Exhibit 3.2
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
WEIGH-TRONIX, LLC
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
WEIGH-TRONIX, LLC
TABLE OF CONTENTS
ARTICLE ONE - THE COMPANY..................................................... 1
Section 1.1 Continuation; Name............................................... 1
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Section 1.2 Purpose and Character of Business................................ 1
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Section 1.3 Place of Business; Agent......................................... 2
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Section 1.4 Term............................................................. 2
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Section 1.5 Title to Company Property........................................ 2
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Section 1.6 Qualification in Other Jurisdictions............................. 2
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Section 1.7 Members.......................................................... 2
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Section 1.8 Meetings of Members.............................................. 3
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ARTICLE TWO - CAPITAL CONTRIBUTIONS AND LIABILITY OF MEMBERS.................. 4
Section 2.1 Capital Accounts................................................. 4
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Section 2.2 Capital Contributions............................................ 4
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Section 2.3 Funding Capital Requirements..................................... 4
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Section 2.4 No Withdrawal of Interest on Capital............................. 5
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Section 2.5 Managers as Members.............................................. 5
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Section 2.6 Liability of Members............................................. 5
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Section 2.7 Purchase of Interests............................................ 5
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Section 2.8 Conforming of Class D Interests.................................. 6
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Section 2.9. Conforming of Class E Interests................................. 6
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Section 2.10. Effect of Becoming a Conformed Interest........................ 6
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ARTICLE THREE - DISTRIBUTIONS: PROFITS AND LOSSES............................. 7
Section 3.1 Distributions Prior to Liquidation............................... 7
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Section 3.2 Distribution Upon Liquidation.................................... 8
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Section 3.3 Distribution of Assets in Kind................................... 9
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Section 3.4 Allocation of Profits and Losses................................. 9
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Section 3.5 Required Regulatory Allocations.................................. 10
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Section 3.6 Curative Allocations............................................. 12
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Section 3.7 Tax and Book Allocations; Other Allocation Rules................ 12
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Section 3.8 Tax Withholding.................................................. 13
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Section 3.9 Distributions to Cover Members' Tax Liability................... 13
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Section 3.10 Basis of Certain Distributions.................................. 13
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ARTICLE FOUR - RIGHTS, POWERS AND DUTIES OF THE BOARD OF MANAGERS............. 14
Section 4.1 Management and Control of the Company............................ 14
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Section 4.2 Authority of the Board of Managers............................... 14
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Section 4.3 Officers of the Company.......................................... 15
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Section 4.4 Super-Majority Requirements...................................... 16
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Section 4.5 Indemnification.................................................. 16
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ARTICLE FIVE - WITHDRAWAL OF MEMBERS, TRANSFERABILITY OF A MEMBER'S INTEREST.. 17
Section 5.1 Withdrawal....................................................... 17
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Section 5.2 Transfer of Member's Interest.................................... 17
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ARTICLE SIX - RIGHTS AND OBLIGATIONS OF THE MEMBERS........................... 18
Section 6.1 No Participation in Management................................... 18
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Section 6.2 No Authority to Act.............................................. 18
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ARTICLE SEVEN - DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY....... 18
Section 7.1 Events Causing Dissolution....................................... 19
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Section 7.2 Liquidation...................................................... 19
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ARTICLE EIGHT - AMENDMENTS.................................................... 20
ARTICLE NINE - CONSENTS, VOTING AND MEETINGS.................................. 20
Section 9.1 Method of Giving Consent......................................... 20
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Section 9.2 Meetings......................................................... 20
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Section 9.3 Submissions to Members........................................... 21
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ARTICLE TEN - BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC............... 21
Section 10.1 Books and Records............................................... 21
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Section 10.2 Accounting; Tax Year............................................ 21
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Section 10.3 Reports......................................................... 21
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Section 10.4 Elections....................................................... 22
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ARTICLE ELEVEN - DEFINITIONS.................................................. 22
ARTICLE TWELVE - MISCELLANEOUS PROVISIONS..................................... 27
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Section 12.1 Appointment of the President as Tax Matters Partner............. 27
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Section 12.2 Notification.................................................... 28
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Section 12.3 Binding Provisions.............................................. 28
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Section 12.4 No Waiver....................................................... 28
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Section 12.5 Legends......................................................... 28
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Section 12.6 Applicable Law.................................................. 28
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Section 12.7 Separability of Provisions...................................... 29
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Section 12.8 Entire Agreement................................................ 29
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Section 12.9 Section Titles.................................................. 29
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Section 12.10 Counterparts................................................... 29
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SCHEDULE I.................................................................... 2
CLASS A MEMBERS.............................................................. 2
CLASS B MEMBERS.............................................................. 4
CLASS C MEMBERS.............................................................. 5
CLASS D MEMBERS.............................................................. 6
CLASS E MEMBERS.............................................................. 7
PIK PREFERRED MEMBER......................................................... 7
SCHEDULE II................................................................... 9
CRITERIA FOR CONFORMING CLASS E INTERESTS.................................... 9
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SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF WEIGH-TRONIX, LLC
(A Delaware Limited Liability Company)
SECOND AMENDED AND RESTATED OPERATING AGREEMENT OF WEIGH-TRONIX, LLC (the
"Company"), dated as of June 13, 2000, by and among those persons now,
heretofore and hereafter admitted as and listed in the books and records of the
Company as Members of the Company. The Members are sometimes collectively
referred to herein as the "Members" and individually as a "Member." Definitions
of certain terms used in this Agreement are contained in Article Eleven. Marconi
is executing and delivering this Agreement in its capacity as holder of the PIK
Preferred Interest and as holder of Warrants exchangeable into Class A
Interests.
WHEREAS, the Company was formed as a limited liability company under the
Delaware Limited Liability Company Act pursuant to a Certificate of Formation
dated as of and filed with the Secretary of State of the State of Delaware on
March 20, 1998;
WHEREAS, the Operating Agreement of the Company was amended and restated as
of May 1, 1998 to provide for the governance of the Company and to set forth in
detail the Members' respective rights and duties relating to the Company; and
WHEREAS, the parties hereto desire to further amend and restate the
Operating Agreement of the Company to provide for additional cash contributions
to the Company by certain Class A Members, the creation and issuance of a new
class of preferred membership interest (the "PIK Preferred Interest") and
warrants, as well as to ascribe rights and duties to said preferred interest and
warrants.
NOW THEREFORE, for consideration of the mutual provisions and agreements
made herein, the parties hereto, intending to be legally bound, hereby agree as
follows:
ARTICLE ONE
THE COMPANY
Section 1.1 Continuation; Name
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The Company has been formed as a limited liability company pursuant to the
provisions of the Act. The name of the Company is Weigh-Tronix, LLC. The
business of the Company may be conducted under any other name as the Board of
Managers may from time to time determine.
Section 1.2 Purpose and Character of Business
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(a) The purposes of the Company are (i) to own and operate,
directly or through one or more Persons, the businesses conducted presently or
in the future by Weigh-
Tronix Acquisition Corp., Tallyho Investments B.V. and their respective
divisions and subsidiaries; (ii) to make such additional investments and engage
in such additional activities as are permitted to be conducted by a limited
liability company under the Act and as the Board of Managers may approve and
(iii) to engage in any and all activities related or incidental to the purposes
set forth in clauses (i) and (ii).
(b) The Company has the power to do any and all acts necessary,
appropriate, proper, advisable, incidental or convenient to or in furtherance of
the purposes of the Company set forth in Section 1.3 hereof and has, without
limitation, any and all powers that may be exercised by a limited liability
company under the Act.
Section 1.3 Place of Business; Agent
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The principal place of business of the Company shall be located at ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇. The Company shall maintain a
registered agent in the State of Delaware. The name and address of the resident
agent of the Company in the State of Delaware and the address of the registered
office of the Company in the State of Delaware is Corporation Trust Company,
Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The
Board of Managers may at any time change the location of the Company's principal
place of business, establish additional offices and places of business and
change the registered agent and registered office of the Company and upon any
such change shall give prompt notice to each Member of such change.
Section 1.4 Term
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The Company shall continue in full force and effect until terminated
pursuant to Article Seven.
Section 1.5 Title to Company Property
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All property originally brought into the Company or subsequently acquired by
purchase with Company funds or otherwise, shall be deemed to be owned by the
Company as an entity, and no Member, individually, shall have any ownership of
such property.
Section 1.6 Qualification in Other Jurisdictions
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The Company shall exist under and be governed by, and this Agreement shall
be construed in accordance with, the applicable laws of the State of Delaware
including the Act. The Board of Managers promptly shall make such filings as it
believes necessary or as are required by applicable law to give effect to the
provisions of this Agreement and to cause the Company to be treated as a limited
liability company under the laws of the State of Delaware. The Board of
Managers shall cause the Company to be registered or qualified under its own
name or under an assumed or fictitious name pursuant to a foreign limited
liability company statute or similar laws in any jurisdictions in which the
Company owns property or transacts business if such registration or
qualification is necessary to protect the limited liability of the Members or to
permit the Company lawfully to own property or transact business in such
jurisdiction.
Section 1.7 Members
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(a) Classes of Members. There shall be six (6) classes of Members of the
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Company, with the Members of each class designated, respectively, as "Class A
Members," "Class B Members," "Class C Members", "Class D Members" and "Class E
Members" and PIK Preferred Members (Class A Members, Class B Members, Class C
Members, Class D Members, Class E Members and PIK Preferred Members are referred
to collectively as "Members"). The Class A, Class B, Class C, Class D, Class E
and PIK Preferred Members shall be as set forth on Schedule I, which schedule
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shall be amended to reflect the addition or withdrawal of any Member.
(b) Voting Rights. Each Class A Member, each Class B Member, each Class C
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Member, each Class D Member and each Class E Member shall be entitled to vote on
all matters as to which Members of the Company are entitled to vote pursuant to
the Act or the terms of this Agreement. Each Class A Member, each Class B
Member, each Class C Member, each Class D Member and each Class E Member shall
have that number of votes that corresponds to his, her or its Percentage
Interest. Notwithstanding the foregoing, (i) no Member shall be entitled to a
vote with respect to a Conformed Interest, and (ii) no PIK Preferred Member
shall be entitled to vote with respect to its PIK Preferred Interest.
(c) Admission of New Members. New Members shall be admitted with the
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approval, and on such terms (including whether they are Class A, Class B, Class
C, Class D or Class E Members), as are determined from time to time by the Board
of Managers; provided that the admission of any new Members shall be subject
always to proportional adjustments, except to the extent expressly permitted by
the terms of this Agreement as in effect on the Effective Date. Upon admission
of any new Member, or the modification of the Percentage Interest of any Member,
appropriate modification will be made to Schedule I to reflect the new
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Percentage Interests of all Members after giving effect to such admission or
modification.
(d) Warrant. Upon an Exercise Event, the Exerciser shall be issued Class A
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Interests equal to the Warrant Percentage Interest. The Percentage Interest
associated with the Class A Interests so issued shall be the Warrant Percentage
Interest of the total Percentage Interests associated with all Membership
Interests issued and outstanding as of June 13, 2000. The Percentage Interest of
all other Members shall be reduced proportionately, based upon their respective
Percentage Interests immediately prior to the Exercise Event. Upon exercise of
the Warrant, the Book Value of the Company's assets shall be restated in
accordance with Section 3.7(b) and the Capital Accounts of the Members shall be
restated so that the Capital Account of the Exerciser shall be proportionate
according to the Warrant Percentage Interest to the Capital Accounts of all
other Members according to their respective Percentage Interests and, in any
case, not less than an amount equal to the Exercise Price.
