EXHIBIT 3.5
AMENDED AND RESTATED TRUST AGREEMENT
OF
COMPASS DIVERSIFIED TRUST
AMONG
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
as Sponsor,
THE BANK OF NEW YORK (DELAWARE)
as Delaware Trustee,
AND
THE REGULAR TRUSTEES NAMED HEREIN
Dated as
of April 25, 2006
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINED TERMS
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1
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Section 1.1 Definitions
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1
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ARTICLE II ESTABLISHMENT OF THE TRUST
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8
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Section 2.1 Name
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8
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Section 2.2 Office of the Delaware Trustee; Principal Place of Business
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8
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Section 2.3 Trust to Be Sole Owner of Sponsor Interests
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8
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Section 2.4 Authorized Shares
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9
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Section 2.5 Shareholders to be Bound
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9
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Section 2.6 Issuance of Additional Shares
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9
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Section 2.7 Repurchase of Outstanding Shares at Direction of the Sponsor
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9
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Section 2.8 Agreement of Trust
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10
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Section 2.9 Authorization to Enter into Certain Transactions
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10
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Section 2.10 Title to Trust Property
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12
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Section 2.11 Certain Covenants of the Sponsor
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12
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ARTICLE III DISTRIBUTIONS
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12
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Section 3.1 Distributions
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12
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Section 3.2 Payment Procedures
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13
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Section 3.3 Tax Returns and Reports
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13
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ARTICLE IV SHARE CERTIFICATES
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13
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Section 4.1 Share Certificates
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13
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Section 4.2 Share Register
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14
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Section 4.3 Transfer of Shares
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14
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Section 4.4 Mutilated, Lost, Destroyed or Stolen Share Certificates
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14
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Section 4.5 Rights of Shareholders
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14
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ARTICLE V MEETINGS; VOTING
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15
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Section 5.1 Annual Meetings of Shareholders
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15
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Section 5.2 Special Meetings of Shareholders
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15
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Section 5.3 Place of Meeting
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15
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Section 5.4 Notice of Meeting
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15
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Section 5.5 Quorum and Adjournment
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17
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i
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Page
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Section 5.6 Voting
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17
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Section 5.7 Proxies
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18
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Section 5.8 Notice of Shareholder Business and Nominations
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18
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Section 5.9 Procedure for Election of Directors; Voting
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21
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Section 5.10 Inspectors of Elections; Opening and Closing the Polls
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Section 5.11 Confidential Shareholder Voting
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22
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Section 5.12 Waiver of Notice
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22
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Section 5.13 Remote Communication
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23
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Section 5.14 Action by Written Consent
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23
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Section 5.15 Inspection of Records
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ARTICLE VI RIGHT OF SHAREHOLDERS TO ENFORCE PROVISIONS OF SPONSOR AGREEMENTS
AND BRING DERIVATIVE ACTION
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24
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Section 6.1 Right to Institute Legal Proceeding
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24
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Section 6.2 Ten Percent (10%) or More Shareholder
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25
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ARTICLE VII SHAREHOLDER VOTE REQUIRED IN CONNECTION WITH CERTAIN
BUSINESS COMBINATIONS OR TRANSACTIONS
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25
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Section 7.1 Vote Generally Required
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25
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Section 7.2 Vote for Business Combinations
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25
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Section 7.3 Power of Continuing Directors
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Section 7.4 No Effect on Fiduciary Obligations
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ARTICLE VIII THE TRUSTEES
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Section 8.1 Certain Duties and Responsibilities
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Section 8.2 Not Responsible for Recitals or Issuance of Shares
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Section 8.3 May Hold Shares
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28
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Section 8.4 Compensation; Indemnity; Fees
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Section 8.5 Delaware Trustee Required; Eligibility of Trustees
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Section 8.6 Resignation and Removal; Appointment of Successor
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Section 8.7 Acceptance of Appointment by Successor
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30
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Section 8.8 Merger, Conversion, Consolidation or Succession to Business
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30
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Section 8.9 Number of Trustees
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31
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Section 8.10 Delegation of Power
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31
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Section 8.11 Resignation and Appointment of Regular Trustees
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31
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ARTICLE IX TERMINATION AND DISSOLUTION
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32
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ii
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Section 9.1 Termination or Dissolution
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32
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Section 9.2 Circumstances Under Which Shares Shall Be Voluntarily Exchanged for
Sponsor Interests
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32
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Section 9.3 Circumstances Under Which Shares Shall Be Mandatorily Exchanged for
Sponsor Interests
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32
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Section 9.4 Early Termination
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Section 9.5 Termination of Obligations
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ARTICLE X MISCELLANEOUS PROVISIONS
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34
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Section 10.1 Limitation of Rights of Shareholders
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Section 10.2 Amendment
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34
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Section 10.3 Separability
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35
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Section 10.4 Specific Performance
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35
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Section 10.5 Governing Law
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35
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Section 10.6 Successors
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36
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Section 10.7 Headings
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36
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Section 10.8 Communications, Notices and Demands
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36
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Section 10.9 Counterpart Execution
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37
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EXHIBIT A — FORM OF SHARE CERTIFICATE
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A-1
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iii
AMENDED AND RESTATED TRUST AGREEMENT
(as amended, revised, supplemented or otherwise modified
from time to time, this “
Agreement
”
),
dated as of April 25, 2006 is entered into by and among
COMPASS GROUP DIVERSIFIED HOLDINGS LLC, a Delaware limited liability company (the “
Sponsor
”), THE
BANK OF NEW YORK (DELAWARE), a Delaware banking corporation, as Delaware trustee (in such capacity,
the “
Delaware Trustee
”), and MR. I. JOSEPH MASSOUD and MR. JAMES J. BOTTIGLIERI, as the initial
regular trustees and MR. ALAN B. OFFENBERG, as replacement regular trustee for MR. I. JOSEPH
MASSOUD (each a “
Regular Trustee
”, together “
Regular Trustees
” and, collectively with the Delaware
Trustee, the “
Trustees
”). The Sponsor and the Trustees hereby agree as follows:
WHEREAS
, the Sponsor and the Trustees, heretofore duly declared and established Compass
Diversified Trust (the “
Trust
”), a statutory trust under the Delaware Statutory Trust Act, by
entering into a trust agreement, dated as of November 18, 2005 (the “
Original Agreement
”), and by
executing and filing of a Certificate of Trust with the Secretary of State of the State of Delaware
on November 18, 2005, for the purpose of owning the Sponsor Interests (as defined herein) and
issuing Shares (as defined herein) of the Trust, in one or more series, each Share representing an
undivided beneficial interest in the Trust Property;
WHEREAS
, the Sponsor and the Trustees desire to amend and restate the Original Agreement in
its entirety as set forth herein to provide for, among other things, the operation of the Trust,
the issuance of the Shares and the holding of the Sponsor Interests;
WHEREAS
, the Sponsor and the Trustees intend that the Trust function as a pass-through entity
structured to give the Shareholders (as defined herein) similar rights and obligations, to the
extent provided herein, as if they held Sponsor Interests (as defined herein) directly and the
Sponsor and the Trustees further intend that this Agreement, including the grant of rights to the
Sponsor, the Board of Directors (as defined herein) and certain other Persons, be interpreted
consistent with such intention;
NOW, THEREFORE
, in consideration of the agreements and obligations set forth herein and for
other good and valuable consideration, the sufficiency of which is hereby acknowledged, each party,
for the benefit of the other party, hereby amends and restates the Original Agreement in its
entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions
For all purposes of this Agreement (as defined herein), except as otherwise expressly provided
or unless the context otherwise requires:
1
(i) the terms defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular;
(ii) unless the context otherwise requires, any reference to an “Article,” “Section” or an
“Exhibit” refers to an Article, Section or an Exhibit, as the case may be, of this Agreement; and
(iii) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to
this Agreement as a whole and not to any particular Article, Section or other subdivision.
“
1933 Act Registration Statement
” has the meaning set forth in Section 2.9 hereof.
“
1934 Act Registration Statement
” has the meaning set forth in Section 2.9 hereof.
“
1940 Act
” means the Investment Company Act of 1940, as amended.
“
4
62(b)
Registration Statement
” has the meaning set forth in Section 2.9 hereof.
“
Acquirer
” has the meaning set forth in Section 9.3 hereof.
“
Acquisition Exchange
” has the meaning set forth in Section 9.3 hereof.
“
Affiliate
” means, with respect to any Person, (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person, (ii) any officer, director,
general member, member or trustee of such Person. For purposes of this definition, the terms
“
controlling
,” “
controlled by
” or “
under common control with
” shall mean, with respect to any
Persons, the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, or the power to elect at least fifty percent (50%) of the directors,
managers, general members or Persons exercising similar authority with respect to such Person.
“
Agreement
” has the meaning set forth in the preamble of this Agreement.
“
Allocation Interests
” has the meaning set forth in the Sponsor Agreement.
“
Associate
” has the meaning ascribed to such term in Rule 12b-2 of the Rules and Regulations
promulgated under the Exchange Act.
“
Beneficial Owner
” has the meaning ascribed to such term in Rule 13d-3 of the Rules and
Regulations promulgated under the Exchange Act.
“
Board of Directors
” means the Board of Directors of the Sponsor or any committee thereof that
has been duly authorized by the Board of Directors to make a decision on the matter in question or
bind the Sponsor as to the matter in question.
2
“
Business Combination
” means:
(i) any merger or consolidation of the Trust with (A) an Interested Shareholder, or (B) any
other Person (whether or not itself an Interested Shareholder) that is, or after such merger or
consolidation would be, an Affiliate or Associate of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with, or proposed by or on behalf of, an Interested
Shareholder or an Affiliate or Associate of an Interested Shareholder of any property or assets of
the Trust having an aggregate Fair Market Value as of the date of consummation of the transaction
giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment
Value as of such date;
(iii) the issuance or transfer by the Trust, the Sponsor or any Subsidiary thereof (in one
transaction or a series of transactions) of any securities of the Trust to, or proposed by or on
behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder in
exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair
Market Value as of the date of consummation of the transaction giving rise to the Business
Combination of not less than ten percent (10%) of the Net Investment Value as of such date; or
(iv) any spin-off or split-up of any kind of the Trust thereof proposed by or on behalf of an
Interested Shareholder or an Affiliate or Associate of an Interested Shareholder; or
(v) any reclassification of the Shares (including any reverse split of Shares) or
recapitalization of the Trust or any merger or consolidation of the Trust with the Sponsor or any
Subsidiary thereof, or any other transaction (whether or not with or into or otherwise involving an
Interested Shareholder), that has the effect, directly or indirectly, of increasing the
proportionate share of Outstanding Shares which is beneficially owned by an Interested Shareholder
or an Affiliate or Associate of an Interested Shareholder; or
(v) any agreement, contract or other arrangement providing for any one or more of the actions
specified in clauses (i) through (iv) above.
“
Business Day
” means any day other than a Saturday, a Sunday or a day on which banks in The
City of New York are required, permitted or authorized, by applicable law or executive order, to be
closed for regular banking business.
“
Chairman
” has the meaning set forth in the Sponsor Agreement.
“
Commission
” means the U.S. Securities and Exchange Commission.
“
Continuing Director
” means (i) any director of the Sponsor who (A) is neither the Interested
Shareholder involved in the Business Combination as to which a determination of Continuing
Directors is provided hereunder, nor an Affiliate, Associate, employee, agent or nominee of such
Interested Shareholder, or a relative of any of the
3
foregoing, and (B) was a director of the Board of Directors prior to the time that such
Interested Shareholder became an Interested Shareholder, or (ii) any successor of a Continuing
Director described in clause (i) above who is recommended or elected to succeed a Continuing
Director by the affirmative vote of a majority of Continuing Directors then on the Board of
Directors.
“
Delaware Statutory Trust Act
” means chapter 38 of title 12 of the Delaware Code, 12 Del. C.
Section 3801 et seq., as it may be amended from time to time.
“
Delaware Trustee
” means the Person identified as the “Delaware Trustee” in the preamble to
this Agreement solely in its capacity as Delaware Trustee of the Trust and not in its individual
capacity, or its successor in interest in such capacity, or any successor Delaware Trustee
appointed as herein provided.
“
Depositary Agreement
” has the meaning set forth in Section 2.9 hereof.
“
Distributions
” means amounts payable in respect of the Shares as provided in Section 3.1
hereof.
“
Early Termination Event
” has the meaning set forth in Section 9.4 hereof.
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
“
Fair Market Value
” means, as of any date:
(i) in the case of Shares, the average of the closing sale prices for such Shares during the
ten (10) Business Days immediately preceding such date:
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(A)
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as reported for composite transactions by the Nasdaq National
Market;
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(B)
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if such Shares are not so reported by the Nasdaq National
Market, the price of Shares as reported, quoted or listed on any other
principal U.S. national or regional securities exchange;
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(C)
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if such equity securities are not so reported, quoted or
listed, the last quoted bid price for Shares in the over-the-counter market as
reported by the National Quotation Bureau or a similar organization; or
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(ii) if Shares are not so reported, quoted or listed, or in the case of any other Property,
the fair market value of such Shares or such Property on the date in question as determined by a
majority of the Board of Directors in good faith;
provided
, that if the Manager shall dispute any
such determination of fair market value by the Board of Directors, fair market value shall be
determined by the investment banking or professional valuation firm selected by the Board of
Directors from among no fewer than three qualified candidates provided by the Manager.
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“
Fiscal Quarter
” means the Sponsor’s fiscal quarter for purposes of its reporting obligations
under the Exchange Act.
“
Future Investments
” means contractual commitments to invest represented by definitive
agreements.
“
Indemnified Persons
” has the meaning set forth in Section 8.4 hereof.
“
Initial Board
” has the meaning set forth in the Sponsor Agreement.
“
Interested Shareholder
” means, as of any date, any Person (other than the Manager and its
Affiliates, the Trust, the Sponsor or any Subsidiary of the Sponsor, any employee benefit plan
maintained by the Sponsor or any Subsidiary thereof or any trustee or fiduciary with respect to any
such plan when acting in such capacity) that:
(i) is, or was at any time within the three-year period immediately prior to such date, the
Beneficial Owner of fifteen percent (15%) or more of the then Outstanding Shares and who did not
become the Beneficial Owner of such amount of Shares pursuant to a transaction that was approved by
the affirmative vote of a majority of the Board of Directors; or
(ii) is an assignee of, or has otherwise succeeded to, any Outstanding Shares of which an
Interested Shareholder was the Beneficial Owner at any time within the three-year period
immediately prior to such date, if such assignment or succession occurred in the course of a
transaction, or series of transactions, not involving a public offering within the meaning of the
Securities Act.
For the purpose of determining whether a Person is an Interested Shareholder, the Shares that may
be issuable or exchangeable by the Trust to the Interested Shareholder pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or
otherwise, shall be included, but not any other Shares that may be issuable or exchangeable by the
Trust pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion
rights, warrants or options, or otherwise, to any Person who is not the Interested Shareholder.
“
Managed Subsidiary
” has the meaning set forth in the Management Services Agreement.
“
Management Services Agreement
” means the Management Services Agreement, entered into by and
among the Manager, the Sponsor and other parties thereto, dated as of the date hereof, as amended
or otherwise modified from time to time.
“
Manager
” means Compass Diversified Management LLC, and any successor thereto, in its capacity
as manager under the Management Services Agreement or in its capacity as holder of the Allocation
Interests in the Sponsor, as the case may be.
“
Market Value
” means, as of any date, the
product
of (i) the average number of Outstanding
Shares, other than treasury Shares, during the last fifteen (15) Business Days
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of the most recently completed Fiscal Quarter as of such date,
multiplied by
(ii) the volume
weighted average trading price per Share, as determined by reference to the relevant securities
exchange identified in clause (i) of the definition of Fair Market Value, over such fifteen (15)
Business Days.
“
Nasdaq National Market
” means the Nasdaq National Market or any successor thereto.
“
Net Investment Value
” means, as of any date, the
sum of
:
(i) the Market Value as of such date;
plus
(ii) the amount of any borrowings (other than intercompany borrowings) of the Sponsor and its
Managed Subsidiaries (but not including borrowings on behalf of any Subsidiary of the Managed
Subsidiaries) as of such date;
plus
(iii) the value of Future Investments of the Sponsor and/or any of its Subsidiaries other than
cash or cash equivalents, as calculated by the Manager and approved by a majority of the Continuing
Directors, as of such date;
provided
, that such Future Investments have not been outstanding for
more than two consecutive full Fiscal Quarters as of such date;
less
(iv) the aggregate amount held by the Sponsor and its Managed Subsidiaries in cash or cash
equivalents (but not including cash or cash equivalents held specifically for the benefit of any
Subsidiary of a Managed Subsidiary) as of such date.
“
Original Agreement
” has the meaning set forth in the recitals to this Agreement.
“
Outstanding Shares
” means, as of any date, all Shares theretofore executed and delivered,
including in electronic form, under this Agreement, except:
(i) Shares theretofore canceled or delivered for cancellation; and
(ii) Shares in exchange for or in lieu of which other Shares have been executed and delivered
pursuant to Section 4.5.
“
Person
” means any individual, partnership (whether general or limited), limited liability
company, corporation, trust, estate, association, nominee or other entity as well as any syndicate
or group deemed to be a person under Section 14(d)(2) of the Exchange Act.
“
Property
” means all real and personal property acquired by the Trust, including cash, and any
improvements thereto, and shall include both tangible and intangible property.
“
Registration Statements
” has the meaning set forth in Section 2.9 hereof.
6
“
Regular Trustee
” means the Persons identified as the “Regular Trustee” in the preamble to
this Agreement, each solely in his own capacity as Regular Trustee of the Trust and not in his own
individual capacity, or such Regular Trustee’s successor in interest in such capacity, or any
successor in interest in such capacity, or any successor Regular Trustee appointed as herein
provided.
“
Relevant Trustee
” has the meaning set forth in Section 8.6 hereof.
“
Rules and Regulations
” means the rules and regulations promulgated under the Exchange Act or
the Securities Act.
“
Secretary
” has the meaning set forth in the Sponsor Agreement.
“
Securities Act
” means the Securities Act of 1933, as amended.
“
Share
” means the shares of the Trust, each representing one undivided beneficial interest
issued by the Trust corresponding to one underlying Sponsor Interest held by the Trust.
“
Share Certificate
” means a certificate evidencing ownership of Shares, substantially in the
form attached hereto as Exhibit A.
“
Share Register
” has the meaning set forth in Section 4.2.
“
Shareholder
” means a Person in whose name a Share Certificate representing a Share is
registered or a Person in whose name a book-entry position is maintained, such Person being a
beneficial owner of such Share within the meaning of the Delaware Statutory Trust Act.
“
Sponsor
” has the meaning set forth in the preamble to this Agreement.
“
Sponsor Agreement
” means the Amended and Restated Operating Agreement of the Sponsor, as
amended, revised, supplemented or otherwise modified from time to time, dated as of the date
hereof, entered into by and between the Trust and the Manager.
“
Sponsor Interest
” means the Trust Interests.
“
Subsidiary
” means, with respect to any Person, any corporation, company, joint venture,
limited liability company, association or other Person in which such Person owns, directly or
indirectly, more than fifty percent (50%) of the outstanding equity securities or interests, the
holders of which are generally entitled to vote for the election of the board of directors or other
governing body of such Person.
“
Transfer Agent
” means, with respect to the Shares and the Sponsor Interests, The Bank of New
York, Inc. or any successor(s) thereto.
“
Trust
” has the meaning set forth in the recitals hereof and which is continued hereby and
identified on the cover page of this Agreement.
7
“
Trust Interest
” has the meaning set forth in the Sponsor Agreement.
“
Trust Property
” means the Sponsor Interests owned by the Trust including any distribution
thereon, or any other property or assets relating thereto.
“
Trust’s Notice
” has the meaning set forth in Section 5.4 hereof.
“
Trustees
” has the meaning set forth in the preamble to this Agreement.
“
Voluntary Exchange
” has the meaning set forth in section 9.2 hereof.
ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 2.1 Name
(a) The name of the Trust shall continue to be Compass Diversified Trust and all business of
the Trust shall be conducted in such name. The Sponsor, acting through the Board of Directors, may
change the name of the Trust upon ten (10) Business Days’ written notice to the Shareholders and
the Trustees, which name change shall be effective upon the filing by the Regular Trustees of a
certificate of amendment or a restated certificate pursuant to Section 3810 of the Delaware
Statutory Trust Act.
(b) The Regular Trustees shall take all action and do all things necessary to give effect to
the requirements of Section 9.5 of the Management Services Agreement.
Section 2.2 Office of the Delaware Trustee; Principal Place of Business
The address of the Delaware Trustee in the State of Delaware is 502 White Clay Center, Route
273 P.O. Box 6973, Newark, Delaware 19711, or such other address in the State of Delaware as the
Delaware Trustee may designate by written notice to the Shareholders and the Sponsor. The
principal executive offices of the Trust are Sixty One Wilton Road, Second Floor, Westport,
Connecticut 06880. The Sponsor, acting through the Board of Directors, may change the principal
executive offices of the Trust to any other place within or without the State of Delaware upon
written notice to the Trustees.
