any
other
capacity and receiving proper compensation therefor.
19
Section
4.16 Time
Devoted to Company.
The
Managers shall devote such time to Company business as they deem necessary
to
manage and supervise the business and affairs of the Company in an efficient
manner; but nothing in this Agreement shall preclude the employment of any
agent, third party or Affiliate to manage or provide other services with
respect
to the Company’s assets or business as the Managers shall
determine.
Section
4.17 Liability
of Managers.
Except
as expressly provided under the Act, no Manager shall be liable for the debts,
liabilities, contracts or other obligations of the Company; provided, however,
that each Manager shall be liable for any debts, liabilities, contracts or
other
obligations of the Company incurred or agreed to by such Manager without
authorization and in violation of Section 4.2 of this Agreement.
Section
4.18 2008
Budget.
During
calendar year 2008, the Company shall operate in accordance with the budget
attached hereto as Exhibit 4.18.
ARTICLE
V
MEETINGS
OF MEMBERS
Section
5.1 Annual
Meetings.
An
annual meeting of the Members shall be held on such date, at such time and
at
such place as shall be determined by the Managers and stated in the notice
of
the meeting. At such meeting, the Members shall elect the Managers (subject
to
Section 4.3 above) and transact such other business as may properly be brought
before the meeting.
Section
5.2 Special
Meetings.
Special
meetings of the Members, for any purpose or purposes, unless otherwise
prescribed by statute, the Certificate or this Agreement, may be called by
holders of at least a majority of any class of Units. Only business within
the
purpose or purposes described in the notice of special meeting of Members
may be
conducted at the meeting.
Section
5.3 Place
of Meetings.
Meetings of Members shall be held at such places, within or without the State
of
Delaware, as may from time to time be fixed by the Managers or as shall be
specified or fixed in the respective notices or waivers of notice thereof;
provided, however, the Members agree that such meetings of Members shall
be held
in Atlanta or Toronto, unless otherwise agreed upon by the Members.
Section
5.4 Notice
of Meetings.
Written
or printed notice (which may be given by email) stating the place, day and
hour
of each meeting of the Members and, in case of a special meeting, the purpose
or
purposes for which the meeting is called, shall be delivered not less than
five
nor more than fifty days before the date of the meeting, either personally,
by
mail or by email, by or at the direction of any Manager or individual calling
the meeting, to each Member entitled to vote at the meeting; provided, however,
that notice of any meeting shall not be required if all Members not receiving
notice waive any and all requirements for giving notice of such meeting of
the
Members.
20
Section
5.5 Quorum
of and Action by Members.
With
respect to any matter, the holders of at least a majority of the Units entitled
to vote on that matter, present in person or represented by proxy shall
constitute a quorum of each meeting of Members for the transaction of business
with respect to that matter. Unless otherwise provided in this Agreement,
the
Members represented in person or by proxy at a meeting of Members at which
a
quorum is not present may adjourn the meeting until such time and place as
may
be determined by a vote of the holders of a majority of the Units represented
in
person or by proxy at that meeting. At any such adjourned meeting at which
a
quorum shall be present or represented, any business may be transacted that
might have been transacted at the meeting as originally convened. Except
as
otherwise specifically provided in this Agreement (including without limitation,
the provisions of Section 4.1(a) hereof) or under applicable law, with respect
to any matter the affirmative vote or consent of the holders of a majority
of
the Units (voting together as one class) entitled to vote on that matter
and
represented in person or by proxy at a meeting of Members at which a quorum
is
present shall be the act of the Members. Unless otherwise provided in this
Agreement, once a quorum is present at a meeting of Members, the Members
represented in person or by proxy may conduct such business as may be properly
brought before the meeting until it is adjourned, and the subsequent withdrawal
from the meeting of any Member or the refusal of any Member represented in
person or by proxy to vote shall not affect the presence of a quorum at the
meeting.
Section
5.6 Action
Without a Meeting.
Any
action required by the Act to be taken at any annual or special meeting of
Members, or any action which may be taken at any annual or special meeting
of
Members, may be taken without a meeting, with prior notice of such contemplated
action to each of the Members thereof (with no requirement to provide copies
to
any additional persons described in Section 14.1 or otherwise), and subject
to
Section 4.1(a), without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the Members holding a majority
of
all of the Units (or if a higher percentage of Units is required to take
action,
such higher percentage). A telegram, telex, cablegram, an email or similar
transmission by a Member, or a photographic, photostatic, facsimile or similar
reproduction of a writing signed by a Member, shall be regarded as signed
by the
Member for purposes of this Section 5.6.
Section
5.7 Telephone
Meetings.
Subject
to the provisions of applicable law and this Agreement regarding notice of
meetings, a Member may participate in any meeting by using conference telephone
or similar communications equipment by means of which all individuals
participating in the meeting can hear each other, and participation in a
meeting
pursuant to this Section 5.7 shall constitute presence in person at such
meeting, except when a Person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that
the
meeting was not lawfully called or convened.
ARTICLE
VI
OFFICERS
Section
6.1 Officers.
The
Managers may designate one or more individuals (who may or may not be Managers)
to serve as officers of the Company. The Company shall have such officers
as the
Managers may from time to time determine. Any two or more offices may be
held by
the same individual. An officer of the Company shall have the duties and
responsibilities consistent with his position and shall perform such duties
and
responsibilities as shall from time to time be prescribed or delegated to
him by
the Managers, subject to the terms of any employment agreement with the Company
or one of its subsidiaries to which such officer may be a party. The Managers
agree that the officers shall be authorized to take the actions set forth
on
Exhibit
6.1
hereto
without further approval of the Managers.
21
ARTICLE
VII
ACCOUNTING
AND TAX MATTERS; REPORTS; BANKING
Section
7.1 Books
and Records.
At all
times during the continuance of the Company, the Company shall maintain and
cause each of its subsidiaries, if any, to maintain, at their respective
principal place of business, separate books of account that shall show a true
and accurate record of all costs and expenses incurred, all charges made, all
credits made and received and all income derived in connection with the
operation of their respective businesses in accordance with United States
generally accepted accounting principles, consistently applied from year to
year
(“GAAP”).
Such
books of account, together with a copy of this Agreement and of the Certificate,
shall at all times be maintained at the principal place of business of the
Company, shall be open to inspection and examination at reasonable times by
each
Member and its duly authorized representative for any purpose reasonably related
to such Member’s interest as a Member of the Company.
Section
7.2 Capital
Accounts.
Each
Member’s initial individual capital account (the “Capital
Account”)
shall
be as set forth on Schedule 3.1 and adjusted pursuant to Section 3.1. Each
Capital Account shall be maintained by the Company for each Member as provided
below:
(a) Each
Member’s Capital Contributions when made shall be credited to such Member’s
Capital Account. The Capital Account of each Member shall, except as otherwise
provided in this Agreement, be (i) credited with the amount of cash and the
fair
market value of any property contributed to the Company by such Member or its
predecessor in interest (net of liabilities secured by such contributed property
that the Company is considered to assume or take subject to under Section 752
of
the Code), (ii) credited with the amount of any Profits or items of income
allocated to such member under Section 3.3 or its predecessor in interest for
federal income tax purposes, (iii) debited by the amount of any Loss or items
of
deductions allocated to such member under Section 3.3 or its predecessor in
interest for federal income tax purposes, and (iv) debited by the amount of
cash
or the fair market value of any property distributed to such Member its
predecessor in interest (net of liabilities secured by such distributed property
that such Member is considered to assume or take subject to under Section 752
of
the Code). Immediately prior to any distribution of property by the Company,
the
Members’ Capital Accounts shall be adjusted, as required by Treasury Regulation
Section 1.704-1(b)(2).
(b) Any
adjustments of basis of Company property provided for under Sections 734 and
743
of the Code and comparable provisions of state law (resulting from an election
under Section 754 of the Code or comparable provisions of state law) shall
not
affect the Capital Accounts of the Members except to the extent required by
Treasury Regulation § 1.704-1(b)(2)(iv)(m), and the Members’ Capital Accounts
shall be debited or credited pursuant to the terms of this Section 7.2 as if
no
such election had been made.
22
(c) It
is the
intention of the parties that the Capital Account of each Member be kept in
the
manner required under Treasury Regulation § 1.704-1(b)(2)(iv).
(d) Capital
Accounts shall be adjusted, in a manner consistent with this Section 7.2, to
reflect any adjustments in items of Company Profits, Losses, income, gain or
deduction that result from amended returns filed by the Company or pursuant
to
an agreement by the Company with the Internal Revenue Service or a final court
decision.
(e) The
“Unit
Capital Account”
of
any
Unit owned by a Member shall be equal to the Capital Account of such Member
divided by the number of Units owned by such Member. Upon a transfer of Class
B
Units pursuant to Article X hereof, an allocable portion of the Class B Member’s
Capital Account with respect to such Class B Units shall be transferred to
the
purchaser of such Units.
Section
7.3 Tax
Matters Partner.
The
Managers shall appoint one of the Members as the tax matters partner
(“TMP”)
under
Section 6231 of the Code, and until the Managers shall appoint another Member,
such TMP shall be MDC. The TMP shall inform each other Member of all significant
tax matters that may come to its attention (including, without limitation,
any
tax audits of the Company) and shall forward to each other Member copies of
all
written communications it may receive in that capacity. The TMP will permit
each
Member to participate in any conferences or meetings with any taxing authority
relating to any tax audit of the Company and any subsequent administrative
or
judicial proceedings. Nothing in this Section 7.3 shall limit the ability of
any
Member to take any action in its individual capacity with respect to tax audit
matters that is left to the determination of an individual Member under Sections
6221 through 6233 of the Code or under any similar state or local provision.
The
TMP shall be entitled to the indemnification provided by the Company as set
forth in Article XI.
Section
7.4 Tax
Elections.
