Exhibit 10.4
HF INVESTMENT HOLDINGS, LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
Dated as of September 27, 1999
HF INVESTMENT HOLDINGS, LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
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ARTICLE 1 - DEFINITIONS........................................................1
ARTICLE 2 - FORMATION AND PURPOSE..............................................1
2.1 Formation....................................................1
2.2 Name.........................................................1
2.3 Registered Office/Agent......................................2
2.4 Term.........................................................2
2.5 Purpose......................................................2
2.6 Specific Powers..............................................2
2.7 Certificate..................................................3
ARTICLE 3 - MEMBERSHIP AND CAPITAL.............................................4
3.1 Members; Units...............................................4
3.2 Capital Contributions........................................4
3.3 Capital Accounts.............................................5
3.4 Revaluations of Assets and Capital Account Adjustments.......5
3.5 Additional Capital Account Adjustments.......................5
3.6 Additional Capital Account Provisions........................6
3.7 Options, Warrants, Etc.......................................6
ARTICLE 4 - STATUS AND RIGHTS OF MEMBERS.......................................7
4.1 Limited Liability............................................7
4.2 Return of Distributions of Capital...........................7
ARTICLE 5 - DISTRIBUTIONS AND ALLOCATIONS OF PROFIT AND LOSS...................7
5.1 Distributions................................................7
5.2 No Violation................................................12
5.3 Withholdings................................................12
5.4 Property Distributions and Installment Sales................13
5.5 Net Profit or Net Loss......................................13
5.6 Limitation on Allocation of Losses; Qualified Income
Offset; Curative Allocations................................15
5.7 Tax Allocations: Code Section 704(c) and Unrealized
Appreciation or Depreciation................................16
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5.8 Additional Investments......................................16
ARTICLE 6 - TAX MATTERS MEMBER................................................17
6.1 Tax Matters Member..........................................17
6.2 Certain Authorizations......................................17
6.3 Indemnity of Tax Matters Member.............................18
6.4 Information Furnished.......................................18
6.5 Notice of Proceedings, etc..................................18
6.6 Notices to Tax Matters Member...............................18
ARTICLE 7 - FEES AND EXPENSES.................................................18
7.1 Compensation to the Administrative Member and Affiliates....18
7.2 Company Expenses............................................19
ARTICLE 8 - DESIGNATION, RIGHTS, AND DUTIES OF THE ADMINISTRATIVE
MEMBERS.......................................................................19
8.1 Designation.................................................19
8.2 Authority; Duties...........................................19
8.3 Business Decisions; Voting Shares of HF Holdings'
Capital Stock...............................................20
ARTICLE 9 - TRANSFER OF INTERESTS.............................................21
9.1 Restrictions on Transfer....................................21
9.2 Transfers under this Agreement, etc.........................21
9.3 Transfers of Class B Units to Permitted Transferees.........21
9.4 Transfers of Class A Units or Class C Units to Immediate
Family......................................................21
9.5 Transfers of Class A Units or Class C Units Upon Death......22
9.6 Transfers of Class A Units or Class C Units to Charities....22
9.7 Transfers of Units to Entities Under Common Control.........22
9.8 ▇▇▇▇ Sell Down..............................................22
ARTICLE 10 - BOOKS, RECORDS, ACCOUNTING, AND REPORTS..........................23
10.1 Books and Records...........................................23
10.2 Information to Member.......................................24
10.3 Financial Statements........................................24
10.4 Filings.....................................................25
10.5 Non-Disclosure..............................................25
ARTICLE 11 - AMENDMENTS TO AGREEMENT..........................................25
11.1 Amendments..................................................25
11.2 Filings.....................................................26
ARTICLE 12 - DISSOLUTION OF COMPANY...........................................26
12.1 Events of Dissolution or Liquidation........................26
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12.2 Liquidation.................................................26
12.3 No Further Claim............................................27
12.4 No Action for Dissolution...................................27
ARTICLE 13 - INDEMNIFICATION..................................................27
13.1 General.....................................................27
13.2 Indemnification.............................................27
ARTICLE 14 - REPRESENTATIONS BY THE MEMBERS...................................28
14.1 Investment Intent...........................................28
14.2 Securities Regulation.......................................28
14.3 Knowledge and Experience....................................28
14.4 Independent Investment Decision.............................29
14.5 Economic Risk...............................................29
14.6 Binding Agreement...........................................29
14.7 Tax Position................................................30
14.8 Information.................................................30
ARTICLE 15 - COMPANY REPRESENTATIONS..........................................30
15.1 Legal Existence.............................................30
15.2 Valid Issuance..............................................30
15.3 Options, Etc................................................30
ARTICLE 16 - MISCELLANEOUS....................................................30
16.1 Additional Documents........................................30
16.2 General.....................................................31
16.3 Notices, Etc................................................31
16.4 Applicable Law..............................................31
16.5 Consent to Jurisdiction.....................................31
16.6 WAIVER OF JURY TRIAL........................................32
16.7 Gender and Number...........................................32
16.8 Severability................................................32
16.9 Headings....................................................33
16.10 Tax Status..................................................33
16.11 No Third Party Rights.......................................33
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HF INVESTMENT HOLDINGS, LLC
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of HF
Investment Holdings, LLC is dated as of September 27, 1999 by and among ▇▇▇▇
Capital Fund IV, L.P., ▇▇▇▇ Capital Fund IV-B, L.P., BCIP Associates and BCIP
Trust Associates, L.P., each a Delaware limited partnership, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an
individual residing in Riverheight, UT, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, an individual residing
in Providence, UT, and such other persons as may from time to time be admitted
as Members.
WHEREAS, the Original Members wish to form a limited liability company
pursuant to and in accordance with the Delaware Limited Liability Company Act in
order to conduct the business described herein; and
WHEREAS, the Members wish to enter into this Agreement to provide for,
among other things, the management of the business and affairs of the Company,
the allocation of profits and losses among the Members, the respective rights
and obligations of the Members to each other and to the Company, and certain
other matters.
NOW, THEREFORE, the Members agree as follows:
ARTICLE 1
DEFINITIONS
For purposes of this Agreement certain capitalized terms have
specifically defined meanings which are either set forth or referred to in
Exhibit 1 which is attached hereto and incorporated herein by reference.
ARTICLE 2
FORMATION AND PURPOSE
2.1 FORMATION. The Members hereby form a limited liability company
pursuant to the Act effective retroactively to the filing of the Certificate
with the Secretary of State of the State of Delaware. The rights, duties and
liabilities of the Members shall be determined pursuant to the Act and this
Agreement. To the extent that such rights, duties or obligations are different
by reason of any provision of this Agreement than they would be in the absence
of such provision, this Agreement shall, to the extent permitted by the Act,
control.
2.2 NAME. The name of the Company is HF Investment Holdings, LLC. The
business of the Company may be conducted under that name or, upon compliance
with
applicable laws, any other name that the Administrative Members deem appropriate
or advisable. The Administrative Members shall file any fictitious name
certificates and similar filings, and any amendments thereto, that the
Administrative Members consider appropriate or advisable.
2.3 REGISTERED OFFICE/AGENT. The registered office required to be
maintained by the Company in the State of Delaware pursuant to the Act shall
initially be c/o Corporation Service Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The name and address of the registered agent of the Company
pursuant to the Act shall initially be Corporation Service Company, ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The Company may, upon compliance with the
applicable provisions of the Act, change its registered office or registered
agent from time to time in the discretion of the Administrative Members.
2.4 TERM. The term of the Company shall continue until December 31,
2024 unless sooner terminated as hereinafter provided. The holders of a majority
of each of the Class A Units and Class B Units may extend the term (unless
terminated pursuant to Section 12.1(b) or (c)) for up to two periods of two
years each if they determine that extension is necessary or desirable.
2.5 PURPOSE. The purpose of the Company is to make investments in the
capital stock of HF Holdings and such other investments as may from time to time
be approved by a Voting Majority, and to engage in any and all activities
necessary, advisable, convenient or incidental to the making, management or
disposition of such investments. In addition, all cash of the Company, including
without limitation all Capital Contributions pending their investment as
contemplated by this Section 2.5, all interest, dividends and other
distributions received with respect to all investments of the Company, all
amounts realized on the sale, exchange or other disposition of securities and
other assets of the Company (including without limitation through mandatory or
voluntary redemptions and repurchases of capital stock), and all miscellaneous
income received from investment of idle funds, shall be segregated and invested
in Short-Term Investments by the Administrative Members to the extent they are
not then required to provide for Distributions, expenses or investments.
2.6 SPECIFIC POWERS. Without limiting the generality of Section 2.5,
the Company shall have the power and authority to take any and all actions
necessary, appropriate, proper, advisable, incidental or convenient to or for
the furtherance of the purpose set forth in Section 2.5, including, but not
limited to, the power:
2.6.1 to conduct its business, carry on its operations and
have and exercise the powers granted to a limited liability company by
the Act or under any other applicable law in any jurisdiction, whether
domestic or foreign, that may be necessary, convenient or incidental to
the accomplishment of the purposes of the Company;
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2.6.2 to negotiate, enter into, renegotiate, extend, renew,
terminate, modify, amend, waive, perform and carry out contracts of any
kind, including without limitation contracts with any Member or any
Affiliate thereof, in connection with, convenient to, or incidental to
the accomplishment of the purposes of the Company;
2.6.3 to purchase, take, receive, subscribe for or otherwise
acquire, own, hold, vote, use, employ, sell, lend, or otherwise dispose
of, and otherwise use and deal in and with, shares or other interests
in or obligations of corporations, associations, general or limited
partnerships, trusts, limited liability companies, or individuals or
direct or indirect obligations of the United States or of any
government, state, territory, governmental district or municipality or
of any instrumentality of any of them;
2.6.4 to ▇▇▇ and be sued, complain and defend, and participate
in administrative or other proceedings, in its name;
2.6.5 to elect and designate one or more managers of the
Company and to appoint officers, employees, agents and representatives
of the Company, and define their duties and fix their compensation;
2.6.6 to indemnify any Person in accordance with this
Agreement;
2.6.7 to cease its activities and cancel its Certificate;
2.6.8 to pay, collect, compromise, litigate, arbitrate or
otherwise adjust or settle any and all other claims or demands of or
against the Company or to hold such proceeds against the payment of
contingent liabilities; and
2.6.9 to make, execute, acknowledge and file any and all
documents or instruments necessary, convenient or incidental to the
accomplishment of the purpose of the Company.
Notwithstanding the foregoing provisions of this Section 2.6, in no event shall
the Company have the authority to borrow or otherwise incur or take property
subject to indebtedness without the written consent of a Voting Majority.
2.7 CERTIFICATE. The filing by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ of the Certificate as
an "authorized person" within the meaning of the Act is hereby authorized and
ratified in all respects, and the Administrative Members, as well as ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇, are designated as "authorized persons" within the
meaning of the Act to execute, deliver and file any amendments, restatements or
cancellation of the Certificate, and any other certificates necessary for the
Company to qualify to do business in a jurisdiction in which the Company may
wish to conduct business. In addition, ▇▇▇▇ ▇. ▇▇▇▇▇▇ is authorized to sign the
CSFB Warrant (as defined below) on the date hereof on behalf of the Company.
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ARTICLE 3
MEMBERSHIP AND CAPITAL
3.1 MEMBERS; UNITS. The Members of the Company shall be listed on
SCHEDULE I hereto, as from time to time amended and supplemented in accordance
with the provisions of this Agreement. The Members' Interests in the Company
shall be represented by up to three separate classes (each a "CLASS") of units
("UNITS"). The Interest of each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ shall be
represented by "Class A Units." The Interest of each ▇▇▇▇ Member and of each
other Member (other than ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇) as the ▇▇▇▇ Members
shall designate shall be represented by "Class B Units." The Interest of any
other Member shall be represented by "Class C Units." Each Unit issued as of the
Closing Date shall represent a Capital Contribution of one hundred dollars
($100). The holders of Class A Units and Class B Units shall have the voting
rights specified in this Agreement. The holders of Class C Units shall not have
any voting rights, except the right to vote in respect of certain proposed
amendments, as more fully specified in Section 11.1. From and after the making
by the Members of Capital Contributions to fund an investment other than the
investment in HF Holdings to be made as of the Closing Date, the Units of the
Company shall be segregated not only by Class, but also by investment so that
the Units issued in respect of an investment shall represent only an interest in
that investment (and the Short-Term Investments, if any, related thereto). The
holders of Class A Units, Class B Units and Class C Units issued in respect of a
particular investment shall be entitled to receive the Distributions and
allocations of Net Profit and Net Loss (and other items treated as Net Profit
and Net Loss pursuant to Sections 3.4 and 3.5) in respect of such investment as
are specified in Article 5. For the sake of clarity, the Units issued in respect
of the investment in HF Holdings on the Closing Date shall be designated the "HF
Class A Units", the "HF Class B Units" and the "HF Class C Units."
