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EXHIBIT 10.27
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LIMITED LIABILITY COMPANY AGREEMENT
OF
GCC INVESTMENTS, LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
DATED AS OF AUGUST 11, 1999
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TABLE OF CONTENTS
PAGE
ARTICLE I - DEFINITIONS........................................................1
SECTION 1.01. Definitions..................................................1
ARTICLE II - ORGANIZATION......................................................1
SECTION 2.01. Formation of Limited Liability Company.......................1
SECTION 2.02. Firm Name; Registered and Principal Office...................1
SECTION 2.03. Purposes.....................................................2
SECTION 2.04. Powers.......................................................2
SECTION 2.05. Tax Treatment................................................2
ARTICLE III - MANAGING MEMBER..................................................3
SECTION 3.01. Name and Address.............................................3
SECTION 3.02. Management and Control of the Company........................3
SECTION 3.03. Powers.......................................................3
SECTION 3.04. Certificate of Formation.....................................4
SECTION 3.05. Other Activities.............................................4
SECTION 3.06. Avoidance of Conflicts of Interest...........................4
SECTION 3.07. Duty of Care.................................................4
SECTION 3.08. Investment and Other Limitations.............................5
SECTION 3.09. Borrowing; Guarantees........................................6
SECTION 3.10. Classification as Partnership................................6
ARTICLE IV - CLASS A MEMBER....................................................6
SECTION 4.01. Name and Address.............................................6
SECTION 4.02. Limited Liability............................................6
SECTION 4.03. No Control of Company........................................6
SECTION 4.04. Dissolution or Bankruptcy....................................6
ARTICLE V - EXPENSES; MANAGEMENT AGREEMENT.....................................7
SECTION 5.01. Management Agreement.........................................7
SECTION 5.02. Fees and Commissions from Portfolio Companies................7
ARTICLE VI - ADVISORY COMMITTEE................................................7
SECTION 6.01. Appointment..................................................7
SECTION 6.02. Meetings.....................................................8
SECTION 6.03. Duties.......................................................8
SECTION 6.04 Valuation Procedures..........................................8
SECTION 6.05. Voting; Rules and Procedures.................................9
SECTION 6.06. Duty of Care.................................................9
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ARTICLE VII - CAPITAL OF THE COMPANY...........................................9
SECTION 7.01. Capital Contributions........................................9
SECTION 7.02. No Interest or Withdrawals..................................10
SECTION 7.03. Minimum Capital Contribution of Managing Member.............10
ARTICLE VIII - ACCOUNTS.......................................................10
SECTION 8.01. Capital Accounts............................................10
SECTION 8.02. Accounting for Distributions in Kind........................11
SECTION 8.03. Compliance with Treasury Regulations........................11
ARTICLE IX - ALLOCATIONS......................................................11
SECTION 9.01. Allocations of Net Gain.....................................11
SECTION 9.02. Allocations of Net Loss.....................................12
SECTION 9.03. Other Specially Allocated Items.............................12
SECTION 9.04. Limitation on Loss Allocations..............................13
SECTION 9.05. Timing of Allocations.......................................13
SECTION 9.06. Advisory Nature of Allocations..............................14
ARTICLE X - DISTRIBUTIONS.....................................................14
SECTION 10.01. Amount, Timing and Form....................................14
SECTION 10.02. Distributions..............................................15
SECTION 10.03. Distribution Limitations...................................16
SECTION 10.04. Tax Withholding............................................19
SECTION 10.05. Certain Distributions Prohibited...........................19
ARTICLE XI - DURATION OF THE COMPANY..........................................20
SECTION 11.01. Term of Company............................................20
SECTION 11.02. Dissolution................................................20
ARTICLE XII - LIQUIDATION OF THE COMPANY......................................20
SECTION 12.01. General Provisions.........................................20
SECTION 12.02. Liquidating Distributions..................................20
SECTION 12.03. Expenses of Liquidator(s)..................................20
SECTION 12.04. Duration of Liquidation....................................21
SECTION 12.05. Duty of Care...............................................21
SECTION 12.06. No Liability for Return of Capital.........................21
ARTICLE XIII - LIMITATION ON TRANSFERS OF INTEREST OF CLASS A MEMBER..........21
SECTION 13.01. Transfers of Class A Membership Interest...................21
SECTION 13.02. Publicly Traded Partnership Provisions.....................22
SECTION 13.03. Other Prohibited Legal Consequences........................22
SECTION 13.04. Admission of Substituted Class A Members...................22
SECTION 13.05. Covenants of Class A Member................................23
ARTICLE XIV - NO WITHDRAWAL OF COMPANY MEMBERSHIP INTERESTS...................23
SECTION 14.01. No Withdrawal of Company Membership Interests..............23
SECTION 14.02. Withdrawal of the Managing Member..........................23
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ARTICLE XV - NO TRANSFER OF MEMBERSHIP INTEREST OF THE MANAGING MEMBER........25
SECTION 15.01. No Transfer of Membership Interest of the Managing
Member.....................................................25
ARTICLE XVI - INDEMNIFICATION.................................................25
SECTION 16.01. General Provisions.........................................25
SECTION 16.02. Advance Payment of Expenses................................26
SECTION 16.03. Limitation by Law..........................................26
ARTICLE XVII - ACCOUNTING; RECORDS AND REPORTS; ANNUAL MEETINGS...............26
SECTION 17.01. Fiscal Year; Tax Elections.................................26
SECTION 17.02. Keeping of Accounts and Records............................27
SECTION 17.03. Inspection Rights..........................................27
SECTION 17.04. Independent Accountants....................................27
ARTICLE XVIII - WAIVER AND AMENDMENT..........................................27
SECTION 18.01. Waiver and Amendment.......................................27
ARTICLE XIX - GENERAL PROVISIONS..............................................28
SECTION 19.01. Notices....................................................28
SECTION 19.02. Additional Documents.......................................28
SECTION 19.03. Binding on Successors......................................28
SECTION 19.04. Counterparts...............................................28
SECTION 19.05. Governing Law..............................................28
SECTION 19.06. Securities Act Matters.....................................28
SECTION 19.07. Right to Rely on Authority of Managing Member..............29
SECTION 19.08. Tax Matters Partner........................................29
SECTION 19.09. Contract Construction......................................29
SECTION 19.10. Section Headings...........................................29
APPENDIX A - Definitions...................................................A-1
APPENDIX B - Regulatory and Tax Allocations................................B-1
SCHEDULE A - Names and Addresses of the Members ..............................
SCHEDULE B - Put Agreement....................................................
SCHEDULE C - Management Agreement.............................................
SCHEDULE D - Certain Portfolio Securities.....................................
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GCC INVESTMENTS, LLC
LIMITED LIABILITY COMPANY AGREEMENT
LIMITED LIABILITY COMPANY AGREEMENT, dated as of this 11th day of
August, 1999, by and among Chestnut Hill Capital Partners, LLC, a limited
liability company organized under the laws of the State of Delaware, as the
Managing Member, and Chestnut Hill Re, Inc., a wholly-owned subsidiary of GCC
Investments, Inc. and a corporation organized under the laws of the State of
[DELAWARE], as the Class A Member. The Managing Member and the Class A Member
are sometimes referred to herein collectively as the "MEMBERS".
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. Capitalized terms used herein without
definition have the meanings ascribed to them in APPENDIX A annexed hereto.
ARTICLE II
ORGANIZATION
SECTION 2.01. FORMATION OF LIMITED LIABILITY COMPANY. The Members agree
to carry on a limited liability company (the "COMPANY") subject to the terms of
this Agreement pursuant to and in accordance with the Delaware Limited Liability
Company Act, as amended (the "DELAWARE ACT").
SECTION 2.02. FIRM NAME; REGISTERED AND PRINCIPAL OFFICE. The name of
the Company is "GCC Investments, LLC." The initial address of the Company's
registered office in Delaware is 1013 Centre Road, Wilmington, County of ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and its initial registered agent at such address for
service of process is Corporation Service Company. The principal office of the
Company initially shall be located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇. With the prior approval of the Advisory Committee, the Managing Member
may change the location of the registered office and principal office of the
Company to such other location within the United States as the Managing Member
may determine at any time, upon written notice to all the Members indicating the
new location of such principal office. With the prior approval of the Advisory
Committee, the Managing Member may cause the Company to open such additional
offices at such other locations as the Managing Member in its sole discretion
may determine.
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SECTION 2.03. PURPOSES. The principal purpose of the Company is to
locate, analyze and invest in equity and equity-oriented securities, including
securities convertible into or exercisable or exchangeable for equity securities
and, in furtherance thereof, (a) to hold, and to sell, distribute or otherwise
dispose of its Portfolio Securities in accordance with this Agreement over such
period as the Advisory Committee, after soliciting the recommendation of the
Managing Member, determines to be in the best interest of the Members, and (b)
subject to the terms and provisions of this Agreement, otherwise to engage in
any lawful activity for which limited liability companies may be organized under
the laws of the State of Delaware.
SECTION 2.04. POWERS. Subject to all of the terms and provisions
hereof, and consistent with the purposes of the Company, the Company shall have
the following powers:
(a) to purchase, invest in and sell securities and interests in
securities of every kind, including, without limitation, capital stock,
partnership interests, limited liability company membership interests, bonds,
notes, debentures, trust receipts, and other obligations, as well as rights and
options to purchase and sell securities;
(b) to make and perform all contracts and engage in all activities and
transactions necessary or advisable to carry out the purposes of the Company,
including, without limitation, the purchase, sale, transfer, pledge and exercise
of all rights, privileges and incidents of ownership or possession with respect
to any Company asset or liability; the securing of payment of any Company
obligation by hypothecation or pledge of Company assets; and the guaranty of or
becoming surety for the debts of others, subject to Section 3.09 hereof; and
(c) otherwise to have all the powers available to it as a limited
liability company under the laws of the State of Delaware.
SECTION 2.05. TAX TREATMENT. The Members intend that the Company shall
be classified and treated as a partnership for federal income tax purposes
within the meaning of Section 761(a) of the Code and that the Managing Member
and the Class A Member shall be treated as partners in a partnership for such
purposes within the meaning of Section 761(b) of the Code. The Members agree
that the economic sharing agreement among the Members set forth in this
Agreement appropriately reflects the contributions and the activities of the
Members on behalf of the Company in their respective capacities as "partners" in
a partnership within the meaning of Subchapter K of the Code. Further, the
Members intend, and the Managing Member shall use its best efforts to ensure,
that the Company will be treated as an "investment partnership" as such term is
defined in Section 731(c)(3)(A)(iii) of the Code and the Treasury Regulations
promulgated thereunder.
ARTICLE III
MANAGING MEMBER
SECTION 3.01. NAME AND ADDRESS. The name and address of the Managing
Member is set forth in Schedule A. SCHEDULE A shall be amended from time to time
to reflect any change
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in the address or identity of the Managing Member. The liability of the Managing
Member to make capital contributions to the Company shall be limited to any
unpaid capital contributions which it agreed to make to the Company, except as
otherwise provided under the Delaware Act or as expressly provided in this
Agreement.
SECTION 3.02. MANAGEMENT AND CONTROL OF THE COMPANY. Subject to the
provisions of this Agreement and consistent with the investment purposes set
forth herein, the management of the Company shall be vested in the Managing
Member. Company policies shall be subject to the approval of the Advisory
Committee.
SECTION 3.03. POWERS. Subject to the provisions of this Agreement and
consistent with the investment purposes set forth herein, the Managing Member
shall have the power on behalf and in the name of the Company to carry out and
implement any and all of the purposes of the Company set forth in Section 2.03
and to exercise any of the powers of the Company set forth in Section 2.04
including, without limitation, the power to:
(a) open, maintain and close accounts with brokers and give
instructions or directions in connection therewith;
(b) open, maintain and close bank accounts and draw checks or other
orders for the payment of money;
(c) receive, dispose of and deal in all securities, checks, money and
other assets or liabilities of the Company;
(d) hire and fire investment bankers, attorneys, accountants,
consultants, custodians, contractors and other agents, and pay them
compensation;
(e) enter into, make and perform such contracts, agreements and other
undertakings, and do any and all such other acts required of the Company with
respect to its interest in any corporation, partnership, limited partnership,
limited liability company, trust, association or other entity or activity,
including but not limited to, entering into agreements with respect to such
interests, which agreements may contain such terms, conditions and provisions as
the Managing Member in its sole discretion shall approve;
(f) maintain one or more offices and in connection therewith rent or
acquire office space and do such other acts as may be advisable in connection
with the maintenance of such offices; and
(g) notwithstanding the foregoing, the Managing Member shall not enter
into any material contracts, agreements or undertakings without the approval of
the Advisory Committee.