Section 1.8 Meetings of Members
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An annual meeting of Members shall be held on the third Tuesday in April at
the Company's principal place of business, or at such other place as the Board
of Managers shall specify. A special meeting of Members may be held at such
time and place, and for such purpose, as is determined by the Board of Managers.
Written notice of any annual or special meeting shall be sent to all Members at
least fifteen (15) days before any meeting setting forth the time, date,
location and purpose(s) of such meeting. Any action requiring consent of the
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Members may also be taken by written instrument signed by such Percentage in
Interest of the Members as is required to approve such action.
ARTICLE TWO
CAPITAL CONTRIBUTIONS AND LIABILITY OF MEMBERS
Section 2.1 Capital Accounts
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A separate account (each a "Capital Account") shall be established and
maintained for each Member which shall reflect (a) the Capital Contribution; if
any, made by such Member to the Company and (b) such Member's shares of the
Profit of the Company, and shall be charged with (c) the amount of cash and the
fair market value of any other property distributed to such Member and (d) such
Member's share of the Losses of the Company. It is the intention of the Members
that the Capital Accounts be maintained in accordance with the provisions of
Section 704(b) of the Code and the Regulations thereunder, that any liabilities
be taken into account in accordance with the provisions of Section 752 of the
Code and the Regulations thereunder, and that this Agreement be interpreted
consistently therewith. Except as otherwise provided in the Regulations, a
transferee of all or a portion of a Member's interest shall succeed to the
Capital Account of his or her transferor to the extent allocable to the
transferred interest.
Section 2.2 Capital Contributions
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(a) Each Class A Member made a Capital Contribution to the Company
in the amount set forth opposite his or her name on Schedule I, and is entitled
to the Percentage Interest set forth opposite his or her name in Schedule I;
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provided, however, that the Percentage Interest of all Members shall be adjusted
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proportionately to reflect the admission or withdrawal of a Member or the
termination or reduction of the Interest of a Member, or as otherwise required
or permitted hereunder.
(b) Each Class B Member, each Class C Member, each Class D Member
and each Class E Member has made no Capital Contribution to the Company and
shall be entitled to the Percentage Interest set forth opposite his or her name
in Schedule I as consideration for services rendered for the benefit of the
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Company by such Class B Member, Class C Member, Class D Member or Class E
Member; provided, however, that the Percentage Interest of all Members shall be
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adjusted proportionately to reflect the admission or withdrawal of a Member or
the reduction of the Interest of a Member whose Interest is conformed pursuant
to Section 2.8 hereof, or as otherwise required or permitted hereunder.
Section 2.3 Funding Capital Requirements
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(a) In the event that the Company requires additional funds to
carry out its purposes, to conduct its business, or to meet its obligations, the
Company may borrow funds from such lender(s), including Managers and Members,
and on such terms and conditions as are approved by the Board of Mangers. No
loan made to the Company by any Member or Manager shall constitute a Capital
Contribution to the Company for any purpose. No Member or Manager
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shall have any obligation to give notice of an existing or potential default of
any obligation of the Company to any of the Members or Managers.
(b) No Member or Manager shall be obligated to make any Capital
Contributions or loans to the Company, or otherwise supply or make available any
funds to the Company, even if the failure to do so would result in a default of
any of the Company's obligations or the loss or termination of all or any part
of the Company's assets or business.
(c) The provisions of this Section 2.3 are not intended to be for
the benefit of any creditor or other Person (other than a Member in his capacity
as a Member) to whom any debts, liabilities or obligations are owed by (or who
otherwise has any claim against) the Company or any of the Members. Moreover,
notwithstanding anything contained in this Agreement, including specifically but
without limitation this Article Two, no such creditor or other Person shall
obtain any rights under this Agreement or shall, by reason of this Agreement,
make any claim in respect of any debt, liability or obligation (or otherwise)
against the Company or any Member.
Section 2.4 No Withdrawal of Interest on Capital
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No Member shall have the right to resign and receive any distribution from
the Company as a result of such resignation, and no Member shall have the right
to receive the return of all or any part of his Capital Contribution or Capital
Account, or any other distribution, except as provided in this Agreement and in
the Members' Agreement. No Member shall have any right to demand and receive
property of the Company in exchange for all or any portion of his Capital
Contribution or Capital Account, except as provided upon dissolution and
liquidation of the Company and except as provided in the Members' Agreement.
Section 2.5 Managers as Members
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Managers may hold Interests in the Company as Members.
Section 2.6 Liability of Members
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No Member, in his capacity as a Member, shall have any liability to restore
any negative balance in his, her or its Capital Account or to contribute to, or
in respect of, the liabilities or the obligations of the Company. No Member
shall have any liability to restore any amounts distributed from the Company,
except as may be required under the Act or other applicable law. In no event
shall any Member, in his capacity as a Member, be personally liable for any
liabilities or obligations of the Company.
Section 2.7 Purchase of Interests
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The Interests of Class B, Class D and Class E Members in the Company shall
be subject to purchase by the Company in accordance with the terms of the
Members' Agreement upon termination of employment under certain circumstances.
In the event of a purchase of Class B, Class C, Class D or E Interests, the
Percentage Interests of the remaining Class A, Class B, Class C, Class D and
Class E Members shall be adjusted proportionately.
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Section 2.8 Conforming of Class D Interests
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The Class D Interest of each Class D Member shall be subject to becoming
conformed (a "Conformed Interest") in the event that such Class D Member shall
for any reason (other than a reason described in the second paragraph of this
Section 2.8) cease to be an employee of the Company or one of its Affiliates
prior to the fourth anniversary of May 1, 1998. On each of the first through
fourth such anniversaries on which a Class D Member shall remain an employee of
the Company or one of its Affiliates, an additional twenty-five percent (25%) of
the Class D Interest of such Class D Member shall be released from being subject
to becoming a Conformed Interest under this Section 2.8, so that if a Class D
Member has remained employed by the Company through the fourth anniversary of
May 1, 1998, none of his Class D Interests shall any longer be subject to
becoming Conformed Interests under this Agreement. Notwithstanding the
foregoing, if a Class D Member has remained employed by the Company or one of
its Affiliates until immediately prior to consummation of a Change of Control,
then effective immediately prior to such Change of Control, the Class D
Interests of such Class D Member shall no longer be subject to becoming a
Conformed Interest under this Section 2.8.
Notwithstanding the provisions of this Section 2.8, Class D Interests of a
Class D Member shall not become Conformed Interests if either (i) the Subsidiary
or division of the Company for which such Class D Member works is sold to an
unaffiliated third party, such Class D Member offers to become an employee of
the buyer for at least one (1) year following such sale at a compensation level
and with responsibilities substantially equivalent to those in place immediately
before such sale, and the buyer declines such offer of employment, or (ii) there
is an internal reorganization or restructuring of the Company and its
Subsidiaries pursuant to which such Class D Member's position is eliminated or
materially changed such Class D Member offers to continue in the employ of the
Company at a compensation level comparable to that in place immediately prior to
such reorganization or restructuring, and to assume responsibilities appropriate
for his experience and abilities, and the Company declines such offer of
employment.
Section 2.9. Conforming of Class E Interests.
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The Interest of each Class E Member shall be subject to becoming a Conformed
Interest in accordance with the terms and provisions of Schedule II attached
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hereto.
Section 2.10. Effect of Becoming a Conformed Interest.
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(a) To the extent that a Class D or Class E Interest has become a
Conformed Interest under the provisions of Section 2.8 or 2.9 hereof, the
Percentage Interest corresponding to the Class D or Class E Interest which has
become a Conformed Interest shall be reduced to zero, and the Percentage
Interests of all Members with respect to all Interests held by them, other than
Conformed Interests, shall be increased proportionately.
(b) Members shall not be allocated any further items of Profit or Loss
with respect to Conformed Interests. Profit and Loss previously allocated with
respect to the Conformed Interests, but not distributed, shall, to the extent
such net amount exceeds one hundred dollars ($100), be reallocated to all
classes of Members based upon their Percentage Interests as revised
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in accordance with Section 2.10(a), as if such amounts were realized by the
Company at the time the Class D Interest or Class E Interest, as the case may
be, became a Conformed Interest. Members shall not be entitled to future
distributions pursuant to Section 3.1 or 3.9 with respect to Conformed
Interests.
(c) Notwithstanding any other provision of this Agreement, Conformed
Interests shall carry no right to vote on any matter otherwise requiring Consent
of the Members and shall carry no rights under Article Eight or Article Nine.
Members who hold only Conformed Interests shall have no right to participate in
the management or control of the Company, and shall immediately resign as an
officer of the Company or as a member of the Board of Managers.
ARTICLE THREE
DISTRIBUTIONS: PROFITS AND LOSSES
Section 3.1 Distributions Prior to Liquidation. (a) Except as provided in
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Section 3.2 and Section 3.9 and so long as the obligations to the PIK Preferred
Member under this Agreement and the Members' Agreement have been met, the Board
of Managers shall direct the Managers to distribute all Available Cash at such
time that they determine to be appropriate to Members as follows:
(i) First, among the Class A Members proportionately (based upon
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each Member's Class A Member Invested Capital) until the amount distributed
pursuant to this Section 3.1 is equal to the amount of their respective
unreturned Class A Member Invested Capital;
(ii) Second, proportionately among the Class B Members, Class C
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Members, Class D Members and Class E Members until the amount distributed
pursuant to this Section 3.1 to each shall have received an amount equal to the
product of (a) their respective Percentage Interest divided by the sum of all
the Class B Members', Class C Members', Class D Members' and Class E Members'
Percentage Interest, and (b) the Second Tier Amount; and
(iii) Third, among the Members in proportion to their respective
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Percentage Interests.
(b) The Members recognize that because the Company will distribute funds
currently to the Members pursuant to Section 3.9 hereof for the payment of their
tax obligations, the timing of when tax gains and losses may be realized over
the term of the Company could result in certain Members receiving total
distributions pursuant to the Agreement, including distributions pursuant to
Section 3.9 hereof, that are in the aggregate greater than the amounts that
would have been distributed to them if the only distribution had been to the
Members in one payment upon liquidation of the Company. Therefore, upon
liquidation of the Company, the Managers shall prepare a schedule detailing all
actual distributions by the Company to each of the Members and shall calculate
the amounts that would be distributed to each of them if all such distributions
actually made and to be made by the Company during its term and upon its
liquidation, including distributions pursuant to Section 3.9 hereof, had instead
been made to the Members in one (1) payment on liquidation of the Company.
Notwithstanding any other
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provision of this Agreement, if it is determined that any Member has received
more distributions from the Company than it would be entitled to receive under
this calculation, each Member hereby agrees to contribute such excess amount to
the Company and the Company shall distribute such amounts to the Members who
have received less than they would receive pursuant to this calculation. No
Member's required contribution shall be increased if other Members fail to make
their required payments to the Company.
