EXHIBIT 99.2
LIMITED LIABILITY COMPANY AGREEMENT
OF
RADIAN INTERNATIONAL LLC
Dated as of January 1, 1996
TABLE OF CONTENTS /
Article Title Page
ARTICLE I
DEFINITIONS
1.1 Definitions 1
ARTICLE II
FORMATION
2.1 Formation of the Company 1
2.2 Name 1
2.3 Purposes 1
2.4 Powers of the Company 2
2.5 Member's Authority 2
2.6 Company Property 2
2.7 Principal Place of Business; Registered
Office and Agent 2
2.8 Office of and Agent for Service of Process 2
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Initial Contributions 3
3.2 Return of Capital Contribution 3
3.3 Interest 4
3.4 Liability of Members 4
3.5 Additional Contributions 4
3.6 Failure to Contribute 6
ARTICLE IV
INTERESTS OF MEMBERS
4.1 Company Interests of Members 8
4.2 Capital Accounts 8
4.3 Interest on Capital Accounts 8
4.4 Loans from Members 8
4.5 Transferred Capital Accounts 8
ARTICLE V
DISTRIBUTIONS, EXPENSES AND
ALLOCATIONS OF PROFITS AND LOSSES
5.1 Allocations of Net Profits and Net
Losses from Operations 9
5.2 Special Allocations 10
5.3 Expenses of the Company 14
5.4 Distributions 15
5.5 Limitation Upon Distributions 16
5.6 Distributions to Cover Taxes 16
ARTICLE VI
MANAGEMENT RIGHTS, DUTIES AND
POWERS OF THE REPRESENTATIVES
6.1 Management 18
6.2 No Management by Members 19
6.3 Number, Qualification and Tenure of
Representatives 19
6.4 Meetings 20
6.5 Quorum and Voting 21
6.6 Committees 21
6.7 Action Without Meeting 21
6.8 Compensation 22
6.9 Rules of Procedure 22
6.10 Certain Transactions 22
6.11 Right to Rely on Authority of the
Representatives 23
6.12 Responsibility of Members and Representatives 24
6.13 Indemnification 24
6.14 Designation of Tax Matters Partner; Expenses
Regarding Tax Matters; Filing of Tax Returns 26
ARTICLE VII
BOOKS AND RECORDS; REPORTS
TO MEMBERS; CAPITAL ACCOUNT MAINTENANCE
7.1 Books; Reports 27
7.2 Accounting and Fiscal Year 28
7.3 Maintenance of Capital Accounts 28
7.4 Bank Accounts 28
7.5 Insurance 28
ARTICLE VIII
TRANSFER OF COMPANY INTEREST;
RADIAN OPTION TO SELL; LIENS
8.1 Transfer of Company Interest Generally 28
8.2 Transfers of Company Interests 29
8.3 Radian Option to Sell 29
8.4 Liens 30
ARTICLE IX
DISSOLUTION AND WINDING UP
9.1 Dissolution 30
9.2 Winding-Up 32
9.3 Accounting on Dissolution 32
9.4 Accounting; Allocations of Residual Net Profits
and Residual Net Loss After Dissolutions 32
9.5 Conversion of Assets to Cash 33
9.6 Distributions in Liquidation 34
9.7 Compliance with Treasury Regulations 34
9.8 Section 708 Termination 35
9.9 Continuation of the Company 35
9.10 Waiver of Certain Rights 35
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Assignment 36
10.2 Notices 36
10.3 Governing Law 37
10.4 Choice of Forum 37
10.5 Consent to Jurisdiction 37
10.6 Waiver of Jury Trial 37
10.7 Entire Agreement; Amendments 37
10.8 Execution in Counterparts 37
10.9 Remedies and Waiver 37
10.10 Headings 38
10.11 Third Party Beneficiaries 38
10.12 Further Assurances 38
10.13 Public Announcements 38
10.14 Termination 38
Exhibit A Definitions
Schedule 2.3 Chemical Products Manufactured By Radian
Schedule 6.1 Initial Officers and Duties
Schedule 6.10(a)(v) Accounting Policies or Procedures
LIMITED LIABILITY COMPANY AGREEMENT
This LIMITED LIABILITY COMPANY AGREEMENT (this "Agreement")
of Radian International LLC (the "Company"), dated as of January
1, 1996, is between Dow Environmental Inc., a Delaware
corporation ("DEI") and Radian Corporation, a Texas corporation
("Radian"). DEI and Radian are sometimes individually referred
to in this Agreement as a "Member" and collectively as "Members".
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
I.1 Definitions. Capitalized terms used in this Agreement
which are not otherwise defined in this Agreement shall have the
meanings given to such terms in Exhibit A.
ARTICLE II
FORMATION
II.1 Formation of the Company. The Members hereby form a
limited liability company pursuant to the Act on the terms and
for the purposes set forth in this Agreement. The rights and
duties of the Members and the administration and termination of
the Company shall be as provided in the Act, except as modified
by this Agreement.
II.2 Name. The name of the Company shall be "Radian
International LLC" or such other name as is designated from time
to time by the Members and, if such other name is to contain
"DOW", as approved by The Dow Chemical Company ("TDCC"). The
Members Committee is hereby directed to file, or cause to be
filed, with the Secretary of State of the State of Delaware a
Certificate of Formation reflecting the name of the Company.
II.3 Purposes. The purposes of the Company shall be to
engage for profit in the Newco Services Business and to engage
for profit in any and all other activities reasonably related to
or incidental to the Newco Services Business, and to engage for
profit in any other business, whether or not related or
incidental thereto, as determined by the Members from time to
time; provided, however, that the Company shall not engage in the
production or manufacture of chemical products, other than the
chemical products manufactured by Radian as of the Closing Date
and listed on Schedule 2.3, or disclose technology received from
TDCC to any third party if such technology is to be used by, or
on behalf of, the third party to optimize its production or
manufacture of chemical products that are being, or will be,
manufactured or produced by TDCC. Notwithstanding the foregoing,
the Company may engage in the production or manufacture of
analytical reference standard materials for end uses such as
environmental, pharmaceutical and forensic drug analyses, such
materials typically being manufactured and sold in microgram and
gram quantities, but with potential sales up to ten (10)
kilograms per material or product to a given purchaser in a
twelve month period; provided, however, that potential sales in
quantities that exceed the ten (10) kilogram limit will be
referred to the Members Committee for approval.
II.4 Powers of the Company. Subject to the restrictions
set forth in this Agreement, the Company shall have the power to
exercise all the powers and privileges granted by this Agreement
and by law, together with any powers incidental thereto, so far
as such powers and privileges are necessary or appropriate for
the conduct, promotion or attainment of the purposes of the
Company.
II.5 Member's Authority. Except as otherwise provided in
this Agreement, no Member shall have any authority to act for, or
to assume any obligations or responsibilities on behalf of, any
other Member or the Company.
II.6 Company Property. All real and personal property,
whether tangible or intangible (including, without limitation,
all permits and licenses), owned by or granted to or held by the
Company shall be deemed to be owned by or granted to or held by
the Company as an entity, and no Member shall have any ownership
or right to use any such property, except as may be otherwise
agreed by the Company and the Members.
II.7 Principal Place of Business; Registered Office and
Agent. The principal place of business of the Company shall be
located at Austin, Texas or at such other place or places as the
Members Committee may from time to time determine. The business
of the Company may also be conducted at such additional place or
places as the Members Committee may designate; provided, however,
that the Company shall not maintain an office or a principal
place of business in any jurisdiction that would jeopardize the
limitation on liability afforded to the Members under the Act or
this Agreement and; provided, further, that the Members Committee
shall take, or cause to be taken, all steps necessary to preserve
the limited liability of the Members in connection with any such
additional places of business.
II.8 Office of and Agent for Service of Process. The
registered office of the Company in Delaware shall be Corporation
Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
The Company's agent for service of process on the Company in
Delaware shall be The Corporation Trust Company. The Members
Committee may change, at any time and from time to time, the
location of such registered office and/or such registered agent
upon written notice of the change to the Members.
ARTICLE III
CAPITAL CONTRIBUTIONS
III.1 Initial Contributions. On the Closing Date (or in
the case of Restricted Assets and liabilities associated thereto,
after the Closing Date), certain contributions will be made to
the Company by or on behalf of, and the Company will assume
certain liabilities of, the Members and their Affiliates, all as
provided in the Contribution Agreement (the "Capital
Contribution"). The Members agree that immediately after such
contributions and assumptions, the sum of the cash and the Gross
Asset Value of assets other than cash contributed by each Member,
reduced by liabilities of such Member assumed by the Company, to
be contributed to the Capital Account of each of DEI and Radian,
respectively, will be as follows:
DEI $225,000,000
Radian $150,000,000
III.2 Return of Capital Contribution.
(a) Except as otherwise provided in this Agreement, no
return shall be paid by the Company to any Member on account of
any Capital Contribution. No Member shall have liability to any
other Member for the return of any Capital Contribution and any
such return shall be made only to the extent of available Company
assets in accordance with the terms of this Agreement.
(b) Except as otherwise provided in this Agreement, no
Member shall have priority over the other Member as to the return
of its Capital Contribution or as to distributions of cash made
by the Company.
(c) Except as otherwise provided in this Agreement, a
Member shall not be entitled to withdraw any part of its capital
or to (i) receive any distributions from the Company, (ii) demand
or receive property other than cash in return for its Capital
Contribution or (iii) receive any funds or property of the
Company.
III.3 Interest. No interest shall be paid on any capital
contributed to the Company, notwithstanding any disproportion
between the Capital Contribution of each of the Members.
III.4 Liability of Members. Except as otherwise provided
in the Act and except with respect to their several respective
obligations under this Agreement to contribute their respective
Capital Contributions, the Members shall not have any personal
liability to contribute money or other property to, or in respect
of, the Company or any of its liabilities or obligations.
III.5 Additional Contributions.
(a) No Company Interest or other ownership interest in the
Company or its assets other than those of the Members shall be
issued by the Company without the consent of each Member and,
except as provided in Section 3.1 and this Section 3.5, no Member
shall be obligated to make any additional contributions to the
capital of the Company.
(b) Subject to Section 3.5(e), the Members Committee shall,
if it reasonably determines that the Company needs additional
funds, use its commercially reasonable efforts to obtain a credit
facility (a "Credit Facility") from one or more commercial
lenders in form and substance reasonably satisfactory to the
Members Committee.
(c) If the Members Committee reasonably determines, in its
sole discretion, that it is desirable for the Company to obtain a
guarantee of such Credit Facility, each Member shall cause its
respective Parent to provide such a guarantee, in form and
substance reasonably satisfactory to the Parents and such
commercial lenders, of the amount of such Credit Facility
multiplied by each Member's Company Interest; provided, however,
that if a guarantee is required subsequent to December 31, 1998,
then, for purposes of this Section 3.5(c), each Member's Company
Interest shall be its respective Company Interest as of
January 1, 2000.
(d) Subject to Sections 3.5(e) and (g), if, after using
commercially reasonable efforts to obtain a Credit Facility
pursuant to Sections 3.5(b) and (c), the Members Committee
reasonably determines, in its sole discretion, that such Credit
Facility cannot be obtained on commercially reasonable terms
pursuant to Sections 3.5(b) and (c) or if the Credit Facility
obtained by the Company is insufficient for the needs of the
Company, then each of DEI and Radian hereby agrees to make loans
to the Company (the "Ordinary Loans") in order to support the
needs of the Company in form and substance reasonably satis-
factory to Radian and DEI. The Company's authorized officer
shall notify DEI and Radian in writing at least three (3)
business days in advance of the time each such loan is required
to be made to the Company. Upon such a written request from the
Company's authorized officer, each Member shall make a cash loan
to the Company in an amount equal to (i) the amount of the
Company's loan determined to be needed by the Members Committee
multiplied by (ii) such Member's Company Interest; provided,
however, that if an Ordinary Loan is required subsequent to
December 31, 1998, then, for purposes of this Section 3.5(d),
each Member's Company Interest shall be its respective Company
Interest as of January 1, 2000. An Ordinary Loan shall bear
interest at the rate equal to the lower of (i) the maximum rate
allowed by law or (ii) two (2) percentage points over the Prime
Rate.
(e) Notwithstanding the foregoing, the aggregate amount
borrowed under the Credit Facility or any Ordinary Loans shall
not result in a Debt Ratio in excess of 0.40.