3.2 CAPITAL CONTRIBUTIONS. Each Member shall contribute to the Company
on the Closing Date the amount set forth opposite such Member's name on SCHEDULE
I, as in effect as of the Closing Date, under the heading "CAPITAL
CONTRIBUTIONS" and shall receive the number of HF Class A Units, HF Class B
Units and/or HF Class C Units, as the case may be, set forth on SCHEDULE I. (For
the treatment of the CSFB Warrant (defined below), see Section 3.7.) Following
the Closing Date, the Administrative Members, with the approval of a Voting
Majority, may issue Class A, B and/or C Units to such persons in exchange for
such additional Capital Contributions as they determine to be appropriate.
Promptly following the issuance of additional Units, the Administrative Members
shall amend SCHEDULE I so that it sets forth, effective as of the date of the
amendment, opposite each Member's name, under the heading "CAPITAL
CONTRIBUTIONS", the total amount of Capital Contributions made by such Member to
the Company on and after the Closing Date, and under the headings "CLASS A
UNITS," "CLASS B UNITS" and "CLASS C UNITS," the number of Class A Units, Class
B or Class C Units, respectively, held by such Member and the investments in
respect of which such Units were issued.
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3.3 CAPITAL ACCOUNTS. A separate account (each a "CAPITAL ACCOUNT")
shall be established and maintained for each Member which shall be increased by
(a) the amount of cash and the fair market value (as agreed upon by such Member
and the Administrative Members, with the consent of a Voting Majority, at the
time of contribution) of any other property contributed by such Member to the
Company as a Capital Contribution (net of liabilities secured by such property
or that the Company assumes or takes the property subject to), (b) such Member's
share of the Net Profit of the Company and (c) amounts required to be credited
to the Members' Capital Accounts in the same manner as Net Profit pursuant to
Section 3.4 or 3.5, and shall be reduced by (d) the amount of cash and the fair
market value (as agreed upon by such Member and the Administrative Members, with
the consent of a Voting Majority, at the time of distribution) of any other
property distributed to such Member (net of liabilities secured by such property
or that the Member assumes or takes the property subject to), (e) such Member's
share of the Net Loss of the Company and (f) amounts required to be credited to
the Members' Capital Accounts in the same manner as Net Loss pursuant to Section
3.4 or Section 3.5. From and after the making by the Members (which term, for
purposes of this sentence, shall not include the holder of any CSFB Warrant
(defined below)) of Capital Contributions to fund an investment other than the
investment in HF Holdings to be made as of the Closing Date, each Member's
Capital Account shall be divided into two or more "Sub-Capital Accounts", and a
separate Sub-Capital Account shall be maintained in the manner provided in the
immediately preceding sentence for each investment (and the Short-Term
Investments, if any, related thereto) in which the Member has an interest.
3.4 REVALUATIONS OF ASSETS AND CAPITAL ACCOUNT ADJUSTMENTS. Immediately
preceding the issuance of additional Class A Units, Class B Units or Class C
Units to a new or existing Member in exchange for cash or other contributions
(other than in connection with the exercise of any CSFB Warrant (as defined
below)), or upon the redemption of the Interest of a Member, the then prevailing
Asset Values of the Company shall be adjusted to equal their respective gross
fair market values, as determined in good faith by the Administrative Members,
with the consent of a Voting Majority, and any increase in the net equity value
of the Company (Asset Values less liabilities) shall be credited to the Capital
Accounts (and the appropriate Sub-Capital Accounts) of the Members in the same
manner as Net Profits are credited under Section 5.5.2 hereof (or any decrease
in the net equity value of the Company shall be charged in the same manner as
Net Losses are charged under Section 5.5.3). Accordingly, as of the date of
issuance of additional Units or the redemption of all or a portion of a Member's
Interest in the Company, the Capital Accounts (and the Sub-Capital Accounts) of
Members will reflect both realized and unrealized gains and losses through such
date and the net fair market value of the equity of the Company as of such date.
3.5 ADDITIONAL CAPITAL ACCOUNT ADJUSTMENTS. Any income of the Company
that is exempt from federal income tax shall be credited to the Capital Accounts
(and the appropriate Sub-Capital Accounts) of the Members in the same manner as
Net Profits are credited under Section 5.5.2 when such income is realized. Any
expenses or expenditures of the Company
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which may neither be deducted or capitalized for tax purposes (or are so treated
for tax purposes) shall be charged to the Capital Accounts (and the appropriate
Sub-Capital Accounts) of the Members, in the same manner as Net Losses are
charged under Section 5.5.3. If the Company makes an election under Section 754
of the Code to provide a special basis adjustment upon the transfer of an
Interest in the Company or the distribution of property by the Company, Capital
Accounts (and the appropriate Sub-Capital Accounts) shall be adjusted to the
limited extent required by the Treasury Regulations under Section 704 following
such transfer or distribution.
3.6 ADDITIONAL CAPITAL ACCOUNT PROVISIONS.
3.6.1 No Member shall have the right to demand a return of all
or any part of its Capital Contributions. Any return of the Capital
Contributions of any Member shall be made solely from the assets of the
Company and only in accordance with the terms of this Agreement. No
interest shall be paid to any Member with respect to its Capital
Contributions or Capital Account (or any Sub-Capital Account).
3.6.2 In the event that all or a portion of the Units of a
Member are transferred in accordance with the terms of this Agreement,
the transferee of such Units shall also succeed to all or the relevant
portion of the Capital Account (and the appropriate Sub-Capital
Accounts) of the transferor. Units held by a Member may not be
transferred independently of the interest in the capital of the Company
to which the Units relate.
3.6.3 No Member shall have any obligation to repay any deficit
balance in its Capital Account (or in any Sub-Capital Account).
3.7 OPTIONS, WARRANTS, ETC. The Administrative Members, with the
approval of a Voting Majority, may issue options, warrants and other rights or
interests in respect of the equity of the Company (each a "Right") to such
persons, in exchange for such amounts of cash or other property, and having such
terms, as the Administrative Members determine to be appropriate. By its
signature to this Agreement, ▇▇▇▇, constituting a Voting Majority as of the date
hereof, hereby approves the issuance as of the date hereof to Credit Suisse
First Boston Management Corporation, a Delaware Corporation ("CSFB"), of a
warrant for the purchase of fifty thousand (50,000) Class C Units having terms
substantially identical to those set forth in the HF Class C Units Purchase
Warrant attached hereto as EXHIBIT 2 (such warrant and any warrant issued to
reflect a partial exercise or a transfer of a portion of such warrant, a "CSFB
Warrant"). Upon the issuance of any Right, the Administrative Members shall set
forth on SCHEDULE I the name of the holder of such Right and the terms of such
Right. Upon the exercise of any CSFB Warrant, the holder thereof shall be deemed
to have made a Capital Contribution equal to the sum of (i) the exercise price
paid in connection with such exercise and (ii) the product of (A) five million
dollars ($5,000,000) and (B) a fraction, the numerator of which is the number of
HF Units received upon such exercise and the denominator of which is the sum of
(I) the aggregate
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number of HF Units for which all unexercised CSFB Warrants are exercisable and
(II) the aggregate number of outstanding HF Units issued in connection with the
exercise of any CSFB Warrants (for purposes of this clause II, adjusted to
reflect any post-exercise distributions of additional HF Units in respect of HF
Units, reclassifications by subdivision of outstanding HF Units, or
reclassifications by combination of outstanding HF Units into a smaller number
of HF Units). Such Capital Contribution shall be set forth on Schedule I.
3.8 LIMITATIONS ON ISSUANCES. The Company shall not issue any
additional Units (or rights to acquire Units) to any ▇▇▇▇ Member unless the
Company shall have provided each other Member with the opportunity to purchase
its pro rata share of such Units or rights on the same terms as such ▇▇▇▇
Member.
ARTICLE 4
STATUS AND RIGHTS OF MEMBERS
4.1 LIMITED LIABILITY. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Member nor any other Indemnified Person shall be obligated
personally for any such debt, obligation or liability of the Company. All
Persons dealing with the Company shall look solely to the assets of the Company
for the payment of the debts, obligations or liabilities of the Company.
4.2 RETURN OF DISTRIBUTIONS OF CAPITAL. Except as otherwise expressly
required by law, a Member, in its capacity as such, shall have no liability
either to the Company or any of the Company's creditors. Except as required by
law or a court of competent jurisdiction, no Member or investor in or partner of
a Member shall be obligated by this Agreement to return any Distribution to the
Company or pay the amount of any Distribution for the account of the Company or
to any creditor of the Company. However, if any court of competent jurisdiction
holds that, notwithstanding the provisions of this Agreement, any Member is
obligated to return or pay any part of any Distribution, the obligation shall be
that of such Member alone, and not of any other Member unless the court so
provides. The amount of any Distribution returned to the Company by or on behalf
of a Member or paid by or on behalf of a Member for the account of the Company
or to a creditor of the Company shall be added to the account or accounts from
which it was subtracted when it was distributed to the Member.
ARTICLE 5
DISTRIBUTIONS AND ALLOCATIONS OF PROFIT AND LOSS
5.1 DISTRIBUTIONS. The Administrative Members shall cause the Company
to make Distributions to the Members and the holder(s) of the CSFB Warrant(s) in
accordance with this Section 5.1.
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5.1.1 DEFINITIONS.
"AVAILABLE CASH" shall mean (a) cash received in respect of
the Company's investment in HF Holdings and (b) cash received in
respect of all Short-Term Investments (i) made with funds pending their
investment in HF Holdings or (ii) made with funds received from HF
Holdings pending the allocation of such funds pursuant to Section
5.1.2, in each case net of expenses of the Company authorized by this
Agreement.
"RELEASED SHARES" shall mean shares of HF Holdings common
stock that were subject to a Junior Management Option which has lapsed
or failed to vest or that were subject to the CSFB Option, prior to its
lapse.
"OPTION SHARES" shall mean shares of HF Holdings common stock
that are subject to a Junior Management Option or to the CSFB Option.
"FREE SHARES" shall mean shares of HF Holdings common stock
that have never been subject to a Junior Management Option or the CSFB
Option.
5.1.2 ALLOCATIONS OF AVAILABLE CASH. Available Cash shall be
allocated among the Members and the holder(s) of the CSFB Warrant(s) as
follows:
(a) ALLOCATIONS OF AVAILABLE CASH ATTRIBUTABLE TO OPTION
SHARES OR RELEASED SHARES. Available Cash received by
the Company (i) as a result of the exercise, in whole
or in part, of any Junior Management Option or the
CSFB Option, (ii) as a result of the sale or other
disposition of Released Shares or (iii) otherwise in
respect of Option Shares or Released Shares (or
Short-Term Investments related thereto), shall be
allocated among all Members and holder(s) of the CSFB
Warrant(s) in proportion to the relative number of HF
Units (regardless of Class) held by the Members and
the holder(s) of the CSFB Warrant(s) (treating,
solely for this purpose, each holder of a CSFB
Warrant as holding at the time of any allocation
pursuant to this Section 5.1.2(a) a number of HF
Units equal to the aggregate number of HF Units for
which all CSFB Warrants then held by such holder may
be exercised).
PRESUMPTION 1 -- IDENTIFYING SHARES
SUBJECT TO DISPOSITION. In the event that a
Junior Management Option or the CSFB Option
lapses or that a Junior Management Option
fails to vest, any sale or other disposition
of HF Holdings common stock by the Company
thereafter (other than pursuant to the
exercise of a Junior Management Option or
the CSFB Option) shall be treated in part as
a sale of Released Shares and in part as
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a sale of Free Shares, (i) with the
percentage of shares sold that are deemed to
be Released Shares equal to THE PRODUCT OF
(A) a fraction, (I) the numerator of which
is equal to the number of Released Shares
held by the Company immediately prior to
such sale or disposition and (II) the
denominator of which is equal to the total
number of shares of HF Holdings common stock
held by the Company immediately prior to
such sale or disposition that are either
Free Shares or Released Shares, and (B) 100;
and (ii) with the percentage of shares sold
that are deemed to be Free Shares equal to
(C) 100 MINUS (D) the percentage of shares
sold that are deemed to be Released Shares,
as calculated in the immediately preceding
clause (i).