(c) Not later than the fifteenth (15) day after each anniversary of the
Effective Date hereof, cash (denominated in Euros) shall be paid to the PIK
Preferred Member in amount equal to the excess of (i) the Guaranteed Payment due
for the period commencing the day after the immediately previous anniversary of
the Effective Date and ending on the first mentioned anniversary of the
Effective Date, over (ii) any additional PIK Preferred Interests issued pursuant
to Section 3.1(d). Amounts paid pursuant to this Section 3.1(c) and Section
3.1(d) hereof are intended to constitute guaranteed payments within the meaning
of Section 707(c) of the Code, and shall not be treated as distributions for
purposes of computing the recipient's Capital Account.
(d) Guaranteed Payments payable under Section 3.1(c) shall, during the
first three years, be paid in additional PIK Preferred Interests and thereafter
be paid in the sole discretion of the Company, in additional PIK Preferred
Interests. If, by the due date for payment of any Guaranteed Payment under
Section 3.1(c), the Company has not exercised that discretion or (where it has
determined to make that payment in cash) has not made that payment, the Company
shall be deemed to have determined to make that payment in additional PIK
Preferred Interests. Where any Guaranteed Payment is to be or deemed to be paid
in additional PIK Preferred Interests, such PIK Preferred Interests shall be
automatically issued (without further action required by any person) upon the
due date for payment of that Guaranteed Payment under Section 3.1(c). Said
additional PIK Preferred Interests shall, for the purposes of this Agreement,
constitute an additional Capital Contribution by the PIK Preferred Member equal
to the amount of cash payable under Section 3.1(c) hereof.
Section 3.2 Distribution Upon Liquidation
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Upon the liquidation of the Company, the following shall occur:
(a) First, assets of the Company shall be used to pay all current
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expenses, debts and obligations; and upon the expiration of such
period of time as the Board of Managers shall deem advisable, the
balance of such reserves remaining after payment of such debts
and obligations shall be distributed in the manner hereinafter
set forth in this Section 3.2;
(b) Second, an amount equal to the Capital Contribution attributable
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to the PIK Preferred Interest (including PIK Preferred Interests
issued pursuant to Section 3.1(d) hereof) plus any and all
Guaranteed Payments payable but unpaid pursuant to this Agreement
shall be payable in cash (denominated in Euros) to the PIK
Preferred Member.
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(c) Third, there shall be made a final allocation pursuant to
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Sections 3.4, 3.5, 3.6 and 3.7 of Profit or Loss and other
items to the Members' Capital Accounts; and
(d) Fourth, the remaining assets shall after the final allocation
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referred to in Section 3.2(c) be distributed in accordance with
Section 3.1.
Section 3.3 Distribution of Assets in Kind
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No Member shall have the right to require any distribution of any assets of
the Company in kind. If any assets of the Company are distributed in kind, such
assets shall be distributed on the basis of their fair market value as
determined by the Board of Managers. Solely for the purpose of maintaining
Capital Accounts, the amount by which the fair market value of any property to
be distributed exceeds or is less than the adjusted basis of such property shall
be taken into account in determining Profit or Loss as if such property had been
sold at its fair market value. Any Member entitled to any interest in such
assets shall, unless otherwise determined by the Board of Managers, receive
separate assets of the Company and not an interest as tenant-in-common, with
other Members so entitled, in each asset being distributed.
Section 3.4 Allocation of Profits and Losses
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(a) After giving effect to the allocations set forth in Sections
3.5 and 3.6, Profits of the Company for any fiscal year or other accounting
period shall be allocated as follows:
(i) First, at any and all such times as the positive balances in
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the Capital Accounts of any Class A Member is less than his Class A Member
Invested Capital less any distributions to such Class A Members, then Profits
shall be allocated to the Class A Member or Members pro rata until such Member's
Capital Account equals his Class A Member Invested Capital less any such
distributions;
(ii) Second, after giving effect to the allocations set forth in
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Section 3.4(a)(i), at any and all such times as the aggregate positive balances
in the Capital Accounts of the Class B Members, Class C Members, Class D Members
and/or Class E Members are less than the Second Tier Amount less any
distributions to such Members, if any, then, in proportion to each such Members'
share of the Second Tier Amount, which amount shall be equal to the product of
(a) such Members' Percentage Interest divided by the sum of all Class B
Members', Class C Members', Class D Members' and Class E Members' Percentage
Interest, and (b) the Second Tier Amount, until the sum of all such Members'
Capital Accounts equals the Second Tier Amount less any such distributions;
(iii) Third, after giving effect to the allocations set forth in
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Section 3.4.(a)(i) and (ii), to all Members in proportion to their respective
Percentage Interests.
(b) After giving effect to the allocations set forth in Sections
3.5 and 3.6, Losses of the Company for any fiscal year or other allocating
period shall be allocated as follows:
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(i) First, to all the Members in proportion to their respective
-----
Percentage Interests up to the excess of the amount of Profit allocations made
under Section 3.4(a)(iii) less any distributions in respect of such Profit
allocations (including distributions made pursuant to Section 3.9) over prior
allocations of losses made to them pursuant to this Section 3.4(b)(i);
(ii) Second, to the Class B Members, Class C Members, Class D
------
Members and Class E Members up to the excess of the amount of Profit allocations
made under Section 3.4.(a)(ii) less any distributions in respect of such Profit
allocations (including distributions made pursuant to Section 3.9) over prior
allocations of losses made to them pursuant to this Section 3.4(b)(ii);
(iii) Third, to the Class A Members in an amount equal to the excess
-----
of their Class A Member Invested Capital, less any distributions to the Class A
Members (other than distributions pursuant to Section 3.9 included in the
calculation of (a)(i) above) over prior allocation of losses made to them
pursuant to this Section 3.4(b)(iii); and
(iv) Fourth, to the Members in accordance with their Percentage
------
Interests; provided, however, that this provision shall not create an obligation
on the part of any Member to contribute additional capital to the Company.
Section 3.5 Required Regulatory Allocations.
--------------------------------
(a) Limitation on and Reallocation of Losses. At no time shall any
----------------------------------------
allocations of Losses, or any item of loss or deduction, be made to a Member if
and to the extent such allocation would cause such Member to have, or would
increase the deficit in, any Adjusted Capital Account Deficit of such Member at
the end of any fiscal year. To the extent any Losses or items are not allocated
to one or more Members pursuant to the preceding sentence, such Losses shall be
allocated to the Members to which such losses or items may be allocated without
violation of this Section 3.5(a).
(b) Minimum Gain Chargeback. If there is a net decrease in the
-----------------------
Minimum Gain of the Company or in the Partner Minimum Gain attributable to
Nonrecourse Debt during any fiscal year or other accounting period, then items
of income or gain of the Company for such fiscal year (and, if necessary,
subsequent fiscal years) shall be allocated to each Member or to each Member who
has a share of such Partner Minimum Gain (determined as set forth in Regulations
Section 1.704-2(i)) as the case may be, in an amount equal to such Member's
share of the net decrease in the Minimum Gain (determined in accordance with
Regulations Section 1.704-2(d)(1) and 2(g)) or in an amount equal to such
Member's share of the net decrease in Partner Minimum Gain (determined in
accordance with Regulations Sections 1.704-2(i)(3) and 2(i)(5)), as the case may
be.
(c) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal
----------------------
year or other accounting period (not including any Partner Nonrecourse
Deductions allocated pursuant to Section 3.5(b)) shall be allocated among the
Members in proportion to their respective Percentage Interests. Solely for
purposes of determining each Member's proportionate share of the "excess
nonrecourse liabilities" of the Company, within the meaning of Regulations
Section
10
1.752-3(a)(3), each Member's interest in Company profits shall be equal to his
Percentage Interest.
(d) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any fiscal year or other accounting period shall be allocated to
the Member who bears the economic risk of loss with respect to the nonrecourse
liability, as determined and defined under Regulations Section 1.704-2(b)(3) to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i)(1).
(e) Qualified Income Offset. If any Member unexpectedly receives an
-----------------------
item described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items
of income and gain shall be allocated to each such Member in an amount and
manner sufficient to eliminate, as quickly as possible and to the extent
required by Regulations Section 1.704-1(b)(2)(ii)(d), the Adjusted Capital
Account Deficit of such Member, provided that an allocation pursuant to this
Section 3.5(e) shall be made if and only to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Article III have been tentatively made as if this Section 3.5(e)
were not in the Agreement. This Section 3.5(e) is intended to constitute a
"qualified income offset" as defined in Regulations Section 1.704-
1(b)(2)(ii)(d).
(f) Basis Adjustment. To the extent an adjustment to the adjusted tax
----------------
basis of any Company asset pursuant to either of Code Sections 734(b) or 743(b)
is required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) to be taken
into account in determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such gain or loss shall be allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are required to be
adjusted pursuant to such Section of the Regulations.
(g) Gross Income Allocation. In the event any Member has a Capital
-----------------------
Account deficit at the end of any Company fiscal year or other accounting
period, which is in excess of the sum of the items to be credited to a Member's
Capital Account under the definition of Adjusted Capital Account Deficit, then
each such Member shall be allocated items of income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 3.5(g) shall be made if and only to the extent that such Member would
have a Capital Account deficit in excess of such sum after all other allocations
provided for in this Article Three have been tentatively made as if this Section
3.5(g) were not in this Agreement. As among Members having such excess if there
are not sufficient items of income and gain to eliminate all such excesses, such
allocations shall be made in proportion to the amount of any such excess.
11
Section 3.6 Curative Allocations.
---------------------
The allocations set forth in Section 3.5 (the "Regulatory Allocations") are
intended to comply with certain requirements of Regulations Sections 1.704-1(b)
and 1.704-2 and with certain guidelines used by the Internal Revenue Service in
determining the tax classification of an entity formed as a limited partnership
under state law. Notwithstanding any other provision of this Article Three, the
Regulatory Allocations shall be taken into account in making allocations of
other items of income, gain, loss, deduction and expenditure among the Members
so that, to the extent possible consistent with the Code and the Regulations,
and on a cumulative basis, the respective net amounts of such allocations of
other items and the Regulatory Allocations to the Members are equal to the
respective net amounts that would have been allocated to the Members had no
Regulatory Allocations been made. The Manager shall apply this Section 3.6 at
such times and in whatever order, and shall divide allocations made pursuant to
this Section 3.6 among the Members in such manner, as it determines is likely to
minimize any economic distortions that might otherwise be caused by the
Regulatory Allocations.
Section 3.7 Tax and Book Allocations; Other Allocation Rules.
------------------------------------------------
(a) Tax Allocations. Tax allocations for each fiscal year or other
---------------
accounting period of the Company shall be made consistent with the allocations
of Profit or Loss and items specially allocated pursuant to Sections 3.5 and 3.6
for such year or period, except that, solely for tax purposes, (i) items of
income, gain, loss and deduction with respect to Company assets reflected
hereunder in the Members' Capital Accounts and on the books of the Company at
values that differ from the Company adjusted tax basis in such assets shall be
allocated among the Members so as to take account of those differences in such
manner as the Board of Managers reasonably determines is in accordance with the
principles of Section 704(c) of the Code and with Regulations Sections 1.704-
1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g), 1.704-1(b)(4)(i) and 1.704-3, and (ii)
adjustments made pursuant to Section 734(b) or Section 743(b) of the Code shall
be taken into account.