(f) Prior to January 1, 1999, no additional cash
contributions may be required without the prior written consent
of each of the Members. If, on or after January 1, 1999, the
Members Committee determines that the Company requires funds and
that borrowings under a Credit Facility or an Ordinary Loan in
response to such requirement would cause the Debt Ratio to exceed
0.40, each of DEI and Radian hereby agrees that it shall make
cash contributions to the Company in an amount equal to (i) the
amount of the Company's cash requirement in excess of the amount
that would cause the Debt Ratio to equal 0.40 as determined by
the Members Committee multiplied by (ii) such Member's Company
Interest; provided, however, that if an additional cash
contribution is required on or prior to December 31, 1999, then,
for purposes of this Section 3.5(f), each Member's Company
Interest shall be its respective Company Interest as of
January 1, 2000. Once the Members Committee approves an
additional cash contribution, the Company's officers shall have,
subject to any terms or conditions specified by the Members
Committee at the time it so approves such additional cash
contribution, the reasonable discretion to determine the timing
of such cash contribution giving due consideration to the
Company's cash needs as determined by the Members Committee. The
Company's authorized officer shall notify DEI and Radian at least
ten (10) days in advance of the time each such cash contribution
is required to be made to the Company.
(g) Notwithstanding the foregoing (and regardless of
whether the Debt Ratio is less than or equal to 0.40), no Member
shall be required to make any cash contribution, to guarantee the
Credit Facility or to make Ordinary Loans if to do so would cause
such Member or its respective Affiliates to violate any Federal,
state or local law or regulation applicable to such Member or its
respective Affiliates or would, by operation of any such law or
regulation, significantly restrict the Member's or its respective
Affiliates' ability to conduct its business as such business was
conducted prior to the Closing. Each Member shall use, and shall
cause its respective Affiliates to use, all reasonable efforts to
maintain its ability to make the cash contributions, guarantees
and loans contemplated by this Section 3.5.
III.6 Failure to Contribute. If either DEI or Radian (in
either such case, the "Non-Contributing Member") (x) fails
(including a failure because of legal requirements as permitted
by Section 3.5(g)), in whole or in part, to make any cash
contribution, to guarantee the Credit Facility or to make
Ordinary Loans or (y) defaults, in whole or in part, on any other
obligation to pay money under this Agreement within five (5)
business days of giving of notice by the other Member to the Non-
Contributing Member that such cash contribution, guarantee or
Ordinary Loan is due or that the Non-Contributing Member has
defaulted in any other such obligation under this Agreement, DEI
(with respect to circumstances in which Radian is the Non-
Contributing Member) or Radian (with respect to circumstances in
which DEI is the Non-Contributing Member), as the case may be (in
either such case, the "Contributing Member"), shall have the
right to:
(i) advance directly to the Company such additional
cash contribution or provide such guarantee or Ordinary
Loan, or portion thereof, or such other payment of money, or
portion thereof, as the Non-Contributing Member has failed
to make or defaulted on (the "Non-Contributing Member's
Share"), and such advance, together with a proportionate
amount of the corresponding cash contribution or other
payment, if any, made by such Contributing Member, shall be
deemed a loan by the Contributing Member to the Company (a
"Member Loan"). A Member Loan shall bear interest at the
rate equal to the lower of: (A) the maximum rate allowed by
law; or (B) four (4) percentage points over the Prime Rate.
A Member Loan shall be recouped and repaid from all funds
which would have been available to make distributions which
the Members would otherwise be entitled to receive from the
Company but for this Section 3.6, all of which shall instead
be paid by the Company to the Contributing Member and
applied to the payment of the Member Loan and all interest
thereon, until the same shall have been paid in full. It is
understood, however, that to the extent the principal and
interest of a Member Loan are not repaid in full by the
Company from all funds which would otherwise have been
available to make distributions (including any distributions
pursuant to Section 9.6(b)) to the Members, the Non-
Contributing Member shall be obligated to repay an amount
equal to the Non-Contributing Member's Share of the
outstanding balance of the principal and interest of such
Member Loan upon commencement of the winding up of the
Company in accordance with Section 9.2. Any amount which
would otherwise have been available to make distributions
from the Company that is applied to any Member Loan shall be
credited first to any interest then due on such Member Loan,
and the balance of the distribution shall be credited
against the outstanding principal balance of such Member
Loan; or
(ii) upon notice to the Non-Contributing Member,
purchase all, but not less than all, of the Non-Contributing
Member's Company Interest, (A) if on or prior to
December 31, 1998, at the price equal to the amount set
forth in Section 8.3 of this Agreement as if Radian had
exercised its option to sell; provided, however, that such
price shall be discounted at a rate of 10% per year or
portion thereof if such purchase shall occur prior to
December 31, 1997, and (B) thereafter, at the fair market
value therefor. Notwithstanding the foregoing, if the
enforceability of such Contributing Member's right to
purchase the Non-Contributing Member's Company Interest as
set forth in this subsection (ii) is in any way limited by
general equitable principles, Bankruptcy, moratorium, or
other laws affecting creditors' rights generally then, upon
notice to the Non-Contributing Member and the Company, the
Contributing Member or any of its Affiliates shall have the
right to purchase all, but not less than all of the assets
and liabilities of the Company at the fair market value
therefor. In either case, if DEI and Radian cannot agree
upon such fair market value within sixty (60) days after the
notice to purchase the Non-Contributing Member's Interest or
all the assets and liabilities of the Company, as the case
may be, is delivered, either DEI or Radian may, by notice to
the other, invoke the Appraisal Procedure. If the Appraisal
Procedure is required to determine the fair market value of
the Non-Contributing Member's Interest or all the assets and
liabilities of the Company, as the case may be, the fees and
expenses of such Appraisal Procedure shall be paid by the
Non-Contributing Member. The closing of either such sale
shall take place upon the date that is within thirty (30)
days after such fair market value is determined in
accordance with this Section 3.6 and all legal requirements
relating to such sale have been satisfied; provided,
however, that if such sale is not in compliance with any
such legal requirements, then DEI and Radian shall equitably
adjust the arrangements set forth in this Section 3.6(ii) in
light of what is legally possible and in compliance with any
such legal requirements in order to effectuate the intent of
the parties.
Notwithstanding the foregoing, if the Non-Contributing
Member fails, in whole or in part, to make any cash contribution,
to guarantee the Credit Facility or to make Ordinary Loans
because of legal requirements as permitted by Section 3.5(g),
then the Contributing Member shall only have the rights set forth
in subsection (i) above; provided, however, that any Member Loan
caused by legal requirements as permitted by Section 3.5(g) shall
bear interest equal to the interest rate paid on an Ordinary
Loan.
Except as set forth above, the exercise of the right to make
a Member Loan or purchase the Non-Contributing Member's Company
Interest shall be in addition to any other rights or remedies
that the Contributing Member may have under this Agreement or at
law or in equity arising from the Non-Contributing Member's (i)
failure to make the required cash contribution, (ii) failure to
provide its portion of the required guarantee, (iii) failure to
make its required loan or (iv) default in any other obligation to
pay money.
ARTICLE IV
INTERESTS OF MEMBERS
IV.1 Company Interests of Members. The "Company Interests"
of the Members shall be as follows:
For the period: DEI Radian
through December 31, 1999 60% 40%
after December 31, 1999 65% 35%
IV.2 Capital Accounts. A separate Capital Account shall be
established and maintained with respect to each Member.
IV.3 Interest on Capital Accounts. Except as specifically
provided in this Agreement, no Member shall be entitled to any
interest on its Capital Account or its contributions to the
capital of the Company, nor shall any Member have the right to
demand or receive the return of all or any part of its Capital
Account or its contributions to the capital of the Company.
IV.4 Loans from Members. Loans by a Member to the Company
(including, without limitation, any Ordinary Loan or Member Loan)
shall not be considered capital contributions.
IV.5 Transferred Capital Accounts. In the event that any
Member transfers all or a portion of its Company Interest in
accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor Member to the
extent such Capital Account relates to the transferred Company
Interest or portion thereof.
ARTICLE V
DISTRIBUTIONS, EXPENSES AND
ALLOCATIONS OF PROFITS AND LOSSES
V.1 Allocations of Net Profits and Net Losses from
Operations.
(a) Allocation of Net Profits. Subject to Section 5.2 and
Section 9.4, the Net Profits of the Company for each Fiscal Year
will be allocated as follows:
(i) Net Profits will first be allocated to the
Members to offset prior allocations of Net Losses pursuant
to Section 5.1(b)(ii) to the extent such allocations have
not been so offset;
(ii) next, Net Profits will be allocated to the
Members in proportion to their Company Interests as of the
last day of the Fiscal Year to which such Net Profits are
attributable.
(b) Allocation of Net Losses. Subject to Section 5.2 and
Section 9.4, the Net Losses of the Company for each Fiscal Year
will be allocated as follows:
(i) First, Net Losses shall be allocated to the
Members in proportion to their Company Interests as of the
last day of the Fiscal Year to which such Net Losses are
attributable;
(ii) Except as otherwise required by the last sentence
of this Section 5.1(b)(ii), no allocation of loss,
deduction, and/or expenditures described in Code
Section 705(a)(2)(B) shall be charged to the Capital
Accounts of any Member if such allocation would cause such
Member to have an Adjusted Deficit Capital Account. The
amount of the loss, deduction, and/or Code
Section 705(a)(2)(B) expenditure which would have caused a
Member to have an Adjusted Deficit Capital Account shall
instead be charged to the Capital Account of any Members
which would not have an Adjusted Deficit Capital Account as
a result of the allocation, in proportion to their positive
Capital Accounts (after giving effect to the adjustments
described in the definition of Adjusted Deficit Capital
Account), or, if no such Members exist, then to the Members
in accordance with their Company Interest.
(c) Proportionate Share of Items. All allocations of Net
Profits and Net Losses shall be deemed to be comprised of a
proportionate share of all items comprising such Net Profits and
Net Losses.
V.2 Special Allocations.
(a) If any Member unexpectedly receives any adjustments,
allocations, or distributions described in Treas. Regs.
Section 1.704-1(b)(2)(ii)(d)(4), (5), or (6), which create or
increase an Adjusted Deficit Capital Account of the Member, then
items of Company income and gain (consisting of a pro rata
portion of each item of Company income, including gross income,
and gain for such year) shall be specially allocated to the
Capital Account of the Member in an amount and manner sufficient
to eliminate, to the extent required by the Treasury Regulations,
the Adjusted Deficit Capital Account so created as quickly as
possible; provided, however, that an allocation pursuant to this
Section 5.2(a) shall be made only if and to the extent that such
Member would have an Adjusted Deficit Capital Account after all
other allocations provided for in this Section 5.2 have been
tentatively made as if this Section 5.2(a) were not in this
Agreement. It is intended that this Section 5.2(a) be
interpreted to comply with the alternate test for economic effect
set forth in Treas. Regs. Section 1.704-1(b)(2)(ii)(d).
(b) If any Member would have a deficit Capital Account at
the end of any Company taxable year which is in excess of the sum
of (i) the amount that the Member is obligated to restore to the
Company under Treas. Regs. Section 1.704-1(b)(2)(ii)(c) and (ii)
the amount such Member is deemed to be obligated to restore
pursuant to the penultimate sentences of Treas. Regs.
Sections 1.704-2(g)(1) and 1.704-2(i)(5), such Member shall be
specially allocated items of Company income (including gross
income) and gain in the amount of the excess as quickly as
possible; provided, however, that an allocation pursuant to this
Section 5.2(b) shall be made only if and to the extent that such
Member would have a deficit Capital Account in excess of such sum
after all other allocations provided for in this Section 5.2 have
been made as if Section 5.2(a) and this Section 5.2(b) were not
in this Agreement.
(c) Except as otherwise provided in Treas. Regs.
Section 1.704-2(f), notwithstanding any other provision of this
Section 5.2, if there is a net decrease in Partnership Minimum
Gain during any Fiscal Year, each Member shall be specially
allocated items of Company income and gain for such Fiscal Year
(and, if necessary, subsequent Fiscal Years) in an amount equal
to such Member's share of the net decrease in Partnership Minimum
Gain, determined in accordance with Treas. Regs.
Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto. The
items to be so allocated shall be determined in accordance with
Treas. Regs. Sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 5.2(c) is intended to comply with the minimum gain
chargeback requirement in Treas. Regs. Section 1.704-2(f) and
shall be interpreted consistently therewith.
(d) Except as otherwise provided in Treas. Regs.
Section 1.704-2(i)(4), notwithstanding any other provision of
this Section 5.2, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Fiscal Year, each Member who has a
share of the Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with
Treas. Regs. Section 1.704-2(i)(5), shall be specially allocated
items of Company income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such
Member's share of the net decrease in Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Treas. Regs. Section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to
each Member pursuant thereto. The items to be so allocated
shall be determined in accordance with Treas. Regs. Sections
1.704-2(i)(4) and 1.704-2(j)(2). This Section 5.2(d) is intended
to comply with the minimum gain chargeback requirement in
Treas. Regs. Section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(e) Nonrecourse Deductions for any Fiscal Year shall be
specially allocated to the Members in the proportions they share
Net Profits pursuant to Section 5.1(a)(ii).