Section 2.3 Trust to Be Sole Owner of Sponsor Interests
(a) The Sponsor shall issue Sponsor Interests to the Trust and simultaneously therewith the
Trust shall issue Shares in accordance with the requirements of Section 2.3(b). Subject to
Sections 9.2 and 9.3, it is intended that the Trust shall be the sole holder and owner of one
hundred percent (100%) of the Sponsor Interests, and the Sponsor shall not issue, sell, or
otherwise transfer any of its Sponsor Interests to any Person other than the Trust. Subject to
Sections 9.2 and 9.3, the Trust shall not sell, lease, exchange, mortgage, pledge or otherwise
transfer any of its Sponsor Interests to any other Person.
8
(b) At all times, the Trust shall have outstanding the identical number of Shares as the
number of Sponsor Interests that have been issued and are outstanding. At all times, the Trust
shall be the sole owner of the Trust Property and shall only own the Trust Property.
Section 2.4 Authorized Shares
The Trust shall be authorized to issue one class of Shares (in one or more series) in an
aggregate amount of up to five hundred million (500,000,000) of such Shares; any Shares of more
than one such series shall constitute one and the same class of security. The Trust is prohibited
from issuing any other class of equity securities, any debt securities or any derivative
securities. The aggregate number of Shares that are authorized may be increased from time to time
by an amendment of this Agreement upon the adoption of a resolution by the affirmative vote of at
least a majority of the Board of Directors declaring such amendment to be advisable and the
approval of such amendment by the affirmative vote of the holders of a majority of the then
Outstanding Shares present in person or represented by proxy at a meeting of the Shareholders.
Section 2.5 Shareholders to be Bound
Every Shareholder, by holding and receiving a Share, agrees with the Trust to be bound by the
terms of this Agreement.
Section 2.6 Issuance of Additional Shares
The Sponsor shall have authority to authorize the issuance, from time to time, of authorized
but unissued Shares and cause the Trust to issue such additional Shares in exchange for and upon
receipt of an equal number of Sponsor Interests. Upon the issuance of such additional Shares, one
of the Regular Trustees shall execute in accordance with Section 4.2 one or more Share Certificates
in certificated, fully registered form and shall deliver such Share Certificates to the Transfer
Agent. The Trust may issue the Shares, in one or more series, in any manner, subject to applicable
law, that the Sponsor, acting through its Board of Directors, in its sole discretion, deems
appropriate and advisable.
Section 2.7 Repurchase of Outstanding Shares at Direction of the Sponsor
(a) From time to time and at the direction of the Sponsor, acting through the Board of
Directors, the Trust shall conduct a capital reduction, including the repurchase of any number of
Outstanding Shares, on similar terms to the capital reduction simultaneously conducted by the
Sponsor with respect to the Sponsor Interests and shall ensure that an identical number of Sponsor
Interests and Shares are issued and outstanding at any one time.
(b) Any Shares tendered and repurchased by the Trust in accordance with this Section 2.7 shall
not be deemed canceled pursuant to Section 3818 of the Delaware Statutory Trust Act but instead,
shall be deemed to be authorized and issued, but not outstanding, and may subsequently be sold or
transferred for due consideration.
9
Section 2.8 Agreement of Trust
The purposes of the Trust are to (i) issue Shares of beneficial interest in Trust Property,
each Share corresponding to one Sponsor Interest held by the Trust, (ii) own the Sponsor Interests
and (iii) engage in such other activities as are necessary, convenient or incidental hereto. Each
Shareholder registered on the books of the Trust shall be a “beneficial owner” within the meaning
of the Delaware Statutory Trust Act. It is intended that the Trust shall qualify as a grantor trust
for U.S. federal income tax purposes; consistent with such treatment, the Trustees shall have no
power under this Agreement to vary the investment of the Trust. Subject to Article IX, the
Trustees are not authorized to sell, exchange, convey, pledge, encumber, or otherwise transfer,
assign or dispose of the Sponsor Interests held by the Trust nor invest or reinvest the assets of
the Trust. There shall be no implied duties or obligations of the Trustees hereunder. Any action
by the Trustees in accordance with their respective powers shall constitute the act of and serve to
bind the Trust. The Delaware Trustee shall not be entitled to exercise any powers, nor shall the
Delaware Trustee have any of the duties and responsibilities of the Sponsor, Manager, the Board of
Directors or the Regular Trustees set forth herein. The Delaware Trustee shall be one of the
Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section
3807 of the Delaware Statutory Trust Act and for taking such actions as are required to be taken by
a Delaware trustee under the Delaware Statutory Trust Act. The duties (including fiduciary
duties), liabilities and obligations of the Delaware Trustee shall be limited to (a) accepting
legal process served on the Trust in the State of Delaware and (b) the execution of any
certificates required to be filed with the Secretary of State of the State of Delaware that the
Delaware Trustee is required to execute under Section 3811 of the Delaware Statutory Trust Act and
there shall be no other duties (including fiduciary duties) or obligations, express or implied, at
law or in equity, of the Delaware Trustee. Notwithstanding anything herein to the contrary, the
Delaware Trustee shall not be liable for the acts or omissions of the Trust, the Sponsor, the
Regular Trustees, the Manager or the Board of Directors.
Section 2.9 Authorization to Enter into Certain Transactions
(a) The Sponsor is hereby authorized and directed, as an agent on behalf of the Trust, to
engage in the following activities:
(i) to prepare and file with the Commission and execute, in each case on behalf of the
Trust, (a) any registration statement from time to time on Form S-1 or any applicable form
at such time, as applicable (a “
1933 Act Registration Statement
”), including any
pre-effective or post-effective amendments thereto, including any preliminary prospectus,
prospectus, prospectus supplement, free writing prospectus or pricing supplement relating
thereto, relating to the registration of any Shares under the Securities Act, (b) any
registration statement filed, from time to time, pursuant to Rule 462(b) under the
Securities Act (the “
4
62(b)
Registration Statement
” and, together with the 1933 Act
Registration Statement, the “
Registration Statements
”), including any amendments thereto,
relating to the registration of any Shares under the Securities Act and (c) as applicable,
a registration statement on Form 8-A (a “
1934 Act Registration
10
Statement
”), including any pre-effective or post-effective amendments thereto,
relating to the registration of any Shares under Section 12(b) or (g) of the Exchange Act;
(ii) to prepare and file with the Nasdaq National Market and/or any other securities
exchange and execute, in each case on behalf of the Trust, a listing application and all
other applications, statements, certificates, agreements and other instruments as shall be
necessary or desirable to cause the Shares to be listed or quoted on the Nasdaq National
Market and/or any other securities exchange;
(iii) to prepare and file and execute, in each case on behalf of the Trust, such
applications, reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers, applications, filings and other documents as shall be
necessary or desirable to register the Shares under the securities or “blue sky” laws of
such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable;
(iv) to select underwriters or other purchasing or placement agents relating to the
public offering or any issuance of any Shares pursuant to any Registration Statements;
(v) to negotiate the terms and conditions of, and execute on behalf of the Trust, any
underwriting agreements or other purchase or placement agreements or other agreements
relating to the public or private offering of any Shares in exchange for Sponsor Interests,
including, without limitation, agreements relating to the registration of such Shares;
(vi) to execute and deliver, in each case on behalf of the Trust, such certifications
or reports required by the Sarbanes-Oxley Act of 2002 from time to time as may be necessary
or proper to the conduct of the business of the Trust;
(vii) to pay any filing, application or other fees associated with any of the
foregoing actions, including those to the Commission, the National Association of
Securities Dealers, any securities exchange, any agents or any other Person;
(viii) to select a transfer agent, including the Transfer Agent, and negotiate the
terms and conditions of, and execute on behalf of the Trust, a transfer agent agreement;
and
(ix) to select a custodian as holder of any Trust Property and negotiate the terms and
conditions of, and execute on behalf of the Trust, a custodian agreement;
(x) to negotiate the terms and conditions of, and execute on behalf of the Trust, a
depositary share agreement with a nationally recognized bank with combined capital and
surplus of $50 million or more for the purpose of
11
establishing a depositary share program for the Shares of the Trust (the “
Depositary
Agreement
”) and to engage such nationally recognized bank as agent with respect thereto;
(xi) to negotiate the terms and conditions of, and execute on behalf of the Trust,
such agreements, documents and certificates, and to do such other acts and things as the
Sponsor may deem to be necessary or advisable in order to (w) give effect to any of the
foregoing, (x) in connection with the public offering or any future issuance of the Shares,
(y) carry out the purpose and intent of the Trust or (z) to comply or give effect to any
terms or provisions of this Agreement.
(b) It is hereby acknowledged and agreed that in connection with any execution, filing or
document referred to in clauses (i) — (ix) above, (A) any Regular Trustee or the Sponsor singly be,
and hereby is, authorized on behalf of the Trust to file and execute such document on behalf of the
Trust and (B) the Delaware Trustee shall not be required or be deemed necessary to join in any such
filing or action or execute on behalf of the Trust any such document or to take any such action.
Section 2.10 Title to Trust Property
Legal title to all Trust Property shall be vested at all times in the Trust and shall be held
and administered by the Regular Trustees for the benefit of the Trust and the Shareholders in
accordance with this Agreement. No Shareholder shall have legal title to any part of the Trust
Property, but shall have an undivided beneficial interest in the Trust Property.
Section 2.11 Certain Covenants of the Sponsor
The Sponsor shall use its best efforts, consistent with the terms and provisions of this
Agreement, to cause the Trust to remain classified as a “grantor trust” for U.S. federal income tax
purposes.
ARTICLE III
DISTRIBUTIONS
Section 3.1
Distributions
The Regular Trustees shall pay Distributions, or cause the payment of Distributions, to the
Shareholders of all distributions received by the Trust with respect to the Sponsor Interests from
the Sponsor within five (5) Business Days of receipt thereof. Such Distributions shall be paid to
Shareholders appearing on the Share Register for the Outstanding Shares who are Shareholders as of
the record date established by the Sponsor for the payment of distributions on the Sponsor
Interests. Any such Distributions shall be allocated to Shareholders in the same proportions as
any such distributions were made per Sponsor Interest by the Sponsor.
12
Section 3.2 Payment Procedures
Payments of Distributions in respect of the Shares shall be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear on the Share Register, or (ii)
wire transfer of immediately available funds to an account maintained by the Person entitled
thereto as specified in the Share Register.
Section 3.3 Tax Returns and Reports
The Regular Trustees shall prepare (or cause to be prepared), at the Trust’s expense, and file
or provide (or cause to be filed or provided) all U.S. federal, state and local tax and information
returns and reports required to be filed or provided to Shareholders by or in respect of the Trust.
In this regard, the Regular Trustees shall (a) prepare and file (or cause to be prepared or filed)
Form 1041 or the appropriate Internal Revenue Service form required to be filed in respect of the
Trust in each taxable year of the Trust and (b) prepare and furnish (or cause to be prepared and
furnished) a tax information statement or such other form or statement, if any, required to be
furnished in respect of the Trust in each taxable year of the Trust. The Regular Trustees shall
comply in all material respects with U.S. federal, state and local withholding and backup
withholding tax laws and information reporting requirements with respect to any payments to
Shareholders upon the Shares. To the extent that the Trust is required to withhold and pay over any
amounts to any authority with respect to Distributions or allocations to any Shareholder, the
amount withheld shall be deemed to be a distribution in the amount of the withholding to the
Shareholder. In the event of any claimed over-withholding, Shareholders shall be limited to an
action against the applicable taxing jurisdiction.
ARTICLE IV
SHARE CERTIFICATES
Section 4.1 Share Certificates
The Shares shall be issued in electronic book-entry form or shall be otherwise evidenced by
the Share Certificates that are issued substantially in the form of Exhibit A hereto. Each Share
Certificate shall bear a serial number, shall exhibit the Shareholder’s name and the number of
Shares evidenced thereby and shall be executed on behalf of the Trust by manual or facsimile
signature of one of the Regular Trustees. Share Certificates bearing the manual or facsimile
signatures of individuals who were, at the time when such signatures shall have been affixed,
authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of
this Agreement, notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the delivery of such Share Certificates or did not hold such offices at the
date of delivery of such Share Certificates. A transferee of a Share Certificate shall become a
Shareholder, and shall be entitled to the rights and subject to the obligations of a Shareholder
hereunder, upon due registration of such Share Certificate in such transferee’s name pursuant to
Section 4.4.
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Section 4.2 Share Register
The Sponsor shall retain the Transfer Agent to keep a register or registers (herein referred
to as the “
Share Register
”) in which shall be recorded the name and address of each Person owning
the Outstanding Shares as maintained by the Transfer Agent electronically with respect to any
Shares issued in book-entry form or as otherwise evidenced by each Share Certificate evidencing
Shares issued by the Trust, the number of Shares evidenced by each such Share Certificate, the date
of issuance thereof and, in the case of cancellation, the date of cancellation. Except as otherwise
expressly required by law, the Person or entity in whose name Shares stand on the Share Register of
the Trust shall be deemed the Beneficial Owner and Shareholder of record thereof for all purposes.
Section 4.3 Transfer of Shares
Registration of transfers of Shares shall be made only in the Share Register of the Trust upon
request of the registered Shareholder of such Shares, or of his attorney thereunto authorized by
power of attorney duly executed and filed with the Transfer Agent, and upon the surrender of the
Share Certificate or Share Certificates or the corresponding book-entry position evidencing such
Shares properly endorsed or accompanied by a stock power duly executed, together with such proof of
authenticity of signatures as the Transfer Agent may reasonably require, or as properly presented
for transfer by a depositary or clearing agent with respect to any book-entry position of Shares.
All Share Certificates surrendered for transfer shall be canceled before new Share Certificates for
the transferred Shares shall be issued. Upon surrender for registration of transfer, and
cancellation, of any Share Certificate, one of the Regular Trustees shall execute in the name of
the designated transferee or transferees, one or more new Share Certificates.
Section 4.4 Mutilated, Lost, Destroyed or Stolen Share Certificates
Each Shareholder of record of Shares shall promptly notify the Trust of any mutilation, loss
or destruction of any Share Certificate of which such Shareholder is the recordholder. The Sponsor
may, in its discretion, cause the Transfer Agent to issue a new Share Certificate in place of any
Share Certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or
destroyed, upon surrender of the mutilated Share Certificate or, in the case of loss, theft or
destruction of the Share Certificate, upon satisfactory proof of such loss, theft or destruction,
and the Sponsor may, in its discretion, require the Shareholder of record of the Shares evidenced
by the lost, stolen or destroyed Share Certificate, or his legal representative, to give the
Transfer Agent a bond sufficient to indemnify the Transfer Agent against any claim made against it
on account of the alleged loss, theft or destruction of any such Share Certificate or the issuance
of such new Share Certificate.
Section 4.5 Rights of Shareholders
The legal title to the Trust Property is vested exclusively in the Trust in accordance with
Section 2.10, and the Shareholders shall not have any right or title
14
therein other than the undivided beneficial interest in the Trust Property conferred by their
Shares and they shall have no right to call for any partition or division of Property, profits or
rights of the Trust except as described below. The Shares shall be personal property giving only
the rights specifically set forth therein and in this Agreement. The Shares shall have no
preemptive or similar rights and, when issued and delivered to Shareholders against payment of the
purchase price therefor and otherwise in accordance with this Agreement, shall be deemed validly
issued, fully paid and nonassessable undivided beneficial interests in Trust Property.
Shareholders, in their capacities as such, shall be entitled to the benefits provided in this
Agreement and to the same limitation of personal liability extended to shareholders of private
corporations for profit organized under the General Corporation Law of the State of Delaware.
ARTICLE V
MEETINGS; VOTING
Section 5.1 Annual Meetings of Shareholders
The annual meeting of Shareholders to direct the voting of the Trust, as a member of the
Sponsor, shall be called by the Sponsor, pursuant to the Sponsor Agreement, and held at such date,
at such time and at such place (if any) within or without the State of Delaware as may be
designated by resolution adopted by a majority of the Board of Directors. Any other business may
be transacted at the annual meeting;
provided
, that it is properly brought before the meeting.
Section 5.2 Special Meetings of Shareholders
Special meetings of Shareholders shall be held on such date, at such time and at such place
(if any) within or without the State of Delaware as shall be designated from time to time by the
Board of Directors and stated in the notice of the meeting. Special meetings of Shareholders may be
called at any time only by the Chairman of the Board of Directors or by the Board of Directors
pursuant to a resolution adopted by a majority of the Board of Directors. Business transacted at
any special meeting of Shareholders shall be limited to the purpose stated in the notice relating
thereto.
Section 5.3 Place of Meeting
The Board of Directors may designate the place (if any) of meeting for any meeting of
Shareholders. If no designation is made by the Board of Directors, the place of meeting shall be
the principal executive office of the Sponsor. In lieu of holding any meeting of Shareholders at a
designated place, the Board of Directors may, in its sole discretion, determine that any meeting of
Shareholders may be held solely by means of remote communication.
Section 5.4 Notice of Meeting
(a) A notice of meeting, stating the place (if any), day and hour of the meeting, and the
means of remote communication, if any, by which Shareholders and
15
proxy holders may be deemed to be present in person and vote at such meeting (the “
Trust’s
Notice
”), shall be prepared and delivered by the Sponsor not less than twenty (20) days and not
more than sixty (60) days before the date of the meeting, either personally, by mail or, to the
extent and in the manner permitted by applicable law, electronically, to each Shareholder of
record. In the case of special meetings, the notice shall state the purpose or purposes for which
such special meeting is called. Such further notice shall be given as may be required by applicable
law. Any previously scheduled meeting of the Shareholders may be postponed, and (unless this
Agreement otherwise provides) any special meeting of the Shareholders may be canceled, by
resolution of the Board of Directors upon public notice given prior to the time previously
scheduled for such meeting of Shareholders.
(b) The Trust’s Notice to Shareholders shall be given personally, by mail or, to the extent
and in the manner permitted by applicable law, electronically to each Shareholder of record. If
mailed, such notice shall be delivered by postage prepaid envelope directed to each holder at such
Shareholder’s address as it appears in the records of the Trust and shall be deemed given when
deposited in the United States mail.
Any Trust’s Notice to Shareholders given by the Trust pursuant to this Section 5.4 shall be
effective if given by a form of electronic transmission consented to by the Shareholder to whom the
notice is given. Any such consent shall be revocable by the Shareholder by written notice to the
Trust and shall also be deemed revoked if (1) the Trust is unable to deliver by electronic
transmission two consecutive notices given by the Trust in accordance with such consent, and (2)
such inability becomes known to the Secretary of the Sponsor, the Transfer Agent or other person
responsible for the giving of notice;
provided,
that, the inadvertent failure to treat such
inability as a revocation shall not invalidate any meeting or other action.
Notice given by electronic transmission pursuant to this subsection shall be deemed given: (1)
if by facsimile telecommunication, when directed to a facsimile telecommunication number at which
the Shareholder has consented to receive notice; (2) if by electronic mail, when directed to an
electronic mail address at which the Shareholder has consented to receive notice; (3) if by posting
on an electronic network together with separate notice to the Shareholder of such specific posting,
upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any
other form of electronic transmission, when directed to the Shareholder. An affidavit of the
Secretary or an assistant Secretary or of the Transfer Agent or other agent of the Sponsor that the
notice has been given by personal delivery, mail or a form of electronic transmission shall, in the
absence of fraud, be
prima facie
evidence of the facts stated therein.
(c) In order that the Trust may determine the Shareholders entitled to notice of or to vote at
any meeting of Shareholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date shall not be more than sixty (60) or
fewer than twenty (20) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining Shareholders entitled to notice of or to vote
at any meeting of
16
Shareholders or any adjournment thereof shall be at the close of business on the day next
preceding the day on which notice is given or, if notice is waived, at the close of business on the
day next preceding the day on which the meeting is held.
Section 5.5 Quorum and Adjournment
Except as otherwise provided by applicable law or by this Agreement, the Shareholders present
in person or by proxy holding a majority of the then Outstanding Shares entitled to vote, shall
constitute a quorum at a meeting of Shareholders. The Chairman or the holders of a majority of the
then Outstanding Shares entitled to vote so represented may adjourn the meeting from time to time,
whether or not there is such a quorum. The Shareholders present at a duly organized meeting at
which a quorum is present in person or by proxy may continue to transact business until
adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum.
When a meeting is adjourned to another time and place, if any, unless otherwise provided by
this Agreement, notice need not be given of the reconvened meeting if the date, time and place, if
any, thereof and the means of remote communication, if any, by which Shareholders and proxyholders
may be deemed to be present in person and vote at such reconvened meeting are announced at the
meeting at which the adjournment is taken. If the time, date and place of the reconvened meeting
are not announced at the meeting at which the adjournment is taken, then the Secretary of the
Sponsor shall give written notice of the time, date and place of the reconvened meeting not less
than twenty (20) days prior to the date of the reconvened meeting.
At the reconvened meeting, the Shareholders may transact any business that might have been
transacted at the original meeting. A determination of Shareholders of record entitled to notice of
or to vote at a meeting of Shareholders shall apply to any adjournment of such meeting;
provided,
however
, that the Board of Directors may fix a new record date for the reconvened meeting. If an
adjournment is for more than thirty (30) days or if, after an adjournment, a new record date is
fixed for the reconvened meeting, a notice of the reconvened meeting shall be given to each
Shareholder entitled to vote at the meeting.
Section 5.6 Voting
(a) Subject to the provisions of this Section 5.6 and Section 5.7, the Shareholders shall have
the exclusive and absolute right to direct the Regular Trustees with respect to the voting of the
Trust on all matters that it, as holder of the Sponsor Interests, is entitled to vote upon under
the terms of the Sponsor Agreement or applicable law and the Regular Trustees shall cause the Trust
to vote its Sponsor Interests as so directed by the Shareholders.