(b) Book-up of Capital Accounts. The Board of Managers may, if it
---------------------------
reasonably determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Members of the Company, adjust
the Book Value values of all the Company's assets to equal their respective
gross fair market values, as determined by the Board of Managers (and the
Capital Accounts of the Members shall be adjusted accordingly), as of the
following times: (i) the acquisition of an additional interest by any new or
existing Member in exchange for more than a de minimis Capital Contribution;
----------
(ii) the distribution by the Company to a Member of more than a de minimis
----------
amount of assets of the Company as consideration for an Interest; (iii)
immediately prior to an Exercise Event; and (iv) the liquidation of the Company.
There shall be a Book-up upon the Effective Date.
(c) Changes in Members' Interests. If during any fiscal year or
-----------------------------
other accounting period of the Company there is a change in any Member's
interest in the Company, the Board of Managers shall allocate Profit or Loss to
the Members in the Company in a manner that complies with the provisions of
Section 706 of the Code and the Regulations thereunder.
12
(d) Credits. All tax credits of the Company for a fiscal year or
-------
other accounting period (or portion thereof, if appropriate) shall be allocated
among the Members in proportion to their Percentage Interests.
Section 3.8 Tax Withholding. If the Company incurs a withholding tax
---------------
obligation with respect to the share of income allocated or amounts paid to any
Member, including a PIK Preferred Member, (a) any amount which is (i) actually
withheld from a distribution that would otherwise have been made to such Member
and (ii) paid over in satisfaction of such withholding tax obligation shall be
treated for all purposes under this Agreement as if such amount had been
distributed to such Member under Section 3.9, and (b) any amount which is so
paid over by the Company, but which exceeds the amount, if any, actually
withheld from a distribution which would otherwise have been made to such
Member, shall be treated as an interest-free advance to such Member. Amounts
treated as advanced to any Member pursuant to this Section 3.8 shall be repaid
by such Member to the Company within thirty (30) days after the Manager or the
Board of Managers gives notice to such Member making demand therefor. Any
amounts so advanced and not timely repaid shall bear interest, commencing on the
expiration of said Thirty (30) day period, compounded monthly on unpaid
balances, at an annual rate equal to the Applicable Federal Rate as of such
expiration date. The Company shall collect any unpaid amounts from any Company
distributions that would otherwise be made to such Member.
Section 3.9 Distributions to Cover Members' Tax Liability. The Managers
---------------------------------------------
shall, to the extent of Available Cash, reduced however, by any amount deemed
distributed under Section 3.8(a), distribute to Members (other than PIK
Preferred Members) amounts intended to cover the potential federal, state or
local tax obligations of such Members on account of the cumulative allocation to
them of taxable income in excess of tax losses pursuant to this Agreement. For
purposes of the foregoing, such federal, state and local tax obligations of each
Member shall be assumed to equal the highest effective combined federal and
state income tax rate applicable to any Member multiplied by the cumulative
allocation to such Member of taxable income in excess of tax losses determined
as described in the definition of Profits and Losses without the adjustments
listed therein, with the result reduced by the cumulative amount previously
distributed pursuant to this Section 3.9. Partial distribution made to the
Members pursuant to this section 3.9 shall be made in proportion to their
respective amounts calculated under the previous sentence. Distributions made
pursuant to this Section 3.9 (including, but not limited to, amounts withheld
from Guaranteed Payments payable hereunder) shall be considered for all purposes
of this Agreement as distributions to the Members pursuant to Section 3.1
hereof.
Section 3.10 Basis of Certain Distributions. Any ambiguity in the
------------------------------
interpretation of the provisions of Sections 3.1, 3.2 or 3.4 shall be resolved
so as to achieve the same or substantially the same result as that contemplated
in the illustrative examples contained in Exhibit 3.10 hereto.
13
ARTICLE FOUR
RIGHTS, POWERS AND DUTIES OF THE BOARD OF MANAGERS
Section 4.1 Management and Control of the Company
-------------------------------------
(a) Subject to the Consent of the Class A Members when required by
this Agreement, the Board of Managers, within the authority granted to it under
and in accordance with the provisions of this Agreement, shall have full,
exclusive and complete discretion in the management and control of the day to
day business and affairs of the Company in the ordinary course and shall make
all decisions regarding the day to day business of the Company in the ordinary
course. Notwithstanding any other provision of this Agreement, the Board of
Managers shall take no action which lies outside the scope of the Company's
ordinary course of business without the Consent of seventy-five percent (75%) in
Interest of the Class A Members.
(b) Subject to Section 2.6(i) of the Members' Agreement, the Board
of Managers shall consist initially of six (6) Managers, designated in
accordance with the Members' Agreement, and may be increased to ten (10)
Managers pursuant to Section 2.6(b) of the Members' Agreement. Managers may
withdraw at any time and may be removed at any time and shall promptly be
replaced by the Members responsible for appointing such representatives pursuant
to this Section 4.1(b). Managers need not be Members of the Company.
Section 4.2 Authority of the Board of Managers
----------------------------------
(a) In addition to any other rights and powers that the Board of
Managers may possess under this Agreement and the Act, the Board of Managers
shall have, except to the extent otherwise provided in Section 4.1(a), 4.4 and
elsewhere in this Agreement, all of the rights and powers which are necessary
for or convenient or incidental to the accomplishment of the Company's purpose
and the conduct of the Company business which, by way of illustration but not
limitation, shall include the following rights and powers:
(i) to carry out the purpose of the Company as set forth in
Section 1.2;
(ii) to employ and dismiss from employment employees, agents,
attorneys, accountants, consultants, custodians of the assets of the Company,
transfer agents and servicing agents;
(iii) to protect and preserve the title and interest of the Company
with respect to the assets at any time owned or acquired by the Company;
(iv) to collect all amounts due to the Company, and otherwise to
enforce all rights of the Company through such means as it shall determine
to be appropriate;
(v) to establish and maintain one or more bank accounts for the
Company;
(vi) to cause securities owned by the Company to be registered in
the Company's name;
14
(vii) to the extent that funds of the Company are available, to pay
all debts, expenses and obligations of the Company;
(viii) to the extent that funds and other assets of the Company are
available, to make periodic distributions to the Members in accordance with
the provisions of this Agreement;
(ix) to establish and maintain the books and records of the Company
in accordance with this Agreement;
(x) to establish and maintain a Capital Account for each Member in
accordance with this Agreement;
(xi) to allocate Profit and Loss and other items in accordance with
the terms of this Agreement;
(xii) to make tax elections on behalf of the Company pursuant to and
in accordance with Section 10.4 provided, however, that this authority shall
not extend to an election on behalf of the Company to be taxed as an
association.
(b) Any Person dealing with the Company may rely upon a
certificate signed by the Board of Managers, thereunto duly authorized, as to:
(i) the identity of the Members;
(ii) the existence or non-existence of any fact or facts which
constitute conditions precedent to acts by the Board of Managers or in any
other manner germane to the affairs of the Company;
(iii) the Persons who are authorized to execute and deliver any
instrument or document of the Company; or
(iv) any act or failure to act by the Company or as to any other
matter whatsoever involving the Company or any Member.
C. Any document executed by the Board of Managers, the President,
any Vice-President, the Secretary or the Treasurer, while acting in the name and
on behalf of the Company in such capacity within the scope of their authority,
shall be deemed to be the action of the Company vis-a-vis any third parties
(including any Member as a third party for such purpose).
Section 4.3 Officers of the Company
-----------------------
The Board of Managers shall designate a President, one or more Vice-
Presidents, a Treasurer and a Secretary, and may from time to time designate
such other officers of the Company and establish the scope of duties to be
performed by such officers. The Board of Managers may terminate a Person's
status as an officer at its sole discretion. The officers of the Company in the
first instance shall be:
15
President ▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Vice-President ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Treasurer ▇▇▇▇▇ ▇▇▇▇▇▇▇
Secretary ▇▇▇▇▇ ▇. ▇▇▇▇▇
Section 4.4 Super-Majority Requirements
---------------------------
Unless the Company shall obtain the prior written consent of the holders of
at least seventy-five percent (75%) interest of the Class A Members, the Company
will not:
(a) sell, lease or otherwise dispose of all or substantially all of
the assets of the Company;
(b) except in the case of a sale or merger transaction pursuant to
Section 2.4 of the Members' Agreement, engage in any Liquidity Event;
(c) issue, sell, repurchase or redeem any Interests or rights,
options, warrants or other securities convertible into or exchangeable for
Interests, except (i) as provided in Section 2.1, 2.2 or 2.3 of the Members'
Agreement; and (ii) the issue or sale of any Interest referred to in Section
2.7(b) of the Members' Agreement;
(d) make any distributions except distributions pursuant to Section
3.1, 3.2 and 3.9;
(e) dissolve, liquidate or wind up the business of the Company; or
(f) make any material change in the nature of its business.
Section 4.5 Indemnification
---------------
The Board of Managers, each Member, and the officers of the Company
("Indemnified Party") shall not be liable, responsible or accountable in damages
or otherwise to the Company or any Member for any loss or damage incurred by
reason of any act or omission performed or omitted by such Indemnified Party in
good faith either on behalf of the Company or in furtherance of the interests of
the Company and in a manner reasonably believed by such Person to be within the
scope of the authority granted to such Person by this Agreement or by law or by
the Consent of the Members in accordance with the provisions of this Agreement,
provided that such Person was not guilty of gross negligence, willful misconduct
or any other breach of duty with respect to such act or omission. To the fullest
extent permitted by law, the Company, out of its assets and not out of the
assets of the Members, shall indemnify and hold harmless each Indemnified Party
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including any action by or in the right of the
Company), by reason of any act or omission or alleged act or omission arising
out of such Person's activities as a Board of Managers, as a Member or as an
officer if such activities were performed in good faith either on behalf of the
Company or in furtherance of the interests of the Company, and in a manner
reasonably believed by such Person to be within the scope of the authority
conferred by this Agreement or by law or by the Consent of the Members in
accordance with the provisions of this
16
Agreement, against losses, damages, or expenses for which such Person has not
otherwise been reimbursed (including attorneys' fees, judgments, fines and
amounts paid in settlement) actually and reasonably incurred by such Person in
connection with such action, suit or proceeding so long as such Person was not
guilty of gross negligence, willful misconduct or any other breach of duty with
respect to such acts or omissions, and, with respect to any criminal action or
proceeding, and had no reasonable cause to believe its conduct was unlawful and
provided that the satisfaction of any indemnification and any holding harmless
shall be from and limited to Company assets and the Members shall not have any
personal liability on account thereof.
ARTICLE FIVE
WITHDRAWAL OF MEMBERS, TRANSFERABILITY OF A MEMBER'S INTEREST
Section 5.1 Withdrawal.
----------
No Member may withdraw from the Company except and to the extent
contemplated by this Agreement or the Members' Agreement.