(f) Any Partner Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to each Member who bears the
economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are
attributable in accordance with Treas. Regs.
Section 1.704-2(i)(1).
(g) To the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Treas. Regs. Section
1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result
of a distribution to a Member in complete liquidation of its
interest in the Company, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially
allocated to the Member in accordance with its interests in the
Company in the event that Treas. Regs. Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Member to whom such
distribution was made in the event that Treas. Regs.
Section 1.704-1(b)(2)(iv)(m)(4) applies.
(h) The allocations set forth in Sections 5.1(b)(ii),
5.2(a), 5.2(b), 5.2(c), 5.2(d), 5.2(e), 5.2(f), and 5.2(g) (the
"Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of
the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company
income, gain, loss or deduction pursuant to this Section 5.2(h).
Therefore, notwithstanding any other provision of this Article V
(other than the Regulatory Allocations), the Members Committee
shall make such offsetting special allocations of Company income,
gain, loss or deduction in whatever manner they determine
appropriate so that, after such offsetting allocations are made,
each Member's Capital Account balance is, to the extent possible,
equal to the Capital Account balance such Member would have had
if the Regulatory Allocations were not part of the Agreement and
all Company items were allocated pursuant to Sections 5.1(a) and
5.1(b). In exercising their discretion under this
Section 5.2(h), the Members Committee shall take into account
future Regulatory Allocations under Sections 5.2(c) and 5.2(d)
that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Sections 5.2(e) and
5.2(f).
(i) For purposes of determining the Net Profits, Net
Losses, or any other items allocable to any period, Net Profits,
Net Losses, and any such other items shall be determined on a
daily, monthly, or other basis, as determined by the Members
Committee using any permissible method under Code Section 706 and
the Treasury Regulations thereunder.
(j) The Members are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be
bound by the provisions of this Article V in reporting their
shares of Company income and loss for income tax purposes.
(k) Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of
the Company within the meaning of the Treas. Regs. Section
1.752-3(a)(3), each Member's interest in the Company's profits
shall be such Member's Company Interest.
(l) To the extent permitted by Treas. Regs. Section
1.704-2(h)(3), the Members shall endeavor to treat distributions
as having been made from the proceeds of a Nonrecourse Liability
or a Partner Nonrecourse Debt only to the extent that such
distributions would cause or increase an Adjusted Deficit Capital
Account for any Member.
(m) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so
as to take account of any variation between the adjusted basis of
such property to the Company for Federal income tax purposes and
its initial Gross Asset Value, using the method described in
Treas. Reg. Sec. 1.704-3(c).
The Gross Asset Value of property other than goodwill
initially contributed to capital of the Company shall equal such
property's adjusted tax basis for Federal income tax purposes as
of January 1, 1996. The Gross Asset Value of goodwill
contributed to the capital of the Company by each Member shall
equal the excess of the value attributed to such Member's initial
Capital Contribution in Section 3.1 of this Agreement (increased
by liabilities of the Member assumed by the Company) over the
Gross Asset Value of property other than goodwill contributed by
the Member. Goodwill shall be recovered by the Company over 10
years using the straight-line method. The tax departments of HSB
and TDCC shall integrate the property systems of Radian and DEI
and shall calculate the Gross Asset Value of goodwill contributed
by the Members within sixty (60) days of the Closing Date.
In the event the Gross Asset Value of any Company asset is
adjusted pursuant to paragraph (ii) of the definition thereof,
subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between
the adjusted basis of such asset for Federal income tax purposes
and its Gross Asset Value in the manner provided in Treas. Regs.
Section 1.704-3(a)(6).
Any elections or other decisions relating to such
allocations shall be made by the Tax Matters Partner in any
manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 5.2(m) are
solely for purposes of Federal, state, and local taxes and shall
not affect, or in any way be taken into account in computing, any
Member's Capital Account or share of Net Profits, Net Losses,
other items, or distributions pursuant to any provision of this
Agreement.
(n) Gross income attributable to corporations in which the
Company owns an interest shall be allocated in the following
priority:
(i) gross income attributable to dividends received
by the Company from its subsidiaries after December 31, 1999
shall be allocated to the Members in proportion to their
Company Interests as of December 31, 1999, until the amount
of gross income allocated with respect to such dividends
from each such subsidiary pursuant to this clause (i) equals
the net increase, if any, in the retained earnings and
profits (for U.S. tax purposes) of the distributing
subsidiary for the four-year period ending December 31, 1999
to the extent such earnings and profits were not included in
the Net Profits of the Company for such four-year period;
and
(ii) all other gross income resulting from any
dividends or resulting from the application of Code
Section 951 shall be included in Net Profits and allocated
pursuant to Section 5.1.
(o) For each of the years 1996 and 1997 respectively, if
the Net Profits allocated to Radian pursuant to Section 5.1(a)
for such year are less than the lesser of Preferred Accounting
Earnings for such year or Accounting Earnings for such year, then
Radian shall be allocated an amount of gross income so that the
net amount of Net Profits, Net Losses and gross income allocated
to Radian at least equals the lesser of Preferred Accounting
Earnings for such year or Accounting Earnings for such year.
(p) DEI shall be allocated an aggregate amount of gross
income pursuant to this Section 5.2(p) such that the net amount
of Net Profits, Net Losses and gross income allocable to DEI
exceeds the amount that would be allocated to it without taking
this Section 5.2(p) into account by an amount equal to 40% of the
amount by which the Net Profits, Net Losses and gross income
allocated to Radian was increased pursuant to Section 5.2(o).
The amount allocated pursuant to this Section 5.2(p) shall not
exceed 40% of the sum of the following amount calculated for 1996
plus the following amount calculated for 1997: the excess, if
any, of (i) the lesser of Preferred Accounting Earnings or
Accounting Earnings over (ii) 100% of Net Profits. Such amount
shall be allocated to DEI ratably over a five-year period
beginning in 1998.
V.3 Expenses of the Company. All of the Company
expenses shall be billed directly to and paid by the Company.
The Company is specifically authorized to make reimbursements to
any Member that provides goods, materials or services used for or
by the Company provided such are authorized in advance in writing
and are in accordance with the Company's annual budget. In no
event shall any amount charged to the Company as a reimbursable
expense by any Member exceed the amount that the Company would be
required to pay to independent parties for comparable goods,
materials or services. Reimbursement for expenses shall be made
to any Member entitled to such reimbursement regardless of
whether any distributions are made to the Members under the
provisions of this Article V.
V.4 Distributions.
(a) Except as provided in Sections 5.6 and 9.6,
(i) and except as provided in clauses (ii) and (iii)
below, all distributions of cash and/or other Property shall
be made to the Members pro rata in proportion to the
respective Company Interest of the Members on the record
date of the distribution,
(ii) and except as provided in clause (iii) below,
distributions of cash or other Property, the record date of
which is after December 31, 1999, shall continue to be
distributed to the Members pro rata in proportion to the
respective Company Interest of the Members as of
December 31, 1999, until an aggregate amount of cash or
other Property has been distributed pursuant to
Section 5.4(a)(i), this Section 5.4(a)(ii) and Section 5.6
equal to 80% of the sum of (A) the excess of the Net Profits
allocated pursuant to Section 5.1 over the Net Losses
allocated pursuant to Section 5.1 and (B) the excess of any
items in the nature of income or gain which were specially
allocated pursuant to Section 5.2 over any items in the
nature of deduction or loss that were allocated pursuant to
Section 5.2 (other than allocations solely for tax purposes
pursuant to Section 5.2(m)), in the case of (A) and (B),
with respect to periods ending before January 1, 2000, and
(iii) distributions of cash or other Property, the
record date of which is after December 31, 1999, shall be
distributed to the Members pro rata in proportion to the
respective Company Interest of the Members as of
December 31, 1999, until the aggregate amount of cash or
other Property distributed pursuant to this clause (iii)
equals 80% of the aggregate amount of gross income allocated
pursuant to Section 5.2(n)(i) of this Agreement after
December 31, 1999 (net of deemed taxes treated as a dividend
received under Code Section 78).
(b) Except as provided below and in Section 5.5,
distributions of Net Cash Flow and Property shall be made
whenever such distributions are permitted under the Company's
strategic business plan. The Members presently intend to operate
the Company to maximize distributions by the Company to the
Members, to the extent consistent with prudent operation of the
Company, while permitting the Company to retain sufficient
capital resources for the rapid growth of the Company in
accordance with its strategic business plan; provided, however,
that no distribution shall be made if in the sole discretion of
the Members Committee such proposed distribution would materially
impair the ability of the Company to comply with its strategic
business plan or the amount of such distribution is needed for
the operations of the Company.
(c) All amounts withheld pursuant to the Code or any
provisions of state or local tax law from any payment or
distribution to the Members from the Company shall be treated as
amounts distributed to the relevant Member or Members pursuant to
this Section 5.4.
(d) Notwithstanding anything to the contrary in this
Agreement, no distribution shall be made to a Member if such
Member has an Adjusted Deficit Capital Account, or if such
distribution would cause such Member to have an Adjusted Deficit
Capital Account, but such undistributed amounts shall be
distributed to such Members as soon as and to the extent that
such distributions can be made without causing such Member to
have an Adjusted Deficit Capital Account.
V.5 Limitation Upon Distributions. Distributions shall be
declared or paid only if, after giving effect to the
distribution, the assets of the Company are in excess of all
liabilities of the Company, except liabilities to Members on
account of their contributions and liabilities for which the
recourse of creditors is limited to specified Property of the
Company. The fair value of Property that is subject to a
liability for which the recourse of creditors is limited shall be
included in the assets of the Company only to the extent the fair
value of that Property exceeds that liability. Notwithstanding
the foregoing, except as provided in Section 5.6, it is the
current expectation of the Members that no distribution shall be
declared or paid prior to January 1, 1999, and then only if such
distribution is in compliance with this Section 5.5.
V.6 Distributions to Cover Taxes. The Company shall make
the following distributions of cash:
(a) by April 15th of each year, the Company shall
distribute to each Member cash pursuant to this Section 5.6(a) so
that the total amount of cash and/or other Property distributed
to such Member pursuant to any provision of this Article 5 other
than Section 5.6(e) since January 1 of such year at least equals
the product of (i) such Member's Company Interest for such year,
multiplied by (ii) the highest marginal federal income tax rate
effective for corporations as of January 1 of such year,
multiplied by (iii) the total projected federal taxable income to
be reported by the Company with respect to such year, multiplied
by (iv) 25%; provided, that this Section 5.6(a) shall not apply
to DEI for the years 1996 or 1997.
(b) by June 15th of each year, the Company shall distribute
to each Member cash pursuant to this Section 5.6(b) so that the
total amount of cash and/or other Property distributed to such
Member pursuant to any provision of this Article 5 other than
Section 5.6(e) since January 1 of such year at least equals the
product of (i) such Member's Company Interest for such year,
multiplied by (ii) the highest marginal federal income tax rate
effective for corporations as of January 1 of such year,
multiplied by (iii) the total projected federal taxable income to
be reported by the Company with respect to such year, multiplied
by (iv) 50%; provided, that this Section 5.6(b) shall not apply
to DEI for the years 1996 or 1997.
(c) by September 15th of each year, the Company shall
distribute to each Member cash pursuant to this Section 5.6(c) so
that the total amount of cash and/or other Property distributed
to such Member pursuant to any provision of this Article 5 other
than Section 5.6(e) since January 1 of such year at least equals
the product of (i) such Member's Company Interest for such year,
multiplied by (ii) the highest marginal federal income tax rate
effective for corporations as of January 1 of such year,
multiplied by (iii) the total projected federal taxable income to
be reported by the Company with respect to such year, multiplied
by (iv) 75%; provided, that this Section 5.6(c) shall not apply
to DEI for the years 1996 or 1997.
(d) by December 15th of each year, the Company shall
distribute to each Member cash pursuant to this Section 5.6(d) so
that the total amount of cash and/or other Property distributed
to such Member pursuant to any provision of this Article 5 other
than Section 5.6(e) since January 1 of such year at least equals
the product of (i) such Member's Company Interest for such year,
multiplied by (ii) the highest marginal federal income tax rate
effective for corporations as of January 1 of such year,
multiplied by (iii) the total projected federal income tax to be
reported by the Company with respect to such year; provided, that
this Section 5.6(d) shall not apply to DEI for the years 1996 or
1997.
(e) Each year, within ten (10) days after the time the
Internal Revenue Service Form 1065 Schedule K-1 is delivered to
the Members, the Company shall distribute cash to each Member
pursuant to this Section 5.6(e) in an amount equal to any excess
of (i) the product of (A) the taxable income allocated to such
Member as shown on the Internal Revenue Service Form 1065
Schedule K-1 delivered to such Member with respect to the
previous year, multiplied by (B) the highest marginal federal
income tax rate effective for corporations on income earned in
the previous year (blended if necessary to reflect any change in
the highest marginal rate), over (ii) the total amount of cash
and/or other Property distributed to such Member pursuant to any
provision of this Article 5 other than Section 5.6(e) during the
previous year.