PRESUMPTION 2 -- IDENTIFYING SHARES
IN RESPECT OF WHICH DIVIDEND IS PAID. In the
event that the Company receives a dividend
or other distribution (other than a
distribution treated as proceeds from an
exchange of HF Holdings Common Stock
pursuant to Section 302(a) of the Code) in
respect of shares of HF Holdings common
stock, such distribution shall be treated in
part as a distribution in respect of Option
Shares and Released Shares and in part as a
distribution in respect of Free Shares, (i)
with the percentage of such distribution
that is deemed attributable to Free Shares
equal to THE PRODUCT OF (A) a fraction, (I)
the numerator of which is equal to the
number of Free Shares then held by the
Company and (II) the denominator of which is
equal to the total number of shares of HF
Holdings common stock then held by the
Company, and (B) 100, and (ii) the
percentage of such distribution that is
deemed attributable to Option Shares and
Released Shares equal to (C) 100 minus (D)
the percentage of such distribution that is
deemed attributable to Free Shares, as
calculated in the immediately preceding
clause (i).
(b) ALLOCATIONS OF AVAILABLE CASH ATTRIBUTABLE TO FREE
SHARES. All Available Cash received by the Company in
respect of Free Shares (or Short-Term Investments
related thereto) shall be allocated as follows:
(i) First, Available Cash in respect of Free
Shares (or Short-Term Investments related
thereto) shall be allocated among all
Members and holder(s) of the CSFB
Warrant(s), in proportion to the relative
number of HF Units (regardless of Class)
held by the Members and the holder(s) of the
CSFB Warrant(s) (treating, solely for this
purpose, each holder of a CSFB Warrant as
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holding at the time of any allocation
pursuant to this Section 5.1.2(b) a number
of HF Units equal to the aggregate number of
HF Units for which all CSFB Warrants then
held by such holder may be exercised), until
each Original Member has been allocated an
amount of Available Cash equal to its
Unreturned Investment;
(ii) Thereafter, (A) an amount of Available Cash
in respect of Free Shares (or Short-Term
Investments related thereto) equal to (I)
the Available Cash in respect of Free Shares
(or Short-Term Investments related thereto)
remaining after making the allocation
pursuant to Section 5.1.2(b)(i) MULTIPLIED
BY (II) the Class A Percentage shall be
allocated to the holders of HF Class A
Units, in proportion to the relative number
of HF Class A Units held by the holders of
such Units, and (B) an amount of Available
Cash in respect of Free Shares (or
Short-Term Investments related thereto)
equal to (I) the Available Cash in respect
of Free Shares (or Short-Term Investments
related thereto) remaining after making the
allocation pursuant to Section 5.1.2(b)(i)
MULTIPLIED BY (II) the Residual Percentage
shall be allocated to all Members and
holder(s) of the CSFB Warrant(s), in
proportion to the relative number of HF
Units (regardless of Class) held by the
Members and the holder(s) of the CSFB
Warrant(s) (treating, solely for this
purpose, each holder of a CSFB Warrant as
holding at the time of any allocation
pursuant to this Section 5.1.2(b) a number
of HF Units equal to the aggregate number of
HF Units for which all CSFB Warrants then
held by such holder may be exercised).
5.1.3 ALLOCATIONS OF NON-CASH ASSETS.
(a) IN GENERAL. Subject to Section 5.1.3(b), the Company
shall allocate among all Members and holder(s) of the
CSFB Warrant(s) all equity and other interests that
it holds in HF Holdings or any successor thereto, and
all of the non-cash proceeds received in exchange for
any of its interests in HF Holdings, upon the
earliest of the following times: (a) immediately
following a Liquidity Event (other than an initial
public offering); (b) immediately prior to the first
secondary public offering of shares in HF Holdings to
follow an initial public offering of shares in HF
Holdings that is a Liquidity Event; or (c) upon the
vote of the holders of a majority of each of the
Class A Units and Class B Units to make such an
allocation. An allocation pursuant to this Section
5.1.3 shall be made in the same proportions as an
allocation of Available Cash
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pursuant to Section 5.1.2 would have been made to the
Members and the holder(s) of the CSFB Warrant(s) had
the assets being allocated first been sold for an
amount of cash equal to the fair market value of such
assets, as determined (except as provided in the next
sentence) in good faith by the Administrative
Members, with the consent of a Voting Majority, and
the proceeds from such sale been allocated pursuant
to Section 5.1.2. For purposes of this Section, the
"fair market value" of any share of HF Holdings or
any successor thereto allocated hereunder shall be
(i) in the case of a Liquidity Event (other than an
initial public offering), the amount of consideration
per share paid in connection with the Liquidity
Event, (ii) in the case of a secondary public
offering, the price at which shares are offered to
the public in such offering or (iii) in all other
cases, as determined in good faith by the
Administrative Members, with the consent of a Voting
Majority.
(b) ALLOCATION TO CSFB WARRANT ACCOUNT. Notwithstanding
the provisions of Section 5.1.3(a), in the event that
any holder of a CSFB Warrant is at the time of an
allocation pursuant to this Section 5.1.3(a) not
permitted under the IBA or the BHCA to hold all or a
portion (the "Impermissible Portion") of any non-cash
asset that would otherwise be allocated to it
(pursuant to Section 5.13(a)), then the Impermissible
Portion of the non-cash asset that would otherwise be
allocated pursuant to Section 5.1.3(a) to such holder
shall instead be allocated to a CSFB Warrant Account
established in respect of the CSFB Warrant held by
such holder.
5.1.4 TREATMENT OF ALLOCATED ASSETS.
(a) CURRENT DISTRIBUTION. All Available Cash allocated
under Section 5.1.2 to any Member or any holder of a
CSFB Warrant shall be distributed to such Member or
such holder within two (2) Business Days of the
receipt by the Company of such cash. All assets other
than Available Cash allocated under Section 5.1.3(a)
to any Member or any holder of a CSFB Warrant shall
be distributed to such Member or such holder as soon
as reasonably practicable.
(b) SET ASIDE IN CSFB WARRANT ACCOUNT. The portion of
each non-cash asset allocated pursuant to Section
5.1.3(b) to a CSFB Warrant Account shall be held in
such account, and no portion of such non-cash asset
shall be distributed to the holder of the CSFB
Warrant in respect of which such account was
established other than in accordance with Section
5.1.4(c). Notwithstanding the foregoing sentence, an
amount equal to all cash earnings received by the
Company in respect of any non-cash
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asset held in the CSFB Warrant Account shall be
distributed, to the extent of Available Cash, to the
holder of the CSFB Warrant in respect of which such
account was established as soon as reasonably
practicable following the receipt by the Company of
such cash. All non-cash earnings in respect of an
asset in the CSFB Warrant Account shall remain in the
account and be distributed in accordance with Section
5.1.4(c).
(c) DISTRIBUTION OF NON-CASH ASSETS FROM CSFB WARRANT
ACCOUNT. No non-cash asset held in a CSFB Warrant
Account shall be distributed until such time as: (i)
the holder of the CSFB Warrant in respect of which
such account was established notifies the Company
that it has become permissible under the IBA and/or
the BHCA for such holder to hold all or a portion of
one or more of the non-cash assets in such account,
in which case, that portion of each non-cash asset in
such CSFB Warrant Account which such holder may then
hold shall be distributed to such holder within two
(2) Business Days of such notification; or (ii) the
CSFB Warrant in respect of which the CSFB Warrant
Account was established is exercised in whole or in
part. In the event of an exercise described in clause
(ii) of the immediately preceding sentence, the CSFB
Account Distribution Fraction of each remaining asset
in the CSFB Warrant Account shall be distributed to
the holder exercising the CSFB Warrant in respect of
which the account was established, within two (2)
Business Days after the date as of which exercise of
the warrant shall be deemed to have been effected
pursuant to Section 1.3 of such CSFB Warrant. In the
event that a CSFB Warrant lapses, distributions that
would have been made to the holder of such warrant
pursuant to the foregoing provisions of this Section
5.1.4(c) shall be made to, or to the designee of,
such holder within five (5) Business Days of such
lapse.
5.2 NO VIOLATION. Notwithstanding any provision to the contrary
contained in this Agreement, the Company shall not make a Distribution to any
Member on account of its Interest in the Company if such Distribution would
violate Section 18-607 of the Act or other applicable law.
5.3 WITHHOLDINGS. All amounts withheld pursuant to the Code or any
provision of any state, local or foreign tax law with respect to any payment,
Distribution, or allocation to the Company shall be treated as amounts paid to
the Company. The Administrative Members are authorized to withhold from
Distributions, or with respect to allocations, to the Members and to pay over to
the appropriate federal, state, local or foreign government any amounts required
to be so withheld. The Administrative Members shall allocate any such amounts to
the Members in respect of whose Distribution or allocation the tax was withheld
and shall treat such amounts as actually distributed to such Members.
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5.4 PROPERTY DISTRIBUTIONS AND INSTALLMENT SALES. The amount by which
the fair market value of any property to be distributed in kind pursuant to
Sections 5.1.3 and 5.1.4 exceeds or is less than the then prevailing Asset Value
of such property shall, to the extent not otherwise recognized by the Company,
be taken into account in determining Net Profit and Net Loss and determining the
Capital Accounts (and the appropriate Sub-Capital Accounts) of the Members as if
such property had been sold at its fair market value immediately prior to the
distribution. If any assets are sold in transactions in which, by reason of the
provisions of Section 453 of the Code or any successor thereto, gain is realized
but not recognized, such gain shall be taken into account when realized in
computing gain or loss of the Company for purposes of allocation of Net Profit
or Net Loss under this Article 5.
5.5 NET PROFIT OR NET LOSS.
5.5.1 DEFINITIONS. The "NET PROFIT" or "NET LOSS" of the
Company for each Fiscal Year or relevant part thereof shall mean the
Company's taxable income or loss for federal income tax purposes for
such period (including therein all items of income, gain, loss or
deduction required to be stated separately pursuant to Section
703(a)(1) of the Code) with the following adjustments:
(a) Gain or loss attributable to the disposition of
property of the Company with an Asset Value different
than the adjusted basis of such property for federal
income tax purposes shall be computed with respect to
the Asset Value of such property and any tax gain or
loss not included in Net Profit or Loss shall be
taken into account and allocated among the Members
pursuant to Section 5.7 hereof.
(b) Depreciation, amortization or cost recovery
deductions with respect to any property with an Asset
Value that differs from its adjusted basis for
federal income tax purposes shall be computed in
accordance with Asset Value and any depreciation
allowable for federal income tax purposes shall be
allocated in accordance with Section 5.7.
5.5.2 ALLOCATIONS OF NET PROFIT. The Net Profit of the Company
attributable to the Company's investment in HF Holdings (or any
Short-Term Investments related thereto) for any relevant fiscal period
shall be allocated and credited to the Capital Accounts (or the
appropriate Sub-Capital Accounts) of the Members as follows:
(a) All income and gain recognized by the Company (and
amounts so treated pursuant to Section 3.4 or 3.5)
(i) as a result of the exercise, in whole or in part,
of any Junior Management Option or the CSFB Option,
(ii) as a result of the sale or other disposition of
Released Shares or (iii) otherwise in respect of
Option Shares or Released Shares (or Short-
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Term Investments related thereto), shall be allocated
to the Members' Capital Accounts (and, if
appropriate, Sub-Capital Accounts for the HF Holdings
investment) pro rata in proportion to their HF Units.
(In determining the extent to which shares of HF
Holdings that are sold are Released Shares, the
presumptions set forth above in Section 5.1.2(a)
shall apply.)
(b) All income and gain recognized by the Company (or
treated as recognized pursuant to Section 3.4 or 3.5)
in respect of Free Shares (or Short-Term Investments
related thereto) shall be allocated to the Members'
Capital Accounts (and, if appropriate, Sub-Capital
Accounts for the HF Holdings investment) as follows:
(i) first, if losses and deductions have previously
been allocated to the Members pursuant to Section
5.5.3(b)(ii), to the Members in proportion to the
relative number of HF Units (regardless of Class)
held by the Members, until the aggregate amount
allocated pursuant to this clause (i) equals the
aggregate amount of losses and deductions previously
allocated pursuant to Section 5.5.3(b)(ii); and
(ii) thereafter, (A) the balance of such income and
gain multiplied by the Class A Percentage shall be
allocated to the holders of HF Class A Units, in
proportion to the relative number of HF Class A Units
held by the holders of such Units, and (B) the
balance of such income and gain multiplied by the
Residual Percentage to all Members, in proportion to
the relative number of HF Units (regardless of Class)
held by the Members.