Section 5.2 Transfer of Member's Interest
-----------------------------
(a) (i) No Member may Transfer all or any part of its Interest in the
Company until all of the following conditions have been complied with in full:
(A) such Member has complied with the applicable provisions of
Sections 2.1 through 2.5 of the Members' Agreement;
(B) if requested by the Managers, the Company shall have received
an opinion of counsel to the Company or in the case of Northwestern, an opinion
of its internal counsel that in any such case that such Transfer (I) will not
result in the termination of the Company under Section 708 of the Code, (II)
will not affect the status of the Company as a partnership for federal income
tax purposes, (III) may be effected without registration under the 1933 Act; and
(IV) will not result in the violation of any applicable state securities laws;
(C) such Transfer is a Permitted Transfer as defined in the
Members' Agreement or has been approved by seventy-five percent (75%) in
interest of the Class A Members, which approval shall not be unreasonably
withheld; and
(D) an instrument of assignment, reasonably satisfactory to the
Board of Managers, transferring such Interest shall have been delivered to the
Board of Managers for recordation on the books of the Company.
(ii) Northwestern may transfer its Interests in accordance with the
terms and provisions of the Members' Agreement.
Upon compliance with the foregoing provisions the Transfer by a Member of all or
any part of its Interest shall be deemed to be approved and the transferee shall
be admitted to the Company as a substituted Member.
17
(b) Unless a transferee is a Member or becomes a substituted Member in
accordance with the provisions set forth in this Section 5.2, such transferee
shall have no right to require any information or account of the Company's
transactions or to inspect the Company's books or to vote or give Consents
hereunder, but shall only be entitled to receive the share of the distributions,
profits or other compensation by way of income, or the return of the
contribution, to which its assignor would otherwise be entitled, as provided
herein and in the Act.
(c) The Company and the Board of Managers shall be entitled to treat the
record owner of any Interest as the absolute owner thereof in all respects, and
shall incur no liability for distributions of cash, securities or other property
made in good faith to such owner until such time as all of the provisions of
Section 5.2(a)(i) or (ii), as the case may be, have been complied with in full.
Any attempted Transfer, other than pursuant to Section 5.2(d), by a Member which
is not in accordance with all of the provisions of Section 5.2(a)(i) or (ii), as
the case may be, shall be void and ineffective and shall not bind the Company or
the Board of Managers.
(d) If a Member dies or becomes incompetent, his executor, administrator or
trustee, or, in the event of appointment by a court of competent jurisdiction,
his conservator or guardian, shall be a permitted assignee of the Interest of
such Member after delivering written notice to the Company of its status as the
legal representative of such Member with reasonable proof of such status, but
shall not be admitted as a substituted Member except in accordance with Section
5.2(a).
ARTICLE SIX
RIGHTS AND OBLIGATIONS OF THE MEMBERS
Section 6.1 No Participation in Management
------------------------------
The Members shall have no right to control or take any part in the
management or control of the Company's business in their capacity as such, but
each Member may exercise the rights and powers of a Member under this Agreement,
including, without limitation, upon the terms and provisions contemplated by the
Members' Agreement. A Member may provide services to the Company pursuant to a
written employment or consulting agreement.
Section 6.2 No Authority to Act
-------------------
The Members shall have no power to represent, act for or sign for the Board
of Managers or the Company in their capacity as such. Each Member hereby
consents to the exercise by the Board of Managers of the powers conferred on it
by State law subject to the terms and conditions of this Agreement and the
Members' Agreement.
ARTICLE SEVEN
DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY
18
Section 7.1 Events Causing Dissolution
--------------------------
The Company shall dissolve and its affairs shall be wound up upon the
happening of any of the following events:
(a) the sale or other disposition by the Company of all or substantially
all of its assets;
(b) the Consent of Class A Members having a collective Percentage Interest
of at least sixty percent (60%) to dissolve and liquidate the Company; or
(c) the entry of decree of judicial dissolution under section 18-802 of
the Act.
Section 7.2 Liquidation
-----------
(a) Upon dissolution of the Company, the Board of Managers or, if one is
appointed, an authorized liquidating trustee shall wind up the Company's
affairs. Upon termination and dissolution of the Company and liquidation of its
assets, the Board of Managers shall apply the Company's assets to the payment of
all liabilities owing to creditors in accordance with the applicable law. The
Board of Managers shall set up such reserves as it deems reasonably necessary
for any contingent or unforeseen liabilities or obligations of the Company. Said
reserves may be paid by the Board of Managers upon dissolution to a bank or
trust company to be held in escrow for the purpose of paying any such contingent
or unforeseen liabilities or obligations and, at the expiration of such period
or occurrence of such events as the Board of Managers may in establishing such
reserves deem advisable, such reserves shall be distributed to the Members or
their assigns in the manner set forth in subparagraph (b) of this Section 7.2.
(b) After paying liabilities and providing for reserves in accordance with
subparagraph (a) of this Section 7.2, the Board of Managers shall make a final
allocation of Profit or Loss, as the case may be, and other items to the
Members' Capital Accounts in accordance with Article Three, which allocation
shall take into account any unrealized gains and losses with respect to assets
to be distributed in kind in accordance with Sections 1.704-1(b)(2)(iv)(e) and
1.704-1(b)(2)(iv)(f) of the Treasury Regulations. The remaining assets of the
Company shall then be distributed to and among the Members in accordance with
Section 3.2. In the event that any part of such remaining assets consists of
property, securities or accounts receivable or other non-cash assets, the Board
of Managers may, but need not, take such steps as it deems appropriate to
convert such assets into cash or into any other form which would facilitate the
distribution thereof. No Member shall have the right to demand or receive
property or other assets other than cash in return for his contribution.
19
ARTICLE EIGHT
AMENDMENTS
This Agreement may be amended only with the Consent of seventy-five percent
(75%) in interest of the Class A Members, provided that no amendment shall be
made which would reduce the Capital Account or otherwise adversely affect the
economic interest of any Member without the Consent of such Member and no
amendment which adversely affects the interests of the Class B Members, Class C
Members, Class D Members or Class E Members without a like effect on all other
Members may be made without the Consent of such Members provided though that in
no event may Article Two, Article Three, Section 5.2 (as it relates to the
transfer of Interests held by Northwestern) or this Article Eight be amended
without written consent of the holders of at least seventy-five percent (75%) of
the Class C Interests and provided further (but without limitation to the
foregoing) that in no event may Section 3.1(c) or 3.1(d) or this Article Eight
be amended without written consent of the PIK Preferred Member or Section 1.7(d)
or other provisions hereof relating to the Warrant or this Article Eight be
amended without written consent of the Exerciser. A Member's Consent to an
amendment may be evidenced by the Member's execution of the amendment. The Board
of Managers shall, within a reasonable time after the adoption of any amendment
to this Agreement (but not longer than the period required by the Act), make any
filings or publications if required by the Act or desirable to reflect such
amendment.
ARTICLE NINE
CONSENTS, VOTING AND MEETINGS
Section 9.1 Method of Giving Consent
------------------------
Any Consent required by this Agreement may be given by:
(a) a written consent given by the consenting Member and received by the
Board of Managers at or prior to the doing of the act or thing for which the
consent is solicited; or
(b) the affirmative vote by the consenting Member to the doing of the act
or thing for which the consent is solicited at any meeting called and held
pursuant to Section 9.2 to consider the doing of such act or thing.
Section 9.2 Meetings
--------
Any matter requiring the Consent of the Members pursuant to this Agreement
may be considered at a meeting of the Members (other than the PIK Preferred
Member) held not less than ten (10) nor more than sixty (60) days after
Notification thereof shall have been given by the Board of Managers to the
Members (other than the PIK Preferred Members). Such Notification may be given
by the Board of Managers, in its discretion, at any time. Any such Notification
shall state briefly the purpose, time and place of the meeting. All such
meetings shall be held within or outside the State at such reasonable place as
the Board of Managers shall designate and during normal business hours. Any
meeting may be held by conference telephone or similar communication equipment
so long as all Members participating in the meeting can
20
hear one another, and all Members participating by telephone or similar
communication equipment shall be deemed to be present in person at the meeting.
Section 9.3 Submissions to Members
----------------------
The Board of Managers shall give the Members (other than the PIK Preferred
Member) Notification of any proposal or other matter required by any provision
of this Agreement or by law to be submitted for the consideration and approval
of the Members. Such Notification shall include any information required by the
relevant provision of this Agreement.
ARTICLE TEN
BOOKS AND RECORDS; ACCOUNTING; TAX ELECTIONS; ETC.
Section 10.1 Books and Records
-----------------
The books and records of the Company, including a list of the names and
residence, business or mailing addresses and Interests of the Members, shall be
maintained at the principal office of the Company and shall be available for
examination there by any Member or by any Member's duly authorized
representatives at any and all reasonable times upon reasonable notice. Any
Member, or such Member's duly authorized representatives, upon Notification to
the Board of Managers and upon paying the costs of collection, duplication and
mailing, shall be entitled for any purpose reasonably related to any Member's
Interest as a Member in the Company to a copy of information to which such
Member is entitled under the Act. The Company may maintain such other books and
records and may provide such financial or other statements as the Board of
Managers in its discretion deem advisable.
Section 10.2 Accounting; Tax Year
--------------------
The books and records of the Company shall be kept on the accrual method and
shall be closed at the end of each fiscal year. In addition, the Company's
fiscal year shall be the calendar year unless another fiscal year must be used
under applicable federal income tax laws for the Company to avoid having to pay
any amount for deferral pursuant to Section 444 of the Code.
Section 10.3 Reports
-------
Within seventy-five (75) days after the end of the Company's fiscal year,
the Board of Managers shall cause to be prepared and sent to each Person who was
a Member at any time during the fiscal year financial statements which shall
cover the Company's entire fiscal year, shall include a balance sheet and a
profit and loss statement, and, if such profit and loss statement is not
prepared on the cash method, a cash flow or source and application of funds
statement. Also within seventy-five (75) days after the end of the Company's
fiscal year, the Board of Managers shall furnish each Member with such
information as may be necessary to enable such Member to file his Federal income
tax returns, any required state income tax returns and any other report or
filing required by any governmental agency or authority. The cost of all such
accounting and reporting and related legal expenses, if any, shall be paid by
the Company.
21
The Board of Managers shall also furnish to any Member (other than the PIK
Preferred Member) upon request such information as is reasonably requested by
such Member concerning the business and financial affairs of the Company.
Section 10.4 Elections
---------
Subject to Section 4.2(a)(xii), the Board of Managers may cause the Company
to make all elections required or permitted to be made by the Company under the
Code and not otherwise expressly provided for in this Agreement, in the manner
that the Board of Managers reasonably believes in good faith will be most
advantageous to the Company.
ARTICLE ELEVEN
DEFINITIONS
The defined terms used in this Agreement shall, unless the context otherwise
requires, have the meanings specified in this Article Eleven. The singular shall
include the plural and the masculine gender shall include the feminine, the
neuter and vice versa, as the context requires:
"Act" means the Delaware Limited Liability Company Act, as amended from time
to time, and any successor to such Act.
"Adjusted Capital Account Deficit" means, with respect to any Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant fiscal year determined after (i) crediting to such Capital Account any
amounts which such Member is obligated to restore thereto hereunder or is deemed
to be obligated to restore thereto pursuant to the penultimate sentences of
Sections 1.704-2(g)(1) and 1.704-2(h)(5) of the Treasury Regulations and (ii)
debiting to such Capital Account the reasonably expected adjustments,
allocations and distributions described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of the Treasury
Regulations. The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the
Treasury Regulations and shall be interpreted consistently therewith.