ARTICLE VI
MANAGEMENT RIGHTS, DUTIES AND POWERS OF THE REPRESENTATIVES
VI.1 Management. (a) It shall be the duty and
responsibility of the Members Committee solely and exclusively to
manage and control the business and affairs of the Company, and,
subject to Section 6.10, all decisions regarding the business and
affairs of the Company shall be made by the Members Committee.
Except as provided in this Agreement, each Representative shall
have all the rights and powers of a Representative as provided in
the Act and as otherwise provided by law, and any action taken by
a Representative in the manner provided for in this Agreement
shall constitute the act of and serve to bind the Company. The
Members Committee may delegate its authorities and responsibi-
lities for management of the business affairs of the Company to
third parties, but such delegation shall not relieve the Members
Committee of any of its obligations under this Agreement. In
furtherance of this right of delegation, the Members Committee
may appoint and authorize officers of the Company to act on
behalf of the Company with such power and authority as the
Members Committee may delegate in writing to such Member. The
initial officers of the Company, and their duties, are set forth
on Schedule 6.1 to this Agreement. Subject to Section 6.10, the
Members Committee is hereby granted (i) the right, power and
authority to do on behalf of the Company all things which, in its
judgment, are necessary, proper or desirable to carry out the
aforementioned duties and responsibilities, including but not
limited to the right, power and authority from time to time to
incur Company expenses; to employ and dismiss from employment any
and all employees, agents, independent contractors, attorneys and
accountants; to establish employee benefits plans; to enter into
leases for real or personal property; to purchase equipment; and
to manage all other aspects of running the business of the
Company all in accordance with any authorization policy adopted
by the Members Committee; and (ii) such other rights, powers and
authorities of a manager as provided in the Act and as otherwise
provided by law.
(a) Except as set forth in Section 6.10, the Members
Committee shall retain the decision-making authority for the
Company. Notwithstanding the foregoing, it is the express
intention of the Members that the Members Committee manage the
affairs of the Company so as to achieve, to the extent consistent
with prudent operation of the Company, the Preferred Accounting
Earnings for each of Fiscal Years 1996 and 1997.
VI.2 No Management by Members. Except as otherwise
provided in this Agreement, no Member shall take part in the day-
to-day management, or the operation or control of the business
and affairs of the Company. Except as expressly delegated by the
Members Committee, no Member shall be an agent of the Company or
have any right, power or authority to transact any business in
the name of the Company or to act for or on behalf of the
Company.
VI.3 Number, Qualification and Tenure of Representatives.
The Members Committee shall have as few as three and as many as
eleven members, as established from time to time by resolution of
the Members Committee. Initially the Members Committee shall
consist of seven (7) members, four (4) of whom shall be DEI
Representatives and three (3) of whom shall be Radian
Representatives. If the Members Committee shall increase or
decrease the number of members on the Members Committee, then the
composition of the Members Committee of DEI and Radian
Representatives shall as closely as possible reflect the Member's
respective Company Interest at that time; provided, however,
that, at all times, there shall be a majority of DEI
Representatives on the Members Committee. All DEI
Representatives on the Members Committee shall be employees of
DEI or one or more of its Affiliates, and all Radian
Representatives on the Members Committee shall be employees of
Radian or its Affiliates. A DEI Representative shall serve as
Chair of the Members Committee. DEI and Radian shall, within ten
(10) days of the date of this Agreement, notify each other in
writing of the identity of the DEI Representatives and the Radian
Representatives, respectively. DEI, within ten (10) days of the
date of this Agreement, shall notify Radian in writing as to
which of its DEI Representatives is to initially serve as Chair
of the Members Committee. Any Representative shall continue to
serve in such capacity until such Member shall have notified the
other Members in writing of his or her replacement. DEI and
Radian may, by written notice to the other, designate a person to
serve as an alternate for each DEI Representative and each Radian
Representative, respectively (each alternate to a DEI Representa-
tive being referred to in this Agreement as a "DEI Alternate"
and, collectively, as the "DEI Alternates"; each alternate to a
Radian Representative being referred to in this Agreement as a
"Radian Alternate" and, collectively, as the "Radian Alternates";
and the DEI Alternates and the Radian Alternates being
collectively referred to in this Agreement as the "Alternates"),
and such DEI Alternate or Radian Alternate, as the case may be,
shall be entitled, in the absence of such DEI Representative or
Radian Representative, to attend meetings, to have such
Alternate's presence counted for purposes of establishing a
quorum and to vote on behalf of such DEI Representative or Radian
Representative at any meeting of the Members Committee. Each
Member, in dealing with DEI Representatives or Alternates or the
Radian Representatives or Alternates, as the case may be, shall
be entitled to rely conclusively upon the power and authority of
such Representatives or Alternates to bind DEI or Radian, as the
case may be, with respect to all matters unless and until it
receives notice to the contrary in writing from DEI or Radian, as
the case may be. To the fullest extent permitted by law, each
Representative and Alternate shall be deemed the agent of the
Member which appointed such Person a Representative or Alternate,
and such Representative or Alternate shall not be deemed an agent
or a sub-agent of the Company or the other Members and shall have
no duty (fiduciary or otherwise) to the Company or the other
Members. Each Member, by execution of this Agreement, agrees to,
consents to, and acknowledges the delegation of powers and
authority to such Representatives and Alternates, and the actions
and decisions of such Representatives and Alternates within the
scope of their respective authority as provided in this
Agreement.
VI.4 Meetings. The Members Committee shall hold regular
meetings at least once during each Fiscal Year on such date or
dates as specified by the Members Committee. Other regular
meetings shall be held at such time and at such place as shall
from time to time be determined by the Members Committee.
Meetings of the Members Committee may be held by conference
telephone or other means of communication by means of which all
participants can hear each other. Participation in such meeting
in such manner shall constitute attendance and presence in person
at the meeting of the person or persons so participating. No
notice of the regular annual meeting need be given. Special
meetings of the Members Committee may be called by the Chairman
of the Members Committee or by any Member on at least two (2)
business days' notice to the other Member. Attendance by any DEI
Representative or Radian Representative or any DEI Alternate or
Radian Alternate at any meeting of the Members Committee shall
constitute an effective waiver of any required prior notice to
DEI or Radian, as the case may be, of such meeting, unless such
attendee declares at the onset of such meeting that such
attendee's attendance at such meeting is solely for the purpose
of contesting the deficiency of any required notice for the
meeting. The Chairman of the Members Committee shall, (i) with
reasonable advance notice (which in the case of regular meetings
shall not be less than five (5) days), prepare and distribute an
agenda for each meeting of the Members Committee, (ii) organize
and conduct such meeting and (iii) prepare and distribute minutes
of such meeting. Any Member may propose in advance topics for
the agenda or, subject to Section 6.5, raise topics which are not
on the agenda for such meeting. Each Representative or
Alternate of each of DEI and Radian may bring one or more other
advisors to any meeting; provided, that such advisors shall not
have the right to vote on any matter brought before the Members
Committee; and provided further, that the Representatives or
Alternates of either of DEI or Radian shall have the right to
call executive sessions of the Members Committee and to exclude
any Person not a Representative or Alternate from such executive
session.
VI.5 Quorum and Voting. Meetings of the Members Committee
may only be held when a quorum is present (whether present in
person or by telephone or other means of telecommunication). A
quorum of the Members Committee shall be comprised of a majority
of Representatives or Alternates (or any combination thereof in
accordance with Section 6.4) of the full Members Committee as
constituted pursuant to Section 6.3 of this Agreement of which at
least a majority of such majority must be DEI Representatives or
DEI Alternates; provided, however, that if a Radian
Representative or Radian Alternate is not present at any meeting
of the Members Committee then, at such meeting, only such
business as set forth on the agenda for such meeting may be
considered and voted upon. The affirmative vote of a majority of
the Members Committee at a meeting at which a quorum is present
being entitled to vote at any such meeting must be obtained in
connection with the decision of any matter being considered by
the Members Committee. If a quorum is not present, the
Representatives and Alternates present may adjourn the meeting
without notice, other than an announcement at the meeting, until
a quorum shall be present.
VI.6 Committees. The Members Committee may appoint from
among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, composed of two or
more Representatives (one of which must be a Radian
Representative or Radian Alternate), to serve at the pleasure of
the Members Committee. Except as expressly limited by applicable
law or this Agreement, each such committee shall exercise such
powers and authority as the Members Committee may determine and
specify in a writing designating such committee or any amendment
thereto. Unless otherwise specified in the writing designating
the committee, a majority of the members of such committee may
elect its Chair, fix its rules of procedure, fix the time and
place of meetings and specify what notice of meetings, if any,
shall be given. Written records of the proceedings of any
committee shall be maintained and furnished to the Members
Committee.
VI.7 Action Without Meeting. Any action required or
permitted to be taken at a meeting of the Members Committee, or
of any committee thereof, may be taken without a meeting if all
members of the Members Committee, or committee thereof, consent
in writing to such action.
VI.8 Compensation. The Members Committee shall not receive
any compensation, but shall be reimbursed by the Company for
reasonable expenses associated with attendance at meetings.
VI.9 Rules of Procedure. The Members Committee may from
time to time adopt detailed rules and procedures not inconsistent
with this Agreement for the management of the business of the
Company.
VI.10 Certain Transactions.
(a) Except as otherwise set forth in this Agreement, the
Company shall not engage in any of the following actions without
the prior affirmative vote of a majority of the Members Committee
present at a meeting, which majority shall include at least one
Radian Representative or Radian Alternate:
(i) the dissolution or winding-up of the Company;
provided, however, that nothing in this Section 6.10(a)(i)
shall be construed to conflict with the requirement in
Section 9.1(a) of this Agreement that a Bankruptcy of any
Member shall cause the dissolution of the Company;
(ii) the sale by the Company of any Company Interests
or derivative rights relating to such Company Interests;
(iii) changing the nature of the business conducted by
the Company or conducting any activity that is outside the
business purposes of the Company, as set forth in
Section 2.3, or otherwise in contravention of this
Agreement;
(iv) amending this Agreement or the Certificate of
Formation of the Company;
(v) prior to January 1, 1999, any change in the
accounting policies or procedures of the Company set forth
on Schedule 6.10(a)(v), except for any such changes in
accounting policies and procedures required by reason of a
concurrent change in GAAP, government cost accounting
standards or other applicable governmental requirements;
(vi) (A) the amendment or modification of the
transfer pricing provision in any contract between the
Company and TDCC or any of TDCC's Affiliates as of the
Closing Date or (B) the entry into any contract between the
Company or any Subsidiary of the Company, on the one hand,
and any Member or any of its Affiliates, on the other hand,
except as a result of a competitive bidding process or on
terms substantially similar to, or more favorable to the
Company or such Subsidiary than, those that could be entered
into by the Company in a similar transaction with
unaffiliated third parties;
(vii) amending the Company's policy regarding earnings
distributions to Members or the declaration of dividends;
(viii) the purchase or other acquisition of another
business; provided, however, that such consent shall not be
required if the aggregate payments involved in such
transaction and in all such transactions during the previous
12-month period do not require an additional capital
contribution by Radian in excess of $10 million; or
(ix) sell all, or substantially all, of the Company's
assets or enter into any other arrangement in which the
Company's business is transferred to a third party.
In connection with any of the proposed actions set forth in this
Section 6.10(a), the officers of the Company shall keep the
Members Committee informed of the Company's business activities
and provide, or cause to be provided, to the Members Committee
such information as may be reasonably necessary for the Members
Committee to make a prudent judgment to approve or disapprove the
proposed action.
(b) The Members Committee shall keep the Members informed
of the Company's business activities. In addition to providing
the periodic reports required by Section 7.1 of this Agreement,
the Members Committee shall promptly advise, or cause to be
advised, the Members of any material developments in the
Company's business, including, without limitation, prior notice
of the terms and conditions of proposed significant investments,
acquisitions or dispositions, or other significant transactions
involving the Company.
(c) Except as otherwise provided hereunder or required
under the Act, whenever it is stated in this Agreement, including
without limitation, this Section 6.10, that an action of the
Company or of the Members Committee on behalf of the Company or
any other action under this Agreement requires the consent or
agreement of or waiver by the Members, such action shall require
the consent or agreement of each Member.
VI.11 Right to Rely on Authority of the Representatives.