5.5.3 ALLOCATIONS OF NET LOSS. The Net Loss of the Company
attributable to the Company's investment in HF Holdings (or any
Short-Term Investments related thereto) for any relevant fiscal period
shall be allocated and charged to the Capital Accounts (or the
appropriate Sub-Capital Accounts) of the Members as follows:
(a) All losses and deductions recognized by the Company
(and amounts so treated pursuant to Section 3.4 or
3.5) (i) as a result of the exercise, in whole or in
part, of any Junior Management Option or the CSFB
Option, (ii) as a result of the sale or other
disposition of Released Shares, or (iii) otherwise in
respect of Option Shares or Released Shares (or
Short-Term Investments related thereto), shall be
allocated to the Members' Capital Accounts (and, if
appropriate, Sub-Capital Accounts for the HF Holdings
investment) pro rata in proportion to their HF Units.
(In determining the extent to which shares of HF
Holdings that
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are sold are Released Shares, the presumptions set
forth above in Section 5.1.2(a) shall apply.)
(b) All losses and deductions recognized by the Company
(or treated as recognized pursuant to Section 3.4 or
3.5) in respect of Free Shares (or Short-Term
Investments related thereto) shall be allocated to
the Members' Capital Accounts (and, if appropriate,
Sub-Capital Accounts for the HF Holdings investment)
as follows:
(i) first, if income and gain have
previously been allocated to the Members
pursuant to Section 5.5.2(b)(ii), (A) the
Class A Percentage multiplied by such losses
and deductions in respect of Free Shares
shall be allocated to the holders of HF
Class A Units, in proportion to the relative
number of HF Class A Units held by the
holders of such Units, and (B) the Residual
Percentage multiplied by such losses and
deductions in respect of Free Shares shall
be allocated to all Members, in proportion
to the relative number of HF Units
(regardless of Class ) held by the Members,
until the aggregate amount allocated
pursuant to this clause (i) equals (x) the
aggregate amount of income and gain
previously allocated pursuant to Section
5.5.2(b)(ii) LESS (y) the aggregate amount
previously allocated for Distribution
pursuant to Section 5.1.2(b)(ii) (or Section
5.1.3, to the extent allocated in accordance
with Section 5.1.2(b)(ii)); and
(ii) thereafter, to the Members in
proportion to the relative number of HF
Units (regardless of Class) held by the
Members.
5.5.4. SPECIAL ALLOCATION. Notwithstanding the provisions of
Sections 5.5.2 and 5.5.3, all income earned in
respect of any non-cash assets allocated to a CSFB
Warrant Account shall be specially allocated to the
holder of the CSFB Warrant in respect of which such
account was established.
5.6 LIMITATION ON ALLOCATION OF LOSSES; QUALIFIED INCOME OFFSET;
CURATIVE ALLOCATIONS. Notwithstanding the provisions of Sections 5.5.2 and
5.5.3, in no event shall an item of loss, expense or deduction be allocated to a
Member's Capital Account if it would cause or increase a deficit balance in such
Member's Capital Account, within the meaning of Treasury Regulation
ss.1.704-1(b)(2)(ii)(d). In addition, this Agreement shall for all purposes be
deemed to contain a qualified income offset provision, within the meaning of
such regulation. It is the intention of the Members that any allocations
required by the first two sentences of this Section 5.6 not affect the amount or
timing of Distributions to be made under this Agreement. In furtherance of this
objective, in the event any allocation is made pursuant to either of the first
two sentences of this Section 5.6, the Administrative Members are hereby
-15-
directed to make (with the advice of the Company's independent tax advisors and
the consent of a Voting Majority) such curative allocations as they determine to
be appropriate to offset the effects of such allocation. Any item of Net Profit
or Net Loss allocated pursuant to this Section 5.6 shall not again be allocated
pursuant to Section 5.5.
5.7 TAX ALLOCATIONS: CODE SECTION 704(C) AND UNREALIZED APPRECIATION OR
DEPRECIATION.
5.7.1 CONTRIBUTED ASSETS. In accordance with Section 704(c) of
the Code, income, gain, loss and deduction with respect to any property
contributed to the Company with an adjusted basis for federal income
tax purposes different from the initial Asset Value at which such
property was accepted by the Company shall, solely for tax purposes, be
allocated among the Members so as to take into account such difference
in the manner required by Section 704(c) and the applicable Treasury
Regulations.
5.7.2 REVALUED ASSETS. If upon the acquisition of additional
Units in the Company by a new or existing Member the Asset Value of any
the assets of the Company is adjusted pursuant to Section 3.4,
subsequent allocations of income, gain, loss and deduction with respect
to such assets shall, solely for tax purposes, be allocated among the
Members so as to take into account such adjustment in the same manner
as under Section 704(c) of the Code and the applicable Treasury
Regulations.
5.7.3 ELECTIONS AND LIMITATIONS. The allocations required by
this Section 5.7 are solely for purposes of federal, state and local
income taxes and shall not affect the allocation of Net Profits or Net
Losses as between Members or any Members' Capital Accounts (or
Sub-Capital Accounts). All tax allocations required by this Section 5.7
shall be made using the so-called "traditional method" described in the
Treasury Regulations 1.704-3(b); except that the Administrative
Members, with the advice of the Company's auditors or tax counsel and
the consent of a Voting Majority, may elect to use the so-called
"traditional method with curative allocations" described in Treasury
Regulations 1.704-3(c).
5.7.4 TAX ALLOCATIONS. Except as noted above, all items of
income, deduction and loss shall be allocated for Federal, state and
local income tax purposes in the same manner such items are allocated
for purposes of calculating Net Profits and Net Losses.
5.8 ADDITIONAL INVESTMENTS. The Members acknowledge and agree that upon
the making by the Company of an investment other than the investment in HF
Holdings as of the Closing Date, Sections 5.1 and 5.5 shall be amended to
include the necessary distribution and allocation provisions for such new
investment.
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ARTICLE 6
TAX MATTERS MEMBER
6.1 TAX MATTERS MEMBER. Unless and until another Member is designated
as the tax matters partner by a Voting Majority, ▇▇▇▇ shall be the tax matters
partner of the Company as provided in the Regulations under Code Section 6231
and any analogous provisions of state law, and in such capacity is referred to
as the "Tax Matters Member".
6.2 CERTAIN AUTHORIZATIONS. The Tax Matters Member shall represent the
Company, at the Company's expense, in connection with all examinations of the
Company's affairs by tax authorities including any resulting administrative or
judicial proceedings. Without limiting the generality of the foregoing, the Tax
Matters Member is hereby authorized, but not required:
6.2.1 to enter into any settlement with the Internal Revenue
Service or the Secretary of the Treasury or his delegate (the
"SECRETARY") with respect to any tax audit or judicial review, in which
agreement the Tax Matters Member may expressly state that such
agreement shall bind the other Members, except that such settlement
agreement shall not bind any Member that (within the time prescribed
pursuant to the Code and Regulations) files a statement with the
Secretary providing that the Tax Matters Member shall not have the
authority to enter into a settlement agreement on behalf of such
Member;
6.2.2 if a notice of a final administrative adjustment at the
Company level of any item required to be taken into account by a Member
for tax purposes is mailed to the Tax Matters Member, to seek judicial
review of such final adjustment, including the filing of a petition for
readjustment with the Tax Court, the District Court of the United
States for the district in which the Company's principal place of
business is located, or elsewhere as allowed by law, or the United
States Claims Court;
6.2.3 to intervene in any action brought by any other Member
for judicial review of a final adjustment;
6.2.4 to file a request for an administrative adjustment with
the Secretary at any time and, if any part of such request is not
allowed by the Secretary, to file a petition for judicial review with
respect to such request;
6.2.5 to enter into an agreement with the Internal Revenue
Service to extend the period for assessing any tax that is attributable
to any item required to be taken into account by a Member for tax
purposes, or an item affected by such item; and
-17-
6.2.6 to take any other action on behalf of the Company in
connection with any administrative or judicial tax proceeding to the
extent permitted by applicable law or the Regulations.
6.3 INDEMNITY OF TAX MATTERS MEMBER. The Company shall indemnify and
reimburse the Tax Matters Member for all reasonable expenses (including
reasonable legal and accounting fees) incurred as Tax Matters Member pursuant to
this Article 6 in connection with any administrative or judicial proceeding with
respect to the tax liability of the Members as long as the Tax Matters Member
has determined in good faith that its course of conduct was in, or not opposed
to, the best interest of the Company. The payment of all such expenses shall be
made before any Distributions are made to the Members. The taking of any action
and the incurring of any expense by the Tax Matters Member in connection with
any such proceeding, except to the extent provided herein or required by law, is
a matter in the sole discretion of the Tax Matters Member and the provisions on
limitations of liability of the Tax Matters Member and indemnification set forth
in Article 13 shall be fully applicable to the Tax Matters Member in its
capacity as such.
6.4 INFORMATION FURNISHED. To the extent and in the manner provided by
applicable law and Regulations, the Tax Matters Member shall furnish the name,
address, profits interest, and taxpayer identification number of each Member to
the Secretary.
6.5 NOTICE OF PROCEEDINGS, ETC. The Tax Matters Member shall use its
best efforts to keep each Member informed of any administrative and judicial
proceedings for the adjustment at the Company level of any item required to be
taken into account by a Member for income tax purposes or any extension of the
period of limitations for making assessments of any tax against a Member with
respect to any Company item, or of any agreement with the Internal Revenue
Service that would result in any material change either in income or loss as
previously reported.
6.6 NOTICES TO TAX MATTERS MEMBER. Any Member that receives a notice of
an administrative proceeding under Code Section 6233 relating to the Company
shall promptly notify the Tax Matters Member of the treatment of any Company
item on such Member's federal income tax return that is or may be inconsistent
with the treatment of that item on the Company's return. Any Member that enters
into a settlement agreement with the Secretary with respect to any Company item
shall notify the Tax Matters Member of such agreement and its terms within sixty
days after its date.
ARTICLE 7
FEES AND EXPENSES
7.1 COMPENSATION TO THE ADMINISTRATIVE MEMBER AND AFFILIATES. Neither
the Administrative Members nor any Affiliate of the Administrative Members shall
receive any
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compensation directly or indirectly in connection with the formation, operation
and dissolution of the Company except as expressly provided in this Agreement.
7.2 COMPANY EXPENSES. The Company shall pay or, if paid by the
Administrative Members, reimburse the Administrative Members for, all
expenditures that are made on behalf of the Company or by the Administrative
Members in connection with their duties pursuant to this Agreement (if and to
the extent such expenditures are approved by a Voting Majority, except that such
approval shall not be required for payments made to PricewaterhouseCoopers, LLP
in connection with such firm's preparation of the Company's financial statements
and any of its audits thereof), including without limitation: (i) all expenses
of legal, accounting, investment banking, consulting, research and other
professional services to the Company, travel and other out-of-pocket expenses
and filing and similar fees; (ii) all custody, transfer, registration and
similar expenses; (iii) all brokerage and finders' fees and commissions and
discounts incurred in connection with the purchase or sale of securities; (iv)
all extraordinary expenses, such as litigation expenses; and (v) all taxes (if
any). If any expenses of the Company are paid to an Affiliate of an
Administrative Member, such expenses shall be paid on a basis not less favorable
to the Company than such Affiliate would obtain in an arms' length transaction.
ARTICLE 8
DESIGNATION, RIGHTS, AND DUTIES
OF THE ADMINISTRATIVE MEMBERS
8.1 DESIGNATION. Each of ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ is hereby
designated as an administrative member (each an "Administrative Member" and,
together, the "Administrative Members") of the Company with the powers set forth
in this Agreement. The Administrative Members, to the extent of their powers set
forth in this Agreement, are agents of the Company for the purpose of the
Company's business, and the actions of the Administrative Members taken in
accordance with such powers shall bind the Company. Except as otherwise
expressly provided in this Agreement, the Administrative Members, acting on
behalf of the Company, shall be the only Persons authorized to execute documents
which shall be binding on the Company.