The TMP
shall make the following elections on behalf of the Company:
(a) To
elect
the fiscal year ending December 31 as the Company’s fiscal year;
(b) To
elect
the accrual method of accounting and partnership tax treatment;
(c) To
elect,
in accordance with Sections 195 and 709 of the Code and applicable Treasury
Regulations and comparable state law provisions, to treat all organization
costs
of the Company as deferred expenses amortizable over 180 months;
(d) To
elect
under Section 754 of the Code to adjust the basis of the Company’s assets
pursuant to Sections 734 and 743 of the Code; and
(e) To
elect
with respect to such other federal, state and local tax matters as the Managers
shall determine from time to time.
23
Section
7.5 Bank
Accounts; Investment of Company Funds.
The
Managers shall cause one or more accounts to be maintained in the name of the
Company in one or more banks, which accounts shall be used for the payment
of
expenditures incurred in connection with the business of the Company and in
which shall be deposited any and all receipts of the Company. All amounts shall
be and remain the property of the Company and shall be received, held and
disbursed for the purposes specified in this Agreement. There shall not be
deposited in any of such accounts any funds other than funds belonging to the
Company, and no other funds shall in any way be commingled with such funds.
The
Managers may invest or cause to be invested the Company funds in any manner
which the Managers deem appropriate, in their discretion, and is consistent
with
prudent business practices. Notwithstanding anything in this Section 7.5 to
the
contrary, the Company and/or its subsidiaries shall maintain such accounts
and
deposit the funds of the Company and its subsidiaries in such manner as may
be
required or advisable in connection with (i) the MDC Cash Management Program
during the Company’s participation in the program or (ii) an MDC
Financing.
Section
7.6 Signature
of Negotiable Instruments.
All
bills, notes, checks or other instruments for the payment of money shall be
signed or countersigned by such officer, officers, agent or agents, and in
such
manner, as are permitted by this Agreement and as from time to time may be
prescribed by resolution (whether general or special) of the
Managers.
ARTICLE
VIII
COVENANTS
OF THE MEMBERS
Section
8.1 Independent
Accountants.
Notwithstanding anything to the contrary in this Agreement, MDC shall be
entitled to appoint the independent public accountants of the Company to audit
the Company’s financial statements.
ARTICLE
IX
DISSOLUTION,
LIQUIDATION AND TERMINATION
Section
9.1 Dissolution.
The
Company shall be dissolved upon the first to occur of either of the approval
of
the Members or the entry of a decree of judicial dissolution under the Act.
As
promptly as possible following the occurrence of either of the foregoing events
effecting the dissolution of the Company, a Manager of the Company shall execute
a statement of intent to dissolve, in such form as shall be prescribed by the
Secretary of State of Delaware.
Section
9.2 Liquidation.
Upon
dissolution of the Company, the Members shall appoint a Manager as liquidating
trustee, who shall immediately commence to wind up the Company’s affairs;
provided, however, that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the satisfaction of liabilities
to
creditors so as to enable the Members to minimize the normal losses attendant
upon a liquidation. Any distribution to the Members in liquidation of the
Company shall be made by the later of the end of the taxable year in which
the
liquidation occurs or 90 days after the date of such liquidation.
Notwithstanding any provisions in this Agreement to the contrary, no Member
shall be obligated to restore a deficit balance in its Capital Account at any
time. The proceeds of liquidation shall be distributed, as realized, in the
manner provided in the Act, pursuant to Section 3.4. Subject to the immediately
following sentence, the Members shall continue to share Profits and Losses
during liquidation in the same proportions, as specified in Section 3.3 hereof,
as before liquidation. Notwithstanding anything to the contrary herein, the
Managers shall in their good faith discretion (and in a manner which reflects
the economic interests of the Members consistent with the intent of the
transactions set forth in this Agreement and the Purchase Agreement) allocate
items of income, gain, deduction, and loss for the year of liquidation (and
for
earlier years if necessary to the extent then possible) so as to give Members
positive Capital Account balances, immediately before the distributions provided
for in the second preceding sentence, equal to the amount (if any) that would
be
distributed to Members if distributions were made in accordance with Section
3.4(a) hereof. In the event that such Manager is unable to perform in his
capacity as liquidating trustee due to bankruptcy, dissolution, death,
adjudicated incompetency or any other termination of such Manager as an entity,
the liquidating trustee shall be a Person approved by the unanimous vote of
the
Membership Interests. With respect to this provision, the term “liquidation”
shall have the same meaning as set forth in Treasury Regulation
§1.704-1(b)(2)(ii) as in effect at such time, provided that the events specified
in Section 10 shall not be deemed a “liquidation”.
24
Section
9.3 Termination.
The
Company shall terminate when all of the assets of the Company have been
distributed in the manner provided for in this Article IX, and the Certificate
shall have been canceled in the manner required by the Act.
Section
9.4 Claims
of the Members.
Members
and former Members shall look solely to the Company’s assets for the return of
their Capital Contributions, and if the assets of the Company remaining after
payment of or due provision for all debts, liabilities and obligations of the
Company are insufficient to return such Capital Contributions, the Members
and
former Members shall have no recourse against the Company or any other
Member.
ARTICLE
X
RESTRICTIONS
ON TRANSFERS; LIQUIDITY RIGHTS
Section
10.1 Transfer
by the Members.
(a) Except
as
provided in the next sentence, no holder of Class B Units shall directly or
indirectly sell, transfer, assign, pledge, encumber, hypothecate, distribute,
dividend or similarly dispose of, either voluntarily or involuntarily, or enter
into any contract, option or other arrangement or understanding with respect
to
the sale, transfer, assignment, pledge, encumbrance, hypothecation,
distribution, dividend or similar disposition of (collectively, “transfer”)
any
Class B Unit without the consent of MDC (which shall not be unreasonably
withheld in connection with a transfer to any trust for the benefit of a holder
of Class B Units or his or her immediate family for estate planning purposes),
except in a transaction pursuant to this Article X. Class A Units and any Class
B units held by MDC or its transferees shall be freely transferable, directly
or
indirectly, without restriction.
(b) Notwithstanding
anything in the foregoing to the contrary, a Management Unitholder may offer
to
sell any or all of its Class B Units (for purposes of this Section 10.1, the
“Subject
Units”)
to the
following Persons in accordance with the following procedures:
25
(i) such
Management Unitholder shall first offer to sell such Subject Units to the
Company and the Company shall have the exclusive right to purchase such Subject
Units for a period of 30 days following the later of (x) the receipt of the
notice referred to in Section 10.1(c) and (y) the day that is six months and
one
day after such Subject Units were acquired by the Management Unitholder;
and
(ii) in
the
event that not all of the Subject Units are purchased pursuant to clause (i)
above by the end of the period specified therein, such Management Unitholder
shall offer to sell such unsold Subject Units to MDC and MDC shall have the
exclusive right to purchase such Subject Units for a period of 30 days following
the termination of the period set forth in clause (i) above. For purposes of
this Section 10.1, the Persons described in clauses (i) and (ii) are known
collectively as the “Purchasers”.
(c) In
order
for a Management Unitholder to exercise its right to sell its Class B Units
pursuant to Section 10.1(b), such Management Unitholder shall deliver a written
notice to the Company of its intention to sell its Units pursuant to this
Section 10.1, which notice shall set forth the number of Subject Units being
offered for sale and the FMV (as defined in Section 10.10) per Unit (which
may
be the most recent determination made by the Board of Managers). Each Purchaser
may exercise its rights under this Section 10.1 by delivering a written notice
to the selling Management Unitholder. The purchase and sale of the Units upon
the exercise of an offer to sell pursuant to Section 10.1(b) shall be made
in
accordance with the applicable provisions of Section 10.10.
Section
10.2 Special
Unit Call; Special Unit Put; Eight Year Call.
(a) Subject
to Section 10.2(d), at any time during the period commencing on the fifth
anniversary of the Effective Time in the case of the Management Unitholders,
and
the third anniversary of the Effective Time in the case of Zyman, and ending,
solely in the case of the Management Unitholders, on the day prior to the eighth
anniversary of the Effective time (such period being referred to herein as
the
“Special
Unit Call Period”)
(it
being understood that with respect to Zyman, the right of MDC to call the
Special Zyman Units shall continue indefinitely), MDC shall have the right
(but
not the obligation), exercisable no more than once in any twelve-month period
(but which may be exercised for all or a portion of such Units upon each such
exercise) with respect to each of Zyman and each Management Unitholder, to
require Zyman and each Management Unitholder to sell to it (such right, the
"Call"),
in the
case of Zyman, up to an aggregate of 2,750,000 Units (such number of Units,
the
"Special
Zyman Units")
from
time to time, and in the case of each Management Unitholder, up to an aggregate
of such Management Unitholder's Pro Rata Portion (as defined in Section 13.1)
of
3,250,000 Units during the Special Unit Call Period (such Call, the "Special
Unit Call");
provided that MDC shall not be entitled to Call any Units from a Member until
the day that is six months and one day after the date on which such Units were
acquired by such Member. The purchase and sale of Units upon the exercise of
a
Special Unit Call shall be made in accordance with the applicable provisions
set
forth in Section 10.10. Any Call Exercise Notice delivered pursuant to this
section or any other relevant section of this Article X shall set forth the
number of Units subject to the Call. The Special Zyman Units subject to the
Special Unit Call at any time shall be reduced by any Special Zyman Units
purchased by MDC pursuant to Section 10.2(b).