Any action taken by the Representatives in their capacity as
such, acting on behalf of the Company pursuant to the authority
conferred on them in this Agreement, shall be binding on the
Company. In no event shall any Person dealing with the
Representatives with respect to the conduct of the affairs of the
Company be obligated to ascertain that the terms of this
Agreement have been complied with, or be obligated to inquire
into the necessity or expediency of any act or action of the
Representatives. Every contract, agreement, promissory note or
other instrument or document executed by a Representative with
respect to any property of the Company or the conduct of its
affairs, in his/her capacity as a Representative acting on behalf
of the Company pursuant to the authority conferred on him/her in
this Agreement, shall be conclusive evidence in favor of any and
every Person relying thereon or claiming under this Agreement
that (i) at the time of the execution and/or delivery of such
instrument or document, this Agreement was in full force and
effect, (ii) such instrument or document was duly executed in
accordance with the terms and provisions of this Agreement and is
binding upon the Company, and (iii) the Representative was duly
authorized and empowered to execute and deliver any and every
such instrument or document for and on behalf of the Company.
Nothing set forth in this Section 6.11 shall be construed as
relieving the Representatives from liability to the Company or
the Members for breach of any of the provisions of this
Agreement, or for acting or failing to act in such manner as
constitutes an exception from indemnification provisions
contained in Section 6.13.
VI.12 Responsibility of Members and Representatives. No
Member or Representative (or their Affiliates) shall have any
fiduciary or other duty or responsibility to the Company, or to
any other Member or Representative (or their Affiliates), except
as expressly provided in this Agreement or for acts or omissions
that constitute willful misconduct or constitute an intentional
criminal act. No Representative or Alternate shall be liable to
the Company or any Member or other Representative or Alternate
(or their Affiliates) because of a decision by the Members
Committee to have the Company engage in, or not engage in, a
particular business, activity or project.
VI.13 Indemnification. (a) The Company shall indemnify,
to the full extent permitted by the laws of the State of
Delaware, any person who was or is a defendant or is threatened
to be made a defendant to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such
person (i) is or was a Member, Representative, Alternate,
officer, employee or agent of the Company, or (ii) is or was a
Member, Representative, Alternate, officer, employee or agent of
the Company and is or was serving at the request of the Company
as a Member, Representative, Alternate, director, officer,
employee or agent of another corporation, limited liability
company, partnership, joint venture, trust or other enterprise,
against expenses (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, provided that the commission or omission which formed
the basis of such action, suit or proceeding does not constitute
gross negligence or willful misconduct or constitute an
intentional criminal act on the part of such person. Any repeal,
amendment or modification of this Section 6.13 shall not affect
any rights or obligations then existing between the Company and
any then incumbent or former Member, Representative, Alternate,
officer, employee or agent with respect to any state of facts
then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought based in whole or in part upon
such state of facts.
(a) Expenses incurred by any current or former Member,
Representative, Alternate, officer, employee or agent in
defending or investigating a threatened or pending action, suit
or proceeding shall be paid by the Company in advance of the
final disposition of such action, suit or proceeding, upon
receipt of an undertaking by or on behalf of the Member,
Representative, Alternate, officer, employee or agent to repay
such amount if it ultimately shall be determined that the Member,
Representative, Alternate, officer, employee or agent is not
entitled to be indemnified by the Company as authorized in this
Section 6.13.
(b) The indemnification and advancement of expenses
mandated or permitted by, or granted pursuant to, this
Section 6.13 shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any agreement, contract, vote of Members or
disinterested Representatives (or Alternates) or pursuant to the
direction (howsoever embodied) of any court of competent
jurisdiction or otherwise both as to action by the person in an
official capacity and as to action in another capacity while
holding such office. The provisions of this Article VI shall not
be deemed to preclude the indemnification of any person who is
not specified in subsections (a) and (b) above, but whom the
Company has the power or obligation to indemnify under the laws
of the State of Delaware or otherwise.
(c) The Company may purchase and maintain insurance on
behalf of any person who is or was a Member, Representative,
Alternate, officer, employee or agent of the Company, or is or
was serving at the request of the Company as a Member,
Representative, Alternate, director, officer, employee or agent
of another corporation, limited liability company, partnership,
joint venture, trust or other enterprise against any liability
asserted against and incurred by such person in any such
capacity, or arising out of the person's status as such, whether
or not the Company would have the power or the obligation to
indemnify such person of the Company against such liability under
the provisions of this Section 6.13.
(d) The indemnification and advancement of expenses
provided by, or granted pursuant to, this Section 6.13 shall
continue as to a person who has ceased to be a Member,
Representative, Alternate, officer, employee or agent of the
Company and shall inure to the benefit of the heirs, executors
and administrators of such person.
VI.14 Designation of Tax Matters Partner; Expenses
Regarding Tax Matters; Filing of Tax Returns.
(a) DEI is hereby designated as the "Tax Matters Partner"
under Section 6231(a)(7) of the Code. During any Company income
tax audit or other income tax controversy with any governmental
agency, the Tax Matters Partner shall keep the Members informed
of all material facts and developments on a timely basis, and
shall consult with the Members at their request. The Tax Matters
Partner shall not be authorized to enter into a settlement which
binds the Members or the Company without the advance written
consent of the Member, except for settlements for de minimis
amounts (e.g., not exceeding $100,000 in the aggregate). The Tax
Matters Partner shall take all actions necessary to cause each
qualifying Member to be a "notice partner" within the meaning of
Sections 6223(a) and 6231(a)(8) of the Code.
(b) All reasonable expenses incurred by the Tax Matters
Partner with respect to any tax matter which does or may affect
the Company, or any Member by reason thereof, including but not
limited to expenses incurred by the Tax Matters Partner acting in
its capacity as Tax Matters Partner in connection with Company-
level administrative or judicial tax proceedings, shall be paid
for out of Company assets. If the Members are permitted by the
Company or permitted under the Code to participate in Company-
level administrative or judicial tax proceedings, the Company
shall be responsible for all expenses incurred by them in
connection with such participation. The cost of any adjustments
to the Members and the cost of any resulting audits or adjust-
ments of the Members' tax returns will be borne solely by the
Members and the cost of any adjustments to the Company and the
cost of any resulting audits or adjustments of the Company's tax
returns will be borne solely by the Company.
(c) The Tax Matters Partner shall prepare and timely file
all tax returns of the Company. The Company shall reimburse the
Tax Matters Partner for the reasonable costs of preparing and
filing the tax returns of the Company.
ARTICLE VII
BOOKS AND RECORDS; REPORTS
TO MEMBERS; CAPITAL ACCOUNT MAINTENANCE
VII.1 Books; Reports. The Company shall maintain or cause
to be maintained separate, full and accurate books and records of
the Company, and the Members or any authorized representative of
the Members will have the right to inspect, examine and copy the
same, and to meet with employees of the Company responsible for
preparing the same, at reasonable times during business hours and
upon reasonable notice. In addition, the Members Committee shall
provide or shall cause to be provided to each Member, its
representatives and an independent accounting firm (if any)
designated by the Member, reasonable access to all such books and
records, during which the Member or such accounting firm may
conduct an audit of the Company; provided, however, that any such
audit shall be conducted at the sole expense of the Member.
Within eight (8) business days after the last day of each
fiscal quarter (or at an earlier date if requested by a Member),
the Company will prepare and deliver to the Members financial
statements in forms reasonably requested by each Member. The
Members Committee shall also prepare and distribute, or cause to
be prepared and distributed, to each Member within sixty (60)
days after the last day of each fiscal quarter, or as soon
thereafter as is practicable, a report which includes (i) a
statement showing results of operations and changes in net assets
prepared on an accrual basis, for such fiscal quarter, (ii) a
statement showing Net Cash Flow for such fiscal quarter, (iii) a
statement showing computation of related party fees and Member
distributions, and (iv) a statement describing any event of
default and any known event which, with the giving of notice or
lapse of time or both, would constitute an event of default under
any indebtedness of the Company. The Members Committee shall
also prepare and distribute, or cause to be prepared and dis-
tributed, to each Member within forty-five (45) days after the
end of each fiscal year, or as soon thereafter as is practicable,
a report with respect to the Company which includes the items set
forth in (i), (ii) and (iii) of the foregoing sentence with
respect to such fiscal year. Such annual report shall be audited
by, and accompanied by an auditor's report containing the opinion
of, the Company's independent public accountants (which opinion,
if qualified, shall state the basis for such qualification). The
Members Committee shall also use its reasonable best efforts to
cause the auditors to provide an annual earnings clearance within
fifteen (15) days after the end of each fiscal year. The costs
of any audits or earnings clearances shall be an expense of the
Company.
The Members Committee shall also engage, or cause to be
engaged, independent public accountants to report on the
Company's consolidated financial statements in accordance with
GAAP. Initially, the auditors of the Company shall be Deloitte &
Touche LLP.
VII.2 Accounting and Fiscal Year. The Company books and
records shall be kept on the accrual basis. The Company's Fiscal
Year shall be the calendar year. The books will be closed at the
end of each Fiscal Year.
VII.3 Maintenance of Capital Accounts. The Members
Committee shall cause the Capital Accounts of the Members to be
determined and maintained throughout the full term of the Company
in accordance with Section 704(b) of the Code.
VII.4 Bank Accounts. All cash funds and securities of the
Company shall be deposited in money market, checking and savings
accounts, certificates of deposit, bankers' acceptances, treasury
bills or notes, or other Federal government debt securities or
commercial paper, all of which shall be kept in the name of the
Company in such Company custody account or accounts as shall be
authorized by the Members Committee or such officers of the
Company as may be delegated such authority from time to time by
the Members Committee. Company funds shall be used only for the
benefit of the Company and shall not be commingled with the funds
of any other Person.
VII.5 Insurance. The Company shall maintain insurance of
such types and for such amounts as are customary for Persons
conducting businesses similar to that conducted by the Company.
Any insurance maintained by the Company shall name the Members
and Parents as an additional named insureds (and shall identify
the Members' status as Members of the Company) and shall provide
at least thirty (30) days' prior notice of change (other than an
increase in coverage), cancellation or non-renewal to the
Members.
ARTICLE VIII
TRANSFER OF COMPANY INTEREST;
RADIAN OPTION TO SELL; LIENS
VIII.1 Transfer of Company Interest Generally. No Member
may assign, transfer or otherwise dispose of all or any portion
of its Company Interest except in accordance with the terms of
this Article VIII. Any attempt by any Member to assign, transfer
or otherwise dispose of all or any portion of its Company
Interest other than in accordance with this Article VIII shall be
null, void ab initio and of no force and effect.
VIII.2 Transfers of Company Interests. Except as otherwise
consented to in writing by the other Member (which consent may be
granted or withheld in the sole and absolute discretion of any
Member), no Member may sell, transfer or otherwise dispose of
(collectively a "Transfer") all or any portion of its Company
Interest. In addition to such consent, no Member may make such a
Transfer unless (i) such a Transfer is pursuant to a written
agreement pursuant to which the transferee agrees to be bound by
all of the terms of this Agreement as if it were originally a
party to this Agreement, (ii) such a Transfer does not cause a
termination of the Company for Federal income tax purposes and
(iii) such a Transfer complies with applicable Federal and state
securities laws.
VIII.3 Radian Option to Sell. From and including
December 31, 1997 through December 31, 1998, Radian, at its
option, upon written notice of not less than thirty (30) days,
may exercise the sell option set forth in this Section 8.3. If
Radian gives the notice referred to in the preceding sentence,
Radian shall have the right to require DEI to purchase, and the
obligation to sell all, but not less than all, of Radian's
Company Interest at a price equal to $131,327,406 plus (i) the
Earnings Shortfall, (ii) the amount of any then outstanding
Ordinary Loans or Member Loans made by Radian or any of its
Affiliates (plus interest thereon), and (iii) any amounts then
outstanding and owed by the Company to HSB under the loan
agreement dated as of January 1, 1996 between HSB and Radian (the
"Loan Agreement") (it being understood that Radian's rights and
obligations under the Loan Agreement will be assigned at the
Closing to the Company). The "Earnings Shortfall" shall equal
the sum of the Preferred Accounting Earnings for Fiscal Year 1996
and Fiscal Year 1997 minus the sum of 40% of the Accounting
Earnings of the Company (which for purposes of this Agreement
shall never be less than zero) for Fiscal Year 1996 and Fiscal
Year 1997, respectively; provided, however, that the Earnings
Shortfall shall not exceed $5,000,000 in the aggregate. If DEI
and Radian cannot agree upon the Accounting Earnings of the
Company within sixty (60) days after the notice referred to in
the first sentence of this Section 8.3, either DEI or Radian may,
by notice to the other, invoke the Appraisal Procedure. If the
Appraisal Procedure is required to determine the Accounting
Earnings, the fees and expenses of such Appraisal Procedure shall
be shared equally by DEI and Radian. The closing of such sale
shall take place upon the date that is within fifteen (15) days
after the later to occur of (i) the determination of the
Accounting Earnings in accordance with this Section 8.3 and (ii)
compliance with any applicable legal requirements; provided,
however, that if such sale is not in compliance with any
applicable legal requirements, then DEI and Radian shall
equitably adjust the arrangements set forth in this Section 8.3
in light of what is legally possible and in compliance with any
applicable legal requirements in order to effectuate the intent
of the parties. Upon the closing of such sale, DEI shall assume
all obligations under any guarantee provided by Radian or its
Affiliates pursuant to Section 3.5 of this Agreement in a written
agreement mutually acceptable to DEI and Radian, and the
Company's obligations under the Loan Agreement and obligation to
pay Radian any amounts in connection with any Ordinary Loans or
Member Loans shall be cancelled. Notwithstanding any other
provision of this Agreement, DEI may assign any of its rights and
obligations under this Section 8.3 to TDCC or any of TDCC's
Affiliates and Radian may assign any of its rights and
obligations under this Section 8.3 to HSB or any of HSB's
Affiliates.