8.2 AUTHORITY; DUTIES. The power and authority granted to, and the
duties undertaken by, the Administrative Members hereunder shall include only
(a) the power and duty to perform administrative functions necessary or
convenient for the furtherance of the purpose of the Company, including without
limitation the maintenance of complete and accurate books and records reflecting
all activities of the Company, the preparation and filing of necessary or
appropriate certificates, reports or other documents with regulatory or
administrative bodies, the preparation of reports for the Members, the
determination and (with the consent of a Voting Majority) payment of expenses of
the Company, the making of Short-Term Investments, and the execution of such
documents in connection with the making of the investment in HF Holdings as are
approved by a Voting Majority, including the Subscription
-19-
Agreement and the Stockholders Agreement, (b) the power and duty to seek out and
provide advice to the Company concerning investments, including without
limitation advice regarding investment opportunities potentially available to
the Company, advice in connection with the structuring of any new or follow-on
investment or the complete or partial disposition of any investment, and advice
regarding the general management of the Company's investments, (c) the power to
execute such documents in connection with any new investment as are approved by
a Voting Majority, (d) the powers and/or duties specifically set forth in
Sections 2.2, 2.3, 2.7, 3.2, 3.4, 5.1, 5.3, 5.6, 5.7.3, 8.3, 10.2, 10.3 and 11.2
and (e) such other powers and/or duties as are approved by the holders of a
majority of each of the Class A Units and the Class B Units.
8.3 BUSINESS DECISIONS; VOTING SHARES OF HF HOLDINGS' CAPITAL STOCK.
(a) All business decisions of the Company, including without
limitation decisions with regard to the management, financing and capitalization
of the Company; approving any amendment or waiver to any of the Stockholders
Agreement or the Subscription Agreement; and the making and dispositions of
investments, including without limitation all capital stock of HF Holdings owned
by the Company (other than Short-Term Investments expressly permitted
hereunder); shall be made by a Voting Majority. The Administrative Members shall
notify the other Members when a business decision to be made arises, and the
Administrative Members shall have the power and the obligation to implement such
decision upon being so directed by a Voting Majority. If the Administrative
Members fail to implement a decision of a Voting Majority, a Member designated
by the Voting Majority may act on behalf of the Company for purposes of
implementing such decision.
(b) The Administrative Members shall notify each of the Voting
Members whenever any Person has requested that the Company vote the shares of HF
Holdings' common stock owned by the Company. A Voting Majority shall be entitled
to direct the Company on how to vote such shares (except as provided in Section
8.3(c) below). Notwithstanding anything contained herein to the contrary, in no
event shall the Administrative Members, acting in their capacity as such, have
any right to determine how the Company should vote any of the shares of HF
Holdings' capital stock owned by the Company.
(c) Holders of a majority of the Class A Units shall be
entitled to select two (2) of the seven (7) directors of HF Holdings to be
selected by the Company pursuant to the Stockholders Agreement. The remaining
five directors to be selected by the Company shall be selected by the holders of
a majority of the Class B Units (subject to Section 9.8.2).
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ARTICLE 9
TRANSFER OF INTERESTS
9.1 RESTRICTIONS ON TRANSFER. No Member shall have the right to
withdraw from the Company except as set forth in this Article 9. No Member shall
sell, assign, pledge, encumber, hypothecate, mortgage, exchange, give away,
dispose of or otherwise transfer, voluntarily or involuntarily by operation of
law, pursuant to judicial process or otherwise (herein, whether used as a noun
or a verb, collectively called a "Transfer"), all or any part of the economic or
other rights that comprise its Interest, except as permitted by this Article 9.
Any Transfer in contravention of any of the provisions of this Article 9 shall
be void and of no effect, and shall not bind or be recognized by the Company;
PROVIDED, HOWEVER, that nothing herein shall prevent or prohibit the transfer of
a CSFB Warrant in accordance with the terms thereof.
9.2 TRANSFERS UNDER THIS AGREEMENT, ETC. Any Member may Transfer any or
all of such Member's Units: (i) to the Company in one or more transactions
approved by a Voting Majority, (ii) to any holder of Class B Units in a
transaction approved by a Voting Majority or (iii) to HF Holdings pursuant to
any pledge agreement securing a debt obligation to HF Holdings.
9.3 TRANSFERS OF CLASS B UNITS TO PERMITTED TRANSFEREES. Any Member
holding Class B Units may Transfer any or all of such Class B Units to: (i) a
▇▇▇▇ Member or an Affiliated Fund, (ii) any trust established for the benefit of
partners of a Member holding Class B Units or an Affiliated Fund or pro rata to
the partners of a Member holding Class B Units or an Affiliated Fund; PROVIDED,
HOWEVER, that no such Transfer shall be effective until the recipient has
delivered to the Company a written acknowledgment and agreement in form and
substance reasonably satisfactory to the Company that any shares of stock of HF
Holdings to be distributed by the Company to such recipient shall be subject to
all the provisions of the Stockholders Agreement and that such recipient is
bound thereby and a party thereto to the same extent as the Member from whom the
Transfer was made.
9.4 TRANSFERS OF CLASS A UNITS OR CLASS C UNITS TO IMMEDIATE FAMILY.
Any individual Member holding Class A Units or Class C Units may Transfer any or
all of such Class A Units or Class C Units to a Member of the Immediate Family
of such Member; PROVIDED, HOWEVER, that no such Transfer shall be effective
until such Member of the Immediate Family has delivered to the Company a written
acknowledgment and agreement in form and substance reasonably satisfactory to
the Company that any shares of stock of HF Holdings to be distributed by the
Company to such Member of the Immediate Family shall be subject to all the
provisions of the Stockholders Agreement and that such Member of the Immediate
Family is bound thereby and a party thereto to the same extent as the Member
from whom the Transfer was made.
9.5 TRANSFERS OF CLASS A UNITS OR CLASS C UNITS UPON DEATH. Upon the
death of any individual Member holding Class A Units or Class C Units, the Units
held by such Member may be distributed by will or other instrument taking effect
at death or by applicable laws of descent and distribution to such Member's
estate, executors, administrators and
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personal representatives, and then to such Member's heirs, legatees or
distributees, whether or not such recipients are Members of the Immediate Family
of such Member; PROVIDED, HOWEVER, that no such Transfer shall be effective
until the recipient has delivered to the Company a written acknowledgment and
agreement in form and substance reasonably satisfactory to the Company that any
shares of stock of HF Holdings to be distributed by the Company to such
recipient shall subject to all the provisions of the Stockholders Agreement and
that such recipient is bound thereby and a party thereto to the same extent as
the Member from whom the Transfer was made.
9.6 TRANSFERS OF CLASS A UNITS OR CLASS C UNITS TO CHARITIES. Any
Member holding Class A Units or Class C Units may Transfer as a charitable gift
any or all of such Units to any Person which is described in Section 501(c)(3)
of the Internal Revenue Code of 1986, as from time to time in effect; PROVIDED,
HOWEVER, that no such Transfer shall be effective until such transferee has
delivered to the Company a written acknowledgment and agreement in form and
substance reasonably satisfactory to the Company that any shares of stock of HF
Holdings to be distributed by the Company to such transferee shall be subject to
all the provisions of the Stockholders Agreement and that such transferee is
bound thereby and a party thereto to the same extent as the Member from whom the
Transfer was made.
9.7 TRANSFERS OF UNITS TO ENTITIES UNDER COMMON CONTROL. Any Member
which is an institutional investor may Transfer any or all of its Units to a
Person under common control with such Member in a bona fide transfer not part of
a transaction or series of transactions that results in the direct or indirect
transfer of such Units to a Person not under common control with such holder;
PROVIDED, HOWEVER, that no such Transfer shall be effective until such
transferee under common control has delivered to the Company a written
acknowledgment and agreement in form and substance reasonably satisfactory to
the Company that any shares of stock of HF Holdings to be distributed by the
Company to such transferee shall be subject to all the provisions of the
Stockholders Agreement and that such transferee is bound thereby and a party
thereto to the same extent as the Member from whom the Transfer was made.
9.8 ▇▇▇▇ SELL DOWN. Until the sixtieth (60th) day following the date of
this Agreement, the ▇▇▇▇ Members may Transfer some or all of their Units to
their designees. The Units received by such designees shall be deemed Class B
Units or Class C Units, as designated by ▇▇▇▇.
9.8.1 DIRECTORS. The ▇▇▇▇ Members may assign, by voting
agreement or other means, to assignees the right to designate up to two
(2) directors otherwise designable by them pursuant Section 8.3(c) by
virtue of their ownership of Class B Units.
9.8.2 PROFIT. The ▇▇▇▇ Members may assign at a price different
than the price paid by the ▇▇▇▇ Members.
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9.9 EFFECTIVENESS OF TRANSFERS. No Transfer under this Article 9 shall
be effective until the transferee shall have executed and delivered to the
Company a written acknowledgment and agreement in form and substance reasonably
satisfactory to the Company that such transferee is bound by this Agreement and
a party hereto to the same extent as the Member from whom the Transfer was made.
9.10 MANAGEMENT ROLL-OVER. The Members agree to take whatever actions
may be reasonably necessary or appropriate in order to effectuate the
"Management Roll-Over" provisions contained in Sections 6.3 and 7.3 of the
Stockholders Agreement and the "Special Management Cut-Back" provisions
contained in Section 8.3.1.3 of the Stockholders Agreement, provided that such
provisions shall first affect shares of HF Holdings owned by the Company, other
than shares subject to the CSFB Option or a Junior Management Option.
9.11 LIMITATIONS ON REDEMPTION. No Member may redeem all or a portion
of its HF Units prior to a Liquidity Event without the prior consent of the
holders of a majority of Class A Units and the holders of a majority of the
Class B Units.
ARTICLE 10
BOOKS, RECORDS, ACCOUNTING, AND REPORTS
10.1 BOOKS AND RECORDS. The Company shall maintain at its principal
office all of the following:
10.1.1 A current list of the full name and last known
business, residential or mailing address of each Member, together with
true and full information regarding the amount of cash and a
description and statement of the fair market value (as agreed upon by
the contributing Member and the Administrative Members, with the
consent of a Voting Majority, at the time of contribution) of any other
contribution to the Company by each Member and which each Member has
agreed to contribute to the Company in the future, and the date on
which each Member became a Member of the Company;
10.1.2 A copy of the Certificate, this Agreement, including
any and all amendments to either thereof, together with executed copies
of any powers of attorney pursuant to which the Certificate, this
Agreement or any amendment has been executed;
10.1.3 Copies of the Company's federal, state, and local
income tax or information returns and reports, if any, for the six (6)
most recent Fiscal Years;
10.1.4 The financial statements of the Company for the six (6)
most recent Fiscal Years; and
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10.1.5 The Company's books and records for at least the
current and past five (5) Fiscal Years.
10.2 INFORMATION TO MEMBER. Upon the request of any Member for any
purpose reasonably related to such Member's Interest in the Company:
10.2.1 The Administrative Members shall promptly deliver to
the requesting Member, at the expense of the Company, a copy of the
information required to be maintained by Sections 10.1.1 through
10.1.4.
10.2.2 The Company will permit the Members to review, at the
Company's office during normal business hours, the Company's books and
records referred to in Section 10.1.5.
10.2.3 The Administrative Members will discuss with any Member
such questions as the Member may wish to raise regarding the
administrative affairs of the Company.
10.2.4 The Company will provide any Member, at such Member's
expense if the expense of obtaining or producing such information is
material, such other information regarding the business affairs of the
Company as is reasonable under the circumstances.
10.3 FINANCIAL STATEMENTS.
10.3.1 The Administrative Members shall maintain or cause to
be maintained books of account reflecting the operations of the
Company. After the end of each Fiscal Year, the Administrative Members
shall prepare or cause to be prepared financial statements of the
Company for such year and shall cause an audit of the Company's
financial statements for such year to be made by
PricewaterhouseCoopers, LLP or another firm of independent public
accountants of recognized national standing approved by a Voting
Majority. Such financial statements shall be prepared in accordance
with generally accepted accounting principles. The Administrative
Members shall use their best efforts to cause a copy of the audited
financial statements to be delivered to each of the Members within
ninety (90) days of the end of such fiscal year.
10.3.2 The Administrative Members shall promptly furnish to
each Member copies of any financial statements and any other material
information it receives with respect to HF Holdings and its
subsidiaries.
10.4 FILINGS. At the Company's expense the Tax Matters Member shall
cause to be prepared and timely filed, with appropriate federal, state, local
and foreign regulatory and
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administrative bodies, all income tax returns and any other reports required to
be filed by the Company with those entities under then current applicable laws,
rules, and regulations. The reports shall be prepared on the accounting or
reporting basis required by the regulatory bodies. In particular, the Tax
Matters Member shall have prepared by PricewaterhouseCoopers, LLP, or another
firm of independent public accountants of recognized national standing approved
by a Voting Majority, the appropriate federal, state and local income tax
returns of the Company and shall furnish the appropriate informational tax
returns to each Member as soon as practicable after March 15 of each year.