SECTION 3.04. CERTIFICATE OF FORMATION. The Managing Member shall file
for public record with the appropriate public authorities, and, if required,
publish the Certificate of Formation of the Company and any amendments thereto
and take all such other action as may be
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required to preserve the limited liability of the Members in any jurisdiction in
which the Company shall conduct operations.
SECTION 3.05. OTHER ACTIVITIES. The Managing Member and the Principals
at all times shall devote substantially all of their business time and effort to
the activities of the Company.
SECTION 3.06. AVOIDANCE OF CONFLICTS OF INTEREST. The Company has
adopted the following policies to deal with potential conflicts of interest.
(a) All investment opportunities which come to the attention of the
Managing Member or a Principal, except for such opportunities which it or he
reasonably believes are not within the purposes of the Company, shall be made
available to the Company before it or he invests, directly or indirectly, if the
investment decision is controlled by it or him, in such opportunities.
(b) The Managing Member and the Principals shall not invest directly or
indirectly, if the investment decision is controlled by the Managing Member or a
Principal (other than through the Company), in any Portfolio Company or in any
Person being considered by the Company as a prospective Portfolio Company.
(c) The Managing Member and each Principal shall comply with the
policies and guidelines for trading of securities established from time to time
by GCX.
(d) Except for transactions that are specifically permitted under the
terms and provisions of this Agreement or as otherwise approved by the Advisory
Committee, any transaction between the Managing Member, the Principals or their
Affiliates and the Company or any Portfolio Company shall be on terms no less
favorable to the Company or the Portfolio Company, as the case may be, than are
generally afforded to unrelated third parties in comparable transactions.
SECTION 3.07. DUTY OF CARE.
(a) It is recognized that decisions concerning investments or potential
investments involve the exercise of judgment and the risk of loss. The Managing
Member and the Principals shall exercise their best judgment in making
investments on behalf of the Company and in carrying out their other obligations
hereunder, and the Managing Member, its members, employees, agents and
Affiliates and the Principals shall not incur any liability to the Company or to
the Class A Member for making such investments on behalf of the Company or
carrying out such obligations, in each case in accordance with the standard of
care set forth in Section 3.07(b). In addition, the Managing Member, its
members, employees, agents and Affiliates, and the Principals and their
respective partners, employees, agents and Affiliates shall be entitled to
indemnification by the Company to the extent provided in Article XVI hereof.
(b) The Managing Member, its members (including the Principals),
employees, agents and the Affiliates of the Managing Member and any Principal
shall not be liable to the Company or to any Member for any loss suffered by the
Company or any Member which arises
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out of any investment or any other action or omission of the Managing Member,
any member, employee, agent or Affiliate of the Managing Member or any
Principal, provided that (1) the Managing Member, member, employee, agent or
Affiliate of the Managing Member, or such Principal acted in good faith and in a
manner such Person reasonably believed to be in, or not opposed to, the best
interest of the Company and, with respect to any criminal action or proceeding,
had no reasonable cause to believe such Person's conduct was unlawful, and (2)
such course of conduct did not constitute gross negligence or willful misconduct
of the Managing Member, member, employee, agent or Affiliate of the Managing
Member or such Principal; nor shall the Managing Member, any member, employee,
agent of the Managing Member or any Affiliate of the Managing Member or any
Principal be liable for the negligence, whether of omission or commission,
dishonesty or bad faith of any employee, broker or other agent of the Company
selected and supervised by the Managing Member (or any member, employee or agent
of the Managing Member or any Affiliate of the Managing Member or any Principal)
with reasonable care. The Managing Member, the members, employees and agents and
the Affiliates of the Managing Member and the Principals shall be fully
protected and justified with respect to any action or omission taken or suffered
by any of them in good faith if such action or omission is taken or suffered in
reliance upon and in accordance with the opinion or advice as to matters of law
of legal counsel, or as to matters of accounting of accountants, selected by any
of them with reasonable care.
SECTION 3.08. INVESTMENT AND OTHER LIMITATIONS. The Company shall not,
without the prior approval of the Advisory Committee, invest in the securities
issued by any entity. The Managing Member shall sell, transfer or otherwise
dispose of a Portfolio Security as directed by the Advisory Committee; provided
that any decision by the Advisory Committee to sell, transfer or otherwise
dispose of a Portfolio Security shall be made only after soliciting the
recommendation of the Managing Member. The Managing Member and the Principals
shall not cause the terms and provisions of the GPLLC Agreement to be waived,
modified, terminated or amended without the written consent of the Advisory
Committee. If a "Cause Event", as defined in the GPLLC Agreement, occurs with
respect to a member of the Managing Member, the Managing Member shall cause such
member's interest in the Managing Member to be converted into a "Retired
Member's interest", as defined in the GPLLC Agreement, if, as and when directed
by the Advisory Committee.
SECTION 3.09. BORROWING; GUARANTEES. Without the prior approval of the
Advisory Committee, the Managing Member may not cause the Company to borrow
money, pledge any assets of the Company, ▇▇▇▇▇ ▇ ▇▇▇▇ on such assets, or
otherwise incur indebtedness or guaranty the indebtedness of Portfolio
Companies.
SECTION 3.10. CLASSIFICATION AS PARTNERSHIP. The Managing Member agrees
that it (a) will not cause or permit the Company to elect (1) to be excluded
from the provisions of Subchapter K of the Code or (2) to be treated as a
corporation for federal income tax purposes; (b) will cause the Company to make
any election reasonably determined to be necessary or appropriate in order to
ensure the treatment of the Company as a partnership for federal income tax
purposes; (c) will cause the Company to file any required tax returns in a
manner consistent with its treatment as a partnership for federal income tax
purposes; and (d) has not taken, and
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will not take, any action that would be inconsistent with the treatment of the
Company as a partnership for such purposes.
ARTICLE IV
CLASS A MEMBER
SECTION 4.01. NAME AND ADDRESS. The Class A Member's address is set
forth in SCHEDULE A. SCHEDULE A shall be amended from time to time to reflect
any change in such address or the identity of the Class A Member.
SECTION 4.02. LIMITED LIABILITY. The liability of the Class A Member to
the Company shall be limited to any unpaid capital contributions which it agreed
to make to the Company, except as otherwise provided under the Delaware Act or
as expressly provided in this Agreement.
SECTION 4.03. NO CONTROL OF COMPANY. The Class A Member, in its
capacity as such, shall not take any part in the control of the affairs of the
Company, shall not undertake any transactions on behalf of the Company, and
shall not have any power to sign for or to bind the Company.
SECTION 4.04. DISSOLUTION OR BANKRUPTCY. The bankruptcy, liquidation or
dissolution of the Class A Member shall not result in the termination of the
Company, but the rights and obligations of the Class A Member under this
Agreement shall accrue to the Class A Member's successor or legal
representative. Except as expressly provided in this Agreement, no other event
affecting the Class A Member (including but not limited to insolvency) shall
affect this Agreement.
ARTICLE V
EXPENSES; MANAGEMENT AGREEMENT
SECTION 5.01. MANAGEMENT AGREEMENT.
(a) The Class A Member (or an Affiliate thereof) shall enter into a
Management Agreement of even date herewith, in the form attached hereto as
SCHEDULE C, with the Managing Member (as amended from time to time, the
"Management Agreement).
Except as specifically provided in this Agreement, the Managing Member
shall not receive any salary, commission, fee or other compensation from the
Company and, while the Management Agreement is in effect, the Principals shall
not receive any salary, commission, fee or other compensation for services from
the Company.
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SECTION 5.02. FEES AND COMMISSIONS FROM PORTFOLIO COMPANIES. The
Managing Member and its Affiliates (including the Principals) shall be permitted
to receive fees, commissions and other compensation from Portfolio Companies,
provided, however, that any director's, consulting, monitoring, investment
banking, transaction or break-up fees or other remuneration (including, without
limitation, proceeds from the disposition of any stock option received in
connection with service as a director, consultant or investment banker) paid to
the Managing Member, a Principal, or any Affiliate of the Managing Member or
Principal by or with respect to a Portfolio Company for services rendered shall
be received by the Managing Member or any such Affiliate as an agent of the
Company and remitted to the Company immediately or at such other time or times
as determined by the Managing Member with the approval of the Advisory
Committee. Any Person receiving such Portfolio Company remuneration hereby
agrees to use its or his best efforts to ensure that the Company, rather than
such Person, is treated for tax purposes as earning such remuneration.
ARTICLE VI
ADVISORY COMMITTEE
SECTION 6.01. APPOINTMENT. The Company shall have an advisory committee
(the "ADVISORY COMMITTEE") which shall consist of four members, one of whom
shall be a designee of the Managing Member and the remainder of whom shall be
designees of the Class A Member. A member of the Advisory Committee may be
removed and replaced at any time, with or without cause, by the Member that
designated such member to the Advisory Committee. The Advisory Committee shall
elect a chairman (the "CHAIRMAN") from among its members. Any member of the
Advisory Committee, other than the designee of the Managing Member, is eligible
to become the Chairman.
SECTION 6.02. MEETINGS. The Advisory Committee shall meet at least
quarterly at such times as its members may determine. At all meetings, a
majority of the members then holding office (including the Chairman) shall
constitute a quorum for the transaction of business. Any action required or
permitted to be taken at any meeting may be taken without a meeting if a
majority of the members then holding office consent thereto and such action and
consent is memorialized in a writing or writings filed with the records of
proceedings of the Advisory Committee.
SECTION 6.03. DUTIES. The functions of the Advisory Committee shall be:
(a) to review and approve or disapprove of proposed Company actions and
investments to the extent required by Sections 2.02, 3.02, 3.06(d), 3.08 and
3.09 or any other applicable sections of this Agreement;
(b) to review and approve or disapprove of Company distributions
proposed to be made to the extent provided in Article X;
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(c) to review and approve or disapprove of proposed valuations of
assets and liabilities of the Company in accordance with Section 6.04;
(d) to review and approve the Management Fee for the Managing Member in
accordance with the Management Agreement;
(e) to review the Managing Member's investment progress;
(f) to approve the selection of the Company's independent public
accountants;
(g) to resolve any questions relating to potential conflicts of
interest between the Managing Member, a Principal or an Affiliate of either such
Person on the one hand, and the Company on the other hand;
(h) to resolve any other issues brought to the Advisory Committee by
the Managing Member and to perform such other functions as are provided for
under this Agreement; and
(i) to hire and replace such attorneys, accountants or other advisors
on behalf of the Company as the Advisory Committee may determine.
SECTION 6.04. VALUATION PROCEDURES. Whenever valuation of Company
assets or net assets is required by this Agreement, the Managing Member shall
submit to the Advisory Committee for approval its proposed valuation of Company
assets, including therewith a statement setting forth the basis of valuation of
each such asset. If the Advisory Committee fails to approve the valuations
proposed by the Managing Member within fifteen (15) business days following
submission by the Managing Member, then the managers of the Managing Member will
meet with the Advisory Committee, either in person or by telephone conference,
to review the proposed valuations and to consider changes therein proposed by
the Advisory Committee. If the Managing Member and the Advisory Committee cannot
agree on the valuation of Company assets within thirty (30) business days after
the original submission by the Managing Member, then the alternative valuations
proposed by the Advisory Committee shall be deemed accepted as the valuation of
the Company assets.
SECTION 6.05. VOTING; RULES AND PROCEDURES. All approvals,
disapprovals, vetoes and other actions taken by the Advisory Committee shall be
authorized by a majority of the Committee members then holding office, including
the Chairman. The Advisory Committee shall have the authority to adopt rules and
procedures, not inconsistent with this Agreement, relating to the conduct of its
affairs.
SECTION 6.06. DUTY OF CARE. The members of the Advisory Committee shall
exercise their best judgment in carrying out their functions for the Company. No
member of the Advisory Committee shall be liable to the Company or to any Member
for any loss suffered by the Company or any Member which arises out of any
action or omission of such member, provided that (1) such member acted in good
faith and in a manner such Person reasonably believed to be in, or not opposed
to, the best interest of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such Person's conduct was
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unlawful, and (2) such course of conduct did not constitute gross negligence or
willful misconduct of such member. The Advisory Committee and each member
thereof shall be fully protected and justified with respect to any action or
omission taken or suffered by any of them in good faith if such action or
omission is taken or suffered in reliance upon and in accordance with the
opinion or advice as to matters of law of legal counsel, or as to matters of
accounting of accountants, selected by any of them with reasonable care. In
addition, each member of the Advisory Committee shall be entitled to
indemnification by the Company to the extent provided in Article XVI hereof.