An "Affiliate" of a Person shall mean a Person which, directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such Person and, when used with respect to the
Company shall include any holder of Interests or other equity interests of the
Company or any officer or director of the Company.
"Agreement" means this Operating Agreement, as originally executed and as
amended, modified, supplemented or restated from time to time, as the context
requires.
"Applicable Percentage Rate" shall mean a rate per annum equal to Twelve
Percent (12%) for the first Five (5) years commencing on the Effective Date
hereof. On the first date of year Six (6) the Applicable Percentage Rate shall
increase to Fifteen Percent (15%) and thereafter
22
shall further increase Fifty (50) basis points at the beginning of each
subsequent Six (6) month period up to a maximum rate of Eighteen Percent (18%).
"Available Cash" shall mean such cash and cash equivalents as the Company
may have from time to time available for distribution to Members, after payment
or the establishment of reserves for the payment of the payment of Company
expenses, Guaranteed Payments, payments due and payable in connection with the
redemption of the PIK Preferred Interest and reservation for liabilities
(including contingent liabilities) and working capital as the Board of Managers
shall deem appropriate.
"Business Day" shall mean any day, other than a Saturday, Sunday or legal
holiday, on which banks in Boston, Massachusetts, are open for business.
"Book Value" means, with respect to any asset of the Company, such asset's
adjusted basis for federal income tax purposes, except that:
(i) the initial Book Value of any asset contributed by a Member to
the Company shall be the gross fair market value of such asset (not reduced
for any liabilities to which it is subject or which the Company assumes), as
such value is determined and for which credit is given to the contributing
Member under this Agreement;
(ii) the Book Values of all assets of the Company shall be adjusted to
equal their respective gross fair market values, as determined by the Board
of Managers, consistent with Section 3.7(b) hereof.
(iii) the Book 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 as determined by the Board of Managers; and
(iv) the Book Value of the assets of the Company shall be increased
(or decreased) to reflect any adjustment to the adjusted basis of such
assets pursuant to Section 734(b) or Section 743(b) of the Code, but only to
the extent such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-(b)(2)(iv)(m); provided,
however, that Book Value shall not be adjusted pursuant to this clause (iv)
to the extent that the Board of Managers determines that an adjustments
pursuant to clause (ii) hereof is necessary or appropriate in connection
with the transaction that would otherwise result in an adjustment pursuant
to this clause (iv).
If the Book Value of an asset has been determined or adjusted pursuant to
the preceding clauses (i), (ii) or (iv), such Book Value shall thereafter be
adjusted by the depreciation taken into account with respect to such assets for
purposes of computing Profits and Losses.
"Capital Account" means, with respect to any Member, the capital account
established and maintained for such Member pursuant to Section 2.1.
"Capital Contribution" means with respect to any Member as of any date of
determination, the sum of (i) the amount of money that such Member has
contributed to the Company or, in the case of the PIK Preferred Member, deemed
to have contributed pursuant to Section 2.1 or
23
Section 3.1(d) hereof, (ii) the fair market value, as agreed by the Members, of
any property that such Member has contributed (net of any liabilities that the
Company has incurred or taken subject to under Section 752 of the Code, in
acquiring such property from such Member), and (iii) the amount of any Company
liabilities that the Member has assumed within the meaning of Regulations
Section 1.704-1(b)(2)(iv)(c), other than in connection with receiving one or
more distributions from the Company provided, however, that for the purposes of
computing Class A Member Invested Capital, only (i) and (ii) shall be
considered.
"Change of Control" means a transaction by which any Person or any two or
more Persons acting as a group, and all Affiliates of such Person or Persons, in
each case other than Persons who are Members on the date hereof or are
Affiliates of such Members, shall acquire Interests in the Company, whether by
purchase, exchange, merger, consolidation or otherwise, such that after giving
effect to such transaction, the aggregate Percentage Interest of such Person or
Persons and their Affiliates exceeds fifty percent.
"Class A Members," "Class B Members," "Class C Members", "Class D Members"
and "Class E Members" shall mean those Members designated as such on Schedule 1
----------
attached hereto.
"Class A Member Invested Capital" means the total Capital Contribution of
the Class A Members and, in the case of Marconi (in its capacity as a holder of
Warrants), the Exercise Price plus any further Capital Contribution in respect
of such Class A Interests.
"Class Percentage" means with respect to any Class A Member, the ratio,
expressed as a percentage, of such Member's Capital Contribution to the total
Capital Contributions of all of the Class A Members; with respect to any Class B
Member, the ratio, expressed as a percentage, of such Member's Percentage
Interest to the total Percentage Interests of all of the Class B Members; with
respect to any Class C Member, the ratio, expressed as a percentage, of such
Member's Percentage Interest to the total Percentage Interests of all of the
Class C Members; with respect to any Class D Member, the ratio, expressed as a
percentage, of such Member's Percentage Interest to the total Percentage
Interests of all of the Class D Members and with respect to any Class E Member,
the ratio, expressed as a percentage, of such Member's Percentage Interest to
the total Percentage Interests of all of the Class E Members.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and, where applicable, any predecessor or successor thereto.
"Company" shall mean Weigh-Tronix, LLC, a Delaware limited liability
company, and its successors and assigns.
"Conformed Interest" means any Class D or Class E Interest which has become
a Conformed Interest pursuant to Section 2.8 or 2.9 hereof.
"Consent" means the prior written approval of a Person, given as provided in
Section 9.1, or the affirmative vote of approval of such Person at a meeting
called and held pursuant to Section 9.2, as the case may be, to do the act or
thing for which the approval is solicited, or the act of granting such approval,
as the context may require.
24
"Effective Date" means June 13, 2000.
"Exercise Event" shall mean the exercise of the Warrants.
"Exercise Price" means $1,980,052.50.
"Exerciser" shall mean Marconi, Inc. or its successor or permitted assigns,
as the case may be.
"Guaranteed Payment" for any period means the aggregate of the amounts
calculated as follows in respect of each part of that period during which both
the Applicable Percentage Rate and the balance of the PIK Preferred Member's
Capital Account are constant. The amount for each such part of that period shall
equal the product of (i) the Applicable Percentage Rate during such part of that
period determined on the basis of a year of 365 or 366 days, as the case may be,
for the actual number of days occurring in that part of such period, and (ii)
the balance of the PIK Preferred Member's Capital Account during such part of
that period.
"Interest" means the interest of a Member in the Company as represented by
such Member's aggregate Capital Account.
"Liquidity Event" shall mean a Public Offering of securities of the Company;
the sale of all or substantially all of the assets of the Company; or a
transaction which results in a Change of Control.
"Member" means any Person who is a Member of the Company as shown on the
books of record of the Company at the time of reference thereto, in such
Person's capacity as a Member of the Company.
"Members' Agreement" shall mean that certain Amended and Restated Members'
Agreement, dated as of the date hereof, by and among the Company, Berkshire Fund
IV, a Limited Partnership, Berkshire Investors LLC, the Management Members, the
Other Members and Marconi (all as defined therein);
"Minimum Gain" shall have the meaning given in Regulations Section 1.704-
2(d).
"1933 Act" means the Securities Act of 1933, as amended from time to time.
"Nonrecourse Deductions" shall have the meaning given in Regulations Section
1.704-2(b)(1).
"Northwestern" shall mean The Northwestern Mutual Life Insurance Company in
its capacity as a holder of Interests under this Agreement.
"Notification" means a writing, containing the information required by this
Agreement to be communicated to any Person, sent as provided in Section 12.2.
"Partner Minimum Gain" shall mean member "nonrecourse debt minimum gain" as
set forth in Regulations Section 1.704-2(i)(3).
25
"Partner Nonrecourse Debt" shall have the meaning given in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" shall have the meaning given in Regulations
Section 1.704-2(i)(2).
"Percentage Interest" shall be the profit interest of a Member set forth in
Schedule I, as amended from time to time. The Percentage Interest associated
----------
with the PIK Preferred Interests shall be zero.
"Person" means an individual, corporation, limited liability company,
partnership, trust, or unincorporated association, or a government or any agency
or political subdivision thereof.
"PIK Preferred Member" means Marconi, Inc. or successors or permitted
assigns, as the case may be, in its capacity as holder of the PIK Preferred
Interest.
"Profit" or "Loss" means, for each fiscal year or other accounting period,
an amount equal to the taxable income or loss for such period determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be separately stated pursuant to
Section 703(a)(1) of the Code shall be included in such taxable income or loss),
including each item thereof, computed with the following adjustments:
(i) income that is exempt from federal income tax and that is not
otherwise taken into account in computing Profit or Loss shall be added to such
taxable income or loss;
(ii) expenditures that are described in Section 705(a)(2)(B) of the
Code (or that are treated as described in such Section pursuant to Section
1.704-1(b)(2)(iv)(i) of the Treasury Regulations) and that are not otherwise
taken into account in computing Profit and Loss shall be subtracted from such
taxable income or loss;
(iii) unrealized gains and losses with respect to assets that are
distributed in kind shall be taken into account in accordance with Sections
1.704-1(b)(2)(iv)(e) and 1.704-1(b)(2)(iv)(f) of the Treasury Regulations;
(iv) adjustments in the book values of properties as a result of
revaluations of such properties pursuant to the last sentence of Section 2.2B
shall be treated as gains or losses, as the case may be, from dispositions of
such properties in accordance with Section 1.704-1(b)(2)(iv)(f) of the Treasury
Regulations;
(v) gains, losses and cost recovery deductions with respect to
properties that are properly reflected, under Section 1.704-1(b)(2)(iv) of the
Treasury Regulations, on the Partnership's books at values that differ from the
Partnership's tax bases in those properties shall be determined with reference
to the book values of those properties in accordance with Sections 1.704-
1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g) and 1.704-1(b)(4)(i) of the Treasury
Regulations; and
(vi) items that are specially allocated pursuant to Section 3.3 or
Section 3.4 shall not be taken into account in computing a Profit or Loss for
any year or other period.
26
"Public Offering" shall mean the first issuance of securities issued by the
Company or any successor entity (including a corporation into which the Company
is converted) pursuant to a public distribution in which all or any portion of
the Interests of the Company, or any security of a successor entity into which
such Interests may be converted, shall be listed and traded on a national
exchange or on the NASDAQ National Market System.
"Regulatory Allocations" shall have the meaning given in Section 3.6.
"Second Tier Amount" shall mean the product of (i) the Class A Member
Invested Capital divided by the Class A Members' Percentage Interests, and (ii)
the sum of the Percentage Interest of the Class B Members, the Class C Members,
Class D Members and Class E Members, as follows:
Class A Member the sum of the Percentage Interests of
Invested Capital X the Class B, C, D and E Members
------------------------
Class A Members'
Percentage Interest
"Third Party" means any Person other than the Company.
"Transfer" shall mean voluntarily or involuntarily to transfer, sell,
assign, pledge, hypothecate, give, create a security interest in or lien on,
place in trust (voting or otherwise), assign or in any other way encumber or
dispose of, directly or indirectly and whether or not by operation of law or for
value, any Interests.
"Treasury Regulations" means the Income Tax Regulations (final, temporary
and, as applicable, proposed) promulgated from time to time under the Code.
References to specific sections of the Treasury Regulations shall be to such
sections as amended, supplemented or superseded by Treasury Regulations
currently in effect.