26
(b) Subject
to Section 10.2(d), at any time on or after April 1, 2008, and so long as,
prior
to such date, the engagement of ▇▇▇▇▇▇ ▇▇▇▇▇ & Company (“Servicer”)
pursuant to that certain Personal Service Agreement dated April 1, 2007 (as
amended from time to time, the “PSA”)
has
not been terminated under any of the circumstances described in Section 10.4(a)
(it being understood that the right of Zyman to put the Special Zyman Units
described herein shall continue indefinitely; provided that, if Servicer’s
engagement pursuant to the PSA is terminated as described in Section 10.4(a),
Zyman's rights under this Section 10.2(b) shall automatically terminate), Zyman
shall have the right (but not the obligation), exercisable not more than once
in
any twelve-month period (but, which may be exercised for all or a portion of
such Units upon each such exercise), to require MDC to purchase from it (such
right, the "Put"
(which
term shall apply to any similar right held by Zyman or a Management Unitholder
under this Article X)), the Special Zyman Units (such Put, the "Special
Unit Put");
provided that Zyman shall not be entitled to Put any Units until the day that
is
six months and one day after the date on which such Units were acquired by
Zyman; and provided further, not more than one-half of the Special Zyman Units
may be put by Zyman by delivery of a Put Exercise Notice issued prior to
April 1, 2009. Subject to the foregoing, Zyman may exercise the Special
Unit Put by delivering written notice of exercise ( a "Put
Exercise Notice"
(which
term shall apply to any notice of exercise of a Put pursuant to this Article
X)
and together with a Call Exercise Notice, an "Exercise
Notice")
to MDC
on or after April 1, 2008. The purchase and sale of the Special Zyman Units
upon the exercise of a Special Unit Put shall be made in accordance with the
applicable provisions set forth in Section 10.10. Any Put Exercise Notice
delivered pursuant to this section or any other relevant section of this Article
X shall set forth the number of Special Zyman Units subject to the Put. The
Special Zyman Units subject to the Special Unit Put at any time shall be reduced
by any Special Zyman Units purchased by MDC pursuant to Section
10.2(a).
(c) At
any
time on or after the eighth anniversary of the Effective Time (the “Eighth
Anniversary Call Period”),
MDC
shall have the right (but not the obligation) to Call any and all Units then
owned by Zyman (such right, the “Eight
Year Call”);
provided that MDC shall not be entitled to Call any Units from Zyman until
the
day that is six months and one day after the date on which such Units were
acquired by Zyman. MDC may exercise the Eight Year Call by delivering a Call
Exercise Notice to Zyman during the Eighth Anniversary Call Period. The purchase
and sale of the Units upon the exercise of a Call shall be made in accordance
with the applicable provisions set forth in Section 10.10.
(d) Notwithstanding
the foregoing, if the Revenues for the twelve months ending on the date of
an
Exercise Notice (such date, the “Exercise
Date”)
are
less than the average Revenues for the two consecutive twelve month periods
immediately preceding the month of the Exercise Date, then neither MDC nor
Zyman
may exercise the Special Unit Call or the Special Unit Put, as applicable,
in
such year.
Section
10.3 Put
and Call of Zyman Units upon Involuntary Termination of Servicer’s Engagement
Pursuant to the PSA.
(a)
Notwithstanding the Put and Call Periods described in Section 10.2(a) and
Section 10.2(b) above, in the event that during the period commencing on the
date hereof and ending on the eighth anniversary of the Effective Time (such
period, the “Zyman
Involuntary Termination Period”)
Servicer shall no longer be engaged under the PSA by reason of SZ’s death,
Disability (as defined in the PSA), a termination of Servicer under the PSA
by
the Company without Cause, or a termination by Servicer for Good Reason under
the PSA, then
27
(i) Zyman
shall be entitled to Put all or a portion of its Units to the Company (the
“Zyman
Termination Put”)
pursuant to and in accordance with the applicable provisions of Section 10.10;
provided, that Zyman shall not be entitled to Put any Units that it has held
for
a period of six months or less. Zyman may exercise the Zyman Termination Put
by
delivering a Put Exercise Notice to the Company anytime during the Zyman
Involuntary Termination Period. The Company shall be entitled to assign its
obligation to purchase all or a portion of such Units Put by Zyman to MDC;
and
(ii) the
Company shall be entitled to Call (the “Company Termination
Call”)
all or
a portion of Zyman’s Units pursuant to and in accordance with the applicable
provisions of Section 10.10 and, to the extent that the Company has not
exercised the Company Termination Call, MDC shall be entitled to Call any
remaining Units; provided, that neither the Company nor MDC shall be entitled
to
Call any Units which have not been held by Zyman for at least six months. Each
of the Company and MDC may exercise the Company Termination Call by delivering
a
Call Exercise Notice to Zyman anytime during the Zyman Involuntary Termination
Period.
(b) Any
Units
which have not been purchased pursuant to this Section 10.3 during the Zyman
Involuntary Termination Period shall become subject to the Eight Year
Call.
Section
10.4 Call
for Zyman Units upon Servicer Resignation Prior to Third anniversary of
Effective Time; Termination for Cause.
(a) Notwithstanding
the Call Periods described in Section 10.2(a) above, in the event that Servicer
voluntarily terminates its engagement with the Company pursuant to the PSA
at
any time prior to the third anniversary of the Effective Time (other than for
Good Reason) or in the event that Servicer’s engagement is terminated by the
Company for Cause pursuant to the PSA at any time, then the Company shall have
the right to Call all or a portion of Zyman’s Units pursuant to and in
accordance with the applicable provisions of Section 10.10 and, to the extent
that the Company has not exercised the Call, MDC shall be entitled to Call
any
remaining Units; provided that neither the Company nor MDC shall be entitled
to
Call any Units which Zyman has not held for a period of at least six months.
Each of the Company and MDC may exercise the Call by delivering a Call Exercise
Notice to Zyman. Upon the occurrence of a termination of Servicer’s engagement
pursuant the PSA described in this Section 10.4, Zyman shall no longer be
entitled to exercise the Special Unit Put.
(b) Any
Units
which have not been purchased pursuant to this Section 10.4 on or before the
eighth anniversary of the Effective Time shall become subject to the Eight
Year
Call.
28
Section
10.5 Call
for Zyman Units upon Servicer Resignation On or Following the Third Anniversary
of Effective Time and Prior to the Eighth Anniversary of the Effective
Time.
(a) Notwithstanding
the Call Periods described in Section 10.2(a) above, in the event that Servicer
voluntarily terminates its engagement with the Company pursuant to the PSA
at
any time on or following the third anniversary of the Effective Time and prior
to the eighth anniversary of the Effective Time (including, without limitation,
if Servicer gives written notice of his intention not to renew the term of
Servicer’s engagement pursuant to the terms of the PSA), then the Company shall
have the right to Call all or a portion of Zyman’s Units pursuant to and in
accordance with the applicable provisions of Section 10.10 and, to the extent
that the Company has not exercised the Call, MDC shall be entitled to Call
any
remaining Units; provided that neither the Company nor MDC shall be entitled
to
Call any Units which Zyman has not held for a period of at least six months.
Each of the Company and MDC may exercise the Call by delivering a Call Exercise
Notice to Zyman.
(b) Any
Units
which have not been purchased pursuant to this Section 10.5 on or before the
eighth anniversary of the Effective Time shall become subject to the Eight
Year
Call.
Section
10.6 Put
and Call for Management Unitholders’ Units upon Termination of
Employment.
In the
event that a Management Unitholder shall no longer be an employee of the Company
or any of its subsidiaries by reason of such Management Unitholder’s death,
Disability, a termination by the Company without Cause or a termination by
such
Management Unitholder for Good Reason, then:
(a)
such
Management Unitholder shall be entitled to Put any such Units to the Company
at
a price per Unit equal to the FMV by delivering a Put Exercise Notice to the
Company (“Manager
Termination Put”);
provided that such Management Unitholder shall not be entitled to Put any Units
which have not been held by such Management Unitholder for a period of at least
six months. The Company shall be entitled to assign its obligation to purchase
all or a portion of such Units to MDC; and
(b)
the
Company shall be entitled to Call (the “Manager
Termination Call”)
all or
a portion of such Management Unitholder’s Units pursuant to and in accordance
with the applicable provisions of Section 10.10 and, to the extent that the
Company has not exercised the Manager Termination Call, MDC shall be entitled
to
Call any remaining Units; provided that neither the Company nor MDC shall be
entitled to Call any Units which have not been held by such Management
Unitholder for a period of at least six months. Each of the Company and MDC
may
exercise the Manager Termination Call by delivering a Call Exercise Notice
to
the Management Unitholder.
29
Section
10.7 Call
for Management Unitholders’ Units Upon Resignation of a Management Member;
Termination for Cause.
Notwithstanding the Call Periods described in Section 10.2(a) above, in the
event that a Management Unitholder voluntarily terminates his employment with
the Company (other than a termination for Good Reason) or in the event that
such
Management Unitholder’s employment is terminated by the Company for Cause at any
time, then the Company shall have the right to Call any or all of such
Management Unitholder’s Units pursuant to and in accordance with the applicable
provisions of Section 10.10 and, to the extent that the Company has not
exercised the Call, MDC shall be entitled to Call any remaining Units; provided
that neither the Company nor MDC shall be entitled to Call any Units which
have
not been held by such Management Unitholder for a period of at least six months.
Each of the Company and MDC may exercise the Call by delivering a Call Exercise
Notice to the Management Unitholder.
Section
10.8 Sale
of Units by Zyman to the Company.