(b) When the Trust is required or permitted to vote with respect to the Sponsor Interests, the
Sponsor shall prepare and deliver to the Regular Trustees the form of proxy materials to enable the
Regular Trustees to solicit from the Shareholders the manner in which the Shareholders desire the
Regular Trustees to vote their Shares.
17
Shareholders shall be entitled to one vote for each Share in respect of any matter as to which
the Trust as a member of the Sponsor is entitled to vote as provided in the Sponsor Agreement.
(c) All Shares shall, to the extent practicable under the circumstances, be voted in the same
proportion as the Shares are directed to be voted by the Shareholders, including for purposes of
determining a quorum, in favor of, in opposition to or abstaining from the matter voted upon. If
such calculation of votes would require a fractional vote, the Regular Trustees shall vote the next
lower number of whole Shares.
Section 5.7 Proxies
At all meetings of Shareholders, a Shareholder may vote by proxy as may be permitted by
applicable law;
provided
, that, no proxy shall be voted after three (3) years from its date, unless
the proxy provides for a longer period in accordance with this Agreement. Any proxy to be used at a
meeting of Shareholders must be filed with the Secretary of the Sponsor or his or her
representative at or before the time of the meeting. A Shareholder may revoke any proxy which is
not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a
revocation of the proxy or a new proxy bearing a later date.
Section 5.8 Notice of Shareholder Business and Nominations
(a) Annual Meetings of Shareholders
(i) Except in the case of the Initial Board, nominations of individuals for election
by the Trust to the Board of Directors, other than the Manager’s appointed directors for so
long as the Manager is entitled to appoint directors to the Board of Directors pursuant to
the terms of the Sponsor Agreement, and the proposal of business to be considered by
Shareholders, may be made at an annual meeting of Shareholders (A) pursuant to the Trust’s
Notice of meeting delivered pursuant to Section 5.4 hereof, (B) by or at the direction of
the Board of Directors or (C) by any Shareholder who is entitled to vote at the meeting,
who complies with the notice procedures set forth in clauses (ii) and (iii) of this Section
5.8(a).
In addition to any other applicable requirements, for a nomination for election of a
director of the Sponsor to be made by a Shareholder (other than the Manager’s appointed
directors) or for business to be properly brought before an annual meeting by a
Shareholder, such Shareholder must (A) be a Shareholder of record on both (1) the date of
the delivery of such nomination or the date of the giving of the notice provided for in
this Section 5.8(a) and (2) the record date for the determination of Shareholders entitled
to vote at such annual meeting, and (B) have given timely notice thereof in proper written
form in accordance with the requirements of this Section 5.8 (a) to the Secretary.
(ii) For nominations or other business to be properly brought before an annual meeting
by a Shareholder pursuant to this Section 5.8(a)(i)(C), a Shareholder must have given
timely notice thereof in writing to the Secretary and,
18
in the case of business other than nominations, such other business must otherwise be
a proper matter for Shareholder action. Except to the extent otherwise required by
applicable law, to be timely, a Shareholder’s notice shall be delivered to the Secretary at
the principal executive offices of the Sponsor not less than one hundred and twenty (120)
days nor more than one hundred and fifty (150) days prior to the first anniversary of the
preceding year’s annual meeting;
provided, however
, that, in the event that the date of the
annual meeting is more than thirty (30) days before or more than seventy (70) days after
such anniversary date, notice by a Shareholder must be so delivered not earlier than the
close of business on the one hundred twentieth (120
th
) day prior to such annual
meeting or the tenth (10
th
) day following the day on which public announcement
of the date of such meeting is first made by the Trust. In the case of the first annual
meeting of Shareholders, a Shareholder’s notice shall be timely if it is delivered to the
Secretary at the principal executive offices of the Sponsor not earlier than the one
hundred and twentieth (120th) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such annual meeting or the
tenth (10th) day following the day on which public announcement of the date of such meeting
is first made. In no event shall the public announcement or an adjournment or postponement
of an annual meeting commence a new time period for the giving of a Shareholder’s notice as
described in this Section 5.8(a).
Subject to Section 5.8(a)(i), such Shareholder’s notice shall set forth: (A) as to
each individual whom the Shareholder proposes to nominate for election or reelection as a
director of the Sponsor, all information relating to such individual that is required to be
disclosed in solicitations of proxies for election of directors in an election contest, or
is otherwise required, pursuant to Regulation 14A under the Exchange Act, including such
individual’s written consent to being named in the proxy statement as a nominee and to
serving as a director of the Sponsor if elected; (B) as to any other business that the
Shareholder proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the text of the proposal or business (including
the text of any resolutions proposed for consideration), the reasons for conducting such
business at the meeting and any material interest in such business of such Shareholder and
the Beneficial Owner or holder of Shares, if any, on whose behalf the proposal is made; and
(C) as to the Shareholder giving the notice and the Beneficial Owner, if any, on whose
behalf the nomination or proposal is made, (1) the name and address of such Shareholder as
they appear on the Trust’s books and of such Beneficial Owner, (2) the number of, and
evidence of such number of, Shares which are owned beneficially and of record by such
Shareholder and such Beneficial Owner, (3) a representation that the Shareholder or
Beneficial Owner, if any, intends to appear in person or by proxy at the meeting to propose
such business or nomination, and (4) a representation whether the Shareholder or the
Beneficial Owner, if any, intends or is part of a group which intends (i) to deliver a
proxy statement and/or form of proxy to holders of at least the percentage of the Trust’s
Outstanding Shares required to approve or adopt the proposal or elect the nominee and/or
(ii) otherwise to solicit proxies from Shareholders in support of
19
such proposal or nomination. The foregoing notice requirements shall be deemed
satisfied by a Shareholder if the Shareholder has notified the Trust of his or her
intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any
successor thereof) promulgated under the Exchange Act and such Shareholder’s proposal has
been included in a proxy statement that has been prepared by the Trust to solicit proxies
for such annual meeting. The Trust may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of such proposed
nominee to serve as a director of the Sponsor or on any committee of the Board of
Directors.
(iii) Notwithstanding anything in the second sentence of clause (ii) of this Section
5.8(a) to the contrary, in the event that the number of directors to be elected to the
Board of Directors is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of Directors made by
the Sponsor, on behalf of the Trust at least one hundred (100) days prior to the first
anniversary of the preceding year’s annual meeting, a Shareholder’s notice required by this
Section 5.8 shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Sponsor not later than the close of business on the
tenth (10th) day following the day on which such public announcement is first made by the
Sponsor, on behalf of the Trust.
(b) Special Meeting of Shareholders
Only such business shall be conducted at a special meeting of Shareholders as shall have been
brought before the meeting pursuant to the Trust’s Notice of meeting pursuant to Section 5.4 of
this Agreement. Nominations of individuals for election to the Board of Directors by the Trust,
other than the Manager’s appointed directors, for so long as the Manager is entitled to appoint
directors of the Board of Directors pursuant to the terms of the Sponsor Agreement, may be made at
a special meeting of Shareholders at which the Shareholders are to direct the Regular Trustees with
respect to the Trust’s election of directors pursuant to the Trust’s Notice of meeting (i) by or at
the direction of the Board of Directors or (ii) by any Shareholder who is entitled to vote at the
meeting who complies with the notice procedures set forth in this Section 5.8.
In addition to any other applicable requirements, for a nomination for election by the Trust
of a director to be made by a Shareholder, such Shareholder must (A) be a Shareholder of record on
both (1) the date of the delivery of such nomination and (2) the record date for the determination
of Shareholders entitled to vote at such special meeting, and (B) have given timely notice thereof
in proper written form in accordance with the requirements of this Section 5.8(b) to the Secretary.
In the event the Sponsor, on behalf of the Trust calls a special meeting of Shareholders for
the purpose of their voting to direct the Trust with respect to its electing one or more directors
to the Board of Directors, any such Shareholder may nominate such number of individuals for
election by the Trust to such position(s) as are specified in the
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Trust’s Notice of Meeting, if the Shareholder’s notice as required by clause (ii) of Section
5.8(a) of this Agreement shall be delivered to the Secretary at the principal executive offices of
the Sponsor not earlier than the one hundred and twentieth (120th) day prior to such special
meeting and not later than the close of business on the later of the ninetieth (90th) day prior to
such special meeting or the tenth (10th) day following the day on which public announcement is
first made of the date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public announcement of an
adjournment or postponement of a special meeting commence a new time period for the giving of a
Shareholder’s notice as described above.
(c) General
(i) Only individuals who are nominated in accordance with the procedures set forth in
this Section 5.8 shall be eligible to be considered for election by the Trust as directors
of the Sponsor at a meeting of Shareholders and only such business shall be conducted at a
meeting of Shareholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 5.8. Except as otherwise provided by applicable
law or this Section 5.8, the Chairman shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Section 5.8 and, if any proposed nomination or
business is not in compliance with this Section 5.8, to declare that such defective
proposal or nomination shall be disregarded.
(ii) For purposes of this Section 5.8, “Public Announcement” shall mean disclosure in
a press release reported by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the Trust with the Commission
pursuant to Sections 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 5.8, a Shareholder
shall also comply with all applicable requirements of the Exchange Act and the Rules and
Regulations thereunder with respect to the matters set forth in this Section 5.8. Nothing
in this Section 5.8 shall be deemed to affect any rights of Shareholders to request
inclusion of proposals in the Trust’s proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 5.9 Procedure for Election of Directors; Voting
The election of directors by the Trust submitted to Shareholders at any meeting shall be
decided by a plurality of the votes cast thereon. The Regular Trustees shall cause the Trust to
vote the Sponsor Interests in accordance with section 5.6. Except as otherwise provided by
applicable law or this Agreement, all matters other than the election of directors by the Trust
submitted to Shareholders at any meeting shall be decided by the affirmative vote of a majority of
the then Outstanding Shares present in person or represented by proxy at the meeting of
Shareholders.
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The vote on any matter at a meeting, including the election of directors by the Trust, shall
be by written ballot. Each ballot shall be signed by shareholder voting, or by such Shareholder’s
proxy, and shall state the number of Shares voted.
Section 5.10 Inspectors of Elections; Opening and Closing the Polls
(a) The Board of Directors by resolution shall appoint one or more inspectors, which inspector
or inspectors shall not be directors, officers or employees of the Sponsor, to act at the meeting
and make a written report thereof. One or more individuals may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or alternate has been so
appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at
a meeting of Shareholders, the Chairman shall appoint one or more inspectors to act at the meeting.
Each such inspector, before discharging his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by the General Corporation Law of the
State of Delaware as if the Trust were a Delaware corporation.
(b) The Chairman shall fix and announce at the meeting the date and time of the opening and
the closing of the polls for each matter upon which the Shareholders will vote at the meeting.
Section 5.11 Confidential Shareholder Voting
All proxies, ballots and votes, in each case to the extent they disclose the specific vote of
an identified Shareholder, shall be tabulated and certified by an independent tabulator, inspector
of elections and/or other independent parties and shall not be disclosed to any director, officer
or employee of the Sponsor or Trustee;
provided, however
, that, notwithstanding the foregoing, any
and all proxies, ballots and voting tabulations may be disclosed: (a) as necessary to meet legal
requirements or to assist in the pursuit or defense of legal action; (b) if the Sponsor concludes
in good faith that a bona fide dispute exists as to the authenticity of one or more proxies,
ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes; (c) in
the event of a proxy, consent or other solicitation in opposition to the voting recommendation of
the Board of Directors; and (d) if a Shareholder requests or consents to disclosure of such
Shareholder’s vote or writes comments on such Shareholder’s proxy card or ballot.
Section 5.12 Waiver of Notice
Whenever any notice is required to be given to any Shareholder by the terms of this Agreement,
a waiver thereof in a writing, signed by the Shareholder or Shareholders entitled to notice,
whether such waiver is given before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. If such a waiver is given by electronic transmission, the electronic
transmission must either set forth or be submitted with information from which it can be determined
that the electronic transmission was authorized by the Shareholder. Neither the business to be
transacted at, nor the purpose of, any annual or special meeting of Shareholders need be specified
in any written waiver
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of notice or any waiver by electronic transmission of such meeting. Notice of any meeting of
Shareholders need not be given to any Shareholder if waived by such Shareholder either in a writing
signed by such Shareholder or by electronic transmission, whether such waiver is given before or
after such meeting is held.
Section 5.13 Remote Communication
For the purposes of this Agreement, if authorized by the Board of Directors in its sole
discretion, and subject to such guidelines and procedures as the Board of Directors may adopt,
Shareholders and proxyholders may, by means of remote communication:
(a) participate in a meeting of Shareholders; and
(b) to the fullest extent permitted by applicable law, be deemed present in person and vote at
a meeting of Shareholders, whether such meeting is to be held at a designated place or solely by
means of remote communication;
provided, however
, that (i) the Sponsor, on behalf of the Trust, shall implement reasonable
measures to verify that each Person deemed present and permitted to vote at the meeting by means of
remote communication is a Shareholder or proxyholder, (ii) the Sponsor, on behalf of the Trust,
shall implement reasonable measures to provide such Shareholders and proxyholders a reasonable
opportunity to participate in the meeting and to vote on matters submitted to Shareholders,
including an opportunity to read or hear the proceedings of the meeting substantially and
concurrently with such proceedings, and (iii) if any Shareholder or proxyholder votes or takes
other action at the meeting by means of remote communication, a record of such vote or other action
shall be maintained by the Sponsor, on behalf of the Trust.
Section 5.14 Action by Written Consent
For so long as the Trust remains the sole holder of Sponsor Interests, the Trust shall take
any action required or permitted to be taken at any meeting of the members of the Sponsor, by
executing a written consent that shall reflect the vote of the Shareholders as required by the
terms of this Agreement, without such meeting, without prior notice, and without a vote. Proxy
materials completed by the Shareholders evidencing the result of a vote taken at a meeting of the
Shareholders with at least the minimum number of votes required to constitute an affirmative vote
of the Shareholders under this Agreement shall be delivered to the Sponsor indicating the vote or
action being approved or disapproved by such Shareholders with respect to those matters reserved to
the Shareholders by this Agreement.
Section 5.15 Inspection of Records
(a) The Sponsor, on behalf of the Trust, shall keep or cause to be kept at its principal
executive office appropriate books and records with respect to the Trust, including, without
limitation, all books and records necessary to provide to the Shareholders any information, lists
and copies of documents required to be provided pursuant to applicable law. Any books and records
maintained by or on behalf of the
23
Trust in the regular course of its business, including, without limitation, the record of the
Shareholders, books of account and records of Trust proceedings, may be kept in electronic or any
other form;
provided,
that the books and records so maintained are convertible into clearly legible
written form within a reasonable period of time.
(b) The Secretary shall make, at least ten (10) days before every meeting of Shareholders, a
complete list of the Shareholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each Shareholder and the number of Shares registered in the name of each
Shareholder. Such list shall be open to the examination of any Shareholder, for any purpose germane
to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably
accessible electronic network;
provided,
that the information required to gain access to such list
is provided with the notice of the meeting, or (ii) during ordinary business hours, at the
principal place of business of the Trust. In the event that the Sponsor determines to make the list
available on an electronic network, the Sponsor may take reasonable steps to ensure that such
information is available only to Shareholders. The list shall be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any Shareholder who is
present.
Any Shareholder or Beneficial Owner, in person or by attorney or other agent, shall, upon
written demand stating the purpose thereof, have the right during the usual business hours to
inspect for any proper purpose, and to make copies and extracts from: (1) the Trust’s Share
Register, a list of the Shareholders, and its other books and records or (2) the Sponsor’s books
and records;
provided
, that as of the date of the making of the demand, inspection of such books
and records would not constitute a breach of any confidentiality agreement. In every instance where
a person purports to be a Beneficial Owner of Shares but who is not the holder of record as
identified on the Share Register, the demand shall state such Person’s status as a Beneficial Owner
of Shares, be accompanied by documentary evidence of beneficial ownership of Shares, and state that
such documentary evidence is a true and correct copy of what it purports to be. A proper purpose
shall mean a purpose reasonably related to such Person’s interest as a Shareholder or Beneficial
Owner of Shares.
ARTICLE VI
RIGHT OF SHAREHOLDERS TO ENFORCE PROVISIONS OF SPONSOR
AGREEMENTS AND BRING DERIVATIVE ACTION
Section 6.1 Right to Institute Legal Proceeding
Pursuant to Section 2.5 of the Sponsor Agreement, Shareholders have certain rights to
institute legal proceedings against the Sponsor to enforce the provisions of the Sponsor Agreement.
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Section 6.2 Ten Percent (10%) or More Shareholder
Subject to the requirements of Section 3816 of the Delaware Statutory Trust Act and other
applicable law, for so long as the Trust remains the sole owner of Sponsor Interests, Shareholders
holding at least ten percent (10%) or more of the Outstanding Shares shall have the right to cause
the Trust to institute any legal proceeding for any remedy available to the Trust, as a holder of
Sponsor Interests, and, to the extent permitted by applicable law, such Shareholders may direct the
time, method and place of conducting any such legal proceeding brought by the Trust.
Except as expressly provided in this Agreement, nothing in this Agreement shall be deemed to
give to any Person any benefit or any legal or equitable right, remedy or claim under this
Agreement.
ARTICLE VII
SHAREHOLDER VOTE REQUIRED IN CONNECTION WITH CERTAIN
BUSINESS COMBINATIONS OR TRANSACTIONS
Section 7.1 Vote Generally Required
Except as provided in Sections 9.2 and 9.3 and subject to the provisions of Section 7.2
hereof, the Trust shall not (a) merge or consolidate with or into any limited liability company,
corporation, statutory trust, business trust or association, real estate investment trust,
common-law trust, or any other unincorporated business, including a partnership, or (b) sell, lease
or exchange all or substantially all of the Trust Property, unless the Sponsor, acting through the
Board of Directors, adopts a resolution, by the affirmative vote of at least a majority of the
Sponsor’s Board of Directors, approving such action and unless such action shall be approved by the
affirmative vote of the holders of a majority of the then Outstanding Shares outstanding and
entitled to vote thereon. The notice of the meeting at which such resolution is to be considered
shall so state.
Section 7.2 Vote for Business Combinations
The affirmative vote of the holders of record of Outstanding Shares representing at least
sixty-six and two-thirds percent (66 2/3%) of the then Outstanding Shares (excluding Shares held by
the Interested Shareholder or any Affiliate or Associate of an Interested Shareholder) shall be
required to approve any Business Combination. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required, or that a lesser percentage may be
specified, by applicable law or in any agreement with any securities exchange or otherwise.
Section 7.3 Power of Continuing Directors
The Continuing Directors shall have the power and duty to determine, on the basis of
information known to them after reasonable inquiry, all facts necessary to determine compliance
with this Article VII, including, without limitation, (a) whether a Person is an
25
Interested Shareholder, (b) the number of Shares beneficially owned by any Person, (c) whether
a Person is an Affiliate or Associate of another and (d) the Fair Market Value of the Shares, the
Sponsor Interests or any equity securities of any Subsidiary thereof; and the good faith
determination of the Continuing Directors on such matters shall be conclusive and binding for all
the purposes of this Article VII.
Section 7.4 No Effect on Fiduciary Obligations
Nothing contained in this Article VII shall be construed to relieve the directors of the Board
of Directors or an Interested Shareholder from any fiduciary obligation imposed by applicable law.
ARTICLE VIII
THE TRUSTEES
Section 8.1 Certain Duties and Responsibilities
(a) In addition to the duties and responsibilities provided for herein, the Regular Trustees
shall have the following exclusive duties:
(i) negotiate, execute and deliver the Sponsor Agreement on behalf of the Trust (which
may be executed by any one Regular Trustee);
(ii) to maintain bank accounts, brokerage accounts and other custody accounts that
receive Trust income and receipts from which Trust expenditures and distributions are
disbursed;
(iii) to maintain the Trust Property;
(iv) to maintain Trust records;
(v) to maintain an office for Trust business;
(vi) to originate, facilitate and review Trust reports and other Trust communications;
(vii) to execute documents and authorize Trust account transactions;
(viii) to retain accountants, attorneys, agents and other advisors in connection with
its duties under this Agreement;
(ix) to file reports and returns on behalf of the Trust with government agencies to
the extent required by applicable law and as specifically directed in writing by the
Sponsor; and
(x) to perform such other actions as are necessary to effect any of the foregoing
duties;
provided, however
, that no action may be taken by the Regular
26
Trustees to the extent that such action would cause the Regular Trustees to be
considered to have the power to vary the investment of the Beneficial Owners or otherwise
to cause the Trust no longer to qualify as a grantor trust for U.S. federal income tax
purposes.
(b) The duties and responsibilities of the Trustees shall be as provided by this Agreement.
Except as provided in Section 2.8 or other express provisions hereof, the Sponsor and the Trustees
hereby acknowledge and agree that the Trustees are authorized, directed and instructed to act as
specifically authorized in writing by the Sponsor.