ARTICLE VII
CAPITAL OF THE COMPANY
SECTION 7.01. CAPITAL CONTRIBUTIONS.
(a) Each Member's initial capital contribution shall be due on the date
determined by the Advisory Committee. The amount of the Members' initial capital
contributions shall be determined by the Managing Member with the consent of the
Advisory Committee. Each Member's initial capital contribution shall be made,
with the approval of the Advisory Committee, (i) in cash, (ii) in securities of
entities that would be treated as Portfolio Companies hereunder if the Company,
rather than the Member, had acquired such securities directly from the issuer,
or (iii) in a combination of the foregoing. The Managing Member's initial
capital contribution shall be made in an amount equal to 1% of the aggregate
capital contribution due from all Members (including the Managing Member).
(b) Each Member shall make additional contributions to the capital of
the Company ("ADDITIONAL CAPITAL CONTRIBUTIONS"), upon no less than three (3)
business days' prior written notice from the Managing Member, solely for the
purpose of allowing the Company to make investments in Portfolio Securities
approved by the Advisory Committee pursuant to Section 3.08. Each contribution
notice shall set forth the date on which the related Additional Capital
Contribution is due. The amount of capital required to be contributed by each
Member on each occasion of a capital contribution shall be computed by the
Managing Member so that the Class A Member contributes 99% of the aggregate
capital contribution to be made by all Members at such time and the Managing
Member contributes 1% of the aggregate capital contribution to be made by all
Members at such time. A Member may not make less than the full amount of an
Additional Capital Contribution and all Additional Capital Contributions shall
be made in cash in United States dollars, unless otherwise approved by the
Advisory Committee.
(c) In the event that a Member makes all or a portion of its initial
capital contribution to the Company by contributing securities (the "CONTRIBUTED
SECURITIES"), such securities shall be credited to the Member's Capital Account,
as such term is defined in Article VIII hereof, at their respective Gross Asset
Values. The books and records of the Company, including for this purpose the
Capital Account of the Member, shall reflect such Gross Asset Value. SCHEDULE D
shall set forth the Gross Asset Values of any Contributed Securities and any
Contributed Securities Interest applicable to such Contributed Securities.
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SECTION 7.02. NO INTEREST OR WITHDRAWALS. No interest shall accrue on
any capital contribution made by a Member, and no Member shall have the right to
withdraw or to be repaid any of its capital contributions so made, except as
specifically provided in this Agreement.
SECTION 7.03. MINIMUM CAPITAL CONTRIBUTION OF MANAGING MEMBER.
Notwithstanding any other provision of this Agreement, the Managing Member shall
contribute cash (unless otherwise agreed to by the Advisory Committee) to the
Company at such times and in such amounts as necessary to ensure that the
paid-in capital contributions of the Managing Member are at all times equal to
1% of the aggregate paid-in capital contributions of all Members at such time.
ARTICLE VIII
ACCOUNTS
SECTION 8.01. CAPITAL ACCOUNTS. There shall be established on the books
of the Company a capital account (the "CAPITAL ACCOUNT") for each Member that
shall consist of such Member's initial capital contribution to the Company and
that shall be:
(a) Increased by (1) any Additional Capital Contributions made to the
Company by such Member pursuant to this Agreement and (2) any amounts from time
to time in the nature of income or gain added to the Capital Account of such
Member pursuant to Article IX or APPENDIX B; and
(b) Decreased by (1) any distributions made to such Member and (2) any
amounts in the nature of loss, deduction or expense subtracted from the Capital
Account of such Member pursuant to Article IX or Appendix B.
SECTION 8.02. ACCOUNTING FOR DISTRIBUTIONS IN KIND. For purposes of
maintaining Capital Accounts when Company property is distributed in kind:
(a) The Company shall treat such property as if it had been sold for
its Gross Asset Value on the date of distribution;
(b) Any difference between the Gross Asset Value as so determined and
the Cost of such property shall constitute Net Gain or Loss and shall be
allocated to the Capital Accounts of the Members pursuant to Article IX; and
(c) The Capital Account of any Member receiving a distribution in kind
shall be reduced by an amount equal to the fair market value of such property on
the date of distribution (net of any liabilities secured by such distributed
property that such Member is considered to assume or take subject to under
Section 752 of the Code).
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SECTION 8.03. COMPLIANCE WITH TREASURY REGULATIONS. To the extent
consistent with Section 9.06, the foregoing provisions and the other provisions
of this Agreement relating to the maintenance of Capital Accounts are intended
to comply with Section 704(b) of the Code and Treasury Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such regulations. In the event that the Advisory Committee shall determine that
it is prudent to modify the manner in which the Capital Accounts, or any debits
or credits thereto, are computed in order to comply with such regulations, the
Advisory Committee may make such modification.
ARTICLE IX
ALLOCATIONS
SECTION 9.01. ALLOCATIONS OF NET GAIN. Except as provided in Section
9.05, as of the end of each fiscal year of the Company and after giving effect
to the special allocations set forth in Sections 9.03 and 9.04 and APPENDIX B,
the Net Gain (if any) of the Company for such fiscal year shall be allocated to
the Capital Accounts of the Members as follows (provided, however, that the
Class A Member shall be entitled at such times and in the manner determined by
the Advisory Committee, to a priority allocation of Net Gain, in an amount equal
to the aggregate amount of Contributed Securities Interest, so as to ensure that
the balance in its Capital Account reflects the Contributed Securities
Interest):
(a) First, to all Members, in proportion to the respective amounts of
Net Loss (if any) previously allocated to each such Member pursuant to Section
9.02(d) and not offset by prior allocations of Net Gain made pursuant to this
Section 9.01(a), an amount of Net Gain equal to the aggregate amount of such Net
Loss;
(b) Second, to all Members, in proportion to their respective
Preferential Return Allocations, an amount of Net Gain equal to the aggregate
amount of all such Preferential Return Allocations;
(c) Third, to the Class A Member, an amount of Net Gain equal to the
Class A Member's Make-Whole Amount; and
(d) Fourth, 80% to all Members in proportion to their respective
Contributions and 20% to the Managing Member.
SECTION 9.02. ALLOCATIONS OF NET LOSS. Except as provided in Section
9.05, as of the end of each fiscal year of the Company and after giving effect
to the special allocations set forth in Sections 9.03 and 9.04 and APPENDIX B,
the Net Loss (if any) of the Company for such fiscal year shall be allocated to
the Capital Accounts of the Members as follows (provided, however, that the
Advisory Committee may in its discretion adjust the allocations of Net Loss
hereunder in a manner consistent with the economic agreement between the Members
with respect to Contributed Securities Interest):
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(a) First, to all Members, in proportion to the respective amounts of
Net Gain (if any) previously allocated to each such Member pursuant to Section
9.01(d) and not offset by prior allocations of Net Loss made pursuant to this
Section 9.02(a), an amount of Net Loss equal to the aggregate amount of such Net
Gain (if any);
(b) Second, to the Class A Member, an amount of Net Loss equal to the
aggregate amount of Net Gain (if any) previously allocated to the Class A Member
pursuant to Section 9.01(c) and not previously offset by prior allocations if
Net Loss pursuant to this Section 9.02(b);
(c) Third, to all Members, in proportion to the respective amounts of
Net Gain (if any) previously allocated to each such Member pursuant to Section
9.01(b) and not offset by prior allocations of Net Loss made pursuant to this
Section 9.02(c), an amount of Net Loss equal to the aggregate amount of such Net
Gain (if any); and
(d) Fourth, to all Members in proportion to their respective
Contributions.
SECTION 9.03. OTHER SPECIALLY ALLOCATED ITEMS.
(a) As of the end of each fiscal year of the Company and after giving
effect to the special allocations set forth in Section 9.04 and APPENDIX B, the
Return Interest of the Company for such fiscal year shall be allocated to the
Managing Member.
(b) From time to time, in its sole discretion, the Advisory Committee
may set off against the Excess Costs the unallocated pool amounts described in
Sections 4 and 5 of the GCC Investments, Inc. Incentive Pool Plan as adopted
effective November 1, 1996, as amended from time to time, and the Advisory
Committee in its sole discretion may make such adjustments to the allocations
made or to be made under this Article IX as it may determine to be necessary or
appropriate.
SECTION 9.04. LIMITATION ON LOSS ALLOCATIONS.
(a) If and to the extent that any allocation of Company items in the
nature of loss or expense to any Member would cause such Member's Capital
Account to be negative, then such item(s) shall be allocated first to the
Capital Accounts of the other Members in proportion to the positive balances in
their respective Capital Accounts until all such Capital Accounts are reduced to
zero, and then to the Capital Accounts of the Members in such proportions as the
Advisory Committee may determine. An allocation pursuant to this Section 9.04
shall be made only if and to the extent that such Member's Capital Account would
be negative after all allocations required by this Article IX have been made
tentatively as if this Section 9.04 and APPENDIX B were not included in this
Agreement.
(b) In the event that any special allocations of losses or expenses are
made pursuant to Section 9.04(a), items of gross Company income and gain from
subsequent periods shall be specially allocated to offset, to the extent
feasible and as promptly as possible, such special allocations of loss or
expense.
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SECTION 9.05. TIMING OF ALLOCATIONS.
(a) The Advisory Committee shall cause the allocations required by this
Agreement to be made no less frequently than as of the end of each fiscal year.
(b) With respect to gains and losses on distributions in kind, (i) any
Net Gain or Loss deemed to have been realized pursuant to Section 8.02 on a
distribution of property in kind shall be allocated, immediately prior to the
time such distribution is made, to and among the Members' Capital Accounts on
the same basis as an equivalent amount of Net Gain or Loss would be allocated
for a hypothetical fiscal year ending immediately prior to such distribution;
and (ii) for this purpose, there shall be taken into account any Net Gain or
Loss attributable to distributions in kind previously made during the fiscal
year but, for administrative convenience, there shall not be taken into account
other items of Company income, gain, loss or deduction realized or incurred
since the end of the prior fiscal year, except as provided in Section 9.05(c).
(c) The Advisory Committee may cause the Company to make the
allocations described in this Article IX (other than allocations for tax
purposes pursuant to Part 4 of APPENDIX B) at a time other than as of the end of
a fiscal year on the basis of an interim closing of the Company's books at such
time. In that event, each short fiscal period attributable to any such interim
closing shall constitute a fiscal year for purposes of this Article IX. In the
event that the Company sells, transfers or otherwise exchanges a Portfolio
Security during a fiscal quarter, and such sale, transfer or exchange would
cause such Portfolio Security to be treated as a Disposed Investment for
purposes of this Agreement, then the Managing Member shall make the allocations
described in Article IX (other than allocations for tax purposes pursuant to
Part 4 of APPENDIX B) as of the end of such fiscal quarter on the basis of an
interim closing of the Company's books at such time.
SECTION 9.06. ADVISORY NATURE OF ALLOCATIONS. The allocation provisions
contained in this Article IX and in APPENDIX B are advisory allocations only,
and shall have no effect on the amounts to be distributed to the Members
pursuant to the Agreement, whether in liquidation or otherwise. Accordingly, if
the Advisory Committee determines that in any fiscal year the allocations set
forth in this Article IX and in APPENDIX B do not satisfy the "economic effect
equivalence" test or the "partners' interest in the partnership" test and would
not otherwise be respected under the provisions of Section 704(b) of the Code,
then all items of Net Gain, Net Loss and other items of income, gain, loss,
deduction and credit shall be allocated to and among the Members so as to ensure
to the maximum extent possible (i) that such allocations satisfy the economic
effect equivalence test of Treasury Regulations Section 1.704-1(b)(2)(ii)(i) or
the partners interest in the partnership test of Treasury Regulations Section
1.704-(b)(3) and (ii) that all allocations of items that cannot have economic
effect are allocated to the Members in accordance with their interests in the
Company. Without limiting the foregoing, the economic effect equivalence test
may generally be satisfied by allocating items that can have economic effect so
that the balance of each Member's Capital Account at the end of any taxable year
would be equal to the amount of cash that the Member would receive (or would be
negative by the amount of cash that such Member would be required to contribute
to the Company) if the Company sold all of its property for an amount of cash
equal to the book value (as determined pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)) of such property, and all of the cash
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of the Company remaining after payment of all liabilities of the Company were
distributed in liquidation immediately following the end of such taxable year
pursuant to the Agreement. In the event that the Company incurs any liability,
claim or indebtedness that would constitute a "nonrecourse liability" within the
meaning of Section 704(b) of the Code and the Treasury Regulations promulgated
thereunder, the Advisory Committee may make such adjustments to the foregoing
allocation provisions as it may determine to be necessary or appropriate.