"Warrants" means the warrants to purchase a Class A Membership Interest in
the Company issued to Marconi, Inc. pursuant to a Warrant Agreement dated June
13, 2000, and attached hereto as Exhibit 1.
"Warrant Agreement" means the agreement relating to the Warrants dated June
13, 2000.
"Warrant Percentage Interest" means such percentage as, after assuming
exercise in full of all warrants, options, convertible securities and other
rights to subscribe, acquire, convert or exchange into Interests in existence as
of the Effective Date represents five percent (5%) of all Interests, subject to
adjustment for any Restructuring Events (as defined in the Warrant Agreement).
ARTICLE TWELVE
MISCELLANEOUS PROVISIONS
Section 12.1 Appointment of the President as Tax Matters Partner
---------------------------------------------------
27
The President shall be the "Tax Matters Partner" for the Company as defined
in Section 6231(a)(7) of the Code. As Tax Matters Partners, the President shall
have all of the rights, duties, obligations and powers of a Tax Matters Partner,
as so defined, set forth in Sections 6221 through 6233 of the Code. Each of the
Members agrees to treat his Interest in the Company in a manner consistent with
that prescribed by the Tax Matters Partner with respect to all federal, state
and local tax matters.
Section 12.2 Notification
------------
All communications provided for hereunder shall be in writing and shall be
delivered or mailed prepaid by registered or certified mail or overnight air
courier, or by facsimile communication, in each case addressed to a party at its
address appearing on Schedule I, or to such other address such party or its
----------
assignee shall designate to the other parties hereto in writing; provided,
however, that a notice to a party by overnight air courier shall only be
effective if delivered to such party at a street address designated for such
purpose on Schedule I, and a notice to a party by facsimile communication shall
----------
only be effective if confirmed by transmission of a copy thereof by prepaid
overnight air courier.
Section 12.3 Binding Provisions
------------------
The covenants and agreements contained herein shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors and
permitted assigns of the respective parties hereto.
Section 12.4 No Waiver
---------
The failure of any Member to seek redress for violation, or to insist on
strict performance, of any covenant or condition of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
Section 12.5 Legends
-------
If certificates are issued evidencing, Interests of the Company , whether
now or hereafter owned by the Members, such certificates shall be subject to the
terms of this Agreement and shall have endorsed in writing, stamped or printed,
thereon the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND
CONDITIONS OF AN OPERATING AGREEMENT DATED AS OF MAY 1, 1998 AS AMENDED BY THE
SECOND AMENDED AND RESTATED OPERATING AGREEMENT DATED JUNE 13, 2000 AND OF A
MEMBERS' AGREEMENT DATED AS OF MAY 1, 1998, AS AMENDED BY THE AMENDED MEMBERS'
AGREEMENT DATED JUNE 13, 2000 AS EACH SUCH AGREEMENT MAY BE FURTHER AMENDED FROM
TIME TO TIME, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE COMPANY.
Section 12.6 Applicable Law
--------------
28
This Agreement shall be construed and enforced in accordance with the laws
of the State of Delaware without reference to the conflicts of laws provisions
thereof.
Section 12.7 Separability of Provisions
--------------------------
Each provision of this Agreement shall be considered separable and if for
any reason any provision or provisions of this Agreement, or the application of
such provision to any Person or circumstance, shall be held invalid or
unenforceable in any jurisdiction, such provision or provisions shall, as to
such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without invalidating the remaining provisions hereof, or the
application of the affected provision to Persons or circumstances other than
those to which it was held invalid or unenforceable, and any such invalidity or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Section 12.8 Entire Agreement
----------------
This Agreement constitutes the entire agreement among the parties. This
Agreement supersedes any prior agreement or understanding among the parties and
may not be modified or amended in any manner other than as set forth herein or
therein.
Section 12.9 Section Titles
--------------
Section titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.
Section 12.10 Counterparts
------------
This Agreement may be executed in several counterparts, all of which
together shall constitute one agreement binding on all parties hereto
notwithstanding that all the parties have not signed the same counterpart.
[Remainder of the Page Intentionally Left Blank]
29
WEIGH-TRONIX, LLC
OPERATING AGREEMENT
Counterpart Signature Page
--------------------------
IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under SEAL as of the date first above written.
BERKSHIRE MEMBERS:
BERKSHIRE FUND IV INVESTMENT CORP.
By: /s/ D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
Name: D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
BERKSHIRE INVESTORS, LLC
By: /s/ D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
Name: D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Managing Member
BERKSHIRE FUND V INVESTMENT CORP.
By: /s/ D. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------
Name: d. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title:
WEIGH-TRONIX, LLC
OPERATING AGREEMENT
Counterpart Signature Page
--------------------------
NORTHWESTERN:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its Authorized Representative
2
WEIGH-TRONIX, LLC
OPERATING AGREEMENT
Counterpart Signature Page
--------------------------
MANAGEMENT MEMBERS:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, III
-----------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, III
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ illegible Director
--------------------------
R & H Trust Co. [Jersey] Limited
3
WEIGH-TRONIX, LLC
OPERATING AGREEMENT
Counterpart Signature Page
--------------------------
OTHER MEMBERS:
DISCRETIONARY SETTLEMENT SUNAPEE SECURITIES, INC.
Dated May 6, 1998
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------- ------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Treasurer
DOMINIC'S TRUST SQUAM LAKE INVESTORS, III, L.P.
Dated May 7, 1998 By: GPI, Inc., its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------- ------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇, Vice-President
▇▇▇▇▇▇▇▇' TRUST BANCBOSTON INVESTMENTS INC.
Dated May 8, 1998
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------- ------------------
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇
W-T INVESTMENT, LLC ▇▇▇▇▇ ▇. ▇▇▇▇ 1986 CHILDREN'S TRUST
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, III By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------- -------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Trustee
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
--------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
4
WEIGH-TRONIX, LLC
OPERATING AGREEMENT
Counterpart Signature Page
--------------------------
MARCONI:
MARCONI INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------
▇▇▇▇▇▇ ▇▇▇▇▇
SCHEDULE I
TO
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
WEIGH-TRONIX, LLC
CLASS A MEMBERS
---------------
NAME AND ADDRESSES PROFIT CAPITAL
OF CLASS A MEMBERS INTEREST CONTRIBUTION
------------------ -------- ------------
Berkshire Fund IV Investment Corp. 47.303 $28,639,310
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Berkshire Fund V Investment Corp. 22.356 $16,821,127
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Berkshire Investors, LLC 6.966 $ 4,546,039
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
BancBoston Investments Inc. .528 $ 250,000
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Sunapee Securities, Inc. .420 $ 256,900
c/o Bain & Company
▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Squam Lake Investors, III, L.P. 2.191 $ 1,413,124
c/o Bain & Company
▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇ 1986 Children's Trust 0.528 $ 250,000
c/o Burr, Egan, Deleage & Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1.834 1,239,000
c/o Cubex Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, III .622 $ 250,000
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
R&H Trust Co. [Jersey] Limited .410 $ 150,000
Ordinance House
St. Helier Jersey
Channel Island
▇▇▇▇▇ ▇. ▇▇▇▇▇ .410 $ 150,000
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ .344 $ 100,000
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
W-T Investment, LLC 1.831 $ 1,083,500
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
------ -----------
Class A Sub-total 85.742 $55,149,000
CLASS B MEMBERS
---------------
NAME AND ADDRESSES PROFIT CAPITAL
OF CLASS B MEMBERS INTEREST CONTRIBUTION
------------------ --------- ------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, III .592% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
R&H Trust Co. [Jersey] Limited .460% - 0 -
Ordinance House
St. ▇▇▇▇▇▇▇ Jersey
Channel Island
Attn: President
▇▇▇▇▇ ▇. ▇▇▇▇▇ .460% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ .460% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
------ ------
Class B Sub-total 1.973% $ 0
CLASS C MEMBERS
---------------
NAME AND ADDRESSES PROFIT CAPITAL
OF CLASS C MEMBER INTEREST CONTRIBUTION
----------------- --------- ------------
The Northwestern Mutual Life Ins. 2.999% - 0 -
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇
------ --------
Class C Sub-total 2.999% $ 0
CLASS D MEMBERS
---------------
NAME AND ADDRESSES PROFIT CAPITAL
OF CLASS D MEMBERS INTEREST CONTRIBUTION
------------------ --------- ------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, III 0.696% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
R&H Trust Co. [Jersey] Limited 0.542% - 0 -
Ordinance House
St. ▇▇▇▇▇▇ Jersey
Channel Island
Attn: President
▇▇▇▇▇ ▇. ▇▇▇▇▇ 0.542 -0-
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 0.542% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
------ -------
Class D Sub-total 2.322% $ 0
CLASS E MEMBERS
NAME AND ADDRESSES PROFIT CAPITAL
OF CLASS E MEMBERS INTEREST CONTRIBUTION
------------------ --------- ------------
▇▇▇▇ ▇. ▇▇▇▇▇▇, III 1.393% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
R&H Trust [Jersey] Limited 1.083% - 0 -
Ordinance House
St. ▇▇▇▇▇▇ Jersey
Channel Island
Attn: President
▇▇▇▇▇ ▇. ▇▇▇▇▇ .386% - 0 -
c/o Weigh-Tronix LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: President
Discretionary Settlement .232% - 0 -
Dated May 6, 1998
By ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Dominic's Trust dtd. May 7, 1998 .232% - 0 -
By ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇' Trust dtd. May 8, 1998 .232% - 0 -
By ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 1.083% - 0 -
c/o Weigh-Tronix, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
W-T Investment, LLC 2.321% - 0 -
c/o Weigh-Tronix, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Class E Sub-total 6.964%
Total (All Members) 100.000% $ 0
======= ======
PIK PREFERRED MEMBER
--------------------
NAME AND ADDRESSES CAPITAL
OF PIK PREFERRED MEMBER CONTRIBUTION
----------------------- ------------
Marconi, Inc. Euro 10.0 million
c/o Marconi Data Systems Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
SCHEDULE II
TO
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
WEIGH-TRONIX, LLC
CRITERIA FOR CONFORMING CLASS E INTERESTS/1/
-------------------------------------------
The Class E Interests shall become Conformed Interests in accordance with
the provisions of Section 2.9 of the Operating Agreement unless the Company
achieves EBITDA (as herein defined) targets as set forth in paragraph A below,
or certain targets are achieved upon sale of the Company as provided in
paragraph B below. Additionally, if a Class E Member's employment by the
Company or any Subsidiary shall terminate for any reason prior to achievement by
the Company of the EBITDA targets set forth in paragraph A below, or the targets
relating to the sale of the Company set forth in paragraph B below, all Class E
Interests held by such Class E Member which remain subject to becoming Conformed
Interests shall become Conformed Interests, except as set forth in the
immediately following sentence. If either (i) the Subsidiary or division of the
Company for which a Class E Member works is sold to an unaffiliated third party,
such Class E Member offers to become an employee of the buyer for at least one
year following such sale at a compensation level and with responsibilities
substantially equivalent to those employees immediately before such sale, and
the buyer declines such offer of employment, or (ii) there is an internal
reorganization or restructuring of the Company and its Subsidiaries pursuant to
which such Class E Member's position is eliminated or materially changed, such
Class E Member offers to continue in the employ of the Company at a compensation
level comparable to that employee immediately prior to such reorganization or
restructuring, and to assume responsibilities appropriate for his expertise and
abilities, and the Company declines such offer of employment, then the Class E
Interest of such Class E Member shall continue to be eligible for release from
becoming a Conformed Interest as provided in this Schedule II.