10.5 NON-DISCLOSURE. Each Member agrees that, except as otherwise
consented to by a Voting Majority, all non-public information furnished to it
pursuant to this Agreement will be kept confidential and will not be disclosed
by such Member, or by any of its agents, representatives, or employees, in any
manner whatsoever, in whole or in part, except that (a) each Member shall be
permitted to disclose such information to those of its agents, attorneys,
accountants, financial and business consultants, other representatives, and
employees who need to be familiar with such information in connection with such
Member's investment in the Company and who are charged with an obligation of
confidentiality, (b) the ▇▇▇▇ Members shall be permitted to disclose such
information to financial institutions, investment bankers and prospective
purchasers and capital investors when such Persons are charged with an
obligation of confidentiality, (c) each Member shall be permitted to disclose
such information to its members, partners and stockholders and their members,
partners and stockholders so long as they agree to keep such information
confidential on the terms set forth herein, (d) each Member shall be permitted
to disclose information to the extent required by law, so long as such Member
shall have first afforded the Company with a reasonable opportunity to contest
the necessity of disclosing such information, and (e) each Member shall be
permitted to disclose information to the extent necessary for the enforcement of
any right of such Member arising under this Agreement. No Member shall disclose
the terms of this Agreement to any Person except (i) to the extent required by
law or (ii) for legitimate business purposes.
ARTICLE 11
AMENDMENTS TO AGREEMENT
11.1 AMENDMENTS. This Agreement may be amended or modified only with
the prior written consent of (i) holders of a majority of the Class A Units,
(ii) holders of a majority of the Class B Units (which majority must include
▇▇▇▇) and (iii) holders of a majority of the Class C Units (treating, solely for
this purpose, the CSFB Warrant as representing the Class C Units associated
therewith only to the extent that the proposed amendment or modification could
significantly and adversely affect the rights or preferences of the CSFB Warrant
or the Class C Units), which consent shall not be unreasonably withheld or
delayed by any Member; PROVIDED, that the prior written consent of all of the
Members shall be required for any amendment or modification of Section 5.1, 5.5,
or 11.1 hereof; PROVIDED, FURTHER, that the prior written consent of
Inverness/Phoenix Capital LLC shall be required for any amendment or
modification of the restrictions on transfer of Class B Units contained in
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Article 9. Notwithstanding the foregoing provisions of this Section 11.1, this
Agreement may be amended or modified with the prior written consent of ▇▇▇▇ and
CSFB, and without the consent of any other Member, to the extent reasonably
necessary or desirable to cause this Agreement adequately to embody the "Intent
of the Parties," as defined in that certain letter agreement dated September 27,
1999 between ▇▇▇▇ Capital Fund IV, L.P., ▇▇▇▇ Capital Fund IV-B, L.P. and CSFB,
provided, that, no such amendment shall adversely affect the rights of any Class
of HF Units without the consent of the holders of a majority thereof. Any
amendment or modification of this Agreement pursuant to this Section 11.1 shall
be binding on all Members.
11.2 FILINGS. The Administrative Members shall cause to be prepared and
filed any amendment to the Certificate that may be required to be filed under
the Act as a consequence of any amendment to this Agreement.
ARTICLE 12
DISSOLUTION OF COMPANY
12.1 EVENTS OF DISSOLUTION OR LIQUIDATION. The Company shall be
dissolved upon the first to occur of the following events, but not upon any
other event: (a) December 31, 2024 unless such date is extended pursuant to
Section 2.4, (b) the written determination of the holders of a majority of each
of the Class A Units and Class B Units, (c) the entry of a decree of judicial
dissolution under Section 18-802 of the Act or (d) the disposition of all of the
Company's assets.
12.2 LIQUIDATION. Upon dissolution of the Company for any reason, the
Company shall immediately commence to wind up its affairs. A reasonable period
of time shall be allowed for the orderly termination of the Company's business,
discharge of its liabilities, and distribution or liquidation of the remaining
assets so as to enable the Company to minimize the normal losses attendant to
the liquidation process. The Company's property and assets or the proceeds from
the liquidation thereof shall be distributed so as not to contravene the Act but
otherwise in compliance with Section 5.1; PROVIDED, HOWEVER, that Distributions
to Members shall be made after their Capital Accounts (and Sub-Capital Accounts)
have been adjusted to reflect all Net Profits and Net Losses (and amounts
treated as Net Profits and Losses pursuant to Sections 3.4 and 3.5) of the
Company through the date of distribution. A full accounting of the assets and
liabilities of the Company shall be taken and a statement thereof shall be
furnished to each Member within thirty (30) days after the distribution of all
of the assets of the Company. Such accounting and statements shall be prepared
under the direction of the Administrative Members with the consent of a Voting
Majority. Upon such final accounting, the Company shall terminate and an
authorized person, appointed pursuant to Section 2.7, shall cancel the
Certificate in accordance with the Act.
12.3 NO FURTHER CLAIM. Upon dissolution, each Member shall look solely
to the assets of the Company for the return of its Capital Contributions, and if
the Company's
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property remaining after payment or discharge of the debts and liabilities of
the Company, including debts and liabilities owed to one or more of the Members,
is insufficient to return the aggregate Capital Contributions of each Member,
such Members shall have no recourse against the Company or any other Member
except to the extent that Member has received Distributions in excess of those
to which such Member was entitled to under the terms of this Agreement.
12.4 NO ACTION FOR DISSOLUTION. The Members acknowledge that
irreparable damage would be done to the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is
not required by Section 12.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of the
Interests of all Members. Accordingly, except where the Company has not been
liquidated as required by Section 12.1 and except as specifically provided in
Section 18-802 of the Act, each Member hereby waives and renounces its right to
initiate legal action to seek dissolution or to seek the appointment of a
receiver or trustee to liquidate the Company.
ARTICLE 13
INDEMNIFICATION
13.1 GENERAL. Neither the Administrative Members nor any holder of
Class B Units nor any director, officer, partner, stockholder, affiliate,
fiduciary, agent, advisor, attorney, controlling person or employee of the
Administrative Members or any holder of Class B Units, nor any person serving at
the request of the Company as a director, officer, employee, partner, trustee or
independent contractor of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise (all of the foregoing persons
and entities being referred to collectively as "Indemnified Parties" and
individually as an "Indemnified Party") shall be liable to the Company or any
Member for any act or omission suffered or taken by it that is not in material
violation of this Agreement and does not constitute fraud, gross negligence or
willful misconduct, and with respect to any criminal action or proceeding,
without reasonable cause to believe that its conduct was unlawful.
13.2 INDEMNIFICATION. To the maximum extent permitted by applicable
law, each Indemnified Party shall be fully protected and indemnified by the
Company out of Company assets against all liabilities and losses (including
amounts paid in respect of judgments, fines, penalties or settlement of
litigation, and legal fees and expenses reasonably incurred in connection with
any pending or threatened litigation or proceeding) suffered by virtue of its
serving as an Indemnified Party with respect to any action or omission suffered
or taken that is not in material violation of this Agreement and does not
constitute fraud, gross negligence or willful misconduct, and with respect to
any criminal action or proceeding, without reasonable cause to believe its
conduct was unlawful. The Company may, with the consent of a Voting Majority,
advance expenses, including legal fees, for which any Indemnified Party would be
entitled by this Agreement to be indemnified upon receipt of an unsecured
undertaking by such
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Indemnified Party to repay such advances if it is ultimately determined by a
court of proper jurisdiction that indemnification for such expenses is not
permitted by law or authorized by this Agreement. Each Indemnified Party may
consult with recognized, outside legal counsel selected by the Company, and any
action or omission taken or suffered in good faith in reliance and accordance
with the opinion or advice of such counsel shall be conclusive evidence that
such action or omission did not materially violate this Agreement, did not
constitute fraud, gross negligence or willful misconduct, and with respect to
any criminal action or proceeding, was suffered or taken without reasonable
cause to believe its conduct was unlawful. Unless there is a specific finding of
fraud, gross negligence, willful misconduct or reasonable cause to believe that
its conduct was unlawful (or where such a finding is an essential element of a
judgment or order), the termination of any action, suit or proceeding by
judgment, order or settlement, or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption for the purposes of this
Section 13.2 that the person or entity in question acted fraudulently, was
grossly negligent or engaged in willful misconduct, or with respect to any
criminal action or proceeding, had reasonable cause to believe that its conduct
was unlawful.
ARTICLE 14
REPRESENTATIONS BY THE MEMBERS
Each Member hereby represents and warrants to, and agrees with, the
other Member or Members and the Company as set forth below.
14.1 INVESTMENT INTENT. It is acquiring its Interest with the intent of
holding the same for investment for its own account and without the intent or a
view of participating directly or indirectly in any distribution of such
Interests within the meaning of the Securities Act or any applicable state
securities laws.
14.2 SECURITIES REGULATION. It is an accredited investor as such term
is defined in Regulation D promulgated pursuant to Section 4(2) of the
Securities Act. It acknowledges and agrees that its Interest is being issued and
sold in reliance on the exemption from registration contained in Section 4(2) of
the Securities Act and exemptions contained in applicable state securities laws,
and that its Interest cannot and will not be sold or transferred except in a
transaction that is exempt under the Securities Act and those state acts or
pursuant to an effective registration statement under the Securities Act and
those state acts or in a transaction that is otherwise in compliance with the
Securities Act and those state acts. It understands that it has no contractual
right for the registration under the Securities Act of its Interest for public
sale and that, unless its Interest is registered or an exemption from
registration is available, its Interests may be required to held indefinitely.
14.3 KNOWLEDGE AND EXPERIENCE. It has such knowledge and experience in
financial, tax, and business matters as to enable it to evaluate the merits and
risks of its investment in the Company and, through its Interest in the Company,
in HF Holdings, and to make informed
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investment decisions with respect thereto. It has, based on its own
investigation of HF Holdings, made its own independent analysis of the
likelihood of success of the Company's investments in HF Holdings.
14.4 INDEPENDENT INVESTMENT DECISION. It acknowledges that it has
independently and without reliance upon the Administrative Members, made its own
analysis and decision to enter into this Agreement and to make the investments
provided for hereunder. It acknowledges that the Administrative Members have not
acted as investment advisers with respect to it in connection with its
investment in the Company or the investments contemplated by the Company and
that the Administrative Members have provided no advice or information with
respect to the value of an investment in the Company or in the investments
contemplated by the Company or with respect to the advisability of investing in,
purchasing or selling an Interest in the Company or in the investments
contemplated by the Company. Each Member represents to the Administrative
Members that such Member will continue to make its own independent analysis and
other decisions in taking or not taking action under this Agreement, including
without limitation decisions relating to the disposition of the Company's
investments in HF Holdings. Each Member expressly acknowledges that neither the
Administrative Members nor any of their officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to
such Member in connection with its investment in the Company or the investments
contemplated by the Company, and no act by the Administrative Members taken
under this Agreement or any other document, shall be deemed to constitute any
representation or warranty by the Administrative Members to such Member in
connection with its investment in the Company or the investments contemplated by
the Company. Except for notices, reports and other documents expressly required
to be furnished to each Member by the Administrative Members under this
Agreement, the Administrative Members shall not have any duty or responsibility
to provide any Member with any information concerning the business, operations,
property, condition, financial or otherwise, of HF Holdings which may come into
the possession of the Administrative Members or any of their officers,
directors, employees, agents, attorneys-in-fact or Affiliates.
14.5 ECONOMIC RISK. It is able to bear the economic risk of its
investment in the Company, confirms that it has no current need for cash from
its investment in the Company in order to service any of its other obligations
whether such other obligations were used to finance its investment in the
Company or for other purposes and recognizes that there is a reasonable
possibility of the loss of all or a substantial portion of its investment in the
Company.
14.6 BINDING AGREEMENT. It has all requisite power and authority to
enter into and perform this Agreement and that this Agreement is and will remain
its valid and binding agreement, enforceable in accordance with its terms
(subject, as to the enforcement of remedies, to any applicable bankruptcy,
insolvency, or other laws affecting the enforcement of creditors' rights).
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14.7 TAX POSITION. Unless it provides prior written notice to the
Company, it will not take a position on its federal or state income tax return,
in any claim for refund, or in any administrative or legal proceedings that is
inconsistent with the characterization of the Company as a partnership for
federal and state income tax purposes, any information return filed by the
Company or the provisions of this Agreement.
14.8 INFORMATION. It has received all documents, books, and records
pertaining to an investment in the Company requested by it. It has had a
reasonable opportunity to ask questions of and receive answers concerning the
Company, and all such questions have been answered to its satisfaction.