ARTICLE X
DISTRIBUTIONS
SECTION 10.01. AMOUNT, TIMING AND FORM.
(a) The Advisory Committee, after soliciting the recommendation of the
Managing Member, shall determine the amount, timing and form (including whether
such distribution shall be made in cash or in securities) of all distributions
made by the Company and the decision of the Advisory Committee shall be binding
upon the Members. Notwithstanding the foregoing, the Advisory Committee shall
cause the Company to distribute the net proceeds from the disposition of
Portfolio Securities within ten (10) days after the end of the fiscal quarter in
which such disposition occurs.
(b) Unless otherwise determined by the Advisory Committee, each class
of securities to be distributed in kind shall be distributed to the Members in
proportion to their respective shares of the proposed distribution as provided
in Section 10.02, except to the extent that a disproportionate distribution of
such securities is necessary in order to avoid distributing fractional shares.
For purposes of the preceding sentence, each lot of stock or other securities
having a separately identifiable tax basis or holding period shall be treated as
a separate class of securities.
(c) Notwithstanding anything to the contrary set forth herein, in the
event that the distribution of securities to any Member would result in the
recognition of gain by any Member under federal, state or local income tax laws,
the Advisory Committee, in its sole discretion, shall have the authority to make
such adjustments to the amounts distributable to the Members under this Article
X as it may deem to be necessary or appropriate, including but not limited to
causing the Company to refrain from making any distribution of securities to any
Member.
SECTION 10.02. DISTRIBUTIONS.
(a) Except as otherwise explicitly provided in this Agreement, all
distributions prior to the commencement of the liquidation of the Company's
assets pursuant to Article XII shall be made in accordance with this Section
10.02. All distributions made pursuant to, or referred to in, this Section 10.02
are referred to herein as "DISTRIBUTIONS."
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(b) First, Distributions shall be made to all Members in proportion to
their respective Priority Return Amounts until each Member has received
aggregate Distributions pursuant to this Section 10.02(b) equal to such Member's
Priority Return Amount;
(c) Second, Distributions shall be made to and among the Members until
each Member has received aggregate Distributions pursuant to this Section
10.02(c) and the proviso in the first sentence of Section 10.03(f) equal to such
Member's Distribution Preference;
(d) Third, Distributions shall be made to the Class A Member until the
Class A Member has received aggregate Distributions pursuant to this Section
10.02(d) and Section 10.03(f)(i) equal to the Class A Member's Make-Whole
Amount; and
(e) Thereafter, Distributions shall be made 80% to all Members in
proportion to their respective Contributions and 20% to the Managing Member.
(f) For purposes of Sections 10.02(b), (c), (d) and (e) hereof:
(i) If at any time the Managing Member is entitled to a larger
distribution than it would otherwise be entitled in order to achieve
the result required by clause (2) of the proviso in Section 14.2(c) of
the GPLLC Agreement, then the distribution to the Class A Member shall
be reduced proportionately and the aggregate amount of such reductions
from time to time is referred to herein as the "Distribution
Deficiency."
(ii) All Distributions made to any Member's predecessors in
interest shall be treated as having been made to such Member;
(iii) In calculating the amount of any Distribution to be made
pursuant to Section 10.02(b), (c), (d) or (e), amounts to be
distributed contemporaneously pursuant to an earlier clause (e.g.,
Section 10.02(b)) shall be taken into account in determining the
amounts distributable with respect to each later clause (e.g., Section
10.02(c)) as if such amounts had actually been distributed pursuant to
the earlier clause before the amounts distributable pursuant to the
later clause are determined;
(iv) As of the date that any Distribution is to be made "20%
to the Managing Member" pursuant to Section 10.02(e), the "Applicable
Percentage" of the aggregate amount of such Distribution shall be
retained by the Company and later distributed to the Managing Member
pursuant to the terms of Section 10.03(a) hereof (the aggregate amounts
so retained are referred to herein as the "UNALLOCATED AMOUNT");
(v) As of the date that any Distribution is to be made "20% to
the Managing Member" pursuant to Section 10.02(e), seventy percent of
the aggregate amount of such Distribution that is not part of the
Unallocated Amount (the "CASH COMPONENT") shall be retained by the
Company and distributed to the Managing Member pursuant to the terms of
Section 10.03(b) hereof; and
(vi) As of the date that any Distribution is to be made "20%
to the Managing Member" pursuant to Section 10.02(e), thirty percent of
the aggregate amount of such
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Distribution that is not part of the Unallocated Amount (the "STOCK
COMPONENT") shall be retained by the Company and distributed to the
Managing Member pursuant to the terms of Section 10.03(c) hereof.
SECTION 10.03. DISTRIBUTION LIMITATIONS. Notwithstanding anything to
the contrary contained in Section 10.02(e) or in any other provision of this
Agreement, as of the date that any Distribution is to be made "20% to the
Managing Member" pursuant to Section 10.02(e) (the "DISTRIBUTION DATE"), the
Company shall retain to the extent required by Section 10.02(f)(iv), (v) and
(vi), a portion of such Distribution and shall distribute the amount retained in
the manner set forth in this Section 10.03.
(a) From time to time, the Advisory Committee may apply against the
Unallocated Amount (i) any Distribution Deficiency to the extent not previously
applied against the Unallocated Amount, plus (ii) 20% of the sum of the
following: (A) Excess Management Fee Payments; plus (B) the portion of the
Members' Contributions that is reflected in the Company's books as having been
used by the Company to acquire Portfolio Securities that are Disposed
Investments and which were disposed of by the Company for a value which was less
than the Cost of such Portfolio Securities, but only to the extent that the
amounts in clauses (A) and (B) have not been applied previously against the
Unallocated Amount, recovered pursuant to Distributions under Sections 10.02(b)
and (d), or set off by the Advisory Committee pursuant to Section 9.03(b) (the
foregoing amounts in clauses (i) and (ii) being referred to as the "Excess
Cost"). The amount so applied shall reduce the Unallocated Amount as follows:
First, against any amount credited to the Unallocated Amount pursuant to Section
10.03(f) plus interest accrued thereon; and Second, against the remainder of the
Unallocated Amount plus interest accrued thereon on a first-in, first-out basis,
and the amount applied against the remainder of the Unallocated Amount shall be
distributed to the Class A Member. Any funds plus interest accrued thereon
retained by the Company in the Unallocated Amount for more than five years,
other than funds credited to the Unallocated Amount pursuant to Section
10.03(f), shall be released from the Unallocated Amount and distributed to the
Managing Member within thirty days after the end of the fiscal quarter in which
such anniversary date occurs. Interest shall accrue on the Unallocated Amount at
the Class A Member's investment rate, as designated from time to time by the
Class A Member, and shall constitute Return Interest.
(b) The Cash Component of any Distribution shall be distributed to the
Managing Member in three annual installments beginning on the Distribution Date.
The first installment distributable to the Managing Member shall constitute 45%
of the total amount of the Cash Component. The second and third installments of
the Cash Component shall each constitute 27.5% of the total amount of the Cash
Component. The second and third annual installment of the Cash Component shall
include interest on the amount of such installment calculated at the Prime Rate
per annum from the Distribution Date, which interest shall constitute Return
Interest. Notwithstanding the foregoing, the Advisory Committee may reduce (but
not below 33.3%) or increase the amount of the first installments distributable
to the Managing Member if the Advisory Committee determines, after consulting
with the Company's tax advisors, that the federal, state and local income tax
liability of the members of the Managing Member on account of Net Gain allocated
to the Managing Member pursuant to Article IX with respect to such Distribution
(i) may be offset by previously allocated Net Loss which is carried forward from
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prior fiscal years or (ii) may be greater or lesser due to changes in federal,
state or local tax rates. One-half of the amount of any such reduction or
increase shall be reflected in the second installment of the Cash Component and
the other one-half shall be reflected in the third installment of the Cash
Component.
(c) The Stock Component of any Distribution shall be distributed to the
Managing Member in five equal annual installments beginning on the Distribution
Date. Upon the distribution of each such installment, GCX shall have the right
to require the Managing Member to use the entire amount of such installment to
purchase on that date common stock of GCX, as provided in the Put Agreement
attached as SCHEDULE B.
(d) Any amounts retained by the Company pursuant to Section 10.03(a),
(b) and (c) which have not been distributed after the liquidation of the Company
pursuant to this Agreement shall be immediately released to the Managing Member;
provided, however, that the Managing Member has not been required to withdraw as
the Managing Member for Cause pursuant to Article XIV.
(e) At the election of the Class A Member, the Company shall make
available an advance to a designated Affiliate of the Class A Member that
portion of the Unallocated Amount, the Cash Component and the Stock Component
not distributed to the Managing Member as the Class A Member may specify. Any
such advance shall be repaid to the Company, with interest (i) on the Cash
Component calculated at the Prime Rate per annum, and (ii) on any Unallocated
Amount, calculated at the Class A Member's investment rate, as designated from
time to time by the Class A Member, and the amount of such interest shall be
applied against and reduce interest accruing pursuant to Section 10.03(a) and
(b). No interest shall be payable by the designated Affiliate of the Class A
Member on the portion of an advance that corresponds to the Stock Component of
any Distribution.
(f) If the interest of a member of the Managing Member is converted
into a "retired member" interest under the GPLLC Agreement resulting in the
forfeiture of certain distributions to which such member would otherwise have
been entitled under the provisions of the GPLLC Agreement but for the provisions
of Section 10.02(f)(iv), (v) and (vi) hereof, then the amount of such forfeited
distributions shall be distributed as follows: (i) First, to the Class A Member
in the event that, at such time, the Class A Member has not received
distributions pursuant to Section 10.02(d) hereof equal to its Make-Whole
Amount, in an amount equal to such shortfall; and (ii) Second, the remainder
shall be distributed to the Class A Member, and any amount so distributed
pursuant to this clause Second shall be credited to the Unallocated Amount;
provided, however, that if the interest of a member of the Managing Member is
converted into a "retired member" interest pursuant to Section 14.2(c)(i) of the
GPLLC Agreement due to the voluntary retirement of such member after the date
which is five years but prior to the date which is twelve years after such
member's admission as a member of the Managing Member, then the amount of such
forfeited distributions shall be distributed to all Members pursuant to Section
10.02(c) and in accordance with the provisions of Section 10.01 until each
Member has received aggregate Distributions pursuant to Section 10.02(c) and
this proviso equal such Member's Distribution Preference and, thereafter, to all
Members in proportion to their respective Contributions, and the amount
distributed to each Member in proportion to its Contribution shall be credited
to, and
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shall reduce the amount of, such Member's Distribution Preference which accrues
from time to time thereafter. Notwithstanding the foregoing, upon the
recommendation of the Managing Member, the Advisory Committee may determine to
distribute any such forfeited distributions to the Managing Member. The Managing
Member, at the direction of the Advisory Committee, shall make such adjustments
to the allocation of Net Gain, Net Loss and gross items of income, gain, loss,
deduction and credit as the Advisory Committee may determine to be necessary to
reflect the economic agreement of the Members set forth in this Section
10.03(f).
(g) If a Distribution relates to a Portfolio Company which had an
initial public offering of its securities after the Company's initial investment
in such Portfolio Company, then the date of each installment under Sections
10.03(b) and 10.03(c) with respect to such Distribution, other than the initial
installment of such Distribution, shall be an anniversary date of such initial
public offering commencing with the anniversary date following the date on which
the securities of such Portfolio Company are disposed of or distributed in kind
by the Company.
SECTION 10.04. TAX WITHHOLDING.
(a) If the Company incurs any obligation to pay any amount in respect
of taxes (including withholding taxes and any interest, penalties or additions
to tax) imposed on income of or distributions made to any Member or former
Member, any amount so required to be paid by the Company with respect to such
Person shall be treated for all purposes of this Agreement as if it had been
loaned to such Person, and the Managing Member shall cause the Company to give
prompt written notice to such Person of the date and amount of such loan.
(b) Each Member covenants, for itself, its successors, assigns, heirs
and personal representatives, that such Person shall pay to the Company at any
time after notice of the loan has been given, but not later than thirty (30)
days after the Company delivers a written demand to such Person for such
repayment (which demand may be made at any time prior to or after the
dissolution of the Company or the Managing Member or the withdrawal of such
Person or its predecessors from the Company); provided, however, that if any
such repayment is not made within such thirty (30) day period:
(i) Such Person shall pay interest to the Company at the
Short-Term T-▇▇▇▇ Rate for the entire period commencing on the date on
which the Company paid such amount and ending on the date on which such
Person repays such amount to the Company together with all accrued but
previously unpaid interest; and
(ii) The Company, at the discretion of the Managing Member,
shall (1) collect such unpaid amounts (including interest) from any
Company distributions that otherwise would be made to such Person
and/or (2) subtract from the Capital Account of such Person, no later
than the day prior to the Company's initial liquidating distribution,
any such unpaid amounts (plus unpaid interest) not so collected, in
each case treating the amount so collected or subtracted as having been
distributed to such Person at the time of such collection or
subtraction.