Any written instructions, notwithstanding any error in the transmission thereof or that such
instructions may not be genuine, shall, as against the Sponsor and in favor of the Trustees, be
conclusively deemed to be valid instructions from the Sponsor to the Trustees for the purposes of
this Agreement, if believed in good faith by the Trustees to be genuine and if not otherwise
insufficient on the face of such written instructions;
provided, however
, that a Trustee in its
discretion may decline to act upon any instructions where they are not received by such Trustee in
sufficient time for such Trustee to act upon or in accordance with such instructions, where such
Trustee has reasonable grounds for concluding that the same have not been accurately transmitted or
are not genuine or where such Trustee believes in good faith that complying with such instructions
is contrary to applicable law or might subject such Trustee to any liability. If a Trustee declines
to act upon any instructions for any reason set out in the preceding sentence, it shall notify (and
provide reasonable detail to) the Sponsor and the other Trustees in writing forthwith after it so
declines. In addition, the Delaware Trustee shall not be required to take or refrain from taking
any action if the Trustee shall have determined, or shall have been advised by counsel, that such
performance is likely to involve the Delaware Trustee in personal liability or is contrary to the
terms of this Agreement, any other document to which the Trust is a party or otherwise contrary to
law.
(c) The Trustees shall not be liable for any act or omission in the course of or connected
with their performance hereunder, except only that each Trustee shall be subject to liability and
assume the entire responsibility for direct damages suffered by the Sponsor or any other Person
occasioned by such Trustee’s own gross negligence or willful misconduct or the gross negligence or
willful misconduct of any of such Trustee’s directors, officers or employees in the rendering of
its performance hereunder, as determined by a court of competent jurisdiction.
(d) The Trustees shall incur no liability to anyone in acting upon any document, including any
certified items referenced herein, reasonably believed by them to be genuine (which is not
insufficient on its face) and to have been signed by the proper Person or Persons, including (i)
written instructions from the Sponsor, and (ii) a certified copy of a resolution of the Board of
Directors or other governing body of any corporate party, which shall be conclusive evidence that
such resolution has been duly adopted by such body and that the same is in full force and effect.
As to any fact or matter the manner of ascertainment of which is not specifically prescribed
herein, the Trustees may for all purposes hereof rely on a certificate, signed by the Sponsor, as
to such fact or
27
matter, and such certificate, if relied upon by the Trustees in good faith, shall constitute
full protection to the Trustees for any action taken or omitted to be taken by them in good faith
in reliance thereon.
In no event shall the Trustees be liable to any Persons for (A) acting in accordance with
instructions from the Sponsor, (B) any damages in the nature of special, indirect or consequential
damages, however styled, including, without limitation, lost profits, or for any losses due to
forces beyond the control of such Trustee, including, without limitation, strikes, work stoppages,
acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God
and interruptions, loss or malfunctions of utilities, communications or computer (software and
hardware) services provided to the Trustees by third parties or (C) the acts or omissions of their
nominees, correspondents, designees, agents or subagents appointed by them in good faith.
(e) In the event that the Trustees are unsure of the course of action to be taken by them
hereunder, the Trustees may request instructions from the Sponsor as to such course of action to be
taken. In the event that no instructions are provided within the time requested by the Trustees,
they shall have no duty or liability for their failure to take any action or for any action they
take in good faith and in accordance with the terms hereof.
Section 8.2 Not Responsible for Recitals or Issuance of Shares
The recitals contained herein and in the Share Certificates shall not be taken as the
statements of the Trustees, and the Trustees do not assume any responsibility for their
correctness.
Section 8.3 May Hold Shares
Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other
capacity, may become the owner or pledgee of Shares and may otherwise deal with the Trust with the
same rights it would have if it were not a Trustee or such other agent.
Section 8.4 Compensation; Indemnity; Fees
The Sponsor agrees:
(i) to pay the Delaware Trustee from time to time such compensation for all services rendered
by it hereunder as the parties shall agree from time to time in writing (which compensation shall
not be limited by any provision of applicable law in regard to the compensation of a trustee of an
express trust);
(ii) except as otherwise expressly provided herein, to reimburse the Trustees upon request for
all reasonable expenses, disbursements and advances incurred or made by the Trustees in accordance
with any provision of this Agreement (including the reasonable compensation and the expenses and
disbursements of its agents, counsel and experts), except any such expense, disbursement or advance
determined by a court of competent jurisdiction to have been caused by its own gross negligence or
willful misconduct; and
28
(iii) to the fullest extent permitted by applicable law, to indemnify and hold harmless (i)
the Trustees, (ii) any officer, director, shareholder, employee, representative or agent of the
Trustees, and (iii) any employee or agent of the Trust (collectively, the “
Indemnified Person
”)
from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature
whatsoever incurred by such Indemnified Person by reason of the creation, operation or termination
of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith
on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this Agreement, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss, damage, liability,
tax, penalty, expense or claim of any kind or nature incurred by such Indemnified Person by reason
of gross negligence or willful misconduct with respect to such acts or omissions.
Section 8.5 Delaware Trustee Required; Eligibility of Trustees
(a) There shall at all times be a Delaware Trustee hereunder with respect to the Shares. The
Delaware Trustee shall be either (i) a natural person who is at least 21 years of age and a
resident of the State of Delaware or (ii) a legal entity with its principal place of business in
the State of Delaware and that otherwise meets the requirements of applicable Delaware law that
shall act through one or more persons authorized to bind such entity. If at any time the Delaware
Trustee with respect to the Shares shall cease to be eligible in accordance with the provisions of
this Section 8.5, it shall resign immediately in the manner and with the effect hereinafter
specified in this Article VIII.
(b) There shall at all times be at least one Regular Trustee hereunder with respect to the
Shares. The Regular Trustee shall be either a natural person who is at least 21 years of age or a
legal entity that shall act through one or more persons authorized to bind that entity.
Section 8.6 Resignation and Removal; Appointment of Successor
(a) Subject to Sections 8.6(b) and 8.6(c), any Trustee (the “
Relevant Trustee
”) may be
appointed or removed without cause upon thirty (30) days prior notice to such Trustee by the
Sponsor.
(b) The Trustee that acts as Delaware Trustee shall not be removed in accordance with Section
8.6(a) until a successor possessing the qualifications to act as Delaware Trustee under Section 8.5
(a “
Successor Delaware Trustee
”) has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the removed
Delaware Trustee.
(c) A Trustee appointed to office shall hold office until his, her or its successor shall have
been appointed or until his, her or its death, removal, resignation, dissolution or liquidation.
Any Trustee may resign from office (without need for prior or subsequent accounting) by an
instrument in writing with thirty (30) days notice signed by the Trustee and delivered to the
Sponsor and the Trust, which resignation shall take effect
29
upon such later date as is specified therein;
provided, however
, that no such resignation of
the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument executed by such Successor
Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee.
(d) If no Successor Delaware Trustee shall have been appointed and accepted appointment as
provided in this Section 8.6 within sixty (60) days after delivery pursuant to this Section 8.6 of
an instrument of resignation or removal, the Delaware Trustee resigning or being removed, as
applicable, may petition, at the expense of the Sponsor, any court of competent jurisdiction for
appointment of a Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Delaware Trustee.
(e) No Delaware Trustee shall be liable for the acts or omissions to act of any Successor
Delaware Trustee, as the case may be.
(f) Notwithstanding the foregoing or any other provision of this Agreement, in the event a
Regular Trustee or a Delaware Trustee who is a natural person dies or becomes, solely in the
opinion of the Sponsor, incompetent or incapacitated, the vacancy created by such death,
incompetence or incapacity may be filled by the Sponsor (with the successor in each case being a
Person who satisfies the eligibility requirement for the Regular Trustee or the Delaware Trustee,
as the case may be, set forth in Section 8.5).
(g) The indemnity provided to a Trustee under Section 8.4 shall survive any Trustee’s
resignation or removal and the termination of this Agreement.
Section 8.7 Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a Successor Trustee, such Successor Trustee so
appointed shall execute, acknowledge and deliver to the Trust and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal of the retiring
Trustee shall become effective and such Successor Trustee, without any further act, deed or
conveyance, shall become vested with all the rights, powers and duties of the retiring Trustee;
provided
, that on the request of the Sponsor or the Successor Trustee, such retiring Trustee shall,
upon payment of its charges, execute and deliver an instrument transferring to such Successor
Trustee all the rights and powers of the retiring Trustee.
(b) No Successor Trustee shall accept its appointment unless at the time of such acceptance
such Successor Trustee shall be qualified and eligible under this Article VIII.
Section 8.8 Merger, Conversion, Consolidation or Succession to Business
Any Person into which the Delaware Trustee or the Regular Trustee that is not a natural person
may be merged or converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which such Relevant
30
Trustee shall be a party, or any Person succeeding to all or substantially all the corporate
trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder;
provided
, such Person shall be otherwise qualified and eligible under this Article VIII, without
the execution or filing of any paper or any further act on the part of any of the parties hereto.
Section 8.9 Number of Trustees
(a) The number of Trustees shall be three;
provided
, that the Sponsor may increase or decrease
the number of Regular Trustees, subject to Section 8.5.
(b) If a Trustee ceases to hold office for any reason and the number of Regular Trustees is
not reduced pursuant to Section 8.9(a), or if the number of Trustees is increased pursuant to
Section 8.9(a), a vacancy shall occur. The vacancy shall be filled by a Successor Trustee appointed
in accordance with Section 8.6.
(c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to
perform the duties of a Trustee shall not operate to annul the Trust.
Section 8.10 Delegation of Power
(a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to
any other natural person over the age of 21 his or her power for the purpose of executing any
documents contemplated in Section 2.9.
(b) The Regular Trustees shall have power to delegate from time to time to such of their
number or to the Sponsor the doing of such things and the execution of such instruments either in
the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may
deem expedient, to the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
Section 8.11 Resignation and Appointment of Regular Trustees
(a) I. Joseph Massoud hereby resigns as a Regular Trustee of the Trust as of the close of
business on the first day upon which the Trust issues Shares.
(b) The Regular Trustees shall be Alan B. Offenberg and James J. Bottiglieri, each an
individual and his successor shall be appointed by the Sponsor. Upon the resignation or removal of
either individual, the Sponsor shall appoint a successor Regular Trustee.
(c) Whenever a vacancy in the number of Regular Trustees shall occur, until such vacancy is
filled by the appointment of a Regular Trustee in accordance with this Section 8.11 or Section 8.6,
the Regular Trustee(s) in office, if any, regardless of their number (and not withstanding any
other provision of this Agreement), shall have all the powers granted to the Regular Trustee and
shall discharge all the duties imposed upon the Regular Trustee by this Agreement.
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ARTICLE IX
TERMINATION AND DISSOLUTION
Section 9.1 Termination or Dissolution
Unless terminated as provided herein, the Trust shall continue without limitation of time. If
an Early Termination Event specified in Section 9.4 occurs, the Trust shall be dissolved, and one
Sponsor Interest shall be distributed to each Shareholder in exchange for each Outstanding Share.
Section 9.2 Circumstances Under Which Shares Shall Be Voluntarily Exchanged for Sponsor Interests
In the event that the Sponsor, acting through the Board of Directors, (i) determines that
either (A) the Trust or the Sponsor, or both, is, or is reasonably likely to be, treated as a
corporation for U.S. federal income tax purposes, (B) the Trust is, or is reasonably likely to be,
required to issue Schedules K-1 to Shareholders or (C) the existence of the Trust otherwise
results, or is reasonably likely to result, in a material tax detriment to the Trust, Shareholders,
the Sponsor or any member of the Sponsor and (ii) obtains an opinion of counsel to such effect, the
Sponsor, acting through the Board of Directors (a) shall declare a record date and deliver a
mandatory instruction to the Regular Trustees, together with any opinions of counsel or officers’
certificates of the Sponsor as the Regular Trustees may reasonably request, directing the Regular
Trustees to, subject to Section 3808(e) of the Delaware Statutory Trust Act, (i) deliver one
Sponsor Interest to each Shareholder in exchange for each Outstanding Share (the “
Voluntary
Exchange
”) and (ii) dissolve the Trust and (b) shall deliver to the Transfer Agent notice of such
Voluntary Exchange and shall cause the Transfer Agent to mail a copy of such notice to the
Shareholders at least thirty (30) days prior to the Voluntary Exchange. Simultaneously with the
completion of such Voluntary Exchange, each Shareholder immediately prior to the completion of the
Voluntary Exchange shall be admitted to the Sponsor as a member in respect of a number of Sponsor
Interests previously held by the Trust equal in number to the Outstanding Shares previously held by
such Shareholder and each such member shall be issued a certificate evidencing the same, in
accordance with the provisions of the Sponsor Agreement. Immediately thereafter, the Trust shall be
deemed withdrawn from the Sponsor as a member in respect of such Sponsor Interest(s), and the Trust
shall tender its certificates evidencing Sponsor Interests to the Transfer Agent or Sponsor for
cancellation.
Section 9.3 Circumstances Under Which Shares Shall Be Mandatorily Exchanged for Sponsor Interests
If at any time one Person is the Beneficial Owner of more than ninety percent (90%) of the
then Outstanding Shares (the “
Acquirer
”), such Acquirer shall then have the right to direct the
Sponsor, acting through the Board of Directors, to (i) declare a record date and deliver a
mandatory instruction to the Regular Trustees, together with any opinions of counsel or officers’
certificates of the Sponsor as the Regular Trustees may
32
reasonably request, directing the Regular Trustees to (A) deliver one Sponsor Interest to each
Shareholder, including the Acquirer, in exchange for each Outstanding Share (the “
Acquisition
Exchange
”) and (B) dissolve the Trust and (ii) deliver to the Transfer Agent notice of such
Acquisition Exchange and cause the Transfer Agent to mail a copy of such notice to Shareholders at
least thirty (30) days prior to the Acquisition Exchange. Simultaneously with the completion of
such Acquisition Exchange, each Shareholder immediately prior to the completion of the Acquisition
Exchange shall, pursuant to the terms of the Sponsor Agreement, be admitted to the Sponsor as a
member in respect of a number of Sponsor Interests previously held by the Trust equal in number to
the Outstanding Shares previously held by such Shareholder and each such member shall be issued a
certificate evidencing the same, in accordance with the provisions of the Sponsor Agreement.
Immediately thereafter, the Trust shall be deemed withdrawn from the Sponsor as a member in respect
of such Sponsor Interest(s), and the Trust shall tender its certificates evidencing Sponsor
Interests to the Transfer Agent or Sponsor for cancellation.
Section 9.4 Early Termination
The Trust shall dissolve upon the first to occur of any of the following events (each an
"
Early Termination Event
”):
(i) the occurrence of a Voluntary Exchange pursuant to Section 9.2 or an Acquisition Exchange
pursuant to Section 9.3;
(ii) the filing of a Certificate of Cancellation or its equivalent with respect to the Sponsor
or the failure of the Sponsor to revive its charter within ten (10) days following the revocation
of the Sponsor’s charter;
(iii) the entry of a decree of judicial dissolution by a court of competent jurisdiction of
the Sponsor or the Trust; or
(iv) the written election of the Sponsor.
As soon as is practicable after the occurrence of any event referred to above, the Regular
Trustees shall notify the Delaware Trustee and then shall wind-up the Trust pursuant to Section
3808(e) of the Delaware Statutory Trust Act and any one of the Regular Trustee shall execute and
file a Certificate of Cancellation with the Secretary of State of the State of Delaware.
Section 9.5 Termination of Obligations
The respective obligations and responsibilities of the Trustees and the Trust continued hereby
shall terminate upon the latest to occur of the following:
(i) the payment of all expenses owed by the Trust pursuant to Section 3808 of the Delaware
Statutory Trust Act;
(ii) the discharge of all administrative duties of the Regular Trustees; and
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(iii) the filing of a Certificate of Cancellation canceling the Trust’s Certificate of Trust
with the Secretary of State of the State of Delaware by one of the Regular Trustees.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Limitation of Rights of Shareholders
The death or incapacity of any person having an interest, beneficial or otherwise, in Shares
shall not operate to terminate this Agreement, nor entitle the legal representatives or heirs of
such person or any Shareholder for such person to claim an accounting, take any action or bring any
proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor
otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.
Section 10.2 Amendment
This Agreement may be amended from time to time by the Sponsor, acting through the Board of
Directors, and by the Regular Trustees at the direction of the Sponsor, acting through the Board of
Directors;
provided, however
, that no such amendment shall alter the rights, powers or immunities
of the Delaware Trustee without its written consent;
provided, further,
that the Sponsor shall not,
and no Trustee shall, without the affirmative vote of a majority of the then Outstanding Shares
present in person or represented by proxy at a meeting of the Shareholders (i) enter into or
consent to any amendment to this Agreement which would cause the Trust to fail or cease to qualify
for the exemption from the status of an “investment company” under the 1940 Act, (ii) cause the
Trust to fail to qualify as a grantor trust for U.S. federal income tax purposes, (iii) cause the
Trust to issue a class of equity securities other than the Shares (it being understood that
separate series of the Shares shall not constitute a different class of equity security from the
Shares) or issue any debt securities or any derivative securities or amend the provision of Section
2.4 of this Agreement prohibiting such issuance, (iv) enter into or consent to any amendment to
this Agreement that would affect the exclusive and absolute right of the Shareholders to direct the
voting of the Trust, as a member of the Sponsor, pursuant to Section 5.6 of this Agreement, with
respect to all matters reserved for the vote of members of the Sponsor pursuant to the provisions
of the Sponsor Agreement or (v) effect the merger or consolidation of the Trust, effect the sale,
lease or exchange of all or substantially all of the Trust Property and certain other Business
Combinations or transactions;
provided, further
, that Section 2.4, Section 3.1 and this Section
10.2 of this Agreement may not be amended without the affirmative vote of a majority of the then
Outstanding Shares present in person or represented by proxy at a meeting of Shareholders.
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Section 10.3 Separability
In case any provision in this Agreement or in the Share Certificates or the application of
such provision to any person or circumstance, shall be held invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this Trust Agreement or in the
Shares Certificates or the application of such provision to persons or circumstances other than
those to which it is held invalid, shall not in any way be affected or impaired thereby.
Section 10.4 Specific Performance
The Sponsor and the Trustees agree that each party to this Agreement would be irreparably
damaged if any of the provisions of this Agreement were not performed in accordance with their
specific terms and that monetary damages would not provide an adequate remedy in such event.
Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching party may
be entitled, at law or in equity, each nonbreaching party shall be entitled to injunctive relief to
prevent breaches of the provisions of this Agreement and specifically to enforce the terms and
provisions hereof in any action instituted in any court of the United States or any state thereof
having subject matter jurisdiction thereof.
Section 10.5 Governing Law
This Agreement and the rights of the parties hereunder shall be governed by and interpreted in
accordance with the laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws;
PROVIDED, HOWEVER
, THAT THERE SHALL
NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS TRUST AGREEMENT ANY PROVISION OF THE LAWS
(COMMON OR STATUTORY) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS (OTHER THAN THE DELAWARE
STATUTORY TRUST ACT) THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF,
(A) THE FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF
TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS
OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER GOVERNMENTAL APPROVAL
CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER
SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS
AND EXPENDITURES TO INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE,
AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR
OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE ESTABLISHMENT OF FIDUCIARY OR OTHER
STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR
35
POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR AUTHORITIES AND POWERS OF THE
TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS AGREEMENT. SECTION 3540 OF TITLE 12 OF THE
DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
Section 10.6 Successors
This Agreement shall be binding upon and shall inure to the benefit of any successor to the
Sponsor, the Trust or the Relevant Trustee, including any successor by operation of law.
Section 10.7 Headings
The Section and other headings contained in this Agreement are for reference purposes only and
are not intended to describe, interpret, define or limit the scope, extent or intent of this
Agreement or any provision hereof.
Section 10.8 Communications, Notices and Demands
(a) Subject to Sections 5.4 and 5.8, any communications, notices or payment demands which are
required or permitted to be given or served to or upon any Shareholder or the Sponsor by any
provision of this Agreement shall be in writing and delivered personally, or, when the same is
actually received, if sent either by registered or certified mail, postage and charges prepaid, or
by facsimile, if such facsimile is followed by a hard copy of the facsimile communication sent
promptly thereafter by registered or certified mail, postage and charges prepaid, addressed as
follows, or to such other address as such Person may from time to time specify by notice to the
Shareholders:
If to the Shareholder, to such Shareholder as such Shareholder’s name and address may
appear in the Share Register.
If to the Sponsor, to:
Compass Group Diversified Holdings LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Attention: Alan B. Offenberg
Facsimile No.: 203-221-8253
With a copy to:
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Attention: Cynthia M. Krus
Facsimile No. 202-637-3593
36
And a copy to:
Richards, Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Attention: Eric A. Mazie
Facsimile No.: (302) 651-7701
or to such other address as such Person may from time to time specify by notice to the other
parties hereto. Such communication, notice or demand to or upon a Shareholder shall be deemed to
have been sufficiently given, or made, for all purposes, upon hand delivery, mailing or
transmission.
(b) Any notice, demand or other communication which by any provision of this Agreement is
required or permitted to be given or served to or upon the Trust, the Delaware Trustee or the
Regular Trustees shall be given in writing (which may be by facsimile transmission) addressed
(until another address is published by the Trust) as follows: (a) with respect to the Delaware
Trustee, to The Bank of New York (Delaware), 502 White Clay Center, Route 273 P.O. Box 6973,
Newark, Delaware 19711, and (b) with respect to each of the Regular Trustees, to him at the address
for notices to the Sponsor, marked “Attention: Alan B. Offenberg” or “Attention: James J.
Bottiglieri.” Such notice, demand or other communication to or upon the Trust shall be deemed to
have been sufficiently given or made only upon actual receipt of the writing by the Trust.
Section 10.9 Counterpart Execution
This Agreement may be executed in any number of counterparts with the same effect as if all of
the Parties had signed the same document. All counterparts shall be construed together and shall
constitute one agreement.