(a) The
Company has established the restricted Unit purchase plan set forth as Exhibit
10.8 (the “Plan”),
pursuant to which it will offer to sell up to 4,379,374 Units to employees
of
the Company, from time to time. Such Units shall be offered for sale to such
employees designated by the Chief Executive Officer of the Company and approved
by MDC from time to time (the “Employee
Offerees”),
in
accordance with the following schedule:
(i) 2,360,000
Units will be offered to the Employee Offerees on or as soon as reasonably
practicable after the Closing Date (as defined in the Purchase Agreement) for
a
period of 60 days;
(ii) 1,000,000
Units plus any Units not sold pursuant to clause (i) above will be offered
to
the Employee Offerees on or before the first anniversary of the Closing Date
for
a period of 60 days;
(iii) 1,000,000
Units plus any Units not sold pursuant to clauses (i) and (ii) above will be
offered to the Employee Offerees on or before the second anniversary of the
Closing Date for a period of 60 days; and
(iv) any
Units
not purchased pursuant to clauses (i), (ii) and (iii) will be offered to the
Employee Offerees on or before the third anniversary of the Closing Date for
a
period of 60 days;
provided,
that in the event that Servicer shall no longer be engaged by the Company
pursuant to the PSA as a result of SZ’s death or Disability (as defined in the
PSA), the Company shall immediately offer to sell to the applicable Employee
Offerees any of the 4,379,374 Units which have not previously been offered
pursuant to this Section 10.8(a) and, provided further, that Zyman shall be
required to hold (and may not Put pursuant to Section 10.3) a number of Units
equal to such Units until the 60th day following the date of SZ’s death or the
date on which Servicer’s engagement pursuant to the PSA is terminated as a
result of SZ’s Disability, as the case may be and shall be required to hold
until the closing of the purchase any Units subscribed for pursuant to the
offering.
(b) Such
Units shall be offered to the Employee Offerees pursuant to clause (a) for
FMV
(as determined based on the most recent valuation prior to the date of each
offer) and the consideration in respect of such Units shall be in the form
of
cash and/or notes payable by the Employee Offerees to the Company substantially
in the form of Exhibit
10.8 (each
a
“Purchase
Note”)
or, at
the election of the relevant Buyer (as defined below), cash.
30
(c) In
the
event that all of the 4,379,374 Units have not been subscribed for by the
Employee Offerees pursuant to clause (a) by the 61st
day
after the date on which Units are offered pursuant to clause (a)(iv) above
and
purchased by such Employee Offerees within the time period set forth in Section
10.10(d) to the extent such Units have been subscribed for, the Company shall
create a plan pursuant to which it shall offer to the Employee Offerees the
option to purchase any such unsold Units beginning no later than the
90th
day
after the third anniversary of the Effective Time, which option may be exercised
on or before the fifth anniversary of the Effective Time (such period, the
“Option
Period”)
at a
price equal to the FMV per Unit as of the date of such offer (such option,
the
“Employee
Option”).
The
consideration paid by an Employee Offeree upon the exercise of such Employee
Option shall be cash in an amount equal to no less than $0.50 per purchased
Unit
(or
such
lesser cash amount as determined by the Board of Managers, in its sole
discretion) and
a
Purchase Note for the remaining consideration. Notwithstanding anything in
this
Agreement to the contrary (including Sections 10.3 and 10.4), during the Option
Period, Zyman shall be required to hold a number of Units at least equal to
the
number of Units subject to the Employee Option (as such number may be reduced
from time to time).
(d) For
each
Unit sold by the Company pursuant to this Section 10.8 Zyman shall sell and
the
Company shall purchase or redeem one Unit from Zyman and in consideration
therefor the Company shall pay and assign to Zyman the cash and/or Purchase
Notes paid to the Company by any holder in respect of such Units; provided
that
the Company shall not purchase or redeem any Units which have not been held
by
Zyman for a period of at least six months.
Section
10.9 Binding
Obligations Upon Exercise of a Put, a Call or an Offer to
Sell.
Upon
the proper delivery of an Exercise Notice in respect of the exercise of a Put
by
a Seller or a Call by a Buyer or a notice of an Offer to Sell by the Management
Unitholders or the Company, any such Seller shall be obligated to sell the
Units
subject to the Call or the Offer to Sell or which it has agreed to sell pursuant
to a Put as set forth in the applicable notice and any such Buyer shall be
obligated to buy the Units subject to the Put or which it has agreed to purchase
pursuant to an Offer to Sell or a Call as set forth in the applicable notice,
in
each case, in accordance with the applicable provisions of Section
10.10.
Section
10.10 Put/Call
Purchase Price.
(a) Calculation/Payment
of the Put/Call Purchase Price.
(i)
In
connection with the exercise of any Put pursuant to Section 10.2(b) or Section
10.3(a) or any Call pursuant to Section 10.2(a), Section 10.3(a) or Section
10.5, or Call of the Special Zyman Units pursuant to the Eight Year Call, each
Buyer shall calculate and pay to Zyman or the Management Unitholders, as
applicable, the following amounts (collectively, the “Put/Call
Purchase Price”):
(x) within
5
Business Days following the determination of PBT for YP-1, but in no event
earlier than the Article X Closing Date (as defined in Section 10.10(d) hereof),
an amount (the “First
Payment”)
equal
to:
31
|
AP
× |
{
|
(PBT
for YP-1)
|
×
4.75 |
}
|
|
3
|
(y) within
5
Business Days following the determination of PBT for YP, but in no event earlier
than the Article X Closing Date), an amount (the “Second
Payment”)
equal
to:
|
{
|
AP
×
|
(((PBT
for YP-1) + (PBT for YP)) × 4.75)
|
}
|
–
{First Payment}
|
|
3
|
(z) within
5
Business Days following the determination of PBT for YP+1, but in no event
earlier than the Article X Closing Date), an amount (the “Final
Payment”)
equal
to:
|
{
|
AP
×
|
(
|
((PBT for YP-1) + (PBT for YP)
+
(PBT for YP+1))
|
×
AM
|
)
|
}
|
–{First Payment + Second Payment}
|
|
3
|
(ii) In
connection with the exercise of the Eight Year Call (except to the extent such
Eight Year Call relates to the Special Zyman Units to which clause (i) above
shall apply) and a Call pursuant to Section 10.4(a), the Buyer shall calculate
and pay to Zyman the product of 50% multiplied by the Put/Call Purchase Price;
provided that in connection with a Call pursuant to Section 10.4(a) because
Servicer voluntarily terminates its engagement with the Company pursuant to
the
PSA, the price paid for any Zyman Special Units shall be the Put/Call Purchase
Price.
(iii) In
connection with the exercise of a Call pursuant to Section 10.7 or an option
pursuant to Section 10.8(c) or a Put pursuant to Section 10.6, the Buyer shall
pay to the applicable seller the product of the number of Units being purchased
and the FMV per Unit.
(b) Other
Definitions.
(i) “AM”
shall
mean the multiple based on applicable PBT Margin and CRGR, as set forth
below:
|
PBT
Margin
|
Multiple
Range
|
||||||
|
CRGR
<=10%
|
CRGR
>=25%
|
||||||
|
<
30%
|
4.0
|
4.0
|
|||||
|
>=
30% & < 35%
|
4.0
|
4.5
|
|||||
|
>=
35% & < 40%
|
4.5
|
5.0
|
|||||
|
>=
40%
|
5.0
|
5.5
|
|||||
32
To
the
extent that CRGR and/or PBT Margin are within the ranges noted above, the
applicable multiple shall be prorated accordingly.
(ii) “Applicable
Percentage”
or
“AP”
shall
mean the percentage that the Class B Units being sold and purchased pursuant
to
a Put or Call represents out of the total number of issued and outstanding
Units, regardless of class.
(iii) “Cumulative
Revenue Growth Rate”
or
“CRGR”
shall
mean the cumulative annual percentage growth rate in Revenues for the three-year
period ending December 31 of YP+1 (based on the applicable Base Revenues).
CRGR
shall be calculated as follows:
|
CRGR
=
|
[(
|
Revenues
for YP + 1
Base
Revenues
|
)
|
1/3
|
– 1
|
]
|
×
100%
|
For
purposes of calculating CRGR, the base revenues (“Base
Revenues”)
shall
be the Revenues for YP-2.
(iv) “FMV”
shall
mean, with respect to any Units, the price that would be paid for such Units,
assuming a willing seller and a willing buyer, as determined in good faith
by
the Board of Managers of the Company from time to time (and no less frequently
than annually) with the advice of an independent appraiser selected by the
Board
of Managers of the Company.
(v) “Market
Value”
with
respect to the First Payment, Second Payment and Final Payment, as the case
may
be, shall be the average of the closing prices per share of MDC Stock in United
States dollars reported on the NASDAQ Stock Market for the 20 consecutive
trading days ending three trading days immediately prior to the date the First
Payment, Second Payment, Final Payment, as the case may be, are required to
be
paid pursuant to Sections 10.10(a)(i)(x), (y), and (z), respectively. The
closing price for each day shall be the closing price on the NASDAQ Stock
Market.
(vi) “Measuring
Period”
shall
mean, as applicable, (x) the calendar year or years included in the applicable
Put/Call Purchase Price calculation under Section 10.10(a) above or (y) any
Distribution Period Calendar Year.
(vii) “PBT
Margin”
for
the
Measuring Period shall equal the percentage equivalent of the quotient
determined by dividing (a) the total PBT plus Class C PBT for the Measuring
Period, by (b) the total Revenues for the Measuring Period. For purposes of
this
Agreement, the PBT Margin shall be rounded up or down, as the case may be,
to
the nearest one-tenth of one percent.
(viii) “Revenues”
during
each relevant calendar year or other period, as applicable, shall mean
consolidated revenues of the Company and its subsidiaries determined in
accordance with GAAP, consistently applied with the accounting principles and
procedures historically utilized by the Company.
33
(ix) “YP”
shall
mean the calendar year in which the respective Put or Call was exercised by
proper delivery of an Exercise Notice.
(x) “YP+1”
shall
mean the calendar year immediately following YP.
(xi) “YP+2”
shall
mean the calendar year immediately following YP+1.
(xii) “YP-1”
shall
mean the calendar year immediately preceding YP.
(xiii) “YP-2”
shall
mean the calendar year immediately preceding YP-1.
(c) Accounting
Procedures.