-----------
A. Termination if EBITDA Targets not Met.
-------------------------------------
The Class E Interests shall become Conformed Interests if either certain
annual or cumulative EBITDA targets are not met as herein provided. For
purposes of this Schedule the term "EBITDA" shall mean, for any year, the
consolidated net earnings of the LLC and its subsidiaries for such period, plus
----
(a) all amounts deducted therefrom on account of (i) taxes, (ii) interest
charges, (iii) depreciation charges and (iv) amortization charges; (b)
management fees paid to Berkshire Investors LLC or its affiliates during such
period; (c) non-cash charges or income for such period attributable to income
and expenses incurred as a result of a Class E Interest no longer being subject
to becoming Conformed Interests; (d) one-time non-recurring costs and expenses
which are attributable to any acquisition, including the acquisition of the
Company and its subsidiaries; and (e) any costs attributable to the write-up of
assets or goodwill
_______________________
/1/ The hurdles will be updated post-closing Fifty percent (50%) of the Class E
Interests will be released from risk of forfeiture. Remember interests will be
subject to revised EBITDA hurdles.
resulting from purchase accounting in connection with any acquisition, including
that of the Company and its subsidiaries, all as determined in conformity with
generally accepted accounting principles. In addition, EBITDA shall be
calculated without regard to any income or expense associated with the grant,
exercise, vesting, issuance or, for accounting purposes only, the revaluation of
the assets underlying any options or warrants. Class E Interests shall become
Conformed Interests if and to the extent that the following targets are not met:
EBITDA Targets
(dollars in millions)
-------------------------------------------------------------------------------------------------------
Column F
Column A Column B Column C Column D Column E cumulative
3/31/99 3/31/00 3/31/01 3/31/02 3/31/03 3/31/2003
-------- -------- -------- -------- -------- ----------
Minimum $ 15.4 $ 18.2 $ 20.1 $ 22.3 $ 25.0 $ 101.0
Threshold
Maximum 17.1 20.2 22.3 24.8 27.8 112.2
Threshold
Percentage of 20% 20% 20% 20% 20% 100%
Class E
Interests
Subject to
being
Conformed
-------------------------------------------------------------------------------------------------------
To the extent that the Company makes acquisitions during the periods listed
in Columns A through F above which require additional equity investments, or
additional debt investments with so-called "equity kickers", the foregoing
EBITDA targets will be revised to reflect the revised capital structure. Upon
the occurrence of extraordinary corporate events (including the sale of a
portion of the business or the license of technology), the performance targets
set forth above will be reset as determined by the Board of Managers (which
determination shall include the affirmative vote of at least one Management
Representative).
1. If the EBITDA for any of the periods specified in Columns A through E
is less than the target for such period set forth opposite the line item
entitled "Minimum Threshold", then 20% of the Class E Interests shall become
Conformed Interests unless the targets in Column F are met or the targets
described in paragraph B below are met.
2. If the EBITDA for any of the periods specified in Columns A through E
equals or exceeds the target for such period set forth opposite the line item
entitled "Maximum Threshold", then 20% of the Class E Interests shall no longer
be subject to becoming Conformed Interests with respect to such period.
3. If the EBITDA for any of the periods in Columns A through E is greater
than the target for such period set forth opposite the line item entitled
"Minimum Threshold" but less than the target for such period set forth opposite
the line item entitled "Maximum Threshold", then
the percentage of the Class E Interests which shall be released from the risk of
becoming Conformed Interests shall be determined by straight line interpolation
between 0% and 20%.
4. If the EBITDA for the period in Column F is less than the target for
such period set forth opposite the line item entitled "Minimum Threshold", then
no Class E Interest shall be released from the risk of becoming Conformed
Interests the Class E Interests beyond that required pursuant to subparagraphs
number (1) through (3) above.
5. If the EBITDA for the period specified in Column F equals or exceeds
the target for such period set forth opposite the line item entitled "Maximum
Threshold", the percentage of Class E Interests which shall be released from the
risk of becoming Conformed Interests shall equal 100% less that percentage which
has theretofore been released from such risk in vesting under subparagraphs (1)
through (3) above.
6. If the EBITDA for the period specified in Column F is greater than the
target for such period set forth opposite the line item entitled "Minimum
Threshold", but is less than the target for such period set forth opposite the
line item entitled "Maximum Threshold", then the percentage of the Class E
Interests which shall be released from the risk of becoming Conformed Interests
shall be determined by a straight line interpolation between 0% and 100%, and
there shall be subtracted from the percentage so determined, the percentage of
Class E Interests which has been released from risk of being conformed pursuant
to paragraph (1) through (3) above.
B. Release of Risk of Becoming Conformed Interests Upon Liquidity Event.
--------------------------------------------------------------------
In the event of the consummation of a Liquidity Event (as defined in the
Operating Agreement), the Class E Interests shall be subject to release from
risk of becoming Conformed Interests as and to the extent provided below:
(a) No release from risk of becoming Conformed Interests shall occur
unless the Net Proceeds payable to Berkshire Fund IV, a Limited Partnership and
its affiliates (collectively, "Berkshire") exceeds two times Berkshire's equity
investment ("Investment") in the LLC if such Liquidity Event is consummated
prior to December 31, 2000, and three times such Investment if such Liquidity
Event is consummated thereafter. (Such requirement is hereinafter referred to
as the "Multiple Test"). The term "Net Proceeds" shall mean the amount payable
to Berkshire Fund IV as a result of Liquidity Event, after payment of all costs
and expenses of such Sale and after giving effect to any release from risk of
becoming Conformed Interests required under this heading (B), but before payment
of any taxes with respect to such receipt of proceeds. The term "Internal Rate
of Return" shall mean the annual rate of return earned by Berkshire on its
Investment in the LLC from the date such Investment was made through the date of
consummation of the Sale, and shall be calculated after giving effect to any
amounts payable with respect to Interests for which the risk of becoming
Conformed Interests has been released pursuant to this Schedule II.
-----------
(b) If the Multiple Test has been met, but the Net Proceeds received
by Berkshire with respect to such Liquidity Event represent less than or equal
to a 30% Internal Rate of Return on Berkshire Fund IV's investment in the
Company, then no release from the risk of becoming Conformed Interests shall
occur under this heading (B).
(c) If the Multiple Test has been met, and the Net Proceeds received
by Berkshire with respect to such Sale equals or exceeds a 35% Annual Internal
Rate of Return on Berkshire's Investment in the Company, then there shall be
released from the risk of becoming Conformed Interests 100% of the Class E
Interests, less such percentage as has otherwise vested pursuant to heading (A)
above.
(d) If the Net Proceeds received by Berkshire with respect to a
Liquidity Event exceeds a 30% annual Internal Rate of Return on Berkshire's
Investment in the Company, but is less than a 35% annual Internal Rate of Return
on such Investment, then the percentage of the Class E Interests which are
released from the risk of becoming Conformed Interests shall be determined by
straight line interpolation between 0% and 100%, and there shall be deducted
from such percentage that percentage of Class E Interests which has been
released from risk of becoming Conformed Interests pursuant to heading (A)
above.
(e) In the event that a Liquidity Event occurs and all of the Class E
Interests do not become released from the risk of becoming Conformed Interests,
then those Class E Interests which have not been released from the risk of
becoming Conformed Interests shall become Conformed Interests.
Exhibit 3.10
WEIGH-TRONIX LLC
EXAMPLE OF ALLOCATION UPON LIQUIDITY EVENT
------------------------------------------
Assumptions:
1) Initial investment - $15MM
2) Sale in year 3 for $30MM
3) In the first example, one half of the Class E Interests have
become conformed, and in the second example, all of the Class E
Interests have become conformed. For purposes of these examples,
the additional 5% Class E Interests for other management have not
been included.)
4) No distributions have previously been made.
Percentage Interests, depending on whether one half or none of Class E Interests
become Conformed Interests:
Percentage if Percentage if
1/2 Class E all Class E
Purchase Initial Interests Interests
Name Interest Price Percentage/(1)/ "Conform" "Conform"
---- -------- ----- -------------- ------------- -------------
Investors Class A $15,000,000 74.29% 78.20% 82.54%
Management
Free Equity Class B -0- 4.25% 4.48% 4.72%
Northwestern Class C -0- 6.46% 6.80% 7.18%
Management
Incentive Time Class D -0- 5.00% 5.26% 5.56%
Management
Incentive Class E -0- 10.00% 5.26% 0%
Performance
Total $15,000,000 100% 100% 100%
=========== ===== ===== =====
Allocations:
A. Assume One Half Class E Interests Conform.
------------------------------------------
1) $15MM first allocated to Class A Members
2) Class B, C, D, E Members are then allocated $4,181,585 (their
collective ownership in LLC of 21.80% times the sum of $15MM plus
$4.181 MM), in proportion to their respective positions, as
follows:
Class B 20.55% $ 859,316
Class C 31.19% $1,304,237
Class D 24.13% $1,009,016
Class E 24.13% $1,009,016
------ ----------
100.00% $4,181,585
====== ==========
3) Balance of proceeds ($30MM less $19,181MM previously allocated,
or $10,818,415), allocated among Class A, B, C, D, E members in
proportion to their Percentage Interests, as follows:
First Tier Second Tier Third Tier Total
Class of Member Distribution Distribution Distribution Distribution
--------------- ------------ ------------ ------------ ------------
Class A $ 15,000,00 -- $ 8,460,000 $23,460,000
Class B -- $ 859,316 484,665 1,343,981
Class C -- 1,304,237 735,652 2,039,889
Class D -- 1,009,016 569,049 1,578,065
Class E 1,009,016 569,049 1,578,065
----------- ---------- ----------- -----------
Totals $15,000,000 $4,181,585 $10,818,415 $30,000,000
=========== ========== =========== ===========
B. Assume All of Class E Interests Conform.
---------------------------------------
1) $15MM first allocated to Class A Members
2) Class B, C, D, E Members are then allocated $3,173,000 (their
collective ownership interest in LLC of 17.46% times the sum of
$15MM plus $3.173 MM), in proportion to their respective
positions, as follows:
Class B 27.04% $ 857,979
Class C 41.12% $1,304,738
Class D 31.84% $1,010,283
----- ----------
100.00% $3,173,000
====== ==========
3) Balance of proceeds ($30MM less $18,173MM previously allocated, or
$11,827,000), allocated among Class A, B, C and D members in
proportion to their Percentage Interests, as follows:
First Tier Second Tier Third Tier Total
Class of Member Distribution Distribution Distribution Distribution
--------------- ------------ ------------ ------------ ------------
Class A $ 15,000,00 -- $ 9,762,006 $24,762,006
Class B -- $ 857,979 $ 558,234 1,416,213
Class C -- 1,304,738 849,179 2,153,917
Class D -- 1,010,283 657,581 1,667,864
----------- ---------- ----------- -----------
Totals $15,000,000 $3,173,000 $11,827,000 $30,000,000
=========== ========== =========== ===========