VIII.4 Liens. No Member may, except with the consent of
the other Member (which consent may be granted or withheld in
such Member's sole discretion), create or permit to exist any
Lien on its Company Interest or any portion thereof (except (i)
Liens for current taxes not delinquent or taxes being contested
in good faith and by appropriate proceedings or (ii) Liens
arising in the ordinary course of business for sums not due or
sums being contested in good faith and by appropriate
proceedings). Any attempt by any Member to create or permit to
exist any Lien (other than the Liens described in the second
parenthetical in the immediately preceding sentence) on its
Company Interest or any portion thereof shall be null, void ab
initio and of no force and effect. Notwithstanding anything to
the contrary contained in this Agreement, if any Person obtains a
Lien on the Company Interest, or portion thereof, of any Member
and forecloses on such Lien, (i) the Company shall continue, (ii)
the Person foreclosing on the Lien shall succeed to the economic
interests of the Company Interest, or portion thereof, upon which
it foreclosed but not the voting or other interests which
comprise such Company Interest, or portion thereof, (iii) the
Person foreclosing on such Lien shall not be admitted as a
"Member" without the approval of the Members Committee and the
consent of the other Members (which consent may be granted or
withheld in the sole and absolute discretion of each such
Member), and (iv) any sale or other disposition of the Company
Interest, or portion thereof, upon which such Person foreclosed
shall be subject to the terms of Article VIII of this Agreement.
ARTICLE IX
DISSOLUTION AND WINDING-UP
IX.1 Dissolution. The Company shall be dissolved upon the
first to occur of the following events (each, a "Dissolution
Event"):
(a) the Bankruptcy of any Member;
(b) the election by the Members to dissolve the Company;
(c) the occurrence of any event that makes it unlawful for
the business of the Company to be carried on or for the Members
to carry it on as a limited liability company;
(d) the entry of a decree of judicial dissolution; or
(e) subject to Sections 9.8 and 9.9, the occurrence of any
other event that, absent an agreement to the contrary, causes a
dissolution of the Company under the Act;
provided that, except as provided in the Contribution Agreement,
if a dissolution of the Company is caused by the Bankruptcy of
any Member (the "Bankrupt Member"), then DEI, if it is not the
Bankrupt Member or Radian, if it is not the Bankrupt Member (in
either case, the "Non-Bankrupt Member") may elect to, upon notice
to the Bankrupt Member, purchase (or have an Affiliate purchase)
all, but not less than all, of the Bankrupt Member's Company
Interest at the Purchase Price. The "Purchase Price" to be paid
to the Bankrupt Member (by the Non-Bankrupt Member) in any sale
and purchase of the Bankrupt Member's Company Interest pursuant
to this Section 9.1 shall be (x) 50% of what the entire Company
could be sold for multiplied by the Bankrupt Member's Company
Interest, determined (unless otherwise agreed) in accordance with
the Appraisal Procedure (which Appraisal Procedure shall be at
the expense of the Bankrupt Member), reduced by (y) the amount of
any actual losses, costs, fees, expenses or damages suffered by
the Company, the Non-Bankrupt Member or any of its Affiliates as
a result of such dissolution, and shall be payable to the
Bankrupt Member in five equal annual installments, without
interest, commencing on the date of the transfer of the Company
Interest of the Bankrupt Member (which shall be the tenth (10th)
business day following the determination of the Purchase Price);
provided, however, that if Radian is the Bankrupt Member and if
DEI elects to purchase (or have an Affiliate purchase) all of
Radian's Company Interest on or prior to December 31, 1998, then
the fair market value of Radian's Company Interest for purposes
of (x) above shall be equal to the amount set forth in
Section 8.3 of this Agreement as if Radian had exercised its
option to sell; provided further, however, that such fair market
value (prior to the adjustment set forth below) shall be
discounted at a rate of 10% per year or portion thereof if such
purchase shall occur prior to December 31, 1997. In any winding
up pursuant to Section 9.2 of this Agreement, the amount
otherwise distributable to the Bankrupt Member pursuant to the
following provisions of this Article IX shall be reduced by the
amount of any actual losses, costs, fees, expenses or damages
suffered by the Company or the Non-Bankrupt Member or any of its
Affiliates as a result of such dissolution. Notwithstanding the
foregoing, if the enforceability of such Non-Bankrupt Member's
right to purchase the Bankrupt Member's Company Interest as set
forth above is in any way limited by general equitable
principles, Bankruptcy, moratorium, or other laws affecting
creditors' rights generally then, upon notice to the Bankrupt
Member and the Company, the Non-Bankrupt Member or any of its
Affiliates shall have the right to purchase from the Company all,
but not less than all, of the assets and liabilities of the
Company at the fair market value therefor. If DEI and Radian
cannot agree upon such fair market value within sixty (60) days
after the notice to purchase all the assets and liabilities of
the Company is delivered, either DEI or Radian may, by notice to
the other, invoke the Appraisal Procedure. If the Appraisal
Procedure is required to determine the fair market value of all
the assets and liabilities of the Company, the fees and expenses
of such Appraisal Procedure shall be borne by the Bankrupt
Member. The closing of such sale shall take place upon the date
that is within thirty (30) days after such fair market value is
determined in accordance with this Section 9.1.
IX.2 Winding-Up. Upon dissolution of the Company, and if
the Non-Bankrupt Member has not made any election pursuant to
Section 9.1, the Member with the largest Company Interest or, if
a dissolution of the Company is caused by the Bankruptcy of any
Member, the Non-Bankrupt Member shall wind up the affairs of the
Company in accordance with the Act and, to the extent permitted
by applicable law, shall settle accounts between the Members as
specified in this Article IX. The Member charged with winding up
the affairs of the Company and settling accounts among the
Members under this Agreement shall be referred to as the
"Liquidating Member".
IX.3 Accounting on Dissolution. If the Company is not
continued in accordance with the terms of this Agreement
following a dissolution, then on the date (the "Accounting Date")
which is four (4) months following the date of dissolution, a
proper accounting shall be made of the Company assets,
liabilities and operations, from the date of the last previous
accounting to the Accounting Date. Any items of income, gain,
credit, loss, expense and other deductions which are realized
subsequent to the date of the last previous accounting to the
Accounting Date shall be allocated in accordance with Article V
and proper adjustments shall be made to the Capital Account of
each Member.
IX.4 Accounting; Allocations of Residual Net Profits and
Residual Net Loss After Dissolutions.
(a) Except as provided in Section 9.4(c), any items of gain
or loss that are realized from Company operations or from sales
of Company assets subsequent to the Accounting Date and before
the date of liquidation shall be allocated as provided in
Article V.
(b) Except as provided in Section 9.4(c) and in addition to
the adjustments to the Member's Capital Accounts described above,
if any of the Company's assets are to be distributed in kind
rather than sold, the fair market value of such assets shall be
determined by the Members and a simulated aggregate gain (if any)
or loss (if any) for those assets (based upon the difference
between such fair market value and the Gross Asset Value of such
assets immediately before such revaluation) shall be allocated to
the Members' Capital Accounts as that simulated aggregate gain
(or loss) would have been allocated under Article V if such
assets had been sold for a cash price equal to each asset's fair
market value on the Accounting Date. If DEI and Radian cannot
agree upon such fair market value within sixty (60) days after
the Accounting Date, either DEI or Radian may, by notice to the
other, invoke the Appraisal Procedure. If the Appraisal
Procedure is required to determine the fair market value of such
assets, the fees and expenses of such Appraisal Procedure shall
be shared equally by DEI and Radian.
(c) Prior to the fourth (4th) anniversary of the Closing,
loss from the sale or deemed sale of assets in conjunction with a
dissolution pursuant to this Agreement shall be specially
allocated 100% to DEI; provided, however, that the Losses
specially allocated pursuant to this Section 9.4(c) shall not
exceed the Stairstep Loss Cap calculated as of the date of the
sale or deemed sale giving rise to the Loss.
IX.5 Conversion of Assets to Cash.
(a) If the Company Interest of the Bankrupt Member is not
purchased in accordance with the terms of this Agreement, then
commencing with the date that is four (4) months after the date
of dissolution, unless arrangements satisfactory to all Members
are otherwise made, sufficient assets of the Company will be
converted into cash to permit the Company to pay all its
liabilities other than long-term debts which (i) are secured by
Company assets from which the projected net income is sufficient
to pay installments of principal and interest on such debts as
they become due and (ii) contain terms specifying that neither
the dissolution of the Company nor the distribution of such
property that is subject to and secured by such debts constitutes
a default or causes the acceleration of the maturity of such
indebtedness ("Approved Debts").
(b) Notwithstanding the provisions of Sections 9.6 and 9.7
regarding the method and timing of the liquidation of the assets
of the Company, but subject to the order of priorities set forth
in this Agreement, if on commencement of the winding up process
in accordance with Section 9.2, the Members determine that an
immediate sale of part or all of the Company's assets would be
impractical or would cause undue loss to the Members, the Members
may defer for a reasonable time the liquidation of any assets
except those necessary to satisfy the liabilities of the Company.
(c) In the event that Company assets are distributed in
kind pursuant to Section 9.4(b), the Members shall be consulted
to determine the most tax-efficient manner to make such
distribution, consistent with the liquidation priorities of
Section 9.6.
IX.6 Distributions in Liquidation. As soon as the actions
required by Sections 9.3, 9.4 and 9.5 have been completed, the
Liquidating Member shall cause the cash and assets of the Company
to be distributed in the following order:
(a) To creditors of the Company (other than Members) in
payment of all liabilities of the Company (other than Approved
Debts) in the order of priority as provided by law. If any
liability is contingent or uncertain in amount, a reserve equal
to the maximum amount to which the Company could reasonably be
held liable will be established. Upon the payment or other
discharge of such liability, the amount remaining in such reserve
not needed, if any, will be distributed in accordance with the
remaining provisions of this Section 9.6.
(b) To the Members in payment of all Member Loans and any
interest thereon in accordance with the amount owing to each
Member.
(c) To the Members in payment of all loans other than
Member Loans (including, without limitation, any Ordinary Loans)
and any interest thereon in accordance with the amount owing to
each Member.
(d) To each Member in accordance with the positive balance
in its Capital Account, as set forth in Section 9.7.
(e) Notwithstanding the foregoing provisions of this
Section 9.6 and the provisions of Article V, any distribution
which would be payable to a Member whose actions in violation of
this Agreement caused the dissolution of the Company shall be
reduced by the amount of losses, costs, fees, expenses and
damages suffered by the Company or any Member or its Affiliates
(other than the Member whose actions caused a dissolution) as a
result of such dissolution, and a corresponding allocation of Net
Losses or gross deductions shall be made to such Member.
IX.7 Compliance with Treasury Regulations. In the event
that the Company or any Member's Company Interest is "liquidated"
within the meaning of Treasury Regulation Section 1.704-
1(b)(2)(ii)(g), liquidating distributions shall be made, pursuant
to this Agreement, in accordance with the Members' positive
Capital Account balances, as required by Treasury Regulation
Section 1.704-1(b)(2)(ii)(b)(2), by the end of the taxable year
or, if later, within ninety (90) days after the date of such
liquidation. In determining any Member's Capital Account balance
pursuant to this Section 9.7, any item of gain, loss, deduction,
and credit that has not previously been allocated pursuant to
Article V shall be so allocated.
IX.8 Section 708 Termination. Notwithstanding any other
provision of this Article IX, in the event that the Company is
liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Treasury Regulations, but no Dissolution Event has occurred,
the assets of the Company shall not be liquidated, the Company's
liabilities shall not be paid or discharged, and the Company's
affairs shall not be wound up.