(i) Upon
the
exercise of (x) a Put pursuant to Section 10.2(b) or Section 10.3(a) or (y)
a
Call pursuant to Section 10.2(a), Section 10.2(c), Section 10.4(a) or Section
10.5(a) involving the sale of Units representing at least 2% of the outstanding
Units, MDC shall, and upon the exercise of any Put or Call pursuant to any
of
the foregoing sections involving the sale of Units representing less than 2%
of
the outstanding Units, MDC may at its option, cause KPMG LLP, or another
independent national accounting firm chosen by MDC (the “Accountants”),
as
soon as practicable after the end of years YP, YP+1 and YP+2, to prepare in
accordance with GAAP, a report containing an audited consolidated balance sheet
of the Company and its subsidiaries, if any, as of the close of business on
the
anniversary of the Effective Time of each such period, and a related audited
consolidated statement of income of the Company and its subsidiaries, if any,
for the relevant year then ended, in each case together with a statement of
the
Accountants based upon such report which (x) states that it was prepared in
accordance with this Agreement and (y) sets forth for the period under
examination the applicable calculation of PBT, Revenues, PBT Margin and AM,
and
(z) sets forth all adjustments required to be made to such audited financial
statements in order to make the calculations required under this Section 10.10
(the “Annual
Determination”).
MDC
shall instruct the Accountants to deliver a copy of each such Annual
Determination to Zyman as soon as possible after the completion of each year
and
shall use commercially reasonable efforts to have each such Annual Determination
delivered not later than 90 days after the end of the period to which such
Annual Determination relates.
(ii) If
Zyman
does not agree that any Annual Determination correctly states the applicable
calculations of PBT, Revenues, PBT Margin or AM for the period under
examination, Zyman shall promptly (but not later than 30 days after the delivery
of such Annual Determination to Zyman) give written notice to MDC of any
exceptions thereto (in reasonable detail describing the nature of the
disagreement asserted). If Zyman and MDC reconcile their differences, the Annual
Determination shall be adjusted accordingly and shall thereupon become binding,
final and conclusive upon all of the parties hereto and enforceable in a court
of law. If Zyman and MDC are unable to reconcile their differences in writing
within 20 days after written notice of exceptions is delivered to Zyman (the
“Reconciliation
Period”),
the
items in dispute shall be submitted to a mutually acceptable accounting firm
(other than the Accountants) (the “Independent
Auditors”)
for
final determination, and the Annual Determination shall be deemed adjusted
in
accordance with the determination of the Independent Auditors and shall become
binding, final and conclusive upon all of the parties hereto and enforceable
in
a court of law. The Independent Auditors shall consider only the items in
dispute and shall be instructed to act within 20 days (or such longer period
as
Zyman and MDC may agree) to resolve all items in dispute. If Zyman does not
give
written notice of any exception within 30 days after the delivery of an Annual
Determination or if Zyman gives written notification of its acceptance of an
Annual Determination prior to the end of such 30 day period, such Annual
Determination shall thereupon become binding, final and conclusive upon all
the
parties hereto and enforceable in a court of law.
34
(iii) In
the
event the Independent Auditors are for any reason unable or unwilling to perform
the services required of it under this Section 10.10, then Zyman and MDC agree
to select another mutually acceptable accounting firm to perform the services
to
be performed under this Section 10.10 by the Independent Auditors. If Zyman
and
MDC fail to select the Independent Auditors as required by clause (i) above
within seven days after the expiration of the Reconciliation Period or fail
to
select another accounting firm within seven days after it is determined that
the
Independent Auditors will not perform the services required, either Zyman or
MDC
may request the American Arbitration Association in Atlanta (the “AAA”)
to
appoint an independent firm of certified public accountants to perform the
services required under this Section 10.10 by the Independent Auditors. MDC,
on
the one hand, and Zyman, on the other hand, shall share the fees of the AAA
equally. For purposes of this Section 10.10(c) the term “Independent
Auditors”
shall
include such other accounting firm chosen in accordance with this clause
(iii).
(iv) The
Independent Auditors shall determine the party (i.e., Zyman or MDC) whose
asserted position as to the calculation of PBT, Revenues, PBT Margin, or AM
for
the period under examination before the Independent Auditors is furthest from
the determination of PBT, Revenues, PBT Margin, or AM, as the case may be,
by
the Independent Auditors, which non-prevailing party shall pay the fees and
expenses of the Independent Auditors and shall reimburse the prevailing party
for the portion of the fees of the AAA previously paid by it.
(v) The
books
and records of the Company and its subsidiaries shall be made available during
normal business hours upon reasonable advance notice at the principal office
of
the Company, to the parties hereto and their representatives, the Accountants
and the Independent Auditors to the extent required to determine the
calculations required under Section 10.10. Zyman, on the one hand, and MDC,
on
the other hand, shall make available to the other party and their
representatives (including auditors) any back-up materials generated by or
for
them to support a position that is contrary to the position taken by the other
party.
35
(d) Closing.
The
closing for each purchase and sale of Units (an “Article
X Closing”)
pursuant to this Article X shall be held at the offices of the Company within
30
days after the later of (i) the delivery of an Exercise Notice, (ii) in the
case
of Offers to Sell, 30 days after the receipt of an acceptance of an Offer to
Sell and (iii) the day that is six months and one day after such Units were
first acquired by the Seller. The date on which the respective Article X Closing
takes place is referred to in this Agreement as its “Article
X Closing Date”.
At
each Article X Closing, the parties shall execute an Assignment of Unit
Agreement in form and substance reasonably acceptable to the purchaser and
the
seller in such transaction and an amendment to this Agreement in accordance
with
Section 14.4 reflecting such transfer and the reallocated Units (including
the
related portion of the Capital Account). The transfer of any Units pursuant
to
this Section 10.10 shall be free and clear of all claims, liens and encumbrances
other than as created by the provisions of this Agreement. Prior to any Article
X Closing, the applicable purchaser and seller shall use their best efforts
to
obtain any required governmental or regulatory approval or approvals. MDC shall
have the right to postpone any scheduled Article X Closing until any such
governmental or regulatory approval is obtained. In connection with a sale
pursuant to this Article X, the transferor shall be entitled to distributions
pursuant to Section 3.4 as and when declared by the Board of Managers in respect
of any amounts which have been allocated to the transferred Units as of the
day
prior to the effective date of any Put or Call or, in the case of an Offer
to
Sell, the applicable Article X Closing Date, and the transferee shall be
entitled to distributions pursuant to Section 3.4 in respect of any amounts
which are allocated to the transferred Units on and after the effective date
or
the Article X Closing Date, as the case may be.
(e) Put/Call
Purchase Price Payment.
(i)
If
MDC is purchasing Units from Zyman pursuant to Section 10.2, Section 10.3,
Section 10.4 or Section 10.5, payment of each component of the Put/Call Purchase
Price shall be made by MDC (x) at least 80% in cash (any amount in excess of
80%
will be determined by MDC in its sole discretion) by direct wire transfer to
the
account of Zyman designated in writing to MDC pursuant to this Agreement and
(y)
up to 20% of each component of the Put/Call Purchase Price may be made in Class
A Shares (subordinate voting shares), of MDC Partners (“MDC
Stock”)
(rounded up or down to the nearest whole share) having an aggregate Market
Value
(as defined above) equal to up to 20% of such component of the Put/Call Purchase
Price and, if the Company is purchasing Units pursuant to Section 10.2, Section
10.3, Section 10.4 or Section 10.5, the purchase price shall be paid in cash.
Each of the First Payment, Second Payment and Final Payment shall be deemed
to
include imputed interest, to the extent required by the Code. Prior to MDC’s
delivery to Zyman of each Put/Call Purchase Price payment in shares of MDC
Stock, Zyman shall be required to deliver an Investment Representation
Certificate in the form of Exhibit
10.10(e) hereto.
The shares of MDC Stock shall be eligible for sale in accordance the applicable
securities laws of the U.S. and Canada, and the terms of the Investment
Representation Certificate to be delivered by the receipt of such shares of
MDC
Stock.
(ii) Any
purchase of Units pursuant to Section 10.1 shall be made in cash; provided
that
if the Seller is the obligor on any Purchase Note(s) at the time of sale, the
Buyer may elect to assume a portion of the amounts outstanding under any such
Purchase Note(s) (equal in proportion to the number of Units being purchased
by
such Buyer relative to the number of Units owned by such Seller immediately
prior to the relevant Article X Closing) and the amount of cash payable shall
be
reduced by the value of the portion of the Purchase Note(s) assumed by such
Buyer.
36
(iii) Any
purchase of Units pursuant to Section 10.6, Section 10.7 or Section 10.8 shall
be made in cash and/or Purchase Notes, or some combination thereof in accordance
with the terms set forth in such sections (to the extent provided); provided
that if the Seller is the obligor on any Purchase Note(s) at the time of sale,
the Buyer may elect to assume a portion of the amounts outstanding under any
such Purchase Note(s) (equal in proportion to the number of Units being
purchased by such Buyer relative to the number of Units owned by such Seller
immediately prior to the relevant Article X Closing) and the amount of cash
and/or Purchase Notes payable shall be reduced by the value of the portion
of
the Purchase Note(s) assumed by such Buyer.
(f) Effect
of Events During Period Class B Units Are Issued.
The
parties hereto understand and agree that under the terms of each Management
Unitholder’s employment agreement with the Company, if any, such Management
Unitholder may be terminated for Cause or without Cause. Accordingly, each
of
the parties hereto agrees that if (a) any Management Unitholder ceases to be
an
employee of the Company, regardless of the reason therefor, or (b) there are
changes in the composition of the Board of Managers of the Company or any
subsidiary of the Company, no party to this Agreement or any Person deriving
rights through any such party shall have the right to make a claim that such
cessation of employment or change in the composition of the Board of Managers
of
the Company or any subsidiary of the Company (x) constitutes a breach by MDC
or
any of its Affiliates of this Agreement, (y) resulted in an adverse effect
on
any Put/Call Purchase Price payment under this Agreement forming the basis
for a
claim against MDC or any of its Affiliates, or (z) constitutes an event forming
the basis for such party to dispute any calculation required to be made pursuant
to the accounting procedures set forth in Section 10.10(c) hereof. In the event
a Management Unitholder ceases to be employed by the Company, regardless of
the
reason therefor, such event shall not affect the right of any Unitholder to
receive any Put/Call Purchase Price payment under this Agreement.