ARTICLE 15
COMPANY REPRESENTATIONS
In order to induce the Members to enter into this Agreement and to make
the Capital Contributions contemplated hereby, the Company hereby represents and
warrants to each Member as follows:
15.1 LEGAL EXISTENCE. The Company is a duly formed and validly existing
limited liability company under the Act and the Certificate has been duly filed
as required by the Act. The Company has all necessary power and authority under
the Act to issue the Interests to be issued to the Members hereunder.
15.2 VALID ISSUANCE. When an Interest is issued to the Member as
contemplated by this Agreement and the Capital Contributions required to be made
by such Member are made, the Interest issued to the Member will be duly and
validly issued and except as specifically provided in the Agreement, no
liability for any additional capital contributions or for any obligations of the
Company will attach thereto.
15.3 OPTIONS, ETC. Except as set forth in this Agreement, the Company
does not have outstanding (a) any rights or options to subscribe for or purchase
any Interests in the Company, (b) any warrants or other agreements providing for
or requiring the issuance of Interests in the Company to any Person, or (c) any
obligation to purchase or otherwise acquire any Interests in the Company.
ARTICLE 16
MISCELLANEOUS
16.1 ADDITIONAL DOCUMENTS. At any time and from time to time after the
date of this Agreement, upon the request of the Administrative Members with the
consent of a Voting Majority, each Member shall do and perform, or cause to be
done and performed, all such additional acts and deeds, and shall execute,
acknowledge, and deliver, or cause to be
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executed, acknowledged, and delivered, all such additional instruments and
documents, as may be required to effectuate the purposes and intent of this
Agreement.
16.2 GENERAL. This Agreement: (a) shall be binding upon the executors,
administrators, estates, heirs, and legal successors and assigns of the Members;
(b) shall be governed by and construed in accordance with the domestic
substantive laws of the State of Delaware without giving effect to any choice or
conflict of laws provision or rule that would cause the application of the
domestic substantive laws of any other jurisdiction; (c) may be executed in more
than one counterpart as of the day and year first above written; and (d)
contains the entire contract among the Members as to the subject matter hereof.
The waiver of any of the provisions, terms, or conditions contained in this
Agreement shall not be considered as a waiver of any of the other provisions,
terms, or conditions hereof.
16.3 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or receipt (which may be evidenced by a return receipt if
sent by registered mail or by signature if delivered by courier or delivery
service), addressed as set forth below, or at such other address as such Person
shall have furnished to the Company in writing as the address to which notices
are to be sent hereunder: (a) if to any Member (other than the Administrative
Members) to such Member at the address of such Member in the records of the
Company, and (b) if to an Administrative Member, to such Administrative Member
at ICON Health & Fitness, Inc., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
16.4 APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, without regard to the
conflict of laws principles thereof.
16.5 CONSENT TO JURISDICTION. Each party to this Agreement, by its
execution hereof, (a) hereby irrevocably submits to the exclusive jurisdiction
of the state courts of the State of New York sitting in the County of New York
or the United States District Court for the Southern District of New York for
the purpose of any action, claim, cause of action or suit (in contract, tort or
otherwise), inquiry, proceeding or investigation arising out of or based upon
this Agreement or relating to the subject matter hereof, (b) hereby waives to
the extent not prohibited by applicable law, and agrees not to assert, and
agrees not to allow any of its subsidiaries to assert, by way of motion, as a
defense or otherwise, in any such action, any claim that it is not subject
personally to the jurisdiction of the above-named courts, that its property is
exempt or immune from attachment or execution, that any such proceeding brought
in one of the above-named courts is improper, or that this Agreement or the
subject matter hereof or thereof may not be enforced in or by such court and (c)
hereby agrees not to commence or maintain any action, claim, cause of action or
suit (in contract, tort or otherwise), inquiry, proceeding or investigation
arising out of or based upon this Agreement or relating to the subject matter
hereof or thereof other than before one of the above-named courts nor to make
any motion or take any other action seeking or intending to cause the
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transfer or removal of any such action, claim, cause of action or suit (in
contract, tort or otherwise), inquiry, proceeding or investigation to any court
other than one of the above-named courts whether on the grounds of inconvenient
forum or otherwise. Notwithstanding the foregoing, to the extent that any party
hereto is or becomes a party in any litigation in connection with which it may
assert indemnification rights set forth in this agreement, the court in which
such litigation is being heard shall be deemed to be included in clause (a)
above. Each party hereto hereby consents to service of process in any such
proceeding in any manner permitted by New York law, and agrees that service of
process by registered or certified mail, return receipt requested, at its
address specified pursuant to Section 16.3 hereof is reasonably calculated to
give actual notice. The provisions of this Section 16.5 shall not restrict the
ability of any party to enforce in any court any judgment obtained in the
federal or state courts of the State of New York.
16.6 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE
LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT
IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO
TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF
ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR
INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER
HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS
CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING.
EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES
HERETO THAT THIS SECTION 16.6 CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY
ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. ANY PARTY HERETO MAY
FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 16.6 WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO
TRIAL BY JURY.
16.7 GENDER AND NUMBER. Whenever required by the context, as used in
this Agreement the singular number shall include the plural, the plural shall
include the singular, and all words herein in any gender shall be deemed to
include the masculine, feminine and neuter genders.
16.8 SEVERABILITY. If any provision of this Agreement is determined by
a court to be invalid or unenforceable, that determination shall not affect the
other provisions hereof, each of which shall be construed and enforced as if the
invalid or unenforceable portion were not contained herein. That invalidity or
unenforceability shall not affect any valid and enforceable application thereof,
and each said provision shall be deemed to be effective, operative, made,
entered into or taken in the manner and to the full extent permitted by law.
-32-
16.9 HEADINGS. The headings used in this Agreement are used for
administrative convenience only and do not constitute substantive matter to be
considered in construing the terms of this Agreement.
16.10 TAX STATUS. The Members intend that the Company be treated as a
partnership for federal and state income tax purposes and the Company shall file
all tax returns on the basis consistent therewith.
16.11 NO THIRD PARTY RIGHTS. The provisions of this Agreement are for
the benefit of the Company, the Members and permitted transferees described in
Article 9, and no other Person, including creditors of the Company shall have
any right or claim against the Company or any Member by reason of this Agreement
or any provision hereof or be entitled to enforce any provision of this
Agreement.
[The remainder of this page has intentionally been left blank.]
-33-
[HF Investment Holdings, LLC Agreement]
IN WITNESS WHEREOF, the parties have executed this Limited Liability
Company Agreement as of the day and year first set forth above.
▇▇▇▇ CAPITAL FUND IV, L.P.
By ▇▇▇▇ Capital Partners IV, L.P., a
Delaware Limited Partnership,
its general partner
By ▇▇▇▇ Capital Investors, Inc.,
its general partner
By_____________________________________
Title:
▇▇▇▇ CAPITAL FUND IV-B, L.P.
By ▇▇▇▇ Capital Partners IV, L.P., a
Delaware Limited Partnership,
its general partner
By ▇▇▇▇ Capital Investors, Inc.,
its general partner
By______________________________________
Title:
BCIP ASSOCIATES
By_______________________________________
Title: a general partner
BCIP TRUST ASSOCIATES, L.P.
By_______________________________________
Title: a general partner
[HF Investment Holdings, LLC Agreement]
____________________________________
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
____________________________________
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
[HF Investment Holdings, LLC Agreement]
INVERNESS/PHOENIX CAPITAL LLC
By_____________________________________
Title: Managing Director
[HF Investment Holdings, LLC Agreement]
____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
[HF Investment Holdings, LLC Agreement]
____________________________________
▇▇▇ ▇▇▇▇ Tsung
[HF Investment Holdings, LLC Agreement]
____________________________________
▇▇▇-▇▇▇▇▇ Ko
EXHIBIT 1
DEFINED TERMS
"ACT" shall mean the Delaware Limited Liability Company Act (6 DEL. C.
ss. 18-101, ET SEQ.) as amended and in effect from time to time.
"ADMINISTRATIVE MEMBER" is defined in Section 8.1.
"AFFILIATE" shall mean, with respect to any specified Person, any
Person that directly or through one or more intermediaries controls or is
controlled by or is under common control with the specified Person. As used in
this definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through ownership of voting securities, by
contract or otherwise.
"AFFILIATED FUND" shall mean any limited partnership or other Person
formed for the purpose of investing in other companies or businesses and for
which ▇▇▇▇ Capital Investors, Inc., a Delaware corporation, or any of its
Affiliates, acts as a general partner or otherwise has the right to direct the
voting of shares of corporations in which such limited partnership or other
Person invests.
"AGREEMENT" shall mean the Amended and Restated Limited Liability
Company Agreement of the Company dated as of September 27, 1999, as amended from
time to time.
"ASSET VALUE" of any property of the Company shall mean its adjusted
basis for federal income tax purposes unless:
(1) the property was accepted by the Company as a contribution to
capital at a value different than its adjusted basis in which
event the initial Asset Value for such property shall mean the
gross fair market value of the property agreed to at the time
of contribution by the Administrative Members, with the
consent of a Voting Majority, and the contributing Member;
(2) as a consequence of the issuance of additional Units or the
redemption of all or part of the Interest of a Member, the
property of the Company is revalued in accordance with Section
3.4.
As of any date references to the "then prevailing Asset Value" of any
property shall mean the Asset Value last determined for such property less the
depreciation, amortization and cost recovery deductions taken into account in
computing Net Profit or Net Loss in fiscal periods subsequent to such prior
determination date.
"AVAILABLE CASH" is defined in Section 5.1.1.
"BAIN" shall mean ▇▇▇▇ Capital Fund IV, L.P.
"BAIN MEMBERS" shall mean Bain, ▇▇▇▇ Capital Fund IV-B, L.P., BCIP
Associates and BCIP Trust Associates, L.P.
"BHCA" shall have the meaning specified in the CSFB Warrant(s).
"BUSINESS DAY" shall mean a day when national banks are open for
business in Boston and New York City.
"CAPITAL ACCOUNT" is defined in Section 3.3.
"CAPITAL CONTRIBUTION" shall mean with respect to any Member, the
amount of cash and the fair market value (as agreed upon by the contributing
Member and the Administrative Members, with the consent of a Voting Majority, at
the time of contribution) of any other property contributed to the Company with
respect to the Interest held by such Member.
"CERTIFICATE" shall mean the Certificate of Formation of the Company
filed on September 1, 1999 and any and all amendments thereto and restatements
thereof filed on behalf of the Company as permitted hereunder with the office of
the Secretary of State of the State of Delaware.
"CLASS" is defined in Section 3.1.
"CLASS A PERCENTAGE" shall mean that percentage equal to the PRODUCT OF
(a) a fraction, (I) the numerator of which is 4.4823% ((4.3333%/96.6667%)
multiplied by (10,000,000/10,002,854)) and (II) the denominator of which is the
percentage of outstanding shares of HF Holdings common stock immediately after
the Closing Date represented by shares held by the Company that are not subject
to either the Junior Management Option or the CSFB Option (treating as
outstanding shares of HF Holdings common stock for purposes of this definition
(i) all shares that would be received upon exercise of the warrants issued on
the Closing Date in exchange for (A) 13% Senior Subordinated Notes due 2002 of
Icon Health & Fitness, Inc., (B) 15% Senior Secured Discount Notes due 2004 of
IHF Holdings, Inc. and (C) 14% Senior Discount Notes due 2006 of ICON Fitness
Corporation and (ii) the shares that would be received upon conversion of that
certain note issued on the Closing Date by HF Holdings to CSFB and having a
maturity date of September 27, 2011) AND (b) 100.
"CLASS A UNIT", "CLASS B UNIT" and "CLASS C UNIT" are each defined in
Section 3.1.
"CLOSING DATE" shall mean September 27, 1999.
-2-
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the corresponding provisions of any future federal tax law.
"COMPANY" shall mean the limited liability company formed pursuant to
the Act and this Agreement and by filing the Certificate in accordance with the
Act.
"CSFB" is defined in Section 3.7.
"CSFB ACCOUNT DISTRIBUTION FRACTION" means, in respect of a CSFB
Warrant Account, a fraction, the numerator of which is the number of HF Units
received upon the exercise of all or a portion of the CSFB Warrant in respect of
which such account was established, and the denominator of which is the
aggregate number of HF Units for which the CSFB Warrant in respect of which such
Account was established was exercisable as of immediately prior to such
exercise.
"CSFB OPTION" shall mean that certain option granted by the Company as
of the Closing Date to CSFB pursuant to Section 5.2 of the Stockholders
Agreement.