37
IN WITNESS WHEREOF
, the parties hereto have caused this Trust Agreement to be duly
executed by their respective officers hereunto duly authorized, as of the day and year first above
written.
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COMPASS GROUP DIVERSIFIED HOLDINGS LLC,
as Sponsor
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By:
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/s/ I. Joseph Massoud
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Name: I. Joseph Massoud
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Title: Chief Executive Officer
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THE BANK OF NEW YORK (DELAWARE),
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as Delaware Trustee
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By:
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/s/ William T. Lewis
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Name:
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William T. Lewis
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Title:
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Senior Vice President
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/s/ I. Joseph Massoud
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Name: I. Joseph Massoud, as Regular Trustee
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/s/ James J. Bottiglieri
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Name: James J. Bottiglieri, as Regular Trustee
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/s/ Alan B. Offenberg
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Name: Alan B. Offenberg, as Regular Trustee
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EXHIBIT A — FORM OF SHARE CERTIFICATE
SPECIMEN
CREATED UNDER THE LAWS
OF
THE STATE OF DELAWARE
COMPASS DIVERSIFIED TRUST
This
Certifies that ___ is the owner of Shares of
___ the Trust with such rights and privileges as are set forth in the Amended and Restated Trust Agreement of the Trust dated April 25, 2006 (the
“Trust Agreement”), as it may be amended from time to time.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE (THE “STATE ACTS”) OR THE
SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SHARES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, BY ANY STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
NEITHER THE SHARES NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR FOR WHICH SUCH REGISTRATION IS OTHERWISE NOT REQUIRED AND (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR FOR WHICH SUCH REGISTRATION OTHERWISE IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE EVIDENCE THE PROPORTIONATE PORTION OF SUCH HOLDER’S SHARES IN THE TRUST. A STATEMENT OF THE RELATIVE RIGHTS AND PREFERENCES OF THE TRUST’S SHARES WILL BE
FURNISHED BY THE TRUST TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE.
IN WITNESS WHEREOF, said Trust has caused this Certificate to be signed by its Regular Trustee this ___day of ___, A.D. 2006.
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COMPASS DIVERSIFIED TRUST
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By:
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Name:
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Title:
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Regular Trustee
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Exhibit 3.6
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
Dated as of April 25, 2006
TABLE OF CONTENTS
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Page
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ARTICLE 1 THE COMPANY
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1
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Section 1.1 Formation
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1
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Section 1.2 Name
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1
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Section 1.3 Purpose; Powers; Company Not to Be an Investment Company; Prior Authorization of
Actions Valid
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2
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Section 1.4 Principal Place of Business; Registered Office; Registered Agent
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3
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Section 1.5 Term
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3
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Section 1.6 Filings
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3
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Section 1.7 Title to Property
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3
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Section 1.8 Payments of Individual Obligations
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3
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Section 1.9 Definitions
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4
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ARTICLE 2 THE TRUST
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23
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Section 2.1 Trust to Be Sole Holder of Trust Interests
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23
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Section 2.2 Trust Shares to Represent Trust Interests
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23
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Section 2.3 Voluntary Exchange of Trust Shares for Trust Interests
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23
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Section 2.4 Acquisition Exchange of Trust Shares for Trust Interests
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23
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Section 2.5 Right of Holders of Trust Shares and Members to Enforce Provisions of this Agreement
and Bring Derivative Action
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23
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Section 2.6 Reimbursement of Regular Trustees
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24
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ARTICLE 3 CLASSES AND ISSUANCE OF LLC INTERESTS; TRANSFER
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24
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Section 3.1 LLC Interests
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24
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Section 3.2 Issuance of Additional Trust Interests
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25
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Section 3.3 Trust Interest Certificates; Admission of Additional Members
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26
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Section 3.4 Repurchase of Trust Interests by the Company
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26
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Section 3.5 Mutilated, Lost, Destroyed or Stolen Certificates
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27
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ARTICLE 4 ALLOCATIONS
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27
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Section 4.1 General Application
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27
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Section 4.2 Allocations of Profits and Losses
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27
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Section 4.3 Special Allocations
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28
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Section 4.4 Curative Allocations
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29
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Section 4.5 Loss Limitation
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30
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Section 4.6 Other Allocation Rules
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30
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Section 4.7 Tax Allocations: Code Section 704(c)
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31
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i
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ARTICLE 5 DISTRIBUTIONS
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31
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Section 5.1 Distributions to Members
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31
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Section 5.2 Distributions to the Allocation Member
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31
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Section 5.3 Amounts Withheld
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37
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Section 5.4 Limitations on Dividends and Distributions
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ARTICLE 6 BOARD OF DIRECTORS
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Section 6.1 Initial Board
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Section 6.2 General Powers
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Section 6.3 Duties of Directors
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38
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Section 6.4 Number, Tenure and Qualifications
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38
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Section 6.5 Election of Directors
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39
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Section 6.6 Removal
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39
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Section 6.7 Resignations
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39
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Section 6.8 Vacancies and Newly Created Directorships
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39
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Section 6.9 Appointment of or Nomination and Election of Chairman
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40
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Section 6.10 Chairman of the Board
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40
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Section 6.11 Regular Meetings
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40
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Section 6.12 Special Meetings
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40
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Section 6.13 Notice for Special Meetings
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40
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Section 6.14 Waiver of Notice
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41
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Section 6.15 Action Without Meeting
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41
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Section 6.16 Conference Telephone Meetings
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41
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Section 6.17 Quorum
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41
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Section 6.18 Committees
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42
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Section 6.19 Committee Members
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43
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Section 6.20 Committee Secretary
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44
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Section 6.21 Compensation
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Section 6.22 Indemnification, Advances and Insurance
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44
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Section 6.23 Reliance; Limitations in Liability
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ARTICLE 7 OFFICERS
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47
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Section 7.1 General
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Section 7.2 Duties of Officers
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48
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Section 7.3 Election and Term of Office
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48
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Section 7.4 Chief Executive Officer
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48
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Section 7.5 Chief Financial Officer
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48
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Section 7.6 Reserved
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49
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Section 7.7 Secretary
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49
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Section 7.8 Resignations
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49
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Section 7.9 Vacancies
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49
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Page
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ARTICLE 8 MANAGEMENT
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49
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Section 8.1 Duties of the Manager
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49
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Section 8.2 Secondment of the Chief Executive Officer and Chief Financial Officer
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49
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Section 8.3 Secondment of Additional Officers
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49
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Section 8.4 Status of Seconded Officers and Employees
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50
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Section 8.5 Removal of Seconded Officers
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50
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Section 8.6 Replacement Manager
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50
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ARTICLE 9 THE MEMBERS
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50
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Section 9.1 Rights or Powers
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50
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Section 9.2 Annual Meetings of Members
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50
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Section 9.3 Special Meetings of Members
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51
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Section 9.4 Place of Meeting
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51
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Section 9.5 Notice of Meeting
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51
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Section 9.6 Quorum and Adjournment
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52
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Section 9.7 Proxies
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52
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Section 9.8 Notice of Member Business and Nominations
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53
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Section 9.9 Procedure for Election of Directors; Voting
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56
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Section 9.10 Inspectors of Elections; Opening and Closing the Polls
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56
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Section 9.11 Confidential Member Voting
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56
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Section 9.12 Waiver of Notice
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57
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Section 9.13 Remote Communication
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57
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Section 9.14 Member Action Without a Meeting
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57
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Section 9.15 Return on Capital Contribution
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58
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Section 9.16 Member Compensation
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58
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Section 9.17 Member Liability
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58
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ARTICLE 10 MEMBER VOTE REQUIRED IN CONNECTION WITH CERTAIN BUSINESS COMBINATIONS OR TRANSACTIONS
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58
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Section 10.1 Vote Generally Required
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58
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Section 10.2 Vote for Business Combinations
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58
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Section 10.3 Power of Continuing Directors
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59
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Section 10.4 No Effect on Fiduciary Obligations
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59
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ARTICLE 11 BOOKS AND RECORDS
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59
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Section 11.1 Books and Records; Inspection by Members
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59
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Section 11.2 Reports
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60
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Section 11.3 Preparation of Tax Returns
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61
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Section 11.4 Tax Elections
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61
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Section 11.5 Tax Information
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61
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iii
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Page
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ARTICLE 12 AMENDMENTS
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62
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ARTICLE 13 TRANSFERS; MONTHLY ALLOCATIONS
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62
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ARTICLE 14 DISSOLUTION AND WINDING UP
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63
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Section 14.1 Dissolution Events
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63
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Section 14.2 Winding Up
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63
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Section 14.3 Compliance with Certain Requirements of Regulations;
Deficit Capital Accounts
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64
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Section 14.4 Deemed Distribution and Recontribution
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64
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Section 14.5 Rights of Members
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64
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Section 14.6 Notice of Dissolution/Termination
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65
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Section 14.7 Allocations During Period of Liquidation
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65
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Section 14.8 Character of Liquidating Distributions
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65
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Section 14.9 The Liquidator
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65
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Section 14.10 Form of Liquidating Distributions
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66
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ARTICLE 15 MISCELLANEOUS
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66
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Section 15.1 Notices
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66
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Section 15.2 Binding Effect
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66
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Section 15.3 Construction
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67
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Section 15.4 Time
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67
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Section 15.5 Headings
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67
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Section 15.6 Severability
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67
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Section 15.7 Incorporation by Reference
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67
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Section 15.8 Variation of Terms
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67
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Section 15.9 Governing Law and Consent to Jurisdiction/Service of Process
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67
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Section 15.10 Waiver of Jury Trial
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67
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Section 15.11 Counterpart Execution
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68
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Section 15.12 Specific Performance
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68
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Exhibit A — Specimen Trust Interest Certificate
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A-1
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iv
This
AMENDED AND RESTATED OPERATING AGREEMENT (the “
Agreement
”) shall be effective as of the
25
th
day of
April, 2006 and is entered into by Compass Diversified Trust and Compass Group
Management LLC, as Members hereunder and pursuant to the provisions of the Act as in effect on the
date hereof. Such Members hereby agree to the amendment and restatement of the Operating
Agreement, dated as of November 18, 2005 (the “
Original Agreement
”), as set forth herein.
Capitalized terms used in this Agreement without definition shall have the respective meanings
specified in Section 1.9 and, unless otherwise specified, article and section references used
herein refer to Articles and Sections of this Agreement.
ARTICLE 1
THE COMPANY
Section 1.1
Formation.
Pursuant to the terms of the Original Agreement, the Manager
formed the Company as a limited liability company under and pursuant to the provisions of the Act
and upon the terms and conditions set forth in the Original Agreement. The fact that the
Certificate is on file in the office of the Secretary of State of the State of Delaware shall
constitute notice that the Company is a limited liability company. Simultaneously with the
execution of Original Agreement and the formation of the Company, the Manager was admitted as a
Member of the Company. Each member of the Board of Directors was designated as an “authorized
person” within the meaning of the Act under the Original Agreement, and I. Joseph Massoud has
executed, delivered and filed the Certificate with the Secretary of State of the State of Delaware,
such execution, delivery and filing being hereby ratified in all respects. Upon the effectiveness
of this Agreement, the powers of each member of the Board of Directors as an authorized person
shall cease, and the Manager shall become the designated “authorized person” within the meaning of
the Act and shall continue as the designated “authorized person” within the meaning of the Act.
The Manager shall execute, deliver and file any other certificates (and any amendments and/or
restatements thereof) necessary for the Company to qualify to do business in Connecticut and in any
other jurisdiction in which the Company may wish to conduct business. The rights and liabilities
of the Members shall be as provided under the Act, the Certificate and this Agreement.
Section 1.2
Name.
(a) Subject to Section 1.2(b), the name of the Company shall continue to be Compass Group
Diversified Holdings LLC and all business of the Company shall be conducted in such name. The Board
of Directors may change the name of the Company upon ten (10) Business Days’ written notice to the
Members, which name change shall be effective upon the filing of a certificate of amendment of the
Certificate with the Secretary of State of the State of Delaware, and an amendment of this
Agreement (which amendment shall not require the consent of any Member or other Person
notwithstanding any other provision of this Agreement).
1
(b) The Board of Directors shall take all action and do all things necessary to give effect to
Section 9.5 of the Management Services Agreement.
Section 1.3
Purpose; Powers; Company Not to Be an Investment Company; Prior Authorization
of Actions Valid.
(a) The purposes of the Company are (i) to conduct or promote any lawful business, purpose or
activity permitted for a limited liability company of the State of Delaware under the Act, (ii) to
make such additional investments and engage in such additional activities as the Board of Directors
may approve, and (iii) to engage in any and all activities related or incidental to the purposes
set forth in clauses (i) and (ii);
provided
,
however
, that the Company is not permitted to engage
in any activities that would cause it to become an “investment company” as defined in Section
3(a)(1) of the Investment Company Act of 1940, as amended and as may be amended from time to time,
or any successor provision thereto.
(b) The Company has the power to do any and all acts necessary, appropriate, proper,
advisable, incidental or convenient to or in furtherance of the purposes of the Company set forth
in this Section 1.3 and has, without limitation, any and all powers that may be exercised on behalf
of the Company by the Board of Directors pursuant to Article 6 hereof.
(c) Notwithstanding anything in this Agreement to the contrary, any actions and things
(including the entering into and performance of any agreements or other documents) properly
authorized, in the name and on behalf of the Company, by the Board of Directors as constituted at
the time of any such authorization, whether prior to the date of this Agreement (including under
the Original Agreement) or under and in accordance with this Agreement (or the Original Agreement),
were, are and shall continue to be valid and duly authorized, and the Company shall continue to
have the power and authority to take and do all such actions and things (including to enter into
and perform all such agreements or other documents), whether or not such actions or things have
already been taken or done (or such agreements or other documents entered into and/or performed),
and regardless of whether the composition of the Board of Directors has changed, whether the
Original Agreement or this Agreement has been amended, whether the Initial Public Offering has
closed or otherwise prior to the actual taking or doing of any such actions or things (including
the entering into or performance of any such documents) by the Company.
(d) The Company, and the Company on behalf of the Trust, is hereby authorized to execute,
deliver and perform, and the Manager or any member of the Board of Directors or the Chief Executive
Officer or the Chief Financial Officer, or any Person authorized by the Board of Directors on
behalf of the Company, are hereby authorized to execute and deliver, the Transaction Documents and
all documents, agreements, certificates, or financing statements contemplated thereby or related
thereto, all without any further act, vote or approval of any other Person notwithstanding any
other provision of this Agreement. The foregoing authorizations shall not be deemed a restriction
on the powers of the Manager or the Board of Directors to enter into (or for the Board of Directors
to delegate to other Persons the power to enter into) other agreements on behalf of the Company.
2
Section 1.4
Principal Place of Business; Registered Office; Registered Agent.
The principal executive offices of the Company are at 61 Wilton Road, Westport, CT 06880. The
Board of Directors may change the principal executive offices of the Company to any other place
within or without the State of Delaware upon written notice to the Members. The address of the
Company’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle. The name of its registered agent for
service of process in the State of Delaware at such address is The Corporation Trust Company or any
successor registered agent for service of process as shall be appointed by the Board of Directors
in accordance with the Act. The Company may have such offices, either within or without the State
of Delaware, as the Board of Directors may designate or as the business of the Company may from
time to time require.
Section 1.5
Term.
The term of the Company commenced on the date the Certificate was
first filed in the Office of the Secretary of State of the State of Delaware in accordance with the
Act and shall continue until the winding up of the Company is completed following a Dissolution
Event, as provided in Article 14 and the Certificate is cancelled as provided in the Act.
Section 1.6
Filings.
(a) The Board of Directors shall take any and all other actions, as may be reasonably
necessary, to perfect and maintain the status of the Company as a limited liability company or
similar type of limited liability entity under the laws of the State of Delaware and under the laws
of any other jurisdictions in which the Company engages in business, including causing the Company
to prepare, execute and file such amendments to the Certificate and such other assumed name
certificates, documents, instruments and publications as may be required by law, including, without
limitation, action to reflect:
(i) a change in the Company name; or
(ii) a correction of false or erroneous statements in the Certificate to accurately
represent the information contained therein.
(b) Upon the dissolution and completion of the winding up of the Company in accordance with
Article 14, the Board of Directors shall cause the Company to promptly execute and file a
Certificate of Cancellation in accordance with the Act and the laws of any other jurisdiction in
which the Board of Directors deems such filing necessary or advisable.
Section 1.7
Title to Property.
All Property owned by the Company shall be owned by the
Company as an entity and no Member shall have any ownership interest in such Property in its
individual name, and each Member’s interest in the Company shall be personal property for all
purposes. At all times after the Effective Date, the Company shall hold title to all of its
Property in the name of the Company and not in the name of any Member.
Section 1.8
Payments of Individual Obligations.
The Company’s credit and assets shall be used solely for the benefit of the Company, and no
asset of the Company shall be Transferred or encumbered for, or in payment of, any individual
obligation of any Member.
3
Section 1.9
Definitions.
For all purposes of this Agreement (as defined herein),
except as otherwise expressly provided or unless the context otherwise requires:
(i) the terms defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular;
(ii) unless the context otherwise requires, any reference to an “Article,” “Section” or an
“Exhibit” refers to an Article, Section or an Exhibit, as the case may be, of this Agreement; and
(iii) the words “herein,” “hereinafter,” “hereof,” “hereto” and “hereunder” and other words of
similar import refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision:
“Acquirer”
has the meaning set forth in the Trust Agreement.
“Acquisition Exchange”
has the meaning set forth in the Trust Agreement.
“Act”
means the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101
et seq.
, as
amended from time to time (or any corresponding provisions of succeeding law) and, for the
avoidance of doubt, includes all applicable jurisprudence.
“Adjusted Capital Account Deficit”
means, with respect to any Member, the deficit balance, if
any, in such Member’s Capital Account as of the end of the relevant Allocation Year, after giving
effect to the following adjustments:
(i) credit to such Capital Account any amounts which such Member is deemed to be obligated to
restore pursuant to the penultimate sentence in each of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations; and
(ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of “Adjusted Capital Account Deficit” is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
“Adjusted Net Assets”
shall be equal to, with respect to any Person as of any date, the
sum
of
(i) such Person’s consolidated total assets (as determined in accordance with GAAP) as of such
date,
plus
(ii) the absolute amount of consolidated accumulated amortization of intangibles of such
Person (as determined in accordance with GAAP) as of such date,
minus
(iii) the absolute amount of
Adjusted Total Liabilities of such Person as of such date.
“Adjusted Profit Distribution Amount”
has the meaning set forth in Section 5.2(b).
“Adjusted Total Liabilities”
shall be equal to, with respect to any Person as of any date,
such Person’s consolidated total liabilities (as determined in accordance with GAAP)
4
as of such
date, after excluding the effect of any outstanding Third Party Indebtedness of such Person.
“Administrator”
means, as of any Calculation Date, (i) the Manager as of such Calculation
Date, and (ii) if there is no Manager, the Chief Financial Officer in all other cases.
“Affiliate”
means, with respect to any Person, (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person or (ii) any officer, director,
general member, member or trustee of such Person. For purposes of this definition, the terms
“controlling,” “controlled by”
or
“under common control with”
shall mean, with respect to any
Persons, the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, or the power to elect at least fifty percent (50%) of the directors,
managers, general members or Persons exercising similar authority with respect to such Person.
“Agreement”
has the meaning set forth in the introductory paragraph hereof.
“Allocated Share of Company Overhead”
means, with respect to any Profit Distribution
Subsidiary during any Measurement Period as of any Calculation Date, the aggregate amount of such
Profit Distribution Subsidiary’s Quarterly Share of the Company’s Overhead for each Fiscal Quarter
ending during such Measurement Period.
“Allocation Interests”
means the limited liability company interests in the Company designated
under the Original Agreement as the “Class B Interests” and redesignated herein as “Allocation
Interests”, as authorized pursuant to Section 3.1(b), and having the rights provided herein.
“
Allocation Interest Certificate
”
means a certificate representing Allocation Interests
substantially in the form attached hereto as Exhibit A.
“Allocation Member”
means the Manager, in its capacity as a Member.
“Allocation Year”
means (i) the period commencing on the Effective Date and ending on December
31, 2005, (ii) any subsequent twelve (12)-month period commencing on January 1 and ending on
December 31, or (iii) any portion of the period described in clause (i) or (ii) above for which the
Company is required to allocate Profits, Losses and other items of Company income, gain, loss or
deduction pursuant to Article 4.
“Applicable Listing Rules”
means the applicable rules, if any, of the principal U.S.
securities exchange or the Nasdaq National Market, as the case may be, on which the Trust Shares or
Trust Interests, as applicable, are listed or quoted, as the case may be.
“Appointed Director”
has the meaning set forth in Section 6.4.
“Approved Profit Distribution”
has the meaning set forth in Section 5.2(c).
“Approved Profit Distribution Payment Date”
means, with respect to any Calculation Date, ten
(10) Business Days after the date upon which the Approved Profit
5
Distribution as of such
Calculation Date is deemed approved in accordance with Sections 5.2(c) or 5.2(d).
“Associate”
has the meaning ascribed to such term in Rule 12b-2 of the rules promulgated under
the Exchange Act.
“Audit Committee”
means the Audit Committee of the Board of Directors established pursuant to
Section 6.18(a)(ii).