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(iii) For purposes of this Agreement, any interest paid by a
Member to the Company pursuant to Section 10.04(b)(i) shall not be
included in "NET GAIN OR LOSS" as defined hereunder, and shall instead
be allocated to and among the other Members in proportion to their
respective Contributions. No such interest shall increase the Capital
Account or the Contributions of the paying Member for any purpose.
(c) For purposes of this Section 10.04, any tax withholding obligation
incurred by the Managing Member with respect to any Member shall constitute a
Company obligation.
SECTION 10.05. CERTAIN DISTRIBUTIONS PROHIBITED. Anything in this
Article X to the contrary notwithstanding, no distribution shall be made to any
Member if, and to the extent that such distribution would not be permitted under
Section 18-607(a) of the Delaware Act.
ARTICLE XI
DURATION OF THE COMPANY
SECTION 11.01. TERM OF COMPANY. The Company shall continue until the
date that is twenty (20) years after the date hereof, unless it is sooner
dissolved as provided in Section 11.02 or by operation of law.
SECTION 11.02. DISSOLUTION. The Company shall be dissolved:
(a) in the event of the bankruptcy, dissolution or withdrawal of the
Managing Member, unless the Class A Member agrees to continue the Company and
elect a replacement for the Managing Member within ninety (90) days after such
event; or
(b) upon the written notice of the Class A Member.
ARTICLE XII
LIQUIDATION OF THE COMPANY
SECTION 12.01. GENERAL PROVISIONS. At dissolution, the Company's assets
shall be liquidated in an orderly manner. The Managing Member shall be the
liquidator to wind up the affairs of the Company pursuant to this Agreement;
provided that the Class A Member may designate one or more other Persons to act
as the liquidator(s) instead of the Managing Member. Any such liquidator(s),
other than the Managing Member, shall be a "liquidating trustee" within the
meaning of Section 18-101(9) of the Delaware Act.
SECTION 12.02. LIQUIDATING DISTRIBUTIONS. The liquidator(s) shall pay
or provide for the satisfaction of the Company's liabilities and obligations to
creditors. Any Net Gain or Loss, and other items in the nature of income, gain,
loss, deduction and credit realized in connection with the liquidation of the
Company shall be allocated among the Members pursuant to
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Article IX, and the remaining assets of the Company shall then be distributed to
the Members in cash (to the extent feasible) or in kind in the manner described
in Article X, subject to any adjustments to the amounts distributable to the
Managing Member pursuant to Article XIV. In performing their duties, the
liquidator(s) shall be authorized to sell, exchange or otherwise dispose of the
assets of the Company in such reasonable manner as the liquidator(s) shall
determine to be in the best interest of the Members. During the liquidation of
the Company, the liquidator(s) shall furnish to the Members the financial
statements and other information specified in Article XVII.
SECTION 12.03. EXPENSES OF LIQUIDATOR(S). The expenses incurred by the
liquidator(s) in connection with winding up the Company, all other losses or
liabilities of the Company incurred in accordance with the terms of this
Agreement, and reasonable compensation for the services of the liquidator(s)
(which, with respect to any liquidator who is a Managing Member, shall be paid
only if the Managing Member is not also receiving the management fee pursuant to
the terms of the Management Agreement) shall be borne by the Company.
SECTION 12.04. DURATION OF LIQUIDATION. A reasonable time shall be
allowed for the winding up of the affairs of the Company in order to minimize
any losses otherwise attendant upon such a winding up. The liquidator(s) shall
use its best efforts to dispose of or distribute all Company assets within one
year of dissolution, but shall not be bound to do so or liable in any way to any
Member for failure to do so. The liquidator(s) shall then make final liquidating
distributions from the Company on or before the later of (a) the end of the
taxable year in which the date of liquidation of the Company occurs, or (b)
ninety (90) days after the date of the liquidation of the Company. For this
purpose, (1) the date of the liquidation of the Company shall be the date on
which the Company has ceased to be a going concern, and (2) the Company shall
not be deemed to have ceased to be a going concern until it has sold,
distributed or otherwise disposed of its Portfolio Securities.
SECTION 12.05. DUTY OF CARE. The liquidator(s) shall not be liable to
the Company or any Member for any loss attributable to any act or omission of
the liquidator(s) taken in good faith in connection with the liquidation of the
Company and distribution of its assets in the belief that such course of conduct
was in the best interest of the Company. The liquidator(s) may consult with
counsel and accountants with respect to liquidating the Company and distributing
its assets and shall be justified in acting or omitting to act in accordance
with the advice or opinion of such counsel or accountants, provided they shall
have been selected with reasonable care.
SECTION 12.06. NO LIABILITY FOR RETURN OF CAPITAL. The liquidator(s),
the Managing Member and their respective officers, directors, agents, partners,
members and Affiliates shall not be personally liable for the return of the
capital contributions of any Member to the Company. Neither the Managing Member
nor the Class A Member shall be obligated to restore to the Company any amount
with respect to a negative Capital Account; PROVIDED, HOWEVER, that the
foregoing shall not affect the obligation of any Member to make such Member's
agreed upon capital contributions to the Company.
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ARTICLE XIII
LIMITATION ON TRANSFERS OF INTEREST OF CLASS A MEMBER
SECTION 13.01. TRANSFERS OF CLASS A MEMBERSHIP INTEREST. Subject to all
of the terms, conditions, restrictions and obligations set forth in this
Agreement, the Class A Member may Transfer all or any part of its membership
interest in the Company to any Affiliate of the Class A Member or to another
Person. Each Transfer shall be evidenced by a written agreement that is executed
by the transferor and the transferee(s).
SECTION 13.02. PUBLICLY TRADED PARTNERSHIP PROVISIONS.
In order to permit the Company to qualify for the benefit of a "safe
harbor" under Section 7704 of the Code, the Managing Member shall not cause or
permit any offering of membership interests in the Company to be registered
under the Securities Act or to become "traded on an established securities
market," and shall not recognize any Transfer that, to the Managing Member's
knowledge after reasonable inquiry, would otherwise be accomplished by a trade
on a "secondary market (or the substantial equivalent thereof)," in each case
within the meaning of Sections 7704 or 469(k) of the Code and the applicable
Treasury Regulations.
SECTION 13.03. OTHER PROHIBITED LEGAL CONSEQUENCES. No Transfer shall
be permitted, and the Managing Member shall not recognize any Transfer, if such
Transfer would:
(a) Result in a violation of the Securities Act;
(b) Require the Company to register as an investment company under the
U.S. Investment Company Act of 1940, as amended;
(c) Require the Managing Member to register as an investment adviser
under the U.S. Investment Advisers Act of 1940, as amended;
(d) Result in the Company being classified for U.S. federal income tax
purposes as an association taxable as a corporation; or
(e) Result in the Company being subject to U.S. federal income tax at
the entity level under Section 7704 of the Code.
SECTION 13.04. ADMISSION OF SUBSTITUTED CLASS A MEMBERS.
(a) Any transferee of a Company membership interest transferred in
accordance with the provisions of this Article XIII shall be admitted as a
substituted Class A Member.
(b) The transferee of a membership interest in the Company transferred
pursuant to Article XIII that is admitted to the Company as a substituted Class
A Member shall succeed to the rights and liabilities of the transferor Class A
Member and, after the effective date of such
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admission, the Contribution and Capital Account of the transferor shall become
the Contribution and Capital Account, respectively, of the transferee, to the
extent of the membership interest transferred.
SECTION 13.05. COVENANTS OF CLASS A MEMBER. The Class A Member agrees
that it will not make any Transfer of all or any part of its membership interest
in the Company except in accordance with the provisions of this Article XIII.
ARTICLE XIV
NO WITHDRAWAL OF COMPANY MEMBERSHIP INTERESTS
SECTION 14.01. NO WITHDRAWAL OF COMPANY MEMBERSHIP INTERESTS. No Member
shall have the right to withdraw its capital and profits from the Company.
SECTION 14.02. WITHDRAWAL OF THE MANAGING MEMBER.
(a) The Managing Member may be removed as the Managing Member hereof,
for Cause or Without Cause, by the Class A Member upon five (5) days' prior
written notice delivered to the Managing Member, and shall be so removed Without
Cause by the Class A Member if there is a Change in Control. Upon a proper
removal of the Managing Member (A) the Managing Member shall cease to be the
Managing Member of the Company, (B) the Class A Member shall be entitled to
appoint a new Managing Member (upon such terms and conditions as the Class A
Member and the new Managing Member may negotiate), (C) subject to Section
14.02(b), the Managing Member shall be deemed to be a Retired Member for all
purposes of this Agreement and (D) the Retired Member shall not have any further
obligation to make capital contributions to the Company pursuant to Section
7.01(b), but shall continue to be entitled to allocations and distributions
pursuant to Article IX and X in respect of its capital contributions to the
Company;
(b) (i) in the event that the Managing Member's interest in the Company
is converted into a Retired Member interest under this Section 14.02, the Class
A Member, in its sole and unreviewable discretion, shall adjust subsequent
allocations of items of Net Gain and Net Loss and gross items of income, gain,
loss, deduction and credit in its discretion as it determines to be necessary to
reflect the economic agreement among the Members concerning the consequences of
such removal;
(ii) the holder of a Retired Member interest shall continue to
be treated as a Member for purposes of this Agreement, but shall take no part in
the management, policy or control of the Company and shall have no power or
authority to undertake any activities on behalf of the Company or to sign for or
to bind the Company. A Retired Member shall be bound by the terms of this
Agreement and by any action taken by the Class A Member and the new Managing
Member. A Retired Member shall not participate in any consent or vote of the
Members pursuant to this Agreement;
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(iii) if the Managing Member's interest is converted into a
Retired Member's interest Without Cause (other than as described in clause (iv)
below), (1) the Unallocated Amount, the Cash Component and the Stock Component
of any Distribution then retained by the Company pursuant to Section 10.02 shall
immediately be distributed to the Retired Member, and (2) solely with respect to
Portfolio Securities held by the Company as of the date that such Managing
Member becomes a Retired Member, the Retired Member shall be treated as the
"Managing Member" of the Company (with the provisions of Section 14.02(b)(ii)
remaining applicable to the Retired Member for all other purposes) for the
one-year period following the date that such Member becomes a Retired Member,
the Retired Member shall be entitled to Distributions pursuant to Section 10.02
as if the Retired Member were the "Managing Member" hereunder for such one-year
period, and the provisions of this Agreement concerning Distributions retained
by the Company pursuant to Section 10.03 shall NOT apply to amounts otherwise
distributable pursuant to Section 10.02 to such Retired Member; and
(iv)(A) if the Managing Member's interest is converted into a
Retired Member's interest Without Cause and concurrently therewith the Board of
Directors of GCX affirmatively resolves to wind down the private equity
investment activities of GCX, (1) the Cash Component and the Stock Component
(but not the Unallocated Amount) of any Distribution then retained by the
Company pursuant to Section 10.02 shall immediately be distributed to the
Retired Member, and (2) the Retired Member shall be treated as the "Managing
Member" of the Company (with the provisions of Section 14.02(b)(ii) remaining
applicable to the Retired Member for all other purposes), the Retired Member
shall be entitled to Distributions pursuant to Section 10.02 as if the Retired
Member were the "Managing Member" hereunder, and the provisions of this
Agreement concerning Distributions retained by the Company pursuant to Section
10.03 SHALL apply to amounts otherwise distributable pursuant to Section 10.02
to such Retired Member.
(B) if the interest of a member of the Managing Member is
converted into a "retired member" interest under the GPLLC Agreement at any time
after the Managing Member's interest is converted into a Retired Member's
interest as described in clause (iv)(A) above, resulting in the forfeiture of
certain distributions to which such member would otherwise have been entitled
under the provisions of the GPLLC Agreement but for the provisions of Section
10.02(f)(iv), then the amount of such forfeited distributions shall be retained
or distributed as follows: (i) First, such forfeited distributions shall be
retained by the Company to pay for the current expenses and reasonably
anticipated future expenses of the Company; and (ii) Second, such forfeited
distributions shall be distributed to the Managing Member at such times as
provided in Section 10.03(a).