ARTICLE
XI
INDEMNIFICATION
Section
11.1 Indemnification
of Managers and Members.
The
Company shall indemnify and advance expenses to a Person who was or is
threatened to be made a named defendant or respondent in a proceeding because
the individual is or was a Manager or Member to the fullest extent permitted
or
authorized by the laws of the State of Delaware as if the Company was a
corporation organized under the laws of Delaware. This indemnification provision
shall inure to each of the Managers and Members of the Company, and other
Persons serving at the request of the Company (as provided in this Article),
and
in the event of his death shall extend to his legal representatives; but such
rights shall not be exclusive of any other rights to which he may be
entitled.
Section
11.2 Others.
The
Company may indemnify and advance expenses to an officer, employee or agent
of
the Company to the same extent that it is required to indemnify and advance
expenses to Managers or Members under this Agreement or by statute. The Company
may indemnify and advance expenses to Persons who are not or were not officers,
employees or agents of the Company but who are or were “serving at the request
of the Company” (as defined in Section 11.5(d)) as a director, officer, partner,
manager, member, venturer, proprietor, trustee, employee, agent or similar
functionary of another limited liability company, corporation, partnership,
employee benefit plan, or other enterprise or entity (individually, an
“Other
Entity”)
to the
same extent that the Company is required to indemnify and advance expenses
to
Managers or Members under this Article or by statute.
37
Section
11.3 Insurance
and Other Arrangements.
The
Company may purchase and maintain insurance or establish and maintain another
arrangement on behalf of any individual who is or was a Manager, officer,
employee, Member or agent of the Company or who is or was serving at the request
of the Company as a director, officer, partner, manager, member, venturer,
proprietor, trustee, employee, agent or similar functionary of an Other Entity,
against or in respect of any liability asserted against him and incurred by
him
in such a capacity or arising out of his status as such an individual, whether
or not the Company would have the power to indemnify him against that liability
under this Agreement or by statute. If the insurance or other arrangement is
with a Person or entity that is not regularly engaged in the business of
providing insurance coverage, the insurance or other arrangement may provide
for
payment of a liability with respect to which the Company would not have the
power to indemnify the Person only if including coverage for the additional
liability has been approved by the Members of the Company. Without limiting
the
power of the Company to purchase, procure, establish or maintain any kind of
insurance or other arrangement, the Company may, for the benefit of persons
indemnified by the Company, (a) create a trust fund; (b) establish any form
of
self-insurance; (c) secure its indemnity obligation by grant of a security
interest or other lien on the assets of the Company; or (d) establish a letter
of credit, guaranty or surety arrangement. The insurance or other arrangement
may be purchased, procured, maintained or established within the Company or
with
any insurer or other Person deemed appropriate by the Managers regardless of
whether all or part of the stock or other securities of the insurer or other
Person are owned in whole or part by the Company. In the absence of fraud,
the
judgment of the Managers as to the terms and conditions of the insurance or
other arrangement and the identity of the insurer or other Person participating
in an arrangement shall be conclusive and the insurance or arrangement shall
not
be voidable and shall not subject the Managers approving the insurance or
arrangement to liability, on any ground, regardless of whether Managers
participating in the approval are beneficiaries of the insurance or arrangement.
Section
11.4 Report
to Members.
Any
indemnification of or advance of expenses to a Manager or Member in accordance
with this Article or the provisions of any statute shall be reported in writing
to the Members with or before the notice or waiver of notice of the next
Members’ meeting or with or before the next submission to the Members of a
consent to action without a meeting and, in any case, within the 12-month period
immediately following the date of the indemnification or advance.
Section
11.5 Definitions.
For
purposes of this Article XI:
(a) The
term
“expenses”
includes court costs and attorneys’ fees and disbursements;
(b) The
term
“proceeding”
means
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, any appeal in such
an
action, suit or proceeding, and any inquiry or investigation that could lead
to
such an action, suit or proceeding;
38
(c) The
term
“Manager”
means
any Person who is or was a Manager of the Company and any Person who, while
a
Manager of the Company, is or was serving at the request of the Company as
a
director, officer, partner, manager, member, venturer, proprietor, trustee,
employee, agent or similar functionary of an Other Entity;
(d) The
term
“serving
at the request of the Company”
as
used
above shall include any service as a manager, director, officer, employee or
agent of the Company or where any such Person performs duties on or otherwise
involves services with respect to an employee benefit plan, or the participants
or beneficiaries of the employee benefit plan sponsored by the Company. Excise
taxes assessed on a Manager with respect to an employee benefit plan pursuant
to
applicable law are deemed fines. Action taken or omitted to be taken by a
Manager with respect to an employee benefit plan in the performance of his
duties for a purpose reasonably believed by him to be in the interest of the
participants and beneficiaries of the plan is deemed to be for a purpose which
is not opposed to the best interests of the Company.
Section
11.6 Severability.
The
provisions of this Article are intended to comply with the Act. To the extent
that any provision of this Article authorizes or requires indemnification or
the
advancement of expenses contrary to such statute or the Certificate, the
Company’s power to indemnify or advance expenses under such provision shall be
limited to that permitted by such statute and the Certificate and any limitation
required by such statute or the Certificate shall not affect the validity of
any
other provision of this Article XI.
Section
11.7 Nonexclusivity
of Rights.
The
right to indemnification and the advancement and payment of expenses conferred
in this Article XI shall not be exclusive of any other right that a Manager
or
other Person indemnified pursuant hereto may have or hereafter acquire under
any
law (common or statutory), provision of the Certificate or this Agreement or
otherwise.
ARTICLE
XII
ADDITIONAL
AGREEMENTS
Section
12.1 “Zyman”
Name.
The
Members hereby agree that (a) all right, title and interest in the trade name
“Zyman Group” or any variation thereof belong to the Company and (b) so long as
the Company is an Affiliate of MDC Partners, the Company, the Members and SZ
shall endeavor to have any materials, documents or other items that reference
the name “Zyman Group” or any variations thereof to be followed by the words “an
MDC Partners Company”.
Section
12.2 2005
Option Plan.
For
each Unit issued to a participant in the Company’s 2005 Unit Option Plan (the
“Plan”) pursuant
to the exercise of any option granted under such plan, Zyman shall sell and
the
Company shall purchase or redeem one Unit from Zyman and, in consideration
therefor, the Company shall pay and assign the consideration paid to the Company
by such participant upon the exercise of such option. Zyman agrees that, until
the expiration of such options, Zyman will hold a number of Units equal to
the
number of Units issued under the Plan and such Units shall not be subject to
any
of the Puts or Calls hereunder.
39
ARTICLE
XIII
OTHER
DEFINITIONS
Section
13.1 Other
Definitions.
When
used herein, the following terms shall have the following meanings:
“Additional
Payment”
shall
have the meaning given thereto in the Purchase Agreement.
“Adjusted
Capital Account Deficit”
with
respect to any Member means the deficit balance, if any, in such Member’s
Capital Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:
(i) Credit
to
such Capital Account any amounts which such Member is obligated to restore
pursuant to any provision of this Agreement or is otherwise treated as being
obligated to restore under Treasury Regulation Section 1.704-1(b)(2)(ii)(c)
or
is deemed to be obligated to restore pursuant to the penultimate sentence of
Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit
to
such Capital Account the items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6).
The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
“Adjusted
PBT”
for any
relevant period shall be equal to the consolidated net income (loss) of the
Company and its subsidiaries but before provision for all federal, state and
local income taxes for such period, determined in accordance with United States
generally accepted accounting principles consistently applied (“GAAP”);
provided, that the following items shall be excluded:
|
(A)
|
Items
(A)(1) to (7) listed in the definition of “PBT”
hereunder;
|
|
(B)
|
any
expenses for non-cash equity-based compensation which accrues prior
to, on
or after Closing and attributable to the 2008
Acquisitions;
|
|
(C
)
|
any
amortization or depreciation expense attributable to the increase
in the
book value of any assets (whether tangible or intangible) of the
Company
resulting from the 2008
Acquisitions;
|
|
(D)
|
any
interest arising from loans or debt incurred by the Company to finance
the
purchase price of the 2008 Acquisitions; and
|
40
|
(E)
|
severance
expense arising from a termination of ▇▇▇▇▇ ▇▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇
by
the Company, or by ▇▇▇▇▇ ▇▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇ with Good
Reason.
|
“Affiliate”
of
any
Person shall mean any Person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with
such Person.
“Business
Day”
shall
mean any day on which commercial banks are not authorized or required to close
in ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇.
“Buyer”
shall
mean the purchaser of Units in any transaction described in Article
X.
“Capital
Contribution”
shall
mean the contribution of a Member and any subsequent contributions of capital
made by that Member to the Company as set forth in Article III.
“Cause”
means,
with respect to Servicer, “Cause” as defined in the PSA with the Company and,
with respect to any other employee of the Company and its subsidiaries, “Cause”
means (A) such employee’s willful failure to perform his or her duties in
any material respect (other than as a result of total or partial incapacity
due
to physical illness), (B) commission of (x) a felony (other than
traffic-related) under the laws of the United States or any state thereof or
any
similar criminal act in a jurisdiction outside the United States or (y) a crime
involving moral turpitude, (C) such employee’s willful malfeasance or willful
misconduct which is injurious to the Company, (D) any act of fraud by such
employee or (E) such employee’s material breach of the Company’s code of
conduct.
“Class
A Distribution Shortfall Amount”
with
respect to any Distribution Period Calendar Year and any Post-Distribution
Period Calendar Year, shall mean the cumulative amount by which distributions
under Section 3.4(a)(i) to holders of Class A Units for all preceding years
since the Effective Time fell short of the cumulative allocations to holders
of
Class A Units of PBT under Section 3.5(a)(i) for such prior years (for this
purpose treating any negative PBT for any calendar year as $0).