“Average Allocated Share of Consolidated Equity”
shall be equal to, with respect to any Profit
Distribution Subsidiary during any Measurement Period as of any Calculation Date, the average (
i.e.
the arithmetic mean) of the Profit Distribution Subsidiary’s Quarterly Allocated Share of
Consolidated Equity for each Fiscal Quarter ending during such Measurement Period.
“Beneficial Owner”
has the meaning ascribed to such term in Rule 13d-3 of the Rules and
Regulations promulgated under the Exchange Act.
“Board”
or
“Board of Directors”
means the Board of Directors referred to in Article 6.
“Business Combination”
means:
(i) any merger or consolidation of the Company or any Subsidiary thereof with (A) an
Interested Shareholder, or (B) any other Person (whether or not itself an Interested Shareholder)
that is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested
Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one
transaction or a series of transactions) to or with, or proposed by or on behalf of, an Interested
Shareholder or an Affiliate or Associate of an Interested Shareholder of any property or assets of
the Company or any Subsidiary thereof having an aggregate Fair Market Value as of the date of the
consummation of the transaction giving rise to the Business Combination of not less than ten
percent (10%) of the Net Investment Value as of such date; or
(iii) the issuance or transfer by the Trust, the Company or any Subsidiary thereof (in one
transaction or a series of transactions) of any securities of the Trust, the Company or any
Subsidiary thereof to, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or
Associate of an Interested Shareholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value as of the date of the consummation of
the transaction giving rise to the Business Combination of not less than ten percent (10%) of the
Net Investment Value as of such date; or
(iv) any spin-off or split-up of any kind of the Company or any Subsidiary thereof, proposed
by or on behalf of an Interested Shareholder or an Affiliate or Associate of an Interested
Shareholder; or
6
(v) any reclassification of the Trust Interests or securities of a Subsidiary of the Company
(including any reverse split of Trust Interests or such securities) or recapitalization of the
Company or such Subsidiary, or any merger or consolidation of the Company or such Subsidiary with
any other Subsidiary thereof, or any other transaction (whether or not with or into or otherwise
involving an Interested Shareholder), that has the effect, directly or indirectly, of increasing
the proportionate share of (A) Outstanding LLC Interests or such securities or securities of such
Subsidiary which are beneficially owned by an Interested Shareholder or an Affiliate or Associate
of an Interested Shareholder or (B) any securities of the Company or such Subsidiary that are
convertible into or exchangeable for Trust Interests or such securities of such Subsidiary, that
are directly or indirectly owned by an Interested Shareholder or any of its Affiliates or
Associates; or
(vi) any agreement, contract or other arrangement providing for any one or more of the actions
specified in clauses (i) through (v) above.
“Business Day”
means any day other than a Saturday, a Sunday or a day on which banks in The
City of New York are required, permitted or authorized, by applicable law or executive order, to be
closed for regular banking business.
“Calculation Date”
means, with respect to any Trigger Event, the last day of the Fiscal
Quarter in which such Trigger Event occurs.
“Capital Account”
means, with respect to any Member, the Capital Account established and
maintained for such Member by the Company in accordance with the following provisions:
(i) to each Member’s Capital Account there shall be credited (A) such Member’s Capital
Contributions (net of any liabilities relating to such Property), and (B) such Member’s
distributive share of Profits and any items in the nature of income or gain which are specially
allocated pursuant to Sections 4.3 or 4.4;
(ii) to each Member’s Capital Account there shall be debited (A) the amount of money and the
Gross Asset Value of any Property distributed to such Member pursuant to any provision of this
Agreement (net of any liabilities relating to such Property), and (B) such Member’s distributive
share of Losses and any items in the nature of expenses or losses which are specially allocated
pursuant to Sections 4.3 or 4.4;
(iii) in the event LLC Interests are Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it
relates to the Transferred LLC Interests; and
(iv) in determining the amount of any liability for purposes of subparagraphs (i) and (ii)
above, there shall be taken into account Code Section 752(c) and any other applicable provisions of
the Code and the Regulations.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be
interpreted and applied in a manner consistent with such Regulations. In the event the Board of
7
Directors shall determine that it is prudent to modify the manner in which the Capital Accounts or
any debits or credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which are assumed by the
Company or any Members) are computed in order to comply with such Regulations, the Board of
Directors may make such modification;
provided
, that it is not likely to have a material effect on
the amounts distributed to any Person pursuant to Article 14 upon the dissolution of the Company.
The Board of Directors also shall (i) make any adjustments that are necessary or appropriate to
maintain equality among the Capital Accounts of the Members and the amount of capital reflected on
the Company’s balance sheet, as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events
might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
“Capital Contributions”
means, with respect to any Member, the amount of money and the initial
Gross Asset Value of any Property (other than money) net of any liabilities relating to such
Property contributed to the Company with respect to the LLC Interests of the Company held or
subscribed for by such Member.
“Capital Gains”
(i) shall mean, with respect to any Person, capital gains (as determined in
accordance with GAAP) that are calculated in connection with the sale of capital stock or assets of
such Person and which gave rise to a Sale Event and the calculation of the Profit Distribution
Amount, and (ii) shall be equal to the amount, adjusted for minority interests, by which (x) the
net sales price of such capital stock or assets, as the case may be,
exceeded
(y) the net book
value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be,
at the time of such sale thereof, as reflected on the Company’s consolidated balance sheet prepared
in accordance with GAAP;
provided
, that such amount shall not be less than zero.
“Capital Losses”
(i) shall mean, with respect to any Person, capital losses (as determined in
accordance with GAAP) that are calculated in connection with the sale of capital stock or assets of
such person and which gave rise to a Sale Event and the calculation of the Profit Distribution
Amount, and (ii) shall be equal to the amount, adjusted for minority interests, by which (x) the
net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case
may be, at the time of such sale thereof, as reflected on the Company’s consolidated balance sheet
prepared in accordance with GAAP,
exceeded
(y) the net sales price of such capital stock or assets,
as the case may be;
provided
, that the absolute amount shall not be less than zero.
“Cash Available for Distribution”
means, for any period, the
sum
of (i) gross cash proceeds of
the Company for such period (which includes the proceeds of borrowings by the Company)
minus
(ii)
the portion thereof used to pay or establish reserves for Company expenses, debt payments, capital
improvements, replacements and contingencies, in each case, as determined by the Board of
Directors. “Cash Available for Distribution” shall not be reduced by
depreciation, amortization, cost recovery deductions or similar allowances, but shall be
increased by any reductions of reserves described in clause (ii) of the prior sentence.
8
“Certificate”
means the certificate of formation of the Company filed with the Secretary of
State of the State of Delaware pursuant to the Act on November 18, 2005, as originally executed and
amended, modified, supplemented or restated from time to time as the context requires.
“Certificate of Cancellation”
means a certificate of cancellation of the Certificate filed in
accordance with 6 Del. C. § 18-203.
“Chairman”
means the director designated or nominated and elected, as the case may be, as
Chairman of the Board of Directors, in accordance with Section 6.9, with such powers and duties as
are set forth in Section 6.10.
“Chief Executive Officer”
means the Chief Executive Officer of the Company, including any
interim Chief Executive Officer of the Company, with such powers and duties as are set forth in
Section 7.4.
“Chief Financial Officer”
means the Chief Financial Officer of the Company, including any
interim Chief Financial Officer of the Company, with such powers and duties as are set forth in
Section 7.5.
“Closing Price”
means, as of any date:
(i) the closing sale price (or, if no closing price is reported, the last reported sale price)
of one Trust Share on the Nasdaq National Market on such date;
(ii) if the Trust Shares are not so quoted on the Nasdaq National Market on any such date, the
last reported sale price as reported in the composite transactions for the principal U.S.
securities exchange on which the Trust Shares are so listed on such date;
(iii) if the Trust Shares are not so reported, the last quoted bid price for the Trust Shares
in the over-the-counter market as reported by the National Quotation Bureau or a similar
organization on such date; or
(iv) if the Trust Shares are not so quoted, the average of the midpoint of the last bid and
ask prices for the Trust Shares from at least three nationally recognized investment banking firms
that the Company selects for such purpose on such date.
“Code”
means the United States Internal Revenue Code of 1986, as amended and in effect from
time to time. Any reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of law in effect in the future.
“Commission”
means the U.S. Securities and Exchange Commission.
“Company”
means the limited liability company formed pursuant to the Original Agreement and
the Certificate, and continued pursuant to this Agreement.
“Company Minimum Gain”
has the same meaning as the term “partnership minimum gain” in Sections
1.704-2(b)(2) and 1.704-2(d) of the Regulations.
9
“Company Only Financial Statements”
means, with respect to any accounting period, the
unconsolidated financial statements of the Company prepared in accordance with GAAP.
“Compass Diversified Investments, Inc.”
means Compass Diversified Investments, Inc. a Bahamian
international business corporation wholly owned by Compass Group Investments, Inc.
“Compensation Committee”
means the Compensation Committee of the Board of Directors
established pursuant to Section 6.18(a)(iii).
“Consolidated Net Equity”
shall be equal to, with respect to the Company as of any date, the
sum
of (i) the Company’s consolidated total assets (as determined in accordance with GAAP) as of
such date,
plus
(ii) the aggregate amount of assets impairments (as determined in accordance with
GAAP) that were taken relating to any Subsidiaries of the Company as of such date,
plus
(iii) the
consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) of the
Company as of such date,
minus
(iv) the Company’s consolidated total liabilities (as determined in
accordance with GAAP) as of such date.
“Continuing Director”
means (i) any director of the Company who (A) is neither the Interested
Shareholder involved in the Business Combination as to which a determination of Continuing
Directors is provided hereunder, nor an Affiliate, Associate, employee, agent or nominee of such
Interested Shareholder, or a relative of any of the foregoing, and (B) was a member of the Board of
Directors prior to the time that such Interested Shareholder became an Interested Shareholder, or
(ii) any successor of a Continuing Director described in clause (i) above who is recommended or
elected to succeed a Continuing Director by the affirmative vote of a majority of Continuing
Directors then on the Board of Directors.
“Contribution-Based Profits”
shall be equal to, with respect to any Profit Distribution
Subsidiary for any Measurement Period as of any Calculation Date, the
sum
of (i) the aggregate
amount of such Profit Distribution Subsidiary’s net income (loss) (as determined in accordance with
GAAP and adjusted for minority interests) with respect to such Measurement Period (without giving
effect to (x) any Capital Gains or Capital Losses realized by such Profit Distribution Subsidiary
that arise with respect to the sale of capital stock or assets held by such Profit Distribution
Subsidiary and which gave rise to a Sale Event and a calculation of Profit Distribution Amount or
(y) any expense attributable to the accrual or payment of any amount of Profit Distribution or any
amount arising under the Supplemental Put Agreement, in each case, to the extent included in the
calculation of such Profit Distribution Subsidiary’s net income (loss)),
plus
(ii) the absolute
aggregate amount of such Profit Distribution Subsidiary’s Loan Expense with respect to such
Measurement Period,
minus
(iii) the absolute aggregate amount of such Profit Distribution
Subsidiary’s Allocated Share of the Company’s Overhead with respect to such Measurement Period.
“Control Date”
means the date upon which the Acquirer becomes the Beneficial Owner of at least
90% of the Outstanding Trust Interests.
10
“Credit Agreement”
means the Credit Agreement, dated as of the date hereof, as may be amended
from time to time, entered into by and between the Company and the Borrower (as defined therein).
“Cumulative Capital Gains”
shall be equal to, as of any Calculation Date, the aggregate amount
of Capital Gains realized by the Company as of such calculation date, after giving effect to any
Capital Gains realized by the Company on such Calculation Date, since its inception.
“Cumulative Capital Losses”
shall be equal to, as of any Calculation Date, the aggregate
amount of Capital Losses realized by the Company, after giving effect to any Capital Losses
realized by the Company on such Calculation Date, since its inception.
“Cumulative Gains and Losses”
shall be equal to, with respect to the Company as of any
Calculation Date, an amount equal to the
sum
of (i) the amount of Cumulative Capital Gains as of
such Calculation Date,
minus
(ii) the absolute amount of Cumulative Capital Losses as of such
Calculation Date.
“Debt”
means (i) any indebtedness for borrowed money or the deferred purchase price of
property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee under
capital leases, (iii) obligations secured by any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind existing on any asset owned or held by the Company, whether or not the
Company has assumed or become liable for the obligations secured thereby, (iv) any obligation under
any interest rate swap agreement, (v) accounts payable, and (vi) obligations under direct or
indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor
against loss in respect of) indebtedness or obligations of the kinds referred to in clauses (i),
(ii), (iii), (iv) and (v) above;
provided
, that Debt shall not include obligations in respect of
any accounts payable that are incurred in the ordinary course of the Company’s business and are not
delinquent or are being contested in good faith by appropriate proceedings.
“DGCL”
means the Delaware General Corporation Law, 8 Del. C. §§ 101
et seq
., as amended from
time to time (or any corresponding provisions of succeeding law) and, for the avoidance of doubt,
includes all applicable jurisprudence.
“Direct Company Expenses”
means, with respect to any period, that portion of the Company’s
operating expenses (including any management fees paid by the Company) for such period that are not
incurred with respect to any Subsidiary for such period.
“Disputed Profit Distribution”
has the meaning set forth in Section 5.2(c).
“Disputed Profit Distribution Date”
has the meaning set forth in Section 5.2(c).
“Disputed Profit Distribution Payment Date”
means, with respect to any Calculation Date, (i)
if the Administrator does not disagree with the Audit Committee’s calculation of Disputed Profit
Distribution in accordance with Section 5.2(e)(i)(B), ten (10)
Business Days after the Disputed Profit Distribution Date as of such Calculation Date or (ii)
in all other cases, twenty-one (21) Business Days after the Disputed Profit Distribution Date as of
such Calculation Date.
11
“Distribution Entitlement”
has the meaning set forth in Section 5.2(l).
“Distribution Entitlement Amount”
shall be equal to, as of any date of a Distribution
Entitlement Notice, the
sum
of (i) the aggregate amount of all Distribution Entitlements elected to
be such by the Allocation Member on all Profit Distribution Payment Dates occurring prior to the
date of such Distribution Entitlement Notice,
minus
(ii) the aggregate amount of all Distribution
Entitlement Payments paid by the Company to the Manager on all Distribution Entitlement Payment
Dates occurring prior to the date of such Distribution Entitlement Notice.
“Distribution Entitlement Notice”
has the meaning set forth in Section 5.2(l).
“Distribution Entitlement Payment”
has the meaning set forth in Section 5.2(l).
“Distribution Entitlement Payment Date”
has the meaning set forth in Section 5.2(l).
“Disinterested Director”
means a director of the Company who is not and was not a party to the
proceeding or matter in respect of which indemnification is sought by the claimant.
“Dissolution Event”
has the meaning set forth in Section 14.1.
“Effective Date”
means November 18, 2005, being the date of the effectiveness of the filing of
the Certificate.
“Election Period”
means, with respect to any Holding Date or anniversary thereof, the 30-day
period immediately following such Holding Date or anniversary thereof.
“Entire Board of Directors”
has the meaning set forth in Section 6.17.
“Escrow Agreement”
means the Escrow Agreement, dated as of the date hereof, as may be amended
from time to time, entered into by and between the Company and The Bank of New York, Inc. or any
successor(s) thereto and the other parties named therein.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended.
“Fair Market Value”
means, as of any date:
(i) in the case of any equity securities, the average of the closing sale prices for such
equity securities during the ten (10) Business Days immediately preceding such date:
(A) as reported in composite transactions by the Nasdaq National Market;
(B) if such equity securities are not so reported by the Nasdaq National Market, as reported
in the composite transactions for the principal U.S. securities exchange on which such equity
securities are so listed;
(C) if such equity securities are not so reported, the last quoted bid price for such equity
securities, in the over-the-counter market as reported by the National Quotation Bureau or a
similar organization; or
12
(ii) if such equity securities are not so reported, quoted or listed, or in the case of any
other Property, the fair market value of such equity securities or such Property as of such date as
determined by a majority of the Board of Directors in good faith;
provided
, that if the Manager
shall dispute any such determination of fair market value by the Board of Directors, fair market
value shall be determined instead by the investment banking or professional valuation firm selected
by the Board of Directors from among no fewer than three qualified candidates provided by the
Manager.
“Fiscal Quarter”
means the Company’s fiscal quarter for purposes of its reporting obligations
under the Exchange Act.
“Fiscal Year”
means the Company’s fiscal year for purposes of its reporting obligations under
the Exchange Act.
“Future Investments”
means contractual commitments to invest represented by definitive
agreements.
“GAAP”
means generally accepted accounting principles in effect in the United States,
consistently applied.
“Gross Asset Value”
means, with respect to any asset, the asset’s adjusted basis for U.S.
federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be
the gross fair market value of such asset, as determined by the Board of Directors;
(ii) the Gross Asset Values of all Company assets shall be adjusted by the Tax Matters Member
to equal their respective gross fair market values (taking Code Section 7701(g) into account), as
determined by the Tax Matters Member as of the following times: (A) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for more than a de
minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de
minimis amount of Company Property as consideration for an interest in the Company; (C) the
liquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) or (D)
upon the declaration of a Holding Event;
provided
, that an adjustment described in clauses (A) and
(B) of this subparagraph (ii) shall be made only if the Tax Matters Member reasonably determines
that such adjustment is necessary to reflect the relative economic interests of the Members in the
Company;
(iii) the Gross Asset Value of any item of Company assets distributed to any Member shall be
adjusted to equal the gross fair market value (taking Code Section 7701(g) into account) of such
asset on the date of distribution, as determined by the Tax Matters Member; and
(iv) the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the
definition of “Profits” and “Losses”;
provided
,
13
however
, that Gross Asset Values shall not be
adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to
subparagraph (ii) is required in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (ii)
or (iv), such Gross Asset Value shall thereafter be adjusted by depreciation taken into account
with respect to such asset for purposes of computing Profits and Losses.
“High Water Mark”
means, as of any Calculation Date, the highest positive amount of the
Company’s Cumulative Gains and Losses as of such Calculation Date that were calculated in
connection with any Qualifying Trigger Event that occurred prior to such Calculation Date.
“High Water Mark Allocation”
shall be equal to, as of any Calculation Date, the
product
of (i)
the amount of the High Water Mark as of such Calculation Date,
multiplied by
(ii) 20%.
“
Holding Date
”
means, with respect to any Subsidiary, the fifth anniversary of the date upon
which the Company acquired a controlling interest in such Subsidiary;
provided,
that if the
Allocation Member has previously elected that a Holding Event has occurred with respect to any
Subsidiary, then Holding Date shall mean, with respect to such Subsidiary, the fifth anniversary of
the Calculation Date with respect to such previously elected Holding Event.
“
Holding Event”
means, with respect to any Subsidiary, (i) the election by the Allocation
Member on or after the Holding Date with respect to such Subsidiary that a Holding Event has
occurred;
provided
, that the Allocation Member must make such election during the Election Period
with respect to such Holding Date, or (ii) the election by the Allocation Member on or after each
anniversary of any Holding Date with respect to such Subsidiary that a Holding Event has occurred;
provided
, that the Allocation Member must make such election during the Election Period with
respect to such anniversary of such Holding Date.
“Independent Director”
means a director who (i) (a) is not an officer or employee of the
Company, or an officer, director or employee of any Subsidiary of the Company, (b) was not
appointed as a director pursuant to the terms of the Management Services Agreement, and (c) for so
long as the Management Services Agreement is in effect, is not affiliated with the Manager or any
of its Affiliates, and (ii) who satisfies the independence requirements under the Applicable
Listing Rules as determined by the Board of Directors.
“Independently Calculated Profit Distribution”
has the meaning set forth in Section 5.2(d).
“Independently Calculated Profit Distribution Payment Date
”
means, with respect to any
Calculation Date, ten (10) Business Days after the receipt by the Administrator
and the Audit Committee of the calculation of Profit Distribution Amount as of such
Calculation Date by the independent accounting firm in accordance with Section 5.2(d).
“Initial Board”
has the meaning set forth in Section 6.1.
14
“Initial Director”
has the meaning set forth in Section 6.1.
“Initial Public Offering”
means the initial public offering of Trust Shares by the Trust,
closing on the date hereof.
“Interested Shareholder”
means any Person (other than the Manager, the Members, the Company or
any Subsidiary of the Company, any employee benefit plan maintained by the Company or any
Subsidiary thereof or any trustee or fiduciary with respect to any such plan when acting in such
capacity) that:
(i) is, or was at any time within the three-year period immediately prior to the date in
question, the Beneficial Owner of fifteen percent (15%) or more of the then Outstanding Trust
Interests and who did not become the Beneficial Owner of such amount of Trust Interests pursuant to
a transaction that was approved by the affirmative vote of a majority of the Entire Board of
Directors; or
(ii) is an assignee of, or has otherwise succeeded to, any Trust Interests of which an
Interested Shareholder was the Beneficial Owner at any time within the three-year period
immediately prior to the date in question, if such assignment or succession occurred in the course
of a transaction, or series of transactions, not involving a public offering within the meaning of
the Securities Act.
For the purpose of determining whether a Person is an Interested Shareholder, the Trust Interests
that may be issuable or exchangeable by the Company to the Interested Shareholder pursuant to any
agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or
options, or otherwise, shall be included, but not any other Trust Interests that may be issuable or
exchangeable by the Company pursuant to any agreement, arrangement or understanding, or upon the
exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the
Interested Shareholder.
“Issuance Items”
has the meaning set forth in Section 4.3(g).