(C) all Company expenses (including any compensation,
fixed or performance based, to be paid to the new Managing Member, if any)
incurred after the Managing Member's interest is converted into a Retired
Member's interest as described in clause (iv)(A) above, shall be applied as
follows: (i) First, against forfeited distributions as provided in clause
(iv)(B) above; (ii) Second, against the Unallocated Amount pursuant to the
provisions of Section 10.03(a), and the amount so applied shall be deemed to be
"Excess Costs"; and (iii) Third, against future gains and, for that purpose
(including for purposes of determining the timing of such application), the
amount so applied shall be included in the "Make-Whole Amount."
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(v) if the Managing Member's interest is converted into a
Retired Member's interest for Cause, the Managing Member shall forfeit the
Unallocated Amount, the Cash Component and the Stock Component of any
Distribution then retained by the Company pursuant to Section 10.02, and such
amounts shall instead be distributed to the Class A Member.
ARTICLE XV
NO TRANSFER OF MEMBERSHIP INTEREST OF THE MANAGING MEMBER
SECTION 15.01. NO TRANSFER OF MEMBERSHIP INTEREST OF THE MANAGING
MEMBER. The Managing Member shall not assign, pledge, mortgage, hypothecate,
sell or otherwise dispose of or encumber all or any part of its membership
interest. Any attempted transfer of the Managing Member's interest shall be
void.
ARTICLE XVI
INDEMNIFICATION
SECTION 16.01. GENERAL PROVISIONS. The Managing Member, its members
(including but not limited to each Principal), officers, employees and agents,
each member of the Advisory Committee, and the Class A Member (each such Person
being referred to herein as an "INDEMNITEE") shall be indemnified by the Company
(only out of Company assets, including the proceeds of liability insurance)
against any claim, demand, controversy, dispute, cost, loss, damage, expense
(including attorneys' fees), judgment and/or liability incurred by or imposed
upon the Indemnitee in connection with any action, suit or proceeding (including
any proceeding before any administrative or legislative body or agency) to which
the Indemnitee may be a party or otherwise involved, or with which the
Indemnitee may be threatened, by reason of the Indemnitee's being at the time
the cause of action arose or thereafter, the Managing Member, a member,
director, officer, employee, consultant or other agent of the Managing Member, a
member of the Advisory Committee, or the Class A Member, or an Affiliate of any
of the foregoing, or a director, officer, partner, employee, consultant or other
agent of any other organization in which the Company owns or has owned an
interest or of which the Company is or has been a creditor, which other
organization the Indemnitee serves or has served as director, officer, partner,
employee, consultant or other agent at the request of the Company (whether or
not the Indemnitee continues to serve in such capacity at the time such action,
suit or proceeding is brought or threatened), except with respect to matters
which result in the Indemnitee being enjoined from future violations of federal
or state securities laws or as to which the Indemnitee shall have been finally
adjudicated in any such action, suit or proceeding (a) not to have acted in good
faith or to have acted with gross negligence or a willful disregard of his
duties, or in breach of his fiduciary obligations, or (b) with respect to any
criminal action or proceeding, not to have had reasonable cause to believe that
the Indemnitee's conduct was lawful. In the event of a settlement in connection
with any action, suit or proceeding, such indemnification shall apply to all
matters covered by the settlement except for matters as to which the Company is
advised by independent counsel (chosen by the Managing Member and approved by
the Advisory
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Committee), that in the opinion of such counsel the person seeking
indemnification did not act in good faith or acted with gross negligence or
willful disregard of his duties. Each Indemnitee shall be entitled to
indemnification pursuant to this Article XVI notwithstanding that the Company
has sold, assigned, distributed or otherwise transferred its entire interest in
such other organization prior to the time that such action, suit or proceeding
is brought or threatened. The foregoing right of indemnification shall be in
addition to any rights to which any Indemnitee may otherwise be entitled. The
foregoing right of indemnification shall inure to the benefit of the executors,
administrators, personal representatives, successors or assigns of each such
Indemnitee.
SECTION 16.02. ADVANCE PAYMENT OF EXPENSES. The Company shall pay the
expenses incurred by an Indemnitee in defending a civil or criminal action, suit
or proceeding, or in opposing any claim arising in connection with any potential
or threatened civil or criminal action, suit or proceeding, in advance of the
final disposition of such action, suit or proceeding, upon receipt of an
enforceable undertaking by such Indemnitee to repay such payment if he shall be
determined to be not entitled to indemnification therefor as provided herein;
PROVIDED, HOWEVER, that in such instance the Indemnitee is not defending an
action, suit or proceeding commenced against him by the Company or opposing a
claim by the Company arising in connection with any such potential or threatened
action, suit or proceeding.
SECTION 16.03. LIMITATION BY LAW. If the Managing Member or the Company
is subject to any federal or state law, rule or regulation which restricts the
extent to which any person may be exonerated or indemnified by the Company, then
the indemnification provisions set forth in this Article XVI and the exoneration
provisions set forth in Sections 3.07, 6.06 and 12.05 shall be deemed to be
amended, automatically and without further action by the Managing Member or the
Class A Member, to conform to such restrictions on exoneration or
indemnification as set forth in such applicable federal or state law, rule or
regulation. The rights to indemnification and advancement of expenses conferred
in this Article XVI shall not be exclusive of any other right which any
Indemnitee may have or hereafter acquire under any law, statute, rule,
regulation, charter document, by-law, contract or agreement.
ARTICLE XVII
ACCOUNTING; RECORDS AND REPORTS; ANNUAL MEETINGS
SECTION 17.01. FISCAL YEAR; TAX ELECTIONS. The fiscal year of the
Company shall be the year ending October 31, or such other year as is required
by Section 706 of the Code. Without the consent of the Advisory Committee, the
Managing Member shall not make any elections under tax or other applicable laws
on behalf of the Company or the Members. Upon the request of the Class A Member,
the Managing Member shall make (or shall cause the Company to make) any filings,
applications or elections required to be made by the Company or the Managing
Member in order to obtain any available exemption from, or any available refund
of, any withholding or similar taxes imposed by any taxing authority with
respect to amounts distributable to the Members or items of income allocable to
the Members under this Agreement.
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SECTION 17.02. KEEPING OF ACCOUNTS AND RECORDS. At all times the
Managing Member shall cause to be kept proper and complete books of account, in
which shall be entered fully and accurately the transactions of the Company. The
Managing Member shall at all times keep such books of account in the manner
directed by the Advisory Committee, and shall not make any changes to any method
of accounting with respect to any item without the consent of the Advisory
Committee. Such books of account (which shall be kept on the accrual method of
accounting), together with (a) an executed copy of this Agreement (and any
amendments hereto); (b) the Certificate of Formation of the Company (and any
amendments thereto); (c) executed copies of any powers of attorney pursuant to
which any certificate has been executed by the Company; (d) a current list of
the full name, taxpayer identification number and last known address of each
Member; (e) copies of all tax returns, if any, filed by the Company; and (f) all
financial statements of the Company, shall at all times be maintained at the
principal office of the Company.
SECTION 17.03. INSPECTION RIGHTS. At any time while the Company
continues and until its complete liquidation, each Member (or the designee
thereof) may fully examine and audit the Company's books, records, accounts and
assets, including bank balances, and may make, or cause to be made, any
examination or audit at such Member's expense. The Class A Member (or the
designee thereof) may examine, or request that the Managing Member furnish, such
additional information as is reasonably necessary to enable the requesting
Member (or the designee thereof) to review the state of the activities of the
Company. The Managing Member shall not have the benefit of the confidential
information provisions of Section 18-305(b) of the Delaware Act.
SECTION 17.04. INDEPENDENT ACCOUNTANTS. The Company's independent
public accountants shall be a nationally recognized independent public
accounting firm selected by the Advisory Committee. The Managing Member may
change accounting firms to another such firm at any time with the consent of the
Advisory Committee.
ARTICLE XVIII
WAIVER AND AMENDMENT
SECTION 18.01. WAIVER AND AMENDMENT. Except as otherwise provided in
this Agreement, the terms and provisions of this Agreement may be waived,
modified, terminated or amended with the written consent of the Managing Member
and the Class A Member. The Managing Member shall promptly furnish copies of any
amendments to this Agreement to all Members.
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ARTICLE XIX
GENERAL PROVISIONS
SECTION 19.01. NOTICES. Except where otherwise specifically provided in
this Agreement, all notices, requests, consents, approvals and statements shall
be in writing and shall be deemed to have been properly given by personal
delivery or if mailed from within the country of the sender by air mail, postage
prepaid, or if sent by prepaid telegram, electronic facsimile transmission or
telex, or if sent by courier service, addressed in each case, if to the Company
or to any Member, at its address set forth in SCHEDULE A, or, in each case, to
such other address or addresses as the addressee may have specified by written
notice as aforesaid to the other parties.
SECTION 19.02. ADDITIONAL DOCUMENTS. Each Member hereby agrees to
execute all certificates, counterparts, amendments, instruments or documents
that may be required by the laws of the various jurisdictions in which the
Company conducts its activities, to conform with the laws of such jurisdictions
governing limited liability companies.
SECTION 19.03. BINDING ON SUCCESSORS. This Agreement shall be binding
upon and it shall inure to the benefit of the respective heirs, successors,
assigns and legal representatives of the parties hereto.
SECTION 19.04. COUNTERPARTS. This Agreement or any amendment hereto may
be signed in any number of counterparts, each of which shall be an original, but
all of which taken together shall constitute one agreement (or amendment, as the
case may be).
SECTION 19.05. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 19.06. SECURITIES ACT MATTERS. Each Member understands that in
addition to the restrictions on transfer contained in this Agreement, it must
bear the economic risks of its investment for an indefinite period because the
Company interests have not been registered under the Securities Act and,
therefore, may not be sold or otherwise transferred unless they are registered
under the Securities Act or an exemption from such registration is available.
Each Member agrees with all other Members that it will not sell or otherwise
transfer its interest in the Company unless such interest has been so registered
or in the opinion of counsel for the Company, or of other counsel reasonably
satisfactory to the Company, such an exemption is available.
SECTION 19.07. RIGHT TO RELY ON AUTHORITY OF MANAGING MEMBER. No Person
that is not a Member, in dealing with the Managing Member, shall be required to
determine such Managing Member's authority to make any commitment or engage in
any undertaking on behalf of the Company, or to determine any fact or
circumstance bearing upon the existence of the authority of the Managing Member.
SECTION 19.08. TAX MATTERS PARTNER. The "tax matters partner," as
defined in Section 6231 of the Code, of the Company shall be the Class A Member
(the "TAX MATTERS
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PARTNER"). The Tax Matters Partner shall not resign as tax matters partner of
the Company unless, on the effective date of such resignation, the Company has
designated another Member as Tax Matters Partner and that Member has given its
consent in writing to its appointment as Tax Matters Partner. The Tax Matters
Partner shall receive no additional compensation from the Company for its
services in that capacity, but all reasonable expenses incurred by the Tax
Matters Partner in its capacity as such shall be borne by the Company. The Tax
Matters Partner is authorized to employ such accountants, attorneys and agents
as it, in its sole discretion, determines are necessary to or useful in the
performance of its duties. If the Class A Member is not eligible to serve as the
Tax Matters Partner under applicable law, then the Managing Member shall be the
Tax Matters Partner, but in that event the Managing Member shall consult with
the Class A Member, and shall obtain the Class A Member's advance consent, in
connection with any action the Managing Member proposes to take as Tax Matters
Partner. Any Person who serves as Tax Matters Partner shall not be liable to the
Company or to any Member for any action it takes or fails to take as Tax Matters
Partner with respect to any administrative or judicial proceeding involving
"Partnership items" (as defined in Section 6231 of the Code) of the Company,
unless such action or failure to act constitutes a violation of the duty of care
standards set forth in Section 3.07.
SECTION 19.09. CONTRACT CONSTRUCTION. Whenever the content of this
Agreement permits, the masculine gender shall include the feminine and neuter
genders, and reference to singular or plural shall be interchangeable with the
other. The invalidity or unenforceability of any one or more provisions of this
Agreement shall not affect the other provisions, and this Agreement shall be
construed in all respects as if any such invalid or unenforceable provision(s)
were omitted. References in this Agreement to particular sections of the Code or
to provisions of Delaware law shall be deemed to refer to such sections or
provisions as they may be amended after the date of this Agreement.
SECTION 19.10. SECTION HEADINGS. Captions in this Agreement are for
convenience only and do not define or limit any term of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Limited
Liability Company Agreement of GCC Investments, LLC as of the day, month and
year first above written.
MANAGING MEMBER:
CHESTNUT HILL CAPITAL PARTNERS, LLC
By: _____________________________
Senior Manager
CLASS A MEMBER:
CHESTNUT HILL RE, INC.