IX.9 Continuation of the Company. Unless required by
applicable law, no sale, transfer, assignment or other
disposition by either Member of all or any part of its Company
Interest in accordance with the terms of this Agreement shall
cause a dissolution of the Company, and, if such a dissolution is
required under applicable law, immediately upon such sale,
transfer, assignment or other disposition by either Member, the
Company shall be reconstituted as a limited liability company,
governed by this Agreement, among the transferee, purchaser or
assignee and the remaining Member or Members; provided, however,
that nothing in this Section 9.9 shall be construed to conflict
with the requirement in Section 9.1(a) of this Agreement that a
Bankruptcy of any Member shall cause the dissolution of the
Company. A Member's rights (i) under the Transaction Documents
and (ii) to be a Member shall terminate upon a Transfer of that
Member's Company Interest (including without limitation a
Transfer pursuant to Sections 8.2, 8.3 or 9.1 of this Agreement).
IX.10 Waiver of Certain Rights. Except as provided in this
Agreement or as otherwise agreed in writing by the Members, to
the extent permitted by Delaware law, each Member hereby waives
(i) all rights it may have under Delaware law to cause the
dissolution of the Company (other than dissolution by operation
of law as a result of a transfer of its Company Interest as
expressly permitted by this Agreement), (ii) to the extent a
dissolution occurs by operation of law, the right to cause the
Company to wind up its affairs and make distributions to the
Members pursuant to Article IX upon the occurrence of such
dissolution and (iii) all rights to partition with respect to
real and personal property, provided that this clause shall not
apply to assets that have previously been distributed by the
Company to the Members.
ARTICLE X
MISCELLANEOUS PROVISIONS
X.1 Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns; provided that no assignment of any
Company Interest, or portion thereof, shall be effective unless
made in accordance with the terms of this Agreement. The sale,
transfer or assignment of a Company Interest, or portion thereof,
in accordance with the terms of this Agreement shall result in
the transfer to the purchaser, transferee or assignee of a
Company Interest, or portion thereof, that is equal to the sold,
transferred or assigned Company Interest, or the sold, trans-
ferred or assigned portion thereof, of the seller, transferor or
assignor and shall cause the purchaser, transferee or assignee to
be subject to and to incur all obligations pertaining to the
sold, transferred or assigned Company Interest, or the sold,
transferred or assigned portion thereof.
X.2 Notices. All communications, notices and consents
provided for in this Agreement shall be in writing and be given
by delivery (including delivery by courier, overnight delivery
service or facsimile transmittal), with delivery effective on
receipt. Notices shall be addressed as follows:
if to DEI to:
Dow Environmental Inc.
c/o The Dow Chemical Company
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
if to Radian at:
Radian Corporation
c/o The Hartford Steam Boiler Inspection
and Insurance Company
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▇.▇. ▇▇▇ ▇▇▇▇
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Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
or at such other address as either DEI or Radian may from time to
time designate by notice duly given in accordance with the
provisions of this Section.
X.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware
without regard to the conflicts of law rules of such state.
X.4 Choice of Forum. All suits, actions or proceedings
arising out of or relating to this Agreement shall be brought in
a state or federal court located in the State of Delaware, which
courts shall be an appropriate forum for all such suits, actions
or proceedings. Each Member waives any objection which it may
now or hereafter have to the laying of venue in any such court of
any such suit, action or proceeding.
X.5 Consent to Jurisdiction. Each Member irrevocably
submits to the jurisdiction of any state or federal court located
in the State of Delaware in any such suit, action or proceeding
referred to in Section 10.4.
X.6 Waiver of Jury Trial. EACH MEMBER WAIVES ANY RIGHT TO
A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY SUCH SUIT,
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
X.7 Entire Agreement; Amendments. This Agreement
(including the exhibit and schedules to this Agreement) together
with the other Transaction Documents (including any exhibits or
schedules thereto) embody the entire agreement and understanding
between the parties with respect to the subject matter of this
Agreement, and supersede any agreements, representations,
warranties or understandings, oral or written, between the
parties with respect to the subject matter of this Agreement and
the other Transaction Documents entered into prior to the date of
this Agreement. This Agreement may be amended or modified
(including, without limitation, to admit a new member or members,
other than any new member or members admitted to the Company
pursuant to a transfer of the Company Interest (or a portion
thereof) of a Member pursuant to Section 8.2) only by an
instrument in writing executed by all of the Members owning
Company Interests as of the date of such amendment or
modification.
X.8 Execution in Counterparts. This Agreement may be
signed in counterparts. Any single counterpart or set of
counterparts signed, in either case, by all the parties to this
Agreement constitutes a full and original agreement for all
purposes.
X.9 Remedies and Waiver. No failure or delay in exercising
any right under this Agreement shall operate as a waiver of or
impair any such right. No single or partial exercise of any such
right shall preclude any other or further exercise thereof or the
exercise of any other right. Any waiver must be given in writing
to be effective, and no waiver shall be deemed a waiver of any
other right.
X.10 Headings. The headings of Articles and Sections have
been included in this Agreement for convenience only and shall
not constitute a part of this Agreement for any other purpose.
X.11 Third Party Beneficiaries. This Agreement is solely
for the benefit of the parties to this Agreement and the parties
having the right to indemnification pursuant to Section 6.13, and
no provision of this Agreement confers upon third parties (other
than the parties having the right to indemnification pursuant to
Section 6.13) any remedy, claim, liability, reimbursement, claim
of action or other right in excess of those existing without
reference to this Agreement.
X.12 Further Assurances. Each Member agrees to execute and
deliver such other documents, certificates, agreements and other
writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the
transactions contemplated by the Transaction Documents and to
vest in the Company good title to the Contributed Assets, subject
only to Permitted Liens.
X.13 Public Announcements. Except as may be required by
applicable law or any listing agreement of any Member or Member's
Affiliates with any national securities exchange, neither the
Company nor any Member nor any Affiliate thereof will issue any
press release or make any public statement with respect to the
business of the Company or its financial performance or condition
without the prior written consent of the Members unless either
(i) a draft of the proposed release has been provided to each
Member at least twenty-four (24) hours prior to its proposed
release in order to permit the Members to comment thereon,
(ii) such press release or other public statement contains
factual information (or discussion or analysis of or comment
based upon such factual information) previously provided in
writing to such Person by the Members Committee, or (iii)
required by law.
X.14 Termination. This Agreement shall terminate if the
Contribution Agreement terminates and the Closing has not
occurred.
IN WITNESS WHEREOF, the parties have signed this Agreement
on the date first written above.
DOW ENVIRONMENTAL INC.
By:/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
President
RADIAN CORPORATION
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President and Chief Executive Officer
EXHIBIT A
Schedule of Definitions
"Accounting Date" has the meaning set forth in Section 9.3
of this Agreement.
"Accounting Earnings" means the maximum amount of earnings
before interest expense and taxes on income that the Company is
allowed to report under GAAP.
"Act" means the Delaware Limited Liability Company Act,
Delaware Code Title 6, Sec. 18-101 et seq., or any successor
thereto, as in effect at the time of reference.
"Adjusted Deficit Capital Account" means, with respect to
any Member, the deficit balance, if any, in such Member's Capital
Account as of the end of the taxable year, after giving effect to
the following adjustments:
(i) credit to such Capital Account of any amount which such
Member is obligated to restore or deemed obligated to
restore under Treas. Regs. Sec. 1.704-1(b)(2)(ii)(b)(3)
and 1.704-1(b)(2)(ii)(c), as well as any addition thereto
pursuant to the penultimate sentences of Treas. Regs.
Sec. 1.704-2(g)(1) and (i)(5); and
(ii) debit to such Capital Account of the items described in
Treas. Regs. Sec. 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
This definition of Adjusted Deficit Capital Account is intended
to comply with Treas. Regs. Sec. 1.704-1(b)(2)(ii)(d), and will be
interpreted consistently with those regulations.
"Affiliate" has the meaning set forth in the Contribution
Agreement.
"Agreement" has the meaning set forth in the Preamble to
this Agreement.
"Alternates" has the meaning set forth in Section 6.3 of
the Agreement.
"Appraisal Procedure" means the following: If any price,
value, amount or determination to be determined under the
Agreement cannot timely be established by agreement, then either
DEI or Radian, by written notice to the other, may invoke this
Appraisal Procedure. Each of DEI and Radian shall appoint its
Qualified Expert to conduct an appropriate valuation and shall
give notice of such appointment to the other Member within
fifteen (15) days after delivery of the notice invoking such
procedure. If DEI or Radian does not appoint its Qualified
Expert within such fifteen (15) day period, the valuation made by
the Qualified Expert appointed by the other Member shall be
conclusive and binding on the Members. If within thirty (30)
days after appointment of the Qualified Experts, such Qualified
Experts are unable to agree upon an appropriate valuation but the
higher valuation is not greater than 110% of the lower valuation,
then the valuation which shall be binding on the Members shall be
the average of the two valuations given by the Qualified Experts.
If the higher valuation is greater than 110% of the lower
valuation, the two (2) Qualified Experts jointly shall appoint a
third Qualified Expert within fifteen (15) days thereafter, or,
if they do not do so, either DEI or Radian may request the
American Arbitration Association, or any organization successor
thereto, to appoint the third Qualified Expert. The decision of
the third Qualified Expert shall be given within sixty (60) days
after its appointment, shall be at least equal to the lower
valuation, shall not exceed the higher valuation and shall be
binding on the Members.
"Approved Debts" has the meaning set forth in
Section 9.5(a) of this Agreement.
"Bankrupt" means any Person with respect to which a
Bankruptcy shall have occurred.
"Bankruptcy" shall mean with respect to any Person the
occurrence of either of the following events:
(i) the Person shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any
bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due,
or shall take any corporate action to authorize any of the
foregoing; or
(ii) an involuntary case or other proceeding shall be
commenced against the Person seeking liquidation, reorgani-
zation or other relief with respect to it or its debts
under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of sixty (60) days;
or an order for relief shall be entered against the Person
under the federal bankruptcy laws as now or hereafter in
effect.
"Bankrupt Member" has the meaning set forth in Section 9.1
of this Agreement.
"Capital Account" shall mean a separate account maintained
for each Member in accordance with Treas. Reg. 1.704-1(b)(2)(iv)
as follows:
(a) To each Member's Capital Account there shall be credited
such Member's Capital Contributions, such Member's
distributive share of Net Profits and any items in the
nature of income or gain which are specially allocated
pursuant to Section 5.2 of this Agreement, and the amount
of any Company liabilities assumed by such Member or which
are secured by any Property distributed to such Member.
(b) To each Member's Capital Account there shall be debited
the amount of cash and the Gross Asset Value of any
Property distributed to such Member pursuant to any
provision of this Agreement, such Member's distributive
share of Net Losses and any items in the nature of expenses
or losses which are specially allocated pursuant to
Section 5.2 of this Agreement, and the amount of any
liabilities of such Member assumed by the Company or which
are secured by any property contributed by such Member to
the Company.
"Capital Contribution" has the meaning set forth in Article
III of this Agreement.
"Closing" has the meaning set forth in the Contribution
Agreement.
"Closing Date" has the meaning set forth in the
Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended
and the regulations promulgated thereunder.
"Company" has the meaning set forth in the Preamble to this
Agreement.
"Company Interests" has the meaning set forth in
Section 4.1 of this Agreement.
"Contributed Assets" has the meaning set forth in the
Contribution Agreement.
"Contributing Member" has the meaning set forth in
Section 3.6 of this Agreement.
"Contribution Agreement" means that certain Contribution
Agreement dated as of the Closing Date among TDCC, The Hartford
Steam Boiler Inspection and Insurance Co., DEI and Radian.
"Credit Facility" has the meaning set forth in
Section 3.5(b) of this Agreement.
"Debt" shall mean, as to any person, (a) indebtedness of
such Person for borrowed money, (b) indebtedness of such
Person for the deferred purchase price of services or
property (other than normal trade accounts payable),
(c) obligations of such Person under leases which have been, or,
in accordance with generally accepted accounting principles,
should be, recorded as capitalized leases, (d) indebtedness of
such Person consisting of unpaid reimbursement obligations in
respect of all outstanding drawings under letters of credit
issued for the account of such Person and (e) Debt of others
guaranteed by such Person.
"Debt Ratio" means a fraction (i) the numerator of which is
equal to the Debt of the Company and (ii) the denominator of
which is the sum of Debt plus the sum of the current GAAP equity
accounts of each of the Members.
"DEI" has the meaning set forth in the Preamble of this
Agreement.
"DEI Alternate" and "DEI Alternates" have the meanings set
forth in Section 6.3 of this Agreement.
"DEI Representative" and "DEI Representatives" means an
employee or employees of DEI or one or more of its Affiliates
selected by DEI to represent it on the Members Committee.
"Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such Fiscal
Year, except that if the Gross Asset Value of an asset differs
from its adjusted basis for Federal income tax purposes at the
beginning of such Fiscal Year, Depreciation shall be an amount
which bears the same ratio to such beginning Gross Asset Value as
the Federal income tax depreciation, amortization, or other cost
recovery deduction for such Fiscal Year bears to such beginning
adjusted tax basis; provided, however, that if the adjusted basis
for Federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any
reasonable method selected by the Members Committee.