“Class
A PBT
Shortfall Amount”
shall
mean, with respect to any calendar year other than the first Distribution Period
Calendar Year, the amount by which the actual allocation of PBT to holders
of
Class A Units under Section 3.5(a)(i) for all previous Distribution Period
Calendar Year(s) is less than the aggregate Preferred Return Amount(s) with
respect to such Distribution Period Calendar Year(s).
“Class
B Catch-Up Amount”
shall
mean, with respect to any Distribution Period Calendar Year, the lesser of
(i)
the difference between (A) the product of the amounts allocated to the holders
of Class A Units pursuant to Section 3.5(a)(i) for the current and all previous
Distribution Period Calendar Year(s) and the fraction (expressed as a
percentage) in which the numerator is the number of outstanding Class B Units
and the denominator is the number of outstanding Class A Units and (B) the
amounts allocated to the holders of Class B Units pursuant to Section 3.5(a)(ii)
for all previous Distribution Period Calendar Year(s) and (ii) the positive
difference (if any) of PBT for such Distribution Period Calendar Year less
the
Preferred Return Amount and less the Class A PBT Shortfall Amount, if
any.
41
“Class
B Distribution Shortfall Amount”
with
respect to any Distribution Period Calendar Year and any Post-Distribution
Period Calendar Year, shall mean the cumulative amount by which distributions
under Section 3.4(a)(ii) to holders of Class B Units for all preceding calendar
years since the Effective Time fell short of the cumulative allocations to
holders of Class B Units of PBT under Section 3.5(a)(ii) for such prior years
(for this purpose treating any negative PBT for any calendar year as $0).
“Class
C PBT” for
any
relevant period shall mean (Adjusted PBT minus $3,000,000) multiplied by
16%.
“Code”
shall
mean the Internal Revenue Code of 1986, as amended from time to time, and any
successor statute or statutes.
“Company
Credit Facility”
shall
mean the revolving credit facility dated as of November 8, 2005 by and between
the Company and Wachovia Bank, National Association, as amended, modified or
supplemented from time to time.
“Company
Minimum Gain”
shall
have the meaning for “Partnership Minimum Gain” set forth in Sections
1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations.
“Depreciation”
shall
mean for each fiscal year, an amount equal to the depreciation, amortization,
or
other cost recovery deduction allowable with respect to an asset for such fiscal
year, except that if the Gross Asset Value of an asset differs from its adjusted
basis for Federal income tax purposes at the beginning of such fiscal year,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the Federal income tax depreciation, amortization, or
other
cost recovery deduction for such fiscal year bears to such beginning adjusted
tax basis; provided, however, that if the adjusted basis for Federal income
tax
purposes of an asset at the beginning of such fiscal year is zero, Depreciation
shall be determined with reference to such beginning Gross Asset Value using
any
reasonable method selected by the TMP.
“Disability”
means,
with respect to SZ, “Disability” as defined in SZ’s employment agreement with
the Company and, with respect to any other employee of the Company and its
subsidiaries, “Disability” means the
inability of an employee to perform the essential functions of the employee’s
job, with or without reasonable accommodation, by reason of a physical or mental
infirmity, for a continuous period of six months or for an aggregate of nine
months in a twenty-four month period.
“Distribution
Period”
shall
mean the period from the Effective Time until the earlier of the termination
of
the Company or the date that is the fifth anniversary of the Effective
Time.
“Distribution
Period Calendar Year”
shall
mean any of (i) the period from the Effective Time until December 31, 2005,
(ii)
the period from January 1st
through
December 31st
of each
of 2006, 2007, 2008 and 2009 and (iii) the period from January 1, 2010 until
the
date that is the fifth anniversary of the Effective Time; provided that if
the
Company is terminated prior to the fifth anniversary of the Effective Time,
the
last calendar year shall be the period from January 1st
of the
year in which the Company is terminated until that date on which the Company
is
terminated.
42
“Effective
Time”
shall
mean the date of the closing of the Purchase Transaction.
“Good
Reason”
shall
mean, with respect to SZ, “Good Reason” as defined in SZ’s employment agreement
with the Company and, with respect to any other employee of the Company and
its
subsidiaries, “Good Reason” means a failure by the Company to pay such
employee’s compensation when due, which failure remains uncured for a period of
20 days after written notice of such breach from the employee to the
Company.
“Gross
Asset Value”,
with
respect to any asset, the asset’s adjusted basis for Federal income tax
purposes, except as follows:
(i) Subject
to the final sentence of this definition and consistent with the capital
accounts as described in Section 3.1, the initial Gross Asset Value of any
asset
contributed by a Member to the Company shall be the gross fair market value
of
such asset, as determined by the Board of Managers;
(ii) The
Gross
Asset Value of all Company assets shall be adjusted to equal their respective
gross fair market values as of the following times: (a) the acquisition of
additional Units by any new or existing Member in exchange for a Capital
Contribution; (b) the distribution by the Company to a Member of property as
consideration for a Unit; and (c) the liquidation of the Company within the
meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); provided, however,
that adjustments pursuant to clauses (a) and (b) above shall be made only if
the
Managers reasonably determine that such adjustments are necessary or appropriate
to reflect the relative economic interests of the Members in the Company;
and
(iii) The
Gross
Asset Value of any Company asset distributed to any Member shall be adjusted
to
equal the gross fair market value of such asset on the date of
distribution.
If
the
Gross Asset Value of an asset has been determined or adjusted pursuant to
clauses (i) or (ii), hereof, such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset for purposes
of computing Profits and Losses.
“MDC
Credit Facility”
shall
mean the Financing
Agreement, dated as of June 18, 2007 (as amended, supplemented or otherwise
modified from time to time), among MDC Partners Inc., a Canadian corporation,
Maxxcom Inc., a Delaware corporation, each subsidiary of MDC Partners listed
as
a "Guarantor" on the signature pages thereto, the lenders from time to time
party thereto, Fortress Credit Corp., as collateral agent for the lenders,
and
▇▇▇▇▇ Fargo Foothill, Inc., as administrative agent for the
lenders.
“Member
Nonrecourse Debt”
shall
have the meaning for “Partner Nonrecourse Debt” set forth in Section
1.704-2(b)(4) of the Treasury Regulations.
43
“Member
Nonrecourse Debt Minimum Gain”
shall
mean an amount, with respect to each Member Nonrecourse Debt, equal to the
Company Minimum Gain that would result if such Member Nonrecourse Debt were
treated as a Nonrecourse Liability, determined in accordance with Section
1.704-2(i)(3) of the Treasury Regulations.
“Member
Nonrecourse Deductions”
shall
have the meaning set forth in Section 1.704-2(i)(2) of the Treasury
Regulations.
“Membership
Interest”
of
any
Member shall mean such Member’s interest in the Company under this Agreement
(including, without limitation, such Member’s interest in Profits and Losses,
distributions, voting, and management, all as specified in this
Agreement).
“Nonrecourse
Deductions”
shall
have the meaning set forth in Section 1.704-2(b)(1) of the Treasury
Regulations.
“Nonrecourse
Liability”
shall
have the meaning set forth in Section 1.704-2(b)(3) of the Treasury
Regulations.
“Offer
to Sell”
shall
mean an offer to sell Units pursuant to Section 10.1 or Section
10.8.
“Original
Unitholders”
shall
mean, those Members who owned Membership Units immediately prior to the
consummation of the transactions contemplated by the Purchase
Agreement.
“PBT”
for
any
relevant period shall mean:
(A)
the
consolidated net income (loss) of the Company and its subsidiaries but before
provision for all federal, state and local income taxes for such period,
determined in accordance with United States generally accepted accounting
principles consistently applied (“GAAP”);
provided, that the following amounts shall be excluded:
(1) any
expenses for non-cash equity-based compensation which accrues prior to, on
or
after Closing and is attributable to transactions contemplated by the Purchase
Agreement.
(2) any
amortization or depreciation expense attributable to the increase in the book
value of any assets (whether tangible or intangible) of the Company resulting
from the merger into the Company of the Nevada limited liability company
predecessor of the Company, any amortization or depreciation expense
attributable to the increase in the book value of any assets (whether tangible
or intangible) of the Company resulting from any acquisition of any Units by
MDC
pursuant to the Purchase Agreement, and interest payable by or for the Company
on indebtedness related to any such acquisition;
(3) neither
the proceeds from nor any dividends or refunds with respect to, nor any
increases in the cash surrender value of, any life insurance policy under which
the Company, or any subsidiary thereof, is the named beneficiary or otherwise
entitled to recovery shall be included as income, nor shall the premiums payable
with respect to any such life insurance policy be considered an expense for
a
period to the extent a death covered by such life insurance policy occurs in
any
such period;
44
(4) any
intercompany management fees and overhead allocations charged by MDC or any
Affiliate of MDC, to the Company or any of its subsidiaries;
(5) any
interest arising from loans to finance the payment of any of the Purchase Price
payments and from any indebtedness allocated to the Company by MDC as a result
of MDC’s acquisition of Membership Interests of the Company; provided, however,
that any interest or fees (other than fees incurred in connection with
terminating the Company Credit Facility) arising under the Company Credit
Facility (or any interest or fees allocable to the Company under the MDC Credit
Facility, if such facility is used to refinance the Company Credit Facility)
and
any working capital loans provided by MDC to the Company from time to time
shall
be included in determining PBT;
(6) any
interest charges incurred by the Company or any subsidiary resulting from any
MDC Financing (as defined in the Purchase Agreement);
and,
solely for the purposes of calculating any Puts or Calls or Offers to Sell
exercised by Zyman,
(7) any
extraordinary or unusual gains or losses and any gains or losses from the sale
of any capital assets used by the Company or any subsidiary thereof in its
operations (as opposed to assets acquired in the ordinary course of the business
of the Company and its subsidiaries for resale or other
disposition);
(8) severance
expense arising from a termination of SZ by the Company or by SZ with Good
Reason; and
(9) premiums
of up to $75,000 payable with respect to any life insurance policy under which
the Company, or any subsidiary thereof, is the named beneficiary or otherwise
entitled to recovery to the extent not already excluded pursuant to (3)
above;
minus
(B) the
Class
C PBT for such period.