By: _____________________________
Name: ___________________________
Title: __________________________
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APPENDIX A
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DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meanings set forth below (such meanings to be equally applicable to both
singular and plural forms of the terms so defined). Additional defined terms are
set forth in the Sections of this Agreement to which they relate.
"ADDITIONAL CAPITAL CONTRIBUTIONS" shall have the meaning set forth in
Section 7.01(b).
"ADVISORY COMMITTEE" means the committee formed and operating pursuant
to Article VI.
"AFFILIATE" means, with respect to the Person to which it refers, a
Person that directly or indirectly through one or more intermediaries, controls
or is controlled by, or is under common control with, such subject Person. For
this purpose, each member of the immediate family of any Person who is an
individual, or trust for the benefit of such Person or such Person's immediate
family, (including with respect to a Principal, such Principal's spouse,
parents, grandparents, siblings and lineal descendants) shall be deemed to be an
Affiliate of such Person.
"AGGREGATE PREFERRED RETURN ACCRUAL" means, with respect to any Member,
the sum of such Member's Preferred Return Accruals for each fiscal period (and
partial fiscal period) from the inception of the Company through the end of such
fiscal period.
"ALLOCATED POOL" means the total points, up to 100, allocated to
members of the Managing Member by the Class A Member, from time to time in its
sole and absolute discretion, after consulting with the Managing Member. The
Allocated Pool shall not exceed 90 unless otherwise requested by the Managing
Member and approved by the Class A Member. The initial Allocated Pool shall
equal 80 points. No member of the Managing Member admitted to the Managing
Member after the date hereof shall have an initial allocation of points in
excess of 25; provided that such allocation may be increased to more than 25
points thereafter by the Advisory Committee. If the points to be allocated to a
new member of the Managing Member would cause the total points allocated to
exceed 90, or 100 if determined by the Advisory Committee, then the current
members shall forfeit an amount equal to the excess on a pro-rata basis or on
such other basis as is determined by the Advisory Committee.
"APPLICABLE PERCENTAGE" means 100 minus the Allocated Pool, stated as a
percentage.
"CAPITAL ACCOUNT" shall have the meaning set forth in Section 8.01.
"CASH COMPONENT" shall have the meaning set forth in Section
10.02(f)(v).
"CAUSE" shall mean that the Managing Member: (a) committed fraud in
respect of any matter involving the Company in any respect whatsoever; (b)
breached this Agreement, the
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Management Agreement or any other contract with, or other obligation to, the
Company, the Class A Member or an Affiliate of the Class A Member; (c)
misappropriated an asset or assets of the Company, whether tangible or
intangible; or (d) committed gross misconduct.
"CHAIRMAN" shall have the meaning set forth in Section 6.01.
"CHANGE IN CONTROL" shall be deemed to have occurred if, after the
occurrence of any of the events described in (a), (b) or (c) below, the capital
made available for investment to the Company by the Class A Member for any
fiscal year following such event falls below $50,000,000 or the total amount
under investment by the Company (determined by taking (1) the greater of the
Cost of all Portfolio Securities then held by the Company and (2) the Gross
Asset Values of all such Portfolio Securities, plus amounts available for
investment but not currently invested) falls below $200,000,000.
(a) Any "person" (as such term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Act")) becomes a
"beneficial owner" (as such term is defined in Rule 13d-3 promulgated under the
Act) (other than the ▇▇▇▇▇ Family Group (as described in the most recent proxy
statement filed by GCX with the Securities and Exchange Commission)) directly or
indirectly, of securities of GCX representing more than the greater of (i)
twenty percent (20%) of the combined voting power of GCX's then outstanding
securities or (ii) the percentage of the combined voting power of GCX's then
outstanding securities as to which the ▇▇▇▇▇ Family Group is the beneficial
owner; provided, however, that a "person" shall not be deemed to include two or
more persons who are acting as a group if such group is comprised of one or more
registered investment companies under the Investment Company Act of 1940, as
amended.
(b) The ▇▇▇▇▇ Family Group becomes the beneficial owner of less than
twenty percent (20%) of the combined voting power of GCX's then outstanding
securities.
(c) Persons who, as of November 1, 1996, constituted GCX's Board of
Directors (the "Incumbent Board") cease for any reason, including without
limitation as a result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board of Directors,
provided that any person becoming a director of GCX subsequent to November 1,
1996 whose nomination or election was approved by at least a majority of the
directors then comprising the Incumbent Board shall, for purposes of this Plan,
be considered a member of the Incumbent Board.
"CLASS A MEMBER" means Chestnut Hill Re, Inc.
"COMPANY" means GCC Investments, LLC, a limited liability company
organized under the laws of the State of Delaware.
"CONTRIBUTED SECURITIES" shall have the meaning set forth in Section
7.01(c).
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"CONTRIBUTED SECURITIES INTEREST" means the compounded annual rate of
return with respect to the Contributed Securities which has accrued prior to the
date of this Agreement, as determined by the Advisory Committee.
"CONTRIBUTION" means, with respect to any Member and at any time, the
aggregate amount of such Member's initial capital contribution pursuant to this
Agreement and any Additional Capital Contributions pursuant to this Agreement
made to the Company by such Member at or before such time pursuant to this
Agreement, either in cash or, as permitted under this Agreement, in Contributed
Securities (the amount of which shall be the Gross Asset Value of such
Contributed Securities). A Partner's Contribution shall not be reduced on
account of any distributions of capital to such Partner or for any other reason.
"COST" means, with respect to any asset held by the Company, the direct
cost to the Company of acquiring that asset (e.g., with respect to securities of
a Portfolio Company, the price paid by the Company to the issuer or holder of
such securities for those securities, determined without regard to any finders,
brokers or similar fees). If any of the assets of the Company consist of
Contributed Securities, which are treated pursuant to Section 7.01(c) hereof as
contributed to the Company at their respective Gross Asset Values (plus
Contributed Securities Interest), the Advisory Committee shall make such
adjustments to this definition of "Cost" as it may deem to be appropriate in
order to comply with the principles of Section 704(c) of the Code, Article V and
APPENDIX B hereof, and the economic agreement among the Members with respect to
such Contributed Securities.
"DELAWARE ACT" means the Delaware Limited Liability Company Act, as
amended from time to time.
"DISPOSED INVESTMENTS" means, as of any time of determination, all
Portfolio Securities that have been sold, distributed to the Members, written
off as worthless securities, or otherwise disposed of, in whole or in part, to
the extent so distributed or disposed of at or prior to the date of
determination; provided, however, that any exchange of any securities of a
Portfolio Company for other securities or property (other than cash or cash
equivalents) shall not constitute a disposition of the original securities. For
this purpose, the following events shall be treated as partial dispositions of
securities:
(a) Each principal payment (or portion thereof) on any security that
constitutes a debt instrument for federal income tax purposes shall be treated
as a disposition of a portion of such security that is equivalent on a
percentage basis to the portion of the original principal amount of such debt
instrument represented by such principal payment;
(b) In the event that the Company agrees to capitalize any interest
that is accrued but remains unpaid on any security that constitutes a debt
instrument for federal income tax purposes and to add such interest to
principal, the amount so capitalized shall be treated, solely for purposes of
determining whether payments subsequently made to the Company with respect to
such security constitute amounts to be treated as Distributions, as a follow-on
investment in the debt securities of the issuer, and any determination regarding
the extent to which subsequent payments made to the Company with respect to the
original or any such follow-on investment in
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debt securities is properly treated as a payment of principal shall be made in
accordance with federal income tax principles;
(c) Each payment (or portion thereof) made to the Company in redemption
of any security constituting stock for federal income tax purposes that is
treated for such purposes as a distribution in part or full payment in exchange
for such stock (rather than, for example, a dividend paid on such security)
shall be treated as a disposition of the portion of such security treated for
such purposes as having been exchanged;
(d) Any partial repurchase by the issuer and any lapse or other
termination of part of any security constituting an option or warrant for
federal income tax purposes shall be treated as a disposition of a portion of
such security that is equivalent on a percentage basis to the portion of the
Company's investment in such security (as reflected in the Company's financial
records maintained in accordance with federal income tax principles) represented
by the portion of such security that was repurchased, lapsed or terminated; and
(e) With respect to any portfolio investment that is subject to a Net
Write-Down, such portfolio investment shall be treated as a Disposed Investment
to the extent of such Net Write-Down while such Net Write-Down is in effect.
"DISTRIBUTION" shall have the meaning set forth in Section 10.02.
"DISTRIBUTION DATE" shall have the meaning set forth in Section 10.03.
"DISTRIBUTION DEFICIENCY" shall have the meaning set forth in Section
10.02(f)(i).
"DISTRIBUTION PREFERENCE" means, with respect to any Member and at any
time, an amount which, if distributed to such Member at such time, would cause
the aggregate amount of distributions made to such Member and such Member's
predecessors in interest by the Company pursuant to Section 10.02(c)
(determined, with respect to distributions in kind, pursuant to 8.02) to equal
but not exceed an amount equal to such Member's (and any such predecessor's)
Aggregate Preferred Return Accrual as of such time to the extent attributable to
such Member's Contribution used by the Company to acquire Portfolio Investments
that, at such time, constitute Disposed Investments.
"EXCESS COSTS" shall have the meaning set forth in Section 10.03(a).
"EXCESS MANAGEMENT FEE PAYMENTS" shall have the meaning set forth in
the Management Agreement.
"GCX" means GC Companies, Inc.
"GPLLC AGREEMENT" means the limited liability company agreement of the
Managing Member, as amended from time to time.
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"GROSS ASSET VALUE" shall mean the fair market value of any asset of
the Company at any time, as determined in accordance with Section 6.04.
"INDEMNITEE" shall have the meaning set forth in Section 16.01.
"INTEREST RATE" shall mean that compounded annual rate of interest
selected by the Advisory Committee from time to time.
"ISSUANCE ITEMS" shall have the meaning set forth in APPENDIX B.
"MAKE-WHOLE AMOUNT" means the aggregate amount of Excess Management Fee
Payments, but only to the extent such Excess Management Fee Payments have not
been applied to reduce the Unallocated Amount. For purposes of the foregoing,
the amount deemed applied to reduce the Unallocated Amount shall equal the
actual amount applied against the Unallocated Amount pursuant to Section
10.03(a)(ii) divided by .20.
"MANAGEMENT AGREEMENT" shall have the meaning set forth in Section
5.01.
"MANAGEMENT FEE" shall have the meaning set forth in Section 5.01(a).
"MANAGING MEMBER" means Chestnut Hill Capital Partners, LLC, a limited
liability company organized under the laws of the state of Delaware.
"MEMBERS" means the Managing Member and the Class A Member.
"NET GAIN OR LOSS" means, with respect to any Company fiscal year, the
sum of the Company's:
(a) Net gain or loss attributable to the sale or exchange of Portfolio
Securities during such fiscal year;
(b) Net gain or loss deemed to have been realized by the Company,
pursuant to Section 8.02, on a distribution in kind during such fiscal year of
Portfolio Securities;
(c) Dividend and interest income for such fiscal year (if any) that is
attributable to investments in Portfolio Securities;
(d) Other items of income and gain for such fiscal year that are not
included in (a), (b) or (c), including any income exempt from federal income
tax; and
(e) A negative number equal to all Company losses for such fiscal year
not taken into account under clauses (a) or (b) above, and all expenses properly
chargeable to the Company for such fiscal year (whether deductible or
non-deductible and whether described in Section 705(a)(2)(B) of the Code,
treated as so described pursuant to Treasury Regulations Section
1.704-1(b)(2)(iv)(i), or otherwise).
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For this purpose, Net Gain or Loss shall be determined in accordance
with tax accounting principles rather than generally accepted accounting
principles, and the following items shall be disregarded:
(1) All items specially allocated pursuant to Sections 9.03 and 9.04 or
APPENDIX B; and
(2) Expenses required to be capitalized and included in the Company's
adjusted tax basis in any asset or which reduce the amount realized by the
Company on the disposition of any asset.
"NET WRITE-DOWN" means, as of any time, the sum of the amounts by which
any Portfolio Security that is not a Disposed Investment in its entirety has
been determined by the Company to have a Gross Asset Value which is less than
its Cost. Unless otherwise determined by the Advisory Committee, a Portfolio
Security which has been held by the Company for six years shall be written down
to its Gross Asset Value as determined pursuant to Article VI on the sixth
anniversary of the original date that such Portfolio Security was acquired by
the Company.
"PERSON" means any individual, general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association and the heirs, executors,
administrators, legal representatives, successors and assigns of such Person
where the context so admits.