"Dissolution Event" has the meaning set forth in
Section 9.1 of this Agreement.
"Earnings Shortfall" has the meaning set forth in
Section 8.3 of this Agreement.
"Fiscal Year" has the meaning set forth in Section 7.2 of
this Agreement.
"GAAP" means the generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession in the United
States.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for Federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the fair market value of
such asset at the time it is accepted by the Company,
unreduced by any liability secured by such asset, as
determined by the contributing Member and the
Representatives;
(ii) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (b) the
distribution by the Company to a Member of more than a de
minimis amount of Property as consideration for an interest
in the Company; and (c) the liquidation of the Company
within the meaning of Treas. Regs. Sec. 1.704-1(b)(2)(ii)(g).
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be adjusted to equal the
fair market value of such asset, unreduced by any liability
secured by such asset, on the date of distribution as
determined by the distributee and the Representatives; and
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the
adjusted basis of such assets pursuant to Code Sec. 734(b) or
Code Sec. 743(b), but only to the extent that such adjustments
are taken into account in determining Capital Accounts
pursuant to Treas. Regs. Sec. 1.704-1(b)(2)(iv)(m) and para-
graph (vi) of the definition of "Net Profits" and "Net
Losses" and Section 5.2(g) of this Agreement.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraphs (i), (ii), or (iv) of this
Agreement, such Gross Asset Value shall thereafter be adjusted by
the Depreciation taken into account with respect to such asset
for purposes of computing Net Profits and Net Losses.
"Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest, easement, right of way,
title defect or encumbrance of any kind with respect to such
asset.
"Liquidating Member" has the meaning set forth in
Section 9.2 of this Agreement.
"Loan Agreement" has the meaning set forth in Section 8.3
of this Agreement.
"Loss" has the meaning set forth in the Contribution
Agreement.
"Member" has the meaning set forth in the Preamble of this
Agreement.
"Member Loan" has the meaning set forth in Section 3.6 of
this Agreement.
"Members Committee" means the committee of Representatives
described in Article VI of this Agreement.
"Net Cash Flow" shall mean all cash, revenues, and funds
received by the Company, including Capital Contributions, less
the sum of the following to the extent paid or set aside by the
Company:
(i) all principal and interest payments on indebtedness of
the Company and all other sums paid to lenders;
(ii) all cash expenditures incurred incident to the normal
operation of the Company's business; and
(iii) such Reserves as the Representatives deem reasonably
necessary to the proper operation of the Company's
business;
all as determined by the Representatives.
"Net Profits" and "Net Losses" shall mean, for each Fiscal
Year, an amount equal to the Company's taxable income or loss for
such Fiscal Year, determined in accordance with Code Sec. 703(a)
(for this purpose, all items of income, gain, loss, or deduction
required to be stated separately pursuant to Code Sec. 703(a)(1)
shall be included in taxable income or loss), with the following
adjustments:
(i) any income of the Company that is exempt from Federal
income tax and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this
definition shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code
Sec. 705(a)(2)(B) or treated as Code Sec. 705(a)(2)(B) expendi-
tures pursuant to Treas. Regs. Sec. 1.704-1(b)(2)(iv)(i), and
not otherwise taken into account in computing Net Profits
or Net Losses pursuant to this definition shall be
subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset
is adjusted pursuant to paragraphs (ii) or (iii) of the
definition of "Gross Asset Value," the amount of such
adjustment shall be taken into account as gain or loss from
the disposition of such asset for purposes of computing Net
Profits or Net Losses;
(iv) gain or loss resulting from any disposition of Property
with respect to which gain or loss is recognized for
Federal income tax purposes shall be computed by reference
to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such
taxable income or loss there shall be taken into account
Depreciation for such Fiscal Year, computed in accordance
with the definition of Depreciation above;
(vi) to the extent an adjustment to the adjusted tax basis of
any Company asset pursuant to Code Sec. 734(b) or Code
Sec. 743(b) is required pursuant to Treas. Regs.
Sec. 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution
other than in complete liquidation of a Member's Interest,
the amount of such adjustment shall be treated as an item
of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases the basis of
the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Net Profits or
Net Losses; and
(vii) notwithstanding any other provision of this definition,
any items which are specially allocated pursuant to Section
5.2 of this Agreement shall not be taken into account in
computing Net Profits or Net Losses.
The amounts of items of Company income, gain, loss or
deduction available to be specially allocated pursuant to
Section 5.2 of this Agreement shall be determined by applying
rules analogous to those set forth in paragraphs (i) through (vi)
above.
"Newco Services Business" has the meaning set forth in the
Contribution Agreement.
"Non-Bankrupt Member" has the meaning set forth in
Section 9.1 of this Agreement.
"Non-Contributing Member" has the meaning set forth in
Section 3.6 of this Agreement.
"Non-Contributing Member's Share" has the meaning set forth
in Section 3.6 of this Agreement.
"Nonrecourse Deductions" has the meaning set forth in
Treas. Regs. Sec. 1.704-2(b)(1).
"Nonrecourse Liability" has the meaning set forth in Treas.
Regs. Sec. 1.704-2(b)(3).
"Ordinary Loans" has the meaning set forth in
Section 3.5(d) of this Agreement.
"Parent" shall mean with respect to DEI, TDCC, and with
respect to Radian, The Hartford Steam Boiler Inspection and
Insurance Company.
"Partner Nonrecourse Debt" has the meaning set forth in
Treas. Regs. Sec. 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" means an amount,
with respect to each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Treas. Regs. Sec. 1.704-2(i)(3).
"Partner Nonrecourse Deductions" has the meaning set forth
in Treas. Regs. Sec. 1.704-2(i)(1) and 1.704-2(i)(2).
"Partnership Minimum Gain" has the meaning set forth in
Treas. Regs. Sec. 1.704-2(b)(2) and 1.704-2(d).
"Permitted Liens" has the meaning set forth in the
Contribution Agreement.
"Person" has the meaning set forth in the Contribution
Agreement.
"Preferred Accounting Earnings" shall mean Accounting
Earnings equal to $19 million for Fiscal Year 1996 and $21
million for Fiscal Year 1997.
"Prime Rate" means the rate publicly announced from time to
time by Citibank, N.A. in New York City as its prime rate.
"Property" means all real and personal property contributed
to or acquired by the Company and any improvements thereto, and
shall include both tangible and intangible property.
"Purchase Price" has the meaning set forth in Section 9.1
of this Agreement.
"Qualified Expert" means either (i) an investment banking
firm or (ii) an independent accounting firm, in either case, of
national and international reputation.
"Radian" has the meaning set forth in the Preamble to this
Agreement.
"Radian Alternate" and "Radian Alternates" have the
meanings set forth in Section 6.3 of this Agreement.
"Radian Representative" and "Radian Representatives" means
an employee or employees of Radian or one or more of its
Affiliates selected by Radian to represent it on the Members
Committee.
"Regulatory Allocations" has the meaning set forth in
Section 5.2(h) of this Agreement.
"Representatives" means each of the Representatives of the
Company designated from time to time by the Members in accordance
with Section 6.3 of this Agreement. As used in this Agreement
and for purposes of the Act, the term Representative shall have
the same meaning and have such rights, powers and authorities of
a "manager" as provided in the Act and as otherwise provided by
law.
"Restricted Asset" has the meaning set forth in the
Contribution Agreement.
"Stairstep Loss Cap" means an amount equal to $200,000,000
less the product of (i) the number of days that have elapsed
since the Closing Date and (ii) $136,986.30; provided, however,
that such Stairstep Loss Cap shall never be less then zero.
"Subsidiary" or "Subsidiaries" has the meaning set forth in
the Contribution Agreement.
"Tax Matters Partner" has the meaning set forth in
Section 6.14 of this Agreement.
"TDCC" has the meaning set forth in Section 2.2 of this
Agreement.
"Transaction Documents" has the meaning set forth in the
Contribution Agreement.
"Transfer" has the meaning set forth in Section 8.2 of this
Agreement.
"Treasury Regulations" or "Treas. Regs." includes temporary
and final regulations promulgated under the Code in effect on the
date of this Agreement and the corresponding sections of any
regulations subsequently issued that amend or supersede those
regulations.
Limited Liability Company Agreement
Schedule 6.1
Initial Officers and Duties
Designation. The officers of the Company shall be chosen
by the Members Committee and shall be a President, a Secretary
and a Treasurer. The Members Committee also may choose such
other officers or agents as from time to time may appear
necessary or advisable in the conduct of the business and affairs
of the Company. Any number of offices may be held by the same
person, unless otherwise prohibited by law or the Limited
Liability Company Agreement. The Members Committee also may
delegate to any other officer of the Company the power to choose
such other officers and to prescribe their respective duties and
powers.
Election and Term. The Members Committee shall elect the
officers of the Company at its first regular meeting during each
Fiscal Year. The officers so elected shall exercise such powers
and perform such duties as shall be determined from time to time
by the Members Committee; and all officers of the Company shall
hold office until their successors are elected by the Members
Committee, or until their earlier resignation or removal.
Resignation. Any officer may resign at any time by giving
written notice to the President or the Secretary of the Company.
Unless otherwise stated in such notice of resignation, the
acceptance thereof shall not be necessary to make it effective;
and such resignation shall take effect at the time specified
therein or, in the absence of such specification, it shall take
effect upon the receipt of the notice of resignation.
Removal. Except where otherwise expressly provided in a
contract authorized by the Members Committee, any officer elected
by the Members Committee may be removed at any time with or
without cause by the affirmative vote of a majority of the entire
Members Committee.
Vacancies. A vacancy in any office may be filled for the
unexpired portion of the term by the Members Committee.
Chair of the Members Committee. The Chair of the Members
Committee, shall preside at all meetings of the Representatives
of the Members Committee. The Chair of the Members Committee
also shall perform such other duties and may exercise such other
powers as may be assigned from time to time by the Members
Committee.
President. The President shall be the chief executive
officer of the Company, and, subject to the control of the
Members Committee, shall be in general and active charge of the
business and affairs of the Company. The President shall have
power to sign certificates of stock, contracts and instruments of
conveyance, checks, drafts, notes, orders for the payment of
money, authorized bonds, and similar obligations. In the absence
or disability of the Chair of the Members Committee, or if the
Members Committee does not appoint one, the President shall
preside at all meetings of the Members and of the Members
Committee. The President shall perform such other duties as may
be assigned from time to time by the Members Committee.
Vice Presidents. Each Senior Vice President or Vice
President, if there be any, shall have such powers and perform
such duties as may be assigned by the President or the Members
Committee.
Secretary. The Secretary shall keep the minutes and give
notices of all meetings of the Members Committee and such
committees as directed by the Members Committee. The Secretary
shall have charge of such books and papers as the Members
Committee may require. The Secretary is authorized to certify
copies of extracts from minutes and of documents in the
Secretary's charge, and anyone may rely on such certified copies
to the same effect as if such copies were originals and may rely
upon any statement of fact concerning the Company certified by
the Secretary. The Secretary shall perform all acts incident to
the office of Secretary, subject to the control of the Members
Committee.
Treasurer. The Treasurer shall have the custody of the
Company funds and securities, shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
Company and shall deposit all moneys and other valuable effects
in the name and to the credit of the Company in such depositories
as may be designated by the Members Committee. The Treasurer
shall disburse the funds of the Company as may be ordered by the
Members Committee, taking proper vouchers for such disbursements,
and shall render to the President and the Members Committee, at
its regular meetings, or when the Members Committee so requires,
an account of all transactions taken as Treasurer and of the
financial condition of the Company. If required by the Members
Committee, the Treasurer shall give the Company a bond in such
sum and with such surety or sureties as shall be satisfactory to
the Members Committee for the faithful performance of the duties
of the office of Treasurer and for the restoration to the
Company, in case of the Treasurer's death, resignation,
retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in the
possession or under the control of the Treasurer and belonging to
the Company.
Other Officers. Such other officers as the Members
Committee may choose shall perform such duties and have such
powers as from time to time may be assigned to them by the
Members Committee. The Members Committee may delegate to any
other officers of the Company the power to choose such other
officers and to prescribe their respective duties and powers.
Compensation of Officers. The officers of the Company
shall receive such compensation for their services as the Members
Committee from time to time may determine.
Limited Liability Company Agreement
Schedule 6.10(a)(v)
Accounting Policies and Procedures
The current GAAP accounting policies and procedures
followed by Radian Corporation, which are hereby adopted by
the Company, to the extent that those policies and
procedures do not substantially conflict with The Dow
Chemical Company Accounting Manual (2 volumes).
See: The Dow Chemical Company Accounting Manual (2 volumes)