"CSFB WARRANT" is defined in Section 3.7.
"CSFB WARRANT ACCOUNT" shall mean an account of the Company established
and maintained for the purpose of holding all non-cash assets allocated to such
account pursuant to Section 5.1.3(b), and all earnings in respect thereof, until
such time as distributions from such account are required to be made pursuant to
Section 5.1.4(b) and Section 5.1.4(c). No holder of a CSFB Warrant in respect of
which a CSFB Warrant Account has been established shall have any right to
receive distributions from the CSFB Warrant Account except as contemplated by
Section 5.1.4(b) and Section 5.1.4(c) and, until distributed in accordance with
Section 5.1.4(b) or Section 5.1.4(c), all assets of such account shall
constitute assets of the Company and remain fully subject to the claims of the
Company's creditors. All earnings in respect of the assets of the account shall
be credited to the account.
"DISTRIBUTION" shall mean the amount of cash and the fair market value
(as agreed upon by the Member to whom the Distribution is made and the
Administrative Members, with the consent of a Voting Majority, at the time of
distribution) of any other property distributed to a Member in respect of the
Member's Interest in the Company.
"FISCAL YEAR" shall mean the fiscal year of the Company which shall end
on December 31 in each year or on such other date in each year as is required by
Code Section 706 and the regulations thereunder.
"FREE SHARES" is defined in Section 5.1.1.
-3-
"HF CLASS A UNIT", "HF CLASS B UNIT" and "HF CLASS C UNIT" are each
defined in Section 3.1.
"HF HOLDINGS" shall mean HF Holdings, Inc., a Delaware corporation.
"HF UNITS" shall mean HF Class A Units, HF Class B Units and HF Class C
Units.
"HOLDER TRANSFEREE" shall have the meaning specified in the CSFB
Warrant(s).
"IBA" shall have the meaning specified in the CSFB Warrant(s).
"IMPERMISSIBLE PORTION" is defined in Section 5.1.3(b).
"INDEMNIFIED PERSONS" is defined in Section 13.2.
"INTEREST" shall mean the entire interest of a Member in the capital
and profits of the Company, including the right of such Member to any and all
benefits to which a Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all the terms and
provisions of this Agreement. Each Member's Interest shall be represented by
Class A, Class B and/or Class C Units.
"JUNIOR MANAGEMENT OPTION" shall mean each option granted by the
Company as of the Closing Date to a management-level employee (other than ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇▇▇▇) of ICON Health and Fitness, Inc. pursuant to
Section 5.1 of the Stockholders Agreement.
"LIQUIDITY EVENT" shall have the meaning set forth in the Stockholders
Agreement.
"MEMBERS OF THE IMMEDIATE FAMILY" shall mean, with respect to any
individual, each spouse, parent, brother, sister or child of such individual,
each spouse of any such Person, each child of any of the aforementioned Persons,
each trust created solely for the benefit of one or more of the aforementioned
Persons and each custodian or guardian of any property of one or more of the
aforementioned Persons in his capacity as such custodian or guardian.
"MEMBERS" (i) shall mean the Persons listed as members on the signature
page to the Agreement and any other Person that both acquires an Interest in the
Company and is admitted to the Company as a Member pursuant to the Agreement and
(ii) for purposes of Sections 3.3, 3.4, 3.5, 3.6, 5.3, 5.4, 5.5, 5.6, 5.7, 6.2,
6.4, 6.5, 10.3, 10.4 and 11.1, shall also mean any permitted holder of a CSFB
Warrant, which holder shall be treated, for purposes of these sections, as
holding a number of HF Units equal to the number of HF Units for which the CSFB
Warrant held by it is then exercisable and shall be treated for purposes of
these Sections as having made a Capital Contribution equal to the purchase price
for the CSFB Warrant held by it.
-4-
"NET PROFIT" and "NET LOSS" are defined in Section 5.5.
"OPTION SHARES" is defined in Section 5.1.1.
"ORIGINAL MEMBERS" shall mean ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, the ▇▇▇▇
Members, each other Member becoming a party to this Agreement on the date hereof
and, for purposes of Article 5 hereof, each transferee thereof.
"PERSON" shall mean an individual, partnership, joint venture,
association, corporation, trust, estate, limited liability company, limited
liability partnership, or any other legal entity.
"RELEASED SHARES" is defined in Section 5.1.1.
"RESIDUAL PERCENTAGE" shall mean one hundred percent (100%) minus the
Class A Percentage.
"RIGHTS" is defined in Section 3.7.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SHORT-TERM INVESTMENTS" shall mean (i) repurchase agreements arranged
by ▇▇▇▇▇ Brothers ▇▇▇▇▇▇▇▇ & Co. on behalf of the Company and secured by direct
obligations of, or obligations which are guaranteed by, the United States of
America, or (ii) such other investments determined by a Voting Majority. The
Administrative Members shall not have discretion with respect to the terms of,
or counterparties to, any repurchase agreements entered into by the Company
referred to in the foregoing clause (i). Notwithstanding anything contained
herein to the contrary, in no event shall any investment in HF Holdings be
deemed to be a "Short-Term Investment" for purposes of this Agreement.
"STOCKHOLDERS AGREEMENT" shall mean the Stockholders Agreement dated
the Closing Date among HF Holdings, ICON Health & Fitness, Inc., the Company and
certain other equityholders of HF Holdings.
"SUB-CAPITAL ACCOUNT" is defined in Section 3.3.
"SUBSCRIPTION AGREEMENT" shall mean the Subscription Agreement dated
the Closing Date to which the Company is party relating to the purchase of stock
of HF Holdings.
"TAX MATTERS MEMBER" is defined in Section 6.1.
"TRANSFER" is defined in Section 9.1.
"UNITS" is defined in Section 3.1.
-5-
"UNRETURNED INVESTMENT" shall mean, as to each Member as of any date,
the EXCESS OF (a) (I) the aggregate amount of Capital Contributions made by such
Member (or such Member's predecessor in interest) on or before such date
MULTIPLIED BY (II) the percentage of outstanding shares of HF Holdings common
stock held by the Company immediately after the Closing Date that is not subject
to a Junior Management Option or the CSFB Option OVER (b) the amount allocated
(or deemed to be allocated pursuant to Section 5.1.3) to such Member on or
before such date pursuant to Section 5.1.2(b)(i).
"VOTING MAJORITY" shall mean Members who, in the aggregate, hold more
than 50% of the aggregate number of Class A Units and Class B Units; PROVIDED,
HOWEVER, that if on the 60th day following the date of this Agreement, the ▇▇▇▇
Members hold Units representing more than $10 million (at cost), "Voting
Majority" shall mean ▇▇▇▇.
"VOTING MEMBERS" shall mean Members holding Class A Units or Class B
Units.
-6-
SCHEDULE I
UNITS
-------------------------------------------------------------------------------------------------------
HF HF HF
Capital Class A Class B Class C
Name of Member Contributions Units Units Units
-------------------------------------------------------------------------------------------------------
▇▇▇▇ Capital Fund IV, $6,259,929.58 -- 62,599.2958 --
L.P.
-------------------------------------------------------------------------------------------------------
▇▇▇▇ Capital Fund IV-B, $7,163,890.42 -- 71,638.9042 --
L.P.
-------------------------------------------------------------------------------------------------------
BCIP Associates $1,055,475.00 -- 10,554.7500 --
-------------------------------------------------------------------------------------------------------
BCIP Trust Associates, $520,705.00 -- 5,207.0500 --
L.P.
-------------------------------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $2,500,000 25,000 -- --
-------------------------------------------------------------------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $2,500,000 25,000 -- --
-------------------------------------------------------------------------------------------------------
Inverness/Phoenix $2,000,000 -- -- 20,000
-------------------------------------------------------------------------------------------------------
Capital LLC
-------------------------------------------------------------------------------------------------------
▇▇▇ ▇▇▇▇ Tsung $1,000,000 -- -- 10,000
-------------------------------------------------------------------------------------------------------
▇▇▇-▇▇▇▇▇ Ko $1,000,000 -- -- 10,000
-------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ $1,000,000 -- -- 10,000
-------------------------------------------------------------------------------------------------------
Total $25,000,000 50,000 150,000 50,000
-------------------------------------------------------------------------------------------------------
RIGHTS
-----------------------------------------------------------------------------------------------
Exercise Other
Option Price(if Terms
Premium/Purch any)
Name of Holder ase Price
-----------------------------------------------------------------------------------------------
Credit Suisse First $5,000,000 $500 Warrant for purchase of 50,000
Boston Management Class C Units having the terms
Corporation more fully set forth in the CSFB
Warrant attached to
the Agreement as
Exhibit 2.
-----------------------------------------------------------------------------------------------
Effective as of: September 27, 1999
THIS NOTE WAS ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION UNDER THE ACT COVERING THE TRANSFER OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE ISSUER, THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
IN ADDITION, THIS NOTE IS SUBJECT TO RESTRICTIONS ON VOTING AND
TRANSFER AND REQUIREMENTS OF SALE AND OTHER PROVISIONS AS SET FORTH IN THE
STOCKHOLDERS AGREEMENT DATED AS OF SEPTEMBER 27, 1999, AS AMENDED AND IN
EFFECT FROM TIME TO TIME, AND CONSTITUTES A CSFB SECURITY AS DEFINED IN
SUCH STOCKHOLDERS AGREEMENT. THE COMPANY WILL FURNISH A COPY OF SUCH
AGREEMENT TO THE HOLDER OF THIS NOTE WITHOUT CHARGE
UPON WRITTEN REQUEST.
HF HOLDINGS, INC.
0% CONVERTIBLE SUBORDINATED NOTE DUE SEPTEMBER 27, 2011
No. R-2
$7,500,000 September 27, 1999
HF HOLDINGS, INC. (together with its successors, the "Company"), a
Delaware corporation, for value received, hereby promises to pay to CREDIT
SUISSE FIRST BOSTON CORPORATION or registered assigns the principal sum of SEVEN
MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) on September 27, 2011.
Payment of principal shall be made in such coin or currency of the
United States of America as at the time of payment is legal tender for the
payment of public and private debts to the registered holder hereof at the
address shown in the register maintained by the Company for such purpose, in the
manner provided in the Note Agreement (defined below).
This Note is one of an issue of Notes of the Company issued in an
aggregate principal amount limited to Seven Million Five Hundred Thousand
Dollars ($7,500,000) pursuant to the Amended and Restated Note Agreement (as may
be amended, restated or otherwise modified from time to time, the "Note
Agreement"), dated as of September 27, 1999, between the Company and the
purchaser listed on Annex 1 thereto. The holder of this Note is entitled to the
benefits of the Note Agreement. This Note is subject to the terms of the Note
Agreement, and such terms are incorporated herein by reference. Capitalized
terms used herein and not defined herein have the meanings specified in the Note
Agreement.
All of the principal of this Note may, under certain circumstances, be
declared due and payable in the manner and with the effect provided in the Note
Agreement.
This Note is a registered Note and is transferable only by surrender at
the principal office of the Company as specified in the Note Agreement, duly
endorsed or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
The obligations evidenced by this Note are subordinated to the Senior
Debt on the terms provided in the Note Agreement.
THIS NOTE AND THE NOTE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
HF HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Chairman & CEO
[FORM OF NOTICE OF CONVERSION]
To HF HOLDINGS, INC.
The undersigned elects to convert $______________________ in principal
amount of the accompanying Note into the number of shares of Common Stock of HF
Holdings, Inc. issuable upon the conversion of such principal amount of such
Note, and requests that the certificates for such shares be issued in the name
of:
------------------------------------------------------------------------
(Please print or type name, address and zip code.)
------------------------------------------------------------------------
(Please insert social security number or tax ID number
If such principal amount of the accompanying Note shall not be the entire
principal amount of the accompanying Note, a new Note or Notes for the balance
remaining of such Note shall be registered in the name of and delivered to:
------------------------------------------------------------------------
(Please print or type name, address and zip code.)
------------------------------------------------------------------------
(Please insert social security number or tax ID number
The undersigned elects that the conversion of the accompanying Note shall be
deemed to have been effected upon:
|_| the date of, and at the time immediately preceding, the occurrence
of the "Triggering Event" giving rise to such conversion right; or
|_| the Business day on which the accompanying Note shall have been
surrendered to the Company.
Dated: ____________________, _________
[HOLDER]
By:_________________________
NOTICE
The signature to the foregoing Notice of Conversion must correspond to
the name as written upon the face of the accompanying Note or any prior
assignment thereof in every particular, without alteration or enlargement or any
change whatsoever.