"PORTFOLIO COMPANY" means any entity in which the Company has made an
investment in furtherance of its primary purposes as set forth in Section 2.03
(other than a temporary investment of the Company's idle funds pending the use
of those funds in furtherance of those primary purposes) or a successor in
interest to such entity.
"PORTFOLIO SECURITY" means any security of a Portfolio Company.
"PREFERENTIAL RETURN ALLOCATION" shall mean, with respect to any Member
and as of the end of any fiscal period such Member's Aggregate Preferred Return
Accrual determined as of the end of such fiscal period.
"PREFERRED RETURN ACCRUAL" shall mean, with respect to any Member and
as of the end of any fiscal period an amount (not less than zero) equal to such
Member's Return Base as of such time multiplied by the Interest Rate. A Member's
Preferred Return Accrual for any fiscal period consisting of less than a full
calendar year shall be determined by applying a daily convention to all
calculations hereunder, which shall be determined by the Advisory Committee in
its discretion.
"PRIME RATE" with respect to any fiscal period, shall mean the prime
rate for such fiscal period as designated by BankBoston (or any successor in
interest).
"PRINCIPAL" means any manager of the Managing Member for so long as
such Person is a manager of the Managing Member, and any other Person that
becomes a manager of the
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Managing Member after the date of this Agreement for so long as such Person is a
manager of the Managing Member.
"PRIORITY RETURN AMOUNT" shall mean, with respect to any Member and at
any time, an amount which, if distributed to such Member at such time, would
cause the aggregate amount of distributions made by the Company to such Member
and such Member's predecessors in interest from the inception of the Company
through such time pursuant to Section 10.02(b) to equal but not exceed that
portion of such Member's Contribution that, at or prior to the time of
determination, is reflected in the Company's books as having been used by the
Company to acquire any Portfolio Securities that, as of such time, are Disposed
Investments (including any investments that are subject to a Net Write Down as
provided for in clause (e) in the definition of "Disposed Investment"), but only
to the extent amounts used by the Company to acquire Portfolio Securities that
are Disposed Investments have not previously been applied to reduce the
Unallocated Amount. For purposes of the foregoing, the amount deemed applied to
reduce the Unallocated Amount shall equal the actual amount applied against the
Unallocated Amount pursuant to Section 10.03(a)(ii) divided by .20. Solely with
respect to the Class A Member and for purposes of this definition, the
Contribution of the Class A Member treated as having been used by the Company to
acquire Portfolio Securities shall include the aggregate amount of the
Contributed Securities Interest, apportioned among the Contributed Securities in
the manner set forth on SCHEDULE D. In no event shall the Members' aggregate
Priority Return Amounts exceed, at any time, their aggregate Contributions at
such time.
"PUT AGREEMENT" shall have the meaning set forth in Section 10.03.
"REGULATORY ALLOCATIONS" shall have the meaning set forth in APPENDIX
B.
"RETIRED MEMBER" shall have the meaning set forth in Section 14.02.
"RETURN BASE" shall mean, with respect to any Member and as of any
determination date, an amount equal to:
(a) with respect to the Class A Member only, the Contributed Securities
Interest; plus
(b) such Member's Return Base as of the end of the date preceding such
determination date;
(c) increased by --
(1) all contributions made by such Member to fund investments
in Portfolio Securities made after the preceding determination date; plus
(2) such Member's full Preferred Return Accrual for the period
commencing immediately after the last day of the preceding determination date
and ending on such determination date; and
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(d) reduced by an amount equal to all Distributions made to such Member
on or before such determination date pursuant to Section 10.02(b) hereof.
"RETURN INTEREST" means interest calculated on the Unallocated Amount
and Cash Component pursuant to Section 10.03(a), (b) and (e).
"SECURITIES ACT" means the United States Securities Act of 1933, as
amended from time to time.
"SHORT-TERM T-▇▇▇▇ RATE" means, as of any determination date, a rate
equal to the rate fixed at the government auction of securities for short-term
U.S. government bills with 26 week maturities as set forth in the Wall Street
Journal dated the business day preceding such determination date, compounded
daily.
"STOCK COMPONENT" shall have the meaning set forth in Section
10.02(f)(vi).
"TAX MATTERS PARTNER" shall have the meaning set forth in Section
19.08.
"TRANSFER" means any transfer, sale, assignment, gift, pledge,
hypothecation or other disposition or encumbrance of an interest in the Company.
"TREASURY REGULATIONS" mean the Regulations promulgated by the United
States Department of the Treasury under the Code, as amended.
"UNALLOCATED AMOUNT" shall have the meaning set forth in Section
10.02(f)(iv).
"WITHOUT CAUSE" shall mean (i) for any reason or for no reason, other
than for Cause, in the Class A Member's sole discretion, or (ii) upon a Change
in Control.
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APPENDIX B
REGULATORY AND TAX ALLOCATIONS
1. REGULATORY ALLOCATIONS.
The following provisions are included in order to comply with tax rules set
forth in the Code and in the Treasury Regulations.
1.1 QUALIFIED INCOME OFFSET.
If any Member unexpectedly receives an adjustment, allocation or distribution
described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6),
and such adjustment, allocation or distribution causes such Member to have a
deficit balance in such Member's Capital Account or further reduces a balance in
such Member's Capital Account that already has a deficit balance, there shall be
allocated to such Member items of income and gain (consisting of a pro rata
portion of each item of Company income, including gross income, and gain for
such fiscal period) in an amount and manner sufficient to eliminate such
Member's deficit Capital Account balance, to the extent required by Treasury
Regulations Section 1.704-1(b)(2)(ii)(d), as quickly as possible, provided that
an allocation pursuant to this 1.1 shall be made only if and to the extent that
there would be a deficit in such Member's Capital Account after all allocations
provided for in Article IX of the Agreement and in this APPENDIX B have been
made tentatively as if this 1.1 were not included in this Agreement. The
foregoing sentence is intended to constitute a "qualified income offset"
provision as described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d), and
shall be interpreted and applied in all respects in accordance with that
Section.
1.2 GROSS INCOME ALLOCATION.
In the event that any Member has a negative Capital Account at the end of any
Company fiscal year, there shall be allocated to such Member items of Company
income (including gross income) and gain in the amount of such excess as quickly
as possible, provided that an allocation pursuant to this 1.2 shall be made only
if and to the extent that there would be a deficit in such Member's Capital
Account after all allocations provided for in Article IX of the Agreement and in
this APPENDIX B have been made tentatively as if 1.1 and this 1.2 were not
included in this APPENDIX B.
1.3 ADJUSTMENTS TO REFLECT SECTION 754 ELECTION.
To the extent that an adjustment to the adjusted tax basis of any Company asset
pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining Capital Accounts, the amount of such adjustment to the Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in a manner consistent
with the manner in which their Capital Accounts are required to be adjusted
pursuant to such Section of the Treasury Regulations.
1.4 OFFSETTING ALLOCATIONS.
The allocations set forth in 1.1, 1.2 and 1.3 of this APPENDIX B (the
"REGULATORY ALLOCATIONS") are intended to comply with certain requirements of
Treasury Regulations Section 1.704-1(b).
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Notwithstanding any other provisions of Article IX of the Agreement and of this
APPENDIX B (other than the Regulatory Allocations), the Regulatory Allocations
shall be taken into account in allocating subsequent items of income, gain, loss
and expense among the Members so that, to the extent possible, the net amount of
such allocations of subsequent items of income, gain, loss and expense and the
Regulatory Allocations to each Member shall be equal to the net amount that
would have been allocated to each such Member pursuant to the provisions of
Article IX of the Agreement and this APPENDIX B if the Regulatory Allocations
had not occurred.
For purposes of applying the foregoing sentence, allocations pursuant to this
1.4 shall be made with respect to allocations pursuant to 1.3 of this APPENDIX B
only to the extent the Advisory Committee reasonably determines that such
allocations will otherwise be inconsistent with the economic agreement among the
Members. Further, if allocations to the Managing Member include or are affected
by Regulatory Allocations or allocations pursuant to this 1.4 that are intended
to offset such Regulatory Allocations, the Advisory Committee, after consulting
with the Company's accountants and other advisors, shall have discretion to make
such adjustments to subsequent allocations that the Advisory Committee deems
reasonably necessary or appropriate to effectuate the economic arrangements of
the Members.
2. ADJUSTMENTS TO REFLECT CHANGES IN INTERESTS.
With respect to any fiscal period during which any Member's interest in the
Company changes, whether by reason of the admission of a Member, the withdrawal
of a Member, a non-pro rata contribution of capital to the Company or any other
event described in Section 706(d)(1) of the Code and the regulations issued
thereunder, allocations of Net Gain, Net Loss and other items of Company income,
gain, loss and expense shall be adjusted appropriately to take into account the
varying interests of the Members during such period. The Advisory Committee
shall consult with the Company's accountants and other advisors and shall select
the method of making such adjustments, which method shall be used consistently
thereafter.
3. SPECIAL ALLOCATIONS OF GROSS GAINS AND LOSSES.
In making allocations of Net Gain or Net Loss pursuant to Article IX of the
Agreement, the Advisory Committee, after consulting with the Company's tax
advisors, is authorized to separate these aggregate amounts into their
components and to allocate the components separately in order to further the
intent of such provisions of the Agreement. For example, if with respect to a
particular fiscal period the Company realizes a gross loss of $100 on a sale of
Portfolio Securities and a gross gain of $200 on a sale of other securities
resulting in a Net Gain of $100 ($200 gross gain minus $100 gross loss = $100
Net Gain), the Advisory Committee may allocate the $100 gross loss as a $100 Net
Loss in the manner required by Section 9.02, and then allocate the $200 gross
gain as a $200 Net Gain in the manner required by Section 9.01, if advised by
the Company's tax advisors that such special allocations will cause the Capital
Accounts of the Members to reflect more closely the Members' relative economic
interests in the Company.
4. TAX ALLOCATIONS.
4.1 GENERAL.
For federal, state and local income tax purposes, Company income, gain, loss,
deduction or credit (or any item thereof) for each fiscal year shall be
allocated to and among the Members in
44
order to reflect the allocations made pursuant to the provisions of Article IX
of the Agreement and the provisions of this APPENDIX B for such fiscal year
(other than allocations of items which are not deductible or are excluded from
taxable income), taking into account any variation between the adjusted tax
basis and book value of Company property in accordance with the principles of
Section 704(c) of the Code.
4.2 SECTION 704(c) ALLOCATIONS; SECTION 704(c)(1)(B) AND SECTION 737 ITEMS.
In the event that the value of an item of property contributed to the Company
differs from its adjusted tax basis, allocations of depreciation, depletion,
amortization, gain, and loss with respect to such property will be made for
federal income tax purposes in a manner that takes account of the variation
between the adjusted tax basis and value of such property in accordance with
Section 704(c) of the Code using, as determined by the Advisory Committee,
either (i) the traditional method specified in Treasury Regulations Section
1.704-3(b), (ii) the traditional method with curative allocations specified in
Treasury Regulations Section 1.704-3(c), or (iii) the remedial allocation method
specified in Treasury Regulations Section 1.704-3(d).
If (i) any property is contributed to the Company by any Member, (ii) such
property is subsequently distributed to any Member, and (iii) pursuant to
Sections 704 (c)(1)(B) and 737 of the Code, any gain is required to be
recognized on such distribution by a contributing Member, the Advisory
Committee, in its sole discretion, may make such amendments to this Agreement as
it may deem necessary or appropriate, including but not limited to making a
special distribution from the Company to such contributing Member in an amount
determined by the Advisory Committee.
4.3 ALLOCATION OF NON-RECOURSE DEDUCTIONS.
Neither the Managing Member nor the Class A Member anticipate that the Company
will incur or realize any "nonrecourse deductions" (as defined in applicable
Treasury Regulations) or similar items but, if the Members anticipate at any
time that the Company may incur or realize any such items, the Managing Member
and the Class A Member may cause this Agreement to be amended to ensure to the
extent feasible that any such items are allocated in a manner that is both
consistent with the intent of the Members and likely to be respected for tax
purposes.
4.4 ISSUANCE ITEMS.
Notwithstanding any provision of this Agreement other than this APPENDIX B, any
income, gain, loss or deduction realized as a direct or indirect result of the
compensatory issuance of a Company interest by the Company to a Member (the
"ISSUANCE ITEMS") and, if necessary, all other items allocable to the Members
under this Agreement, shall be allocated among the Members so that, to the
extent possible, the net amount of such Issuance Items and other items allocated
to each Member shall be equal to the net amount that would have been allocated
to such Member if the Issuance Items had not been realized.