“Level 1 Hurdle Amount”
shall be equal to, with respect to any Profit Distribution Subsidiary
as of any Calculation Date, the
product
of (i) (x) 1.75%
multiplied by
(y) the number of Fiscal
Quarters ending during the Measurement Period with respect to such Profit Distribution Subsidiary
as of such Calculation Date,
multiplied by
(ii) such Profit Distribution Subsidiary’s Average
Allocated Share of Consolidated Equity for each Fiscal Quarter ending during such Measurement
Period.
“Level 2 Hurdle Amount
”
shall be equal to, with respect to any Profit Distribution Subsidiary
as of any Calculation Date, the
product
of (i) (x) 2.1875%,
multiplied by
(y) the number of Fiscal
Quarters ending during the Measurement Period with respect to such Profit Distribution Subsidiary
as of such Calculation Date,
multiplied by
(ii) such Profit
Distribution Subsidiary’s Average Allocated Share of Consolidated Equity for each Fiscal
Quarter ending during such Measurement Period.
“Liquidation Period”
has the meaning set forth in Section 14.7.
15
“Liquidator”
means a Person appointed by the Board of Directors to oversee the winding up of
the Company.
“LLC Interests”
means, collectively, the Trust Interests and the Allocation Interests.
“Loan Expense”
means, with respect to any Profit Distribution Subsidiary for any Measurement
Period as of any Calculation Date, the aggregate amount of all interest or other expenses paid by
such Profit Distribution Subsidiary with respect to indebtedness of such Profit Distribution
Subsidiary to either the Company or other Subsidiaries of the Company with respect to such
Measurement Period.
“Losses”
has the meaning set forth in the definition of “
Profits
” and “
Losses
” below.
“Management Fee”
means the management fee payable by the Company pursuant to the Management
Services Agreement with respect to the provision of management services to the Company.
“Management Services Agreement”
means the Management Services Agreement, dated as of the date
hereof, as may be amended from time to time, entered into by and between the Company and the
Manager.
“Manager”
means Compass Group Management LLC, and any successor thereto.
“Market Value”
means, as of any date, the
product
of (1) the average number of, if the Trust
is in existence as of such date, Trust Shares or, if the Trust is not in existence as of such date,
Trust Interests, as applicable, issued and Outstanding, other than treasury shares or treasury
Trust Interests, as applicable, during the last fifteen (15) Business Days of the most recently
completed Fiscal Quarter as of such date
multiplied
by (2) the volume weighted average trading
price per Trust Share or per Trust Interest, as applicable, as determined by reference to the
relevant securities exchange identified in clause (i) of the definition of Fair Market Value, over
such fifteen (15) Business Days.
“Measurement Period”
means, with respect to any Profit Distribution Subsidiary as of any
Calculation Date, the period from and including the later of: (i) the date upon which the Company
acquired a controlling interest in such Profit Distribution Subsidiary and (ii) the immediately
preceding Calculation Date as of which Contribution-Based Profits were calculated with respect to
such Profit Distribution Subsidiary and with respect to which Profit Distributions were paid (or,
at the election of the Allocation Member, deferred) by the Company, up to and including such
Calculation Date.
“Member”
means, as of any date, any holder of Trust Interests or Allocation Interests, as of
such date.
“Member Nonrecourse Debt”
has the same meaning as the term “partner nonrecourse debt” in
Section 1.704-2(b)(4) of the Regulations.
16
“Member Nonrecourse Debt Minimum Gain”
means an amount, with respect to each Member
Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3)
of the Regulations.
“Member Nonrecourse Deductions”
has the same meaning as the term “partner nonrecourse
deductions” in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
“Nasdaq National Market”
means the Nasdaq National Market or any successor thereto.
“Net Investment Value”
means, as of any date, the
sum
of:
(i) the Market Value as of such date;
plus
(ii) the amount of any borrowings (other than intercompany borrowings) of the Company and its
Subsidiaries (but not including borrowings on behalf of any Subsidiary of such Subsidiaries) as of
such date;
plus
(iii) the value of Future Investments of the Company and/or any of its Subsidiaries other than
cash or cash equivalents, as calculated by the Manager and approved by a majority of the Continuing
Directors as of such date;
provided
, that such Future Investments have not been outstanding for
more than two consecutive full Fiscal Quarters as of such date;
less
(iv) the aggregate amount held by the Company and its Subsidiaries in cash or cash equivalents
(but not including cash or cash equivalents held specifically for the benefit of any Subsidiary of
such Subsidiaries) as of such date.
“Net Long Term Capital Gain”
has the meaning set forth in Code Section 1222(7).
“Nominating and Governance Committee”
means the Nominating and Governance Committee of the
Board of Directors established pursuant to Section 6.18(a)(i).
“Nonrecourse Deductions”
has the meaning set forth in Section 1.704-2(b)(1) of the
Regulations.
“Nonrecourse Liability”
has the meaning set forth in Section 1.704-2(b)(3) of the Regulations.
“Offer Price”
means, as of any Control Date, the average Closing Price per Trust Share or
Trust Interest, as applicable, on the twenty (20) Business Days immediately prior to, but not
including, such Control Date.
“Original Agreement”
has the meaning set forth in the introductory paragraph hereof.
17
“Outstanding”
means, as of any date, with respect to any security theretofore issued by the
Company, except:
(i) such securities as represented by certificates or electronic positions evidencing such
securities that have been canceled or delivered for cancellation; and
(ii) such security as represented by certificates or electronic positions that have been
exchanged for or in lieu of which other securities have been executed and delivered pursuant to
Section 3.5.
“Overhead”
shall be equal to, with respect to the Company for any Fiscal Quarter, the
sum
of
(i) that portion of the Company’s operating expenses (as determined in accordance with GAAP)
(without giving effect to any expense attributable to the accrual or payment of any amount of
Profit Distribution or any amount arising under the Supplemental Put Agreement to the extent
included in the calculation of the Company’s operating expenses), including any Management Fees
actually paid by the Company to the Manager, with respect to such Fiscal Quarter that are not
attributable to any Subsidiary of the Company (
i.e.
, operating expenses that do not correspond to
operating expenses of a Subsidiary of the Company with respect to such Fiscal Quarter),
plus
(ii)
the Company’s accrued interest expense (as determined in accordance with GAAP) on any outstanding
Third Party Indebtedness of the Company with respect to such Fiscal Quarter,
minus
(iii) revenue,
interest income and other income reflected in the Company Only Financial Statements.
“
Over-Paid Profit Distributions
”
shall be equal to, as of any Calculation Date, the amount by
which (i) the aggregate amount of Profit Distributions that were actually paid by the Company with
respect to all Profit Distribution Payment Dates immediately preceding such Calculation Date,
exceeded
(ii) the aggregate amount of Profit Distributions that were actually due and payable by
the Company with respect to all such Profit Distribution Payment Dates, as determined in accordance
with Section 5.2;
provided
, that such amount shall not be less than zero.
“Percentage Interest”
means, with respect to any Member as of any date, the ratio (expressed
as a percentage) of the number of LLC Interests held by such Member on such date relative to the
aggregate number of LLC Interests then Outstanding as of such date.
“Person”
means any individual, company (whether general or limited), limited liability
company, corporation, trust, estate, association, nominee or other entity.
“Profit Distribution”
means, as of any Calculation Date, any Approved Profit Distribution as
of such Calculation Date, Disputed Profit Distribution as of such Calculation Date, the
Independently Calculated Profit Distribution as of such Calculation Date or the Profit Distribution
Amount as of such Calculation Date, originally submitted to the Audit Committee by the
Administrator pursuant to Section 5.2(c), as the case may be. For the avoidance of doubt, Profit
Distribution shall also mean any portion of the foregoing payable on any applicable Profit
Distribution Payment Date, including any Independently Calculated Profit Distribution Payment Date
or Submission Failure Payment Date, as the case may be.
18
“
Profit Distribution Amount
”
shall be equal to, with respect to any Profit Distribution
Subsidiary as of any Calculation Date, the
sum
of (i) the amount by which Total Profit Allocation
with respect to such Profit Distribution Subsidiary as of such Calculation Date
exceeds
such Profit
Distribution Subsidiary’s Level 1 Hurdle Amount as of such Calculation Date but is less than such
Profit Distribution Subsidiary’s Level 2 Hurdle Amount as of such Calculation Date,
plus
(ii) the
product
of (x) the amount by which Total Profit Allocation with respect to such Profit Distribution
Subsidiary as of such Calculation Date
exceeds
such Profit Distribution Subsidiary’s Level 2 Hurdle
Amount as of such Calculation Date,
multiplied by
(y) 20%,
minus
(iii) the High Water Mark
Allocation, if any, as of such Calculation Date.
“
Profit Distribution Payment Date”
means any Approved Profit Distribution Payment Date, as of
any Calculation Date, with respect to Approved Profit Distribution, any Disputed Profit
Distribution Payment Date, as of any Calculation Date, with respect to Disputed Profit
Distribution, any Submission Failure Payment Date, as of any Calculation Date, with respect to
Approved Profit Distribution, or any Independently Calculated Profit Distribution Payment Date, as
of any Calculation Date, with respect to the Independently Calculated Profit Distribution, as the
case may be.
“Profit Distribution Subsidiary”
has the meaning set forth in Section 5.2(b).
“Profits”
and
“Losses”
mean, for each Allocation Year, an amount equal to the Company’s
taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a)
(for this purpose, all items of income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following
adjustments (without duplication):
(i) any income of the Company that is exempt from U.S. federal income tax and not otherwise
taken into account in computing Profits or Losses pursuant to this definition of “Profits” and
“Losses” shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits or Losses pursuant to this definition of
“Profits” and “Losses” shall be subtracted from such taxable income or loss;
(iii) in the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraph (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment
shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the
asset) or an item of loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of computing Profits or
Losses;
(iv) gain or loss resulting from any disposition of Property with respect to which gain or
loss is recognized for U.S. federal income tax purposes shall be computed by reference to the Gross
Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such
Property differs from its Gross Asset Value;
19
(v) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to
Code Section 734(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as a result of a distribution other than in
liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) from the disposition of such asset and shall be taken into account for
purposes of computing Profits or Losses; and
(vi) notwithstanding any other provision of this definition, any items which are specially
allocated pursuant to Sections 4.3 or 4.4 shall not be taken into account in computing Profits or
Losses.
The amounts of the items of Company income, gain, loss or deduction available to be specially
allocated pursuant to Sections 4.3 and 4.4 shall be determined by applying rules analogous to those
set forth in subparagraphs (i) through (v) above.
“Property”
means all real and personal property acquired by the Company, including cash, and
any improvements thereto, and shall include both tangible and intangible property.
“Qualifying Trigger Event”
means any Trigger Event with respect to a Profit Distribution
Subsidiary (i) that gave rise to the calculation of Total Profit Allocation with respect to such
Profit Distribution Subsidiary as of any Calculation Date and (ii) where the amount of Total Profit
Allocation so calculated as of such Calculation Date exceeded such Profit Distribution Subsidiary’s
Level 2 Hurdle Amount as of such Calculation Date.
“Quarterly Allocated Share of Consolidated Equity”
shall be equal to, with respect to any
Profit Distribution Subsidiary for any Fiscal Quarter, the
product
of (i) the Company’s
Consolidated Net Equity as of the last day of such Fiscal Quarter,
multiplied by
(ii) a fraction,
the numerator of which is such Profit Distribution Subsidiary’s Adjusted Net Assets as of the last
day of such Fiscal Quarter and the denominator of which is the
sum
of (x) the Company’s Adjusted
Net Assets as of the last day of such Fiscal Quarter,
minus
(y) the aggregate amount of any cash
and cash equivalents as such amount is reflected on the Company’s consolidated balance sheet as
prepared in accordance with GAAP that is not taken into account in the calculation of any
Subsidiary of the Company’s Adjusted Net Assets as of the last day of such fiscal quarter.
“Quarterly Share of Company Overhead”
shall be equal to, with respect to any Profit
Distribution Subsidiary for any Fiscal Quarter, the
product
of (i) the absolute amount of the
Company’s Overhead with respect to such Fiscal Quarter,
multiplied by
(ii) a fraction, the
numerator of which is such Profit Distribution Subsidiary’s Adjusted Net Assets as of the last day
of such Fiscal Quarter and the denominator of which is the Company’s Adjusted Net Assets as the
last day of such Fiscal Quarter.
“Register”
has the meaning set forth in Section 3.3.
“Regular Trustees”
has the meaning set forth in the Trust Agreement.
20
“Regulations”
means the income tax regulations, including temporary regulations, promulgated
under the Code, as such regulations are amended from time to time.
“Regulatory Allocations”
has the meaning set forth in Section 4.4.
“Repurchase Date”
has the meaning set forth in Section 3.4(b).
“Rules and Regulations”
means the rules and regulations promulgated under the Exchange Act or
the Securities Act.
“Sale Event”
means, with respect to any Subsidiary, the sale of a material amount, as
determined by the Allocation Member and consented to by a majority of the Board of Directors, such
consent not to be unreasonably withheld, conditioned or delayed, of the capital stock or assets of
such Subsidiary or a Subsidiary of such Subsidiary.
“Secretary”
means the Secretary of the Company, with such powers and duties as set forth in
Section 7.7.
“Securities Act”
means the Securities Act of 1933, as amended.
“Stock Transfer Agency Agreement”
means the Stock Transfer Agency Agreement, dated as of the
date hereof, as may be amended from time to time, entered into by and between the Company and The
Bank of New York, Inc. or any successor(s) thereto.
“Submission Date”
has the meaning set forth in Section 5.2(d).
“Submission Failure Payment Date”
means, with respect to any Calculation Date, ten (10)
Business Date after the Submission Date with respect to such Calculation Date.
“Subsidiary”
means, with respect to any Person, any corporation, company, joint venture,
limited liability company, association or other Person in which such Person owns, directly or
indirectly, more than 50% of the Outstanding equity securities or interests, the holders of which
are generally entitled to vote for the election of the board of directors or other governing body
of such Person.
“Supplemental Put Agreement”
means the Supplemental Put Agreement, dated as of the date
hereof, as may be amended from time to time, entered into by and between the Company and the
Allocation Member.
“Tax Distribution”
has the meaning set forth in Section 5.2(h).
“Tax Distribution Payment Date”
has the meaning set forth in Section 5.2(h).
“Tax Matters Member”
has the meaning set forth in Section 11.4(a).
“Third Party Indebtedness”
means, with respect to any Person, indebtedness of such Person owed
to any third party lenders that are not Affiliated with such Person.
“Total Profit Allocation”
shall be equal to, with respect to any Profit Distribution
Subsidiary as of any Calculation Date, the
sum
of (i) the Contribution-Based Profits of such
21
Profit Distribution Subsidiary for the Measurement Period with respect to such Profit
Distribution Subsidiary as of such Calculation Date,
plus
(ii) if the Trigger Event underlying the
calculation of Total Profit Allocation as of such Calculation Date is a Sale Event, the Company’s
Cumulative Gains and Losses as of such Calculation Date.
“Transaction Documents”
means the Management Services Agreements, the Trust Agreement, the
Supplemental Put Agreement, the Credit Agreement, the Underwriting Agreement, the Stock Transfer
Agency Agreement, the Escrow Agreement and all documents and certificates contemplated thereby or
delivered in connection therewith.
“Transfer”
means, as a noun, any voluntary or involuntary transfer, sale, pledge or
hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell,
pledge or hypothecate or otherwise dispose of.
“Transfer Agent”
means, with respect to the
Trust Shares and the LLC Interests, The Bank of
New York, Inc., or any successor(s) thereto.
“Trigger Event”
means, with respect to any Subsidiary, the occurrence of either a Sale Event
or a Holding Event with respect to such Subsidiary.
“Trust”
means Compass Diversified Trust, a Delaware statutory trust.
“Trust Agreement”
means the Amended and Restated Trust Agreement, dated as of the date hereof,
entered into by and among the Company and The Bank of New York (Delaware), a Delaware banking
corporation, as property trustee, and the Regular Trustees.
“Trust Interests”
means the limited liability company interests in the Company designated
under the Original Agreement as the “Class A Interests” and redesignated herein as “Trust
Interests”, as authorized pursuant to Section 3.1(a), and having the rights provided herein.
“Trust Interest Certificates”
means a certificate representing Trust Interests substantially
in the form attached hereto as Exhibit A.
“Trust Member”
means any holder of a Trust Interest, in its capacity as a Member.
“Trust Shares”
means the shares of the Trust, each representing one undivided beneficial
interest in the assets of the Trust.
“Under-Paid Profit Distributions”
shall be equal to, as of any Calculation Date, the amount by
which (i) the aggregate amount of Profit Distributions that were actually due and payable by the
Company with respect to all Profit Distribution Payment Dates immediately preceding such
Calculation Date, as determined in accordance with Section 5.2
exceeded
(ii) the aggregate amount
of Profit Distributions that were actually paid by the Company with respect to all such Profit
Distribution Payment Dates;
provided
, that such amount shall not be less than zero.
22
“Underwriting Agreement”
means the Underwriting Agreement, dated as of the date hereof,
entered into by and among the Company, the Trust, the Manager, Ferris, Baker Watts, Incorporated,
and the other parties thereto.
“Voluntary Exchange”
has the meaning set forth in the Trust Agreement.
ARTICLE 2
THE TRUST
Section 2.1
Trust to Be Sole Holder of Trust Interests.
The Company shall issue Trust
Interests to the Trust as the initial Trust Member, and the Trust shall be admitted to the Company
as a Member of the Company in respect thereof upon its execution of a counterpart of this
Agreement. For so long as the Trust remains in existence, subject to Sections 2.3 and 2.4(a), it
is intended that the Trust shall be the sole Trust Member and the sole owner of one hundred percent
(100%) of the Trust Interests, and, during such period, the Company shall not issue, sell or
otherwise transfer any of its Trust Interests to any Person other than the Trust. Each Trust Member
agrees with the Company to be bound by the terms of this Agreement.
Section 2.2
Trust Shares to Represent Trust Interests.
Each Trust Share represents one
undivided beneficial interest in the assets of the Trust, which assets consist of the underlying
Trust Interests.
Section 2.3
Voluntary Exchange of Trust Shares for Trust Interests.
The Company,
acting through its Board of Directors, shall take all actions and do all things necessary to give
effect to a Voluntary Exchange on the terms and conditions set forth in Section 9.2 of the Trust
Agreement.
Section 2.4
Acquisition Exchange of Trust Shares for Trust Interests.
(a)
Right to Acquisition Exchange
. The Company, acting through its Board of Directors,
shall take all actions and do all things necessary to give effect to an Acquisition Exchange on the
terms and conditions set forth in Section 9.3 of the Trust Agreement.
(b)
Right to Acquire Trust Interests of Remaining Holders for Cash
. Following the
completion of an Acquisition Exchange, the Acquirer shall have the right to purchase, solely for
cash, and Members other than the Acquirer shall be required to sell, all, but not less than all, of
the Outstanding Trust Interests not then held by the Acquirer, at the Offer Price. The Acquirer may
exercise its right to effect such purchase by delivering written notice to the Company and the
Transfer Agent of its election to make the purchase not less than sixty (60) days prior to the
Control Date. Promptly after receipt of such notice, the Board of Directors shall declare a record
date. The Company will cause the Transfer Agent to mail a copy of such notice to the Trust Members
at least thirty (30) days prior to such Control Date.
Section 2.5
Right of Holders of Trust Shares and Members to Enforce Provisions of this
Agreement and Bring Derivative Action.
23
(a) The Allocation Member, individually, and any other Member or Members holding, in the
aggregate, at least ten percent (10%) of the Outstanding Trust Interests, shall have the right to
institute any legal proceeding against the Company to enforce the provisions of this Agreement, and
to the fullest extent permitted by applicable law, no other Member or Members shall have the right
to institute any legal proceeding against the Company to enforce the provisions of this Agreement.
(b) For so long as the Trust remains the sole holder of Trust Interests, holders of at least
ten percent (10%) of the Outstanding Trust Shares shall have the right to cause the Trust to
institute any legal proceeding for any remedy available to the Trust, as a holder of Trust
Interests and, to the extent permitted by applicable law, such holders of Trust Shares may direct
the time, method and place of conducting any such legal proceeding brought by the Trust. For so
long as the Trust remains the sole holder of Trust Interests, holders of record of at least ten
percent (10%) of the Outstanding Trust Shares shall also have the right to institute directly
against the Company any legal proceeding available to the Trust against the Company to enforce the
provisions of this Agreement. Solely for purposes of this Section 2.5(b) and only to the extent
provided herein, the holders of the Outstanding Trust Shares shall be deemed to be third-party
beneficiaries of this Agreement to the same extent as if they were signatories hereto.
(c) Except as expressly provided in this Agreement, nothing in this Agreement shall be deemed
to give to any Person any benefit or any legal or equitable right, remedy or claim under this
Agreement.
Section 2.6
Reimbursement of Regular Trustees
. The Company shall reimburse the
Regular Trustees for any expenses, out-of-pocket or otherwise, incurred on behalf of the Trust or
otherwise in connection with performing any of their duties or obligations under the Trust
Agreement.
ARTICLE 3
CLASSES AND ISSUANCE OF LLC INTERESTS; TRANSFER
Section 3.1
LLC Interests.
The Company shall be authorized to issue two classes of
limited liability company interests to the Members: Trust Interests and Allocation Interests as
provided in Sections 3.1(a) and (b).
(a)
Trust Interests.