“Person”
shall
mean an individual, partnership, limited partnership, limited liability company,
trust, estate, corporation, custodian, trustee, executor, administrator, nominee
or entity in a representative capacity.
“Post
Distribution Period Calendar Year”
shall
mean (i) the period from the fifth anniversary of the Effective Time until
December 31, 2010 and (ii) thereafter, each calendar year ending December 31;
provided that if the Company is terminated prior to December 31 in any calendar
year, the last calendar year shall be the period from January 1 of the year
in
which the Company is terminated until the date on which the Company is
terminated.
45
“Preferred
Return Amount”
shall
mean, with respect to any Distribution Period Calendar Year, the sum of (i)
$13,000,000 (provided, that with respect to the first and last Distribution
Period Calendar Years, the amount in this clause (i) shall be equal to the
product of $13,000,000 and the fraction (expressed as a percentage) in which
the
numerator is the number of days elapsed in such Distribution Period Calendar
Year and the denominator is 365) and (ii) in the event that an Additional
Payment (as defined in Section 13.1) is made, from the date on which such
Additional Payment is made, an amount equal to the product of 20% multiplied
by
the amount of such Additional Payment (the “Additional
Payment Amount”)
(provided, that with respect to the first and last Distribution Period Calendar
Years, the amount in this clause (ii) shall be equal to the product of the
Additional Payment Amount and the fraction (expressed as a percentage) in which
the numerator is the number of days elapsed in such Distribution Period Calendar
Year and the denominator is 365).
“Profits
and Losses”,
shall
mean, for each fiscal year, an amount equal to the Company’s taxable income or
loss for such fiscal year, determined in accordance with Section 703(a) of
the
Code (for this purpose, all items of income, gain, loss, or deduction required
to be stated separately pursuant to Section 703(a)(1) of the Code shall be
included in taxable income or loss), with the following
adjustments:
(i) Any
income of the Company that is exempt from Federal income tax and not otherwise
taken into account in computing Profits or Losses pursuant to this definition
shall be added to such taxable income or loss;
(ii) Any
expenditures of the Company described in Section 705(a)(2)(B) of the Code or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not otherwise taken into
account in computing Profits or Losses pursuant to this definition, shall be
subtracted from such taxable income or loss;
(iii) In
the
event the Gross Asset Value of any Company asset is adjusted pursuant to clauses
(ii) or (iii) of the definition of “Gross Asset Value” herein, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Profits or Losses;
(iv) Gain
or
loss resulting from any disposition of property with respect to which gain
or
loss is recognized for Federal income tax purposes shall be computed by
reference to the Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its Gross Asset
Value;
(v) In
lieu
of the depreciation, amortization, and other cost recovery deductions taken
into
account in computing such taxable income or loss, there shall be taken into
account depreciation for such fiscal year or other period, computed in
accordance with the definition thereof;
(vi) To
the
extent an adjustment to the adjusted tax basis of any Company asset pursuant
to
Code Section 734(b) or Code Section 743(b) is required pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Member’s Units, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or
loss
(if the adjustment decreases the basis of the asset) from the disposition of
the
asset and shall be taken into account for the purposes of computing Profits
or
Losses; and
46
(vii) Notwithstanding
any other provisions of this definition, any items which are specially allocated
pursuant to Section 3.3(b) and (c) shall not be taken into account in computing
Profits or Losses.
“Pro
Rata Portion”
shall
mean, with respect to any Management Unitholder at any given time, the number
of
Units held by such Management Unitholder relative to the number of Units held
by
all of the Management Unitholders.
“Seller”
shall
mean the seller of Units in any transaction described in Article X.
“Treasury
Regulations”
shall
mean final regulations issued by the Department of the Treasury interpreting
the
Code.
“Units”
shall
mean Class A Units or Class B Units, as applicable.
ARTICLE
XIV
MISCELLANEOUS
Section
14.1 Manner
of Giving Notice.
Whenever under the provisions of the Act, the Certificate or this Agreement,
notice is required to be given to the Company, any Member or Manager of the
Company, and no provision is made as to how such notice shall be given, any
such
notice to be given hereunder shall be in writing and shall be deemed to have
been given (a) upon personal delivery, if delivered by hand or courier, (b)
three days after the date of deposit in the mails, postage prepaid, or (c)
the
next Business Day if sent by facsimile transmission (if transmission is
electronically confirmed) or by a prepaid overnight courier service, and in
each
case at the respective addresses or numbers set forth below or such other
address or number as such party may have fixed by notice:
If
to MDC
or MDC Partners, to:
MDC
Partners
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
47
with
a
copy to:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to
Zyman, to:
Zyman
Company, Inc.
▇▇▇
▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇/▇▇
▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
Zyman
Group LLC
▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇.▇.
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer
Fax:
with
a
copy to:
▇▇▇▇▇
Day
▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to the
Company, to:
c/o
MDC
Partners Inc.
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
48
with
a
copy to:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to any
Management Unitholder, to such person at the address set forth on the signature
pages hereto.
or
to
such other address or fax as hereafter shall be designated in writing by the
applicable party sent in accordance herewith or in the records of the Company.
Section
14.2 Waiver
of Notice.
Whenever any notice is required to be given to any Member or Manager of the
Company under the provisions of the Act, the Certificate or this Agreement,
a
waiver thereof in writing signed by the Person or Persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
Section
14.3 No
Company Seal.
The
Company shall not have a Company seal, and no agreement, instrument or other
document executed on behalf of the Company that would otherwise be valid and
binding on the Company shall be invalid or not binding on the Company solely
because no Company seal is affixed thereto.
Section
14.4 Amendment
or Modification.
The
power to adopt, alter, amend or repeal this Agreement is vested solely in the
Members. Except for the amendments contemplated by Sections 2.1, Section 2.3,
and Section 2.4 hereof and subject to the provisions of Section 4.1, this
Agreement may be altered or amended only by the vote or written consent of
MDC
and holders of a majority of the outstanding Class B Units; provided that,
in
the event that an amendment does not affect the interests of any holder of
Class
B Units other than Zyman, then such amendment may only be effected with the
vote
or written consent of MDC and Zyman (it being understood that the consent of
any
other holders of Class B Units shall not be required to effect such
amendment).
Section
14.5 Binding
Effect; Assignment.
Subject
to the restrictions on transfer and assignment set forth in Article X of this
Agreement, this Agreement is binding on and inures to the benefit of the Members
and their respective successors and assigns, including without limitation,
any
Lender who exercises a default remedy under any agreement entered into in
connection with an MDC Financing. Except as expressly provided herein, none
of
the Company, Zyman nor any Management Unitholder shall be entitled to assign
any
of its rights or obligations under this Agreement. Except as expressly provided
herein, the rights and obligations of MDC under this Agreement shall be freely
assignable; provided that, except in connection with a transfer by MDC of its
Units (in which case MDC shall have no further obligations hereunder), MDC
shall
continue to remain liable for any of its obligations under this Agreement in
the
event that MDC assigns its rights hereunder.
Section
14.6 Governing
Law; Severability.
This
Agreement is governed by and shall be construed in accordance with the law
of
the State of Delaware without regard to the principles of conflict of laws
thereof. In the event of a direct conflict between the provisions of this
Agreement and any provision in the Certificate or any mandatory provision of
the
Act, the applicable provisions of the Certificate or the Act shall control.
If
any provision of this Agreement or the application thereof to any Person or
circumstance is held invalid or unenforceable to any extent, the remainder
of
this Agreement and the application of that provision to other Persons or
circumstances is not affected thereby and that provision shall be enforced
to
the greatest extent permitted by law.
49
Section
14.7 Counterparts.
This
Agreement may be executed by the parties hereto in any number of counterparts,
each of which shall be deemed an original, but all of which shall constitute
one
and the same agreement.
Section
14.8 Entire
Agreement.
This
Agreement, including the other documents referred to herein and the Exhibits
and
Schedules hereto that form a part hereof, contains the entire understanding
of
the parties hereto with respect to the subject matter contained herein and
therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter, including without
limitation, the Original Operating Agreement.
Section
14.9 Consent
and Acknowledgement.
▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ & Company (a Georgia corporation), and each of the
parties hereto hereby consent and agree (i) to the proposed 2008 Acquisitions
by
the Company; (ii) to the proposed hiring of each of ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇, on the terms and conditions proposed and presented to the Company's
Board
of Managers; and (iii) that the proposed duties and responsibilities of ▇▇▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇ & Company, after giving effect to the 2008
Acquisitions and the hiring of ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇, shall not
constitute "good reason" as defined in Section 5 of that certain Personal
Services Agreement dated as of April 1, 2007.
50
IN
WITNESS WHEREOF,
the
undersigned have executed this Second Amended and Restated Limited Liability
Company Agreement as of the day and year first above written.
|
By:
___________________________________
Name: ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Title: Managing
Director
By:
___________________________________
Name: ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇
Title: Secretary
ZG
ACQUISITION INC.
By:
___________________________________
Name:
Title:
By:
___________________________________
Name:
Title:
ZYMAN
COMPANY INC.
By:
___________________________________
Name:
Title:
ZYMAN
GROUP LLC
By: __________________________________
Name:
Title:
|
|
MANAGEMENT
UNITHOLDER
By: __________________________________
Name:
Address:
c/o
MDC Partners Inc.
▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇ & COMPANY
By: __________________________________
Name:
Title:
By:
___________________________________
▇▇▇▇▇▇
▇▇▇▇▇
|
2