(i)
Generally
. The Company, and the Board of Directors by resolution on behalf
of the Company, shall initially be authorized to issue up to five hundred million
(500,000,000) Trust Interests in one or more series and, for so long as the Trust remains
the sole holder of Trust Interests, shall cause to be issued to the Trust, as of any date,
the identical number of Trust Interests as the number of Trust Shares that are issued and
Outstanding. The aggregate number of Trust Interests that are authorized may be
increased from time to time by an amendment to this Agreement upon the adoption of a
resolution by the affirmative vote of at least a majority of the Entire Board of Directors
declaring such amendment to be advisable and the approval of such amendment by the
24
affirmative vote of the holders of a majority of the Trust Interests then Outstanding
present in person or represented by proxy at a meeting of the Members. Each Member holding a
Trust Interest shall have all the rights, privileges and obligations set forth herein
pertaining to holders of Trust Interests, and shall have one vote per Trust Interest in
accordance with the terms of this Agreement. The Trust Interests shall be certificated in
the form of a Trust Interest Certificate or represented by electronic book-entry position.
(ii)
Restrictions on Transfer of Trust Interests
. Except as otherwise provided
in Article 2, the Trust to the fullest extent permitted by law shall not be permitted to
transfer, and the Company shall not recognize any purported transfer of, nor in any respect
treat any purported transferee as the owner of, any Trust Interests held by the Trust.
(b)
Allocation Interests.
(i)
Generally
. The Company is authorized to issue one thousand (1,000)
Allocation Interests. As of the date hereof, all one thousand (1,000) Allocation Interests
have been or are hereby issued to the Allocation Member. One hundred percent (100%) of the
Allocation Interests shall be issued to the Manager. Each Member holding an Allocation
Interest shall have all the rights, privileges and obligations set forth herein pertaining
to holders of Allocation Interests. The Allocation Interests shall be certificated in the
form of an Allocation Interest Certificate. The holders of Allocation Interests shall not
be entitled to vote with respect to any issue relating to the Company notwithstanding the
Act or other applicable law, except as provided in Article 10 (in which case, the holders of
Allocation Interests shall have one vote per Allocation Interest). For the avoidance of
doubt, the parties intend that the Manager not be a “manager” within the meaning of Section
18-402 of the Act.
(ii)
Restrictions on Transfer of Allocation Interests
. Until such time as the
Management Services Agreement is terminated, the Manager (or any Allocation Member holding
Allocation Interests in accordance with this Section 3.1(b)) to the fullest extent permitted
by law shall not be permitted to transfer, and the Company shall not recognize any purported
transfer of, nor in any respect treat any purported transferee as the owner of, any
Allocation Interests held by the Manager;
provided
, that any Allocation Member may transfer
Allocation Interests to any Affiliate of the Manager, and any Allocation Interests so
transferred shall remain subject to the restrictions of this Section 3.1(b)(i) in the hands
of such permitted transferee.
Section 3.2
Issuance of Additional Trust Interests.
For so long as the Trust remains
the sole holder of Trust Interests, (a) the Board of Directors shall have authority to issue to the
Trust, from time to time without any vote or other action by the Members, in one or more series,
any or all Trust Interests of the Company at any time authorized, and (b) the Company will issue
additional Trust Interests
,
in one or more series to the Trust in exchange for an equal number of
Trust Shares which the Company may sell or
distribute in any manner, subject to applicable law, that the Board of Directors in its sole
discretion deems appropriate and advisable.
25
Section 3.3
Trust Interest Certificates; Admission of Additional Members.
The Trust
Interest Certificates shall be conclusive evidence of ownership of the related Trust Interests, and
every holder of record of Trust Interests of the Company shall be entitled to one or more Trust
Interest Certificates representing the number of Trust Interests held by such holder of record. Any
Trust Interest Certificates of the Company to be issued shall be issued under the seal of the
Company, or a facsimile thereof, and shall be numbered and shall be entered in the books of the
Company as they are issued. If and when issued, each Trust Interest Certificate shall bear a serial
number, shall exhibit the holder’s name and the number of Trust Interests evidenced thereby and
shall be signed by the Chief Executive Officer or the Chief Financial Officer. Any or all of the
signatures on the Trust Interest Certificates may be facsimiles. If any officer or Transfer Agent
who has signed or whose facsimile signature has been placed upon a Trust Interest Certificate shall
have ceased to be such officer or Transfer Agent before such Trust Interest Certificate is issued,
the Trust Interest Certificate may be issued by the Company with the same effect as if such Person
or entity were such officer or Transfer Agent at the date of issue. From the time of the closing of
the Initial Public Offering, the Company shall retain the Transfer Agent to maintain a register of
the Trust Interests (the “
Register
”), the Transfer Agent, in such capacity shall be known as the
Registrar, and cause such Registrar to register thereon any transfer of Trust Interest
Certificates. Transfer of Trust Interests of the Company shall be made on the Register only upon
surrender to the Transfer Agent of the Trust Interest Certificates duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer;
provided
,
however
, that such
succession, assignment or transfer is not prohibited by the Trust Interest Certificates, this
Agreement, applicable law or contract. Thereupon, the Company shall issue a new Trust Interest
Certificate (if requested) to the Person entitled thereto, cancel the old Trust Interest
Certificate, and shall instruct the Registrar to record the transaction upon the Register.
Section 3.4
Repurchase of Trust Interests by the Company.
(a) The Board of Directors shall have authority to cause the Company to conduct a capital
reduction, including the repurchase of any number of issued and Outstanding Trust Interests;
provided
,
however
, that the Company shall not purchase or redeem its Trust Interests for cash or
other property if any such purchase or redemption would be inconsistent with the requirements of
Section 18-607 or Section 18-804 of the Act;
provided
,
further
, that so long as the Trust remains
the sole holder of Trust Interests, the Company, as sponsor of the Trust, acting through its Board
of Directors, shall cause the Trust to conduct a capital reduction on similar terms and shall
ensure that an identical number of Trust Interests and Trust Shares are issued and Outstanding at
any one time.
(b) In the event the Board of Directors determines that the Company shall make an offer to
repurchase any number of issued and Outstanding Trust Interests, the Board of Directors shall
deliver to the Transfer Agent notice of such offer to repurchase indicating the repurchase price
and the date of repurchase (the “
Repurchase Date
”) and shall cause the Transfer Agent to mail a
copy of such notice to the Members and holders of Trust Shares, as the case may be, at least thirty
(30) days prior to the Repurchase Date. Any Trust Interests tendered
and repurchased by the Company, in accordance with this Section 3.4, shall be deemed to be
authorized and issued, but not Outstanding and, subject to Section 2.1, may subsequently be sold or
Transferred for due consideration.
26
Section 3.5
Mutilated, Lost, Destroyed or Stolen Certificates
. Each holder of record of Trust
Interests and Allocation Interests shall promptly notify the Company of any mutilation, loss or
destruction of any certificate of which such holder is the record holder. The Company may, in its
discretion, cause the Transfer Agent to issue a new certificate in place of any certificate
theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon
surrender of the mutilated Share certificate or, in the case of loss, theft or destruction of the
certificate, upon satisfactory proof of such loss, theft or destruction, and the Board of Directors
may, in its discretion, require the holder of record of the Trust Interests or Allocation
Interests evidenced by the lost, stolen or destroyed certificate, or his legal representative, to
give the Transfer Agent a bond sufficient to indemnify the Transfer Agent against any claim made
against it on account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE 4
ALLOCATIONS
Section 4.1
General Application
. The rules set forth below in this Article 4 shall
apply for the purposes of determining each Member’s allocable share of the items of income, gain,
loss and expense of the Company comprising Profits or Losses of the Company for each Allocation
Year, determining special allocations of other items of income, gain, loss and expense, and
adjusting the balance of each Member’s Capital Account to reflect the aforementioned general and
special allocations. For each Allocation Year, the special allocations in Section 4.3 shall be
made immediately prior to the general allocations of Section 4.2.
Section 4.2
Allocations of Profits and Losses.
(a)
Special Allocations Following Capital Gain Transactions
. If the Company has a
Sale Event during the Allocation Year, any Company Net Long Term Capital Gain shall be allocated:
(i) First to the Allocation Member to the extent of any amounts payable to the
Allocation Member with respect to the Allocation Year pursuant to Section 5.2, and
(ii) The balance of such Net Long Term Capital Gain shall be allocated among the
Members in accordance with the general allocation of Profits or Losses for such year, as
provided in Section 4.2(b) or (c).
(b)
Allocation of Profit
. If the Company has Profits during the Allocation Year, after
excluding the amount of any Net Long Term Capital Gain allocated to the Allocation Member pursuant
to Section 4.2(a), such Profits (as so reduced) shall be allocated:
(i) First to the Allocation Member to the extent of the any amounts payable to the
Allocation Member with respect to the Allocation Year pursuant to Section 5.2, but without
duplicating any allocations of Net Long Term Capital Gain to the Allocation Member for such
Allocation Year pursuant to Section 4.2(a), and
27
(ii) The balance to the Members in accordance with their Percentage Interests.
(c)
Allocation of Losses
. If the Company has Losses during the Allocation Year, after
excluding the amount of any Net Long Term Capital Gain allocated to the Allocation Member pursuant
to Section 4.2(a), such Losses (as so increased) shall be allocated, subject to the limitations of
Section 4.5:
(i) First to the Members in accordance with their Percentage Interests, up to, but not
exceeding, the amount that would cause the Capital Account of any Member to be a negative
number; and
(ii) The balance, if any, shall be allocated among the Trust Members in accordance with
their Percentage Interests.
(d)
Character of Allocations
. Allocations to Members of Profits or Losses pursuant to
Sections 4.2(b) and 4.2(c) shall consist of a proportionate share of each Company item of income,
gain, expense and loss entering into the computation of Profits or Losses for such Allocation Year
(other than the portion of each Net Long Term Capital Gain that is specially allocated to the
Allocation Member pursuant to Section 4.2(a)).
Section 4.3
Special Allocations.
The following special allocations shall be made in
the following order:
(a)
Minimum Gain Chargeback
. Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Article 4, if there is a net decrease in
Company Minimum Gain during any Allocation Year, each Member shall be specially allocated items of
Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years)
in an amount equal to such Member’s share of the net decrease in Company Minimum Gain, determined
in accordance with Regulations Section 1.704-2(g) and (h). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be allocated to each
Member pursuant thereto. The items to be so allocated shall be determined in accordance with
Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 4.3(a) is intended to
comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and
shall be interpreted consistently therewith.
(b)
Member Minimum Gain Chargeback
. Except as otherwise provided in Section
1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Article 4, if there
is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt
during any Allocation Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items
of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation
Years) in an amount equal to such Member’s share of the net decrease in Member Nonrecourse Debt,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required to be
28
allocated to each Member pursuant thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 4.3(b) is
intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c)
Qualified Income Offset
. In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and
gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account Deficit of the Member as
quickly as possible;
provided
, that an allocation pursuant to this Section 4.3(c) shall be made
only if and to the extent that the Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article 4 have been tentatively made as if this Section
4.3(c) were not in this Agreement.
(d)
Nonrecourse Deductions
. Nonrecourse Deductions for any Allocation Year shall be
specially allocated to the Members in the manner elected by the Tax Matters Member in conformity
with the provisions of Regulations 1.704-2, and in the absence of such an election, to the Trust
Members in proportion to their respective Percentage Interests.
(e)
Member Nonrecourse Deductions
. Any Member Nonrecourse Deductions for any
Allocation Year shall be specially allocated to the Member who bears the economic risk of loss with
respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable
in accordance with Regulations Section 1.704-2(i)(1).
(f)
Section 754 Adjustments
. To the extent an adjustment to the adjusted tax basis of
any Company asset, pursuant to Code Section 734(b) or Code Section 743(b), is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Member in complete liquidation of
such Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members
in accordance with their interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies or to the Member to whom such distribution was made in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(g)
Allocations Relating to Taxable Issuance of Company LLC Interests
. Any income,
gain, loss or deduction realized as a direct or indirect result of the issuance of LLC Interests by
the Company to a Member (the
“Issuance Items”
) shall be allocated among the Members (the Trust
Members and Allocation Members) so that, to the extent possible, the net amount of such Issuance
Items, together with all other allocations made under this Agreement to each Member, shall be equal
to the net amount that would have been allocated to each such Member if the Issuance Items had not
been realized.
Section 4.4
Curative Allocations.
The allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d), 4.3(e), 4.3(f), 4.3(g)
and 4.5 (the
“Regulatory Allocations”
) are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the
29
extent possible, all Regulatory Allocations shall be offset either with other Regulatory
Allocations or with special allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 4.4. Therefore, notwithstanding any other provision of this Article 4
(other than the Regulatory Allocations), the Board of Directors shall make such offsetting special
allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate
so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to
the extent possible, equal to the Capital Account balance such Member would have had if the
Regulatory Allocations were not part of this Agreement and all Company items were allocated
pursuant to Sections 4.1, 4.2 and 4.3(h).
Section 4.5
Loss Limitation.
Losses allocated pursuant to Section 4.2 shall not exceed
the maximum amount of Losses that can be allocated without causing any Member to have an Adjusted
Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the
Members would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 4.2, the limitation set forth in this Section 4.5 shall be applied on a
Member-by-Member basis, and Losses not allocable to any Member as a result of such limitation shall
be allocated to the other Members in accordance with the positive balances in such Members’ Capital
Accounts so as to allocate the maximum permissible Losses to each Member under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
Section 4.6
Other Allocation Rules.
(a) For purposes of determining the Profits and Losses or any other items allocable to any
period, Profits, Losses, and any other such items shall be determined on a monthly or other basis,
as determined by the Company using any method permissible under Code Section 706 and the
Regulations thereunder.
(b) The Members are aware of the income tax consequences of the allocations made by this
Article 4 and hereby agree to be bound by the provisions of this Article 4 in reporting their
shares of Company income and loss for income tax purposes.
(c) Solely for purposes of determining a Member’s proportionate share of the “excess
nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3),
the Member’s interests in Company profits are in proportion to their Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Manager shall
endeavor to treat distributions as having been made from the proceeds of a Nonrecourse Liability or
a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for any Member.
(e) To the extent the Tax Matters Member determines, in consultation with the Company’s tax
advisors, that any distribution pursuant to Article 5 to a Member hereunder (or portion of such
distribution) would more properly be characterized as a payment described in Code Section 707(a) or
707(c), such payment may be so characterized in the Company’s tax filings, and in such event, shall
be taken into account for federal income tax purposes as an
30
expense of the Company, and not as an allocation of income to a Member affecting such Member’s Capital Account.
Section 4.7
Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the
Regulations thereunder, income, gain, loss and deduction with respect to any Property contributed
to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as
to take account of any variation between the adjusted basis of such Property to the Company for
U.S. federal income tax purposes and its initial Gross Asset Value (computed in accordance with the
definition of Gross Asset Value) using a method, selected in the discretion of the Board of
Directors in accordance with Section 1.704-3 of the Regulations.
In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph
(ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and
deduction with respect to such asset shall take account of any variation between the adjusted basis
of such asset for U.S. federal income tax purposes and its Gross Asset Value in the same manner as
under Code Section 704(c) and the Regulations thereunder.
Any elections or other decisions relating to such allocations shall be made by the Board of
Directors in any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 4.7 are solely for purposes of U.S. federal, state and local
taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital
Account or share of Profits, Losses, other items or distributions pursuant to any provision of this
Agreement.
ARTICLE 5
DISTRIBUTIONS
Section 5.1
Distributions to Members.
Except as otherwise provided in Section 5.3 and Article 14,
the Board of Directors may, in its sole discretion and at any time, declare and pay distributions
with respect to the LLC Interests to the Members, as of any record date established by the Board of
Directors with respect to such distributions, from Cash Available for Distribution to all Members
in proportion to their Percentage Interests.
Section 5.2
Distributions to the Allocation Member.
(a)
In General
. Except as otherwise provided in Section 5.3 and Article 14 and
subject to the other terms and conditions set forth in this Section 5.2, for so long as the
Allocation Interests are Outstanding (i) the Administrator shall calculate (x) the Profit
Distribution Amount, and the components thereof, in accordance with Section 5.2(b) and (y) Tax
Distributions, and the components thereof, in accordance with Section 5.2(i) and (ii) the Company
shall pay (x) Profit Distributions in accordance with Section 5.2(e) and (y) Tax Distributions in
accordance with Section 5.2(h).
(b)
Calculation of Profit Distribution Amount Upon Trigger Event
. Subject to Section
5.2(g), upon the occurrence of a Trigger Event with respect to any Subsidiary (the
31
“
Profit Distribution Subsidiary
”), the Administrator, as of the relevant Calculation Date with respect to
such Trigger Event, shall:
(i) calculate, on or promptly following such Calculation Date, the Profit Distribution Amount
with respect to such Profit Distribution Subsidiary as of such Calculation Date; and
(ii) adjust such Profit Distribution Amount (as adjusted, the
“Adjusted Profit Distribution
Amount”
) so calculated, on a dollar-for-dollar basis, by:
(A)
reducing
such Profit Distribution Amount by the aggregate amount of any Over-Paid Profit
Distributions, if any, existing as of such Calculation Date;
(B)
increasing
such Profit Distribution Amount by the aggregate amount of any Under-Paid
Profit Distributions, if any, existing as of such Calculation Date; and
(C)
reducing
such Profit Distribution Amount by the aggregate amount of any Tax Distributions,
if any, that were previously received by the Allocation Member on any Tax Distribution Payment Date
prior to such Calculation Date, to the extent such amount of Tax Distributions have not been
previously applied towards a reduction of Profit Distribution Amount in accordance with this
Section 5.2(b).
If more than one Trigger Event takes place during any Fiscal Quarter which would cause the
calculation of the Profit Distribution Amount with respect to more than one Profit Distribution
Subsidiary as of the Calculation Date with respect to such Trigger Event, then the Profit
Distribution Amount shall be calculated under this Section 5.2(b) with respect to each Profit
Distribution Subsidiary separately and in the order in which controlling interest in each such
Profit Distribution Subsidiary was acquired or otherwise obtained by the Company, and the resulting
amounts so calculated shall be aggregated to determine the total amount of the Profit Distribution
Amount as of such Calculation Date for any purpose hereunder;
provided
, that if controlling
interest in such Profit Distribution Subsidiaries was acquired or otherwise obtained at the same
time, then the Profit Distribution Amount shall be further calculated under this Section 5.2(b)
with respect to each Profit Distribution Subsidiary separately and in the order in which each such
Profit Distribution Subsidiary was sold.
(c)
Approval of Profit Distributions
. The Administrator shall promptly submit in
writing any calculation of the Adjusted Profit Distribution Amount to the Audit Committee, in
sufficient detail to permit a prompt review and approval by the Audit Committee. Any calculation
of the Adjusted Profit Distribution Amount so submitted by the Administrator shall be deemed
automatically approved by the Audit Committee ten (10) Business Days after the date submitted by
the Administrator (such approved Adjusted Profit Distribution Amount, as well as any amounts deemed
to be Approved Profit Distributions pursuant to Sections 5.2(c) or 5.2(d)), the “
Approved Profit
Distribution
”);
provided
, that if the Audit Committee, by resolution, disapproves of the
calculation of such Adjusted Profit Distribution Amount submitted to it by the Administrator within
such ten (10) Business Days, then, within ten (10) Business Days after the date of such resolution
of disapproval, the Audit Committee shall recalculate, or cause the recalculation of, such Adjusted
Profit Distribution Amount as of the relevant Calculation Date in accordance with this Section 5.2
(such recalculated Adjusted Profit
32
Distribution Amount, the “
Disputed Profit Distribution
”) and present in writing its calculation of the Disputed Profit Distribution to the Administrator in
sufficient detail to permit a prompt review by the Administrator (such date of presentation, the
“
Disputed Profit Distribution Date
”);
provided
,
further
, that if the Audit Committee fails to
present such a calculation of Disputed Profit Distribution to the Administrator by the tenth
(10
th
) Business Day after the date it disapproves of the calculation of Adjusted Profit
Distribution Amount submitted to it by the Administrator, then the calculation of the Adjusted
Profit Distribution Amount originally submitted to the Audit Committee by the Administrator shall
be deemed an Approved Profit Distribution on such tenth (10
th
) Business Day.
(d)
Independent Accounting Firm
. The Administrator shall have ten (10) Business Days
to review the Audit Committee’s calculation of any Disputed Profit Distribution presented to it
pursuant to Section 5.2(c), and if the Administrator disagrees with such calculation, then the
Administrator shall have the right, pursuant to a written notice that must be delivered during such
ten (10) Business Day period, to direct the Audit Committee to engage, at the Company’s cost and expense, an independent accounting firm to calculate the Adjusted
Profit Distribution Amount as of the relevant Calculation Date in accordance with this Section 5.2.
Such notice from the Administrator shall state any points of disagreement with the Audit
Committee’s calculation and shall designate no fewer than three independent accounting firms to
calculate the Adjusted Profit Distribution Amount. The Audit Committee shall engage one of the
designated independent accounting firms within ten (10) Business Days. If the Audit Committee
fails to engage one of the designated independent accounting firms within ten (10) Business Days,
then the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit
Committee by the Administrator pursuant to Section 5.2(c) shall be deemed an Approved Profit
Distribution. The Audit Committee shall direct the designated independent accounting firm to
deliver its calculation of the Adjusted Profit Distribution Amount, calculated in accordance with
this Section 5.2 (as calculated, the “
Independently Calculated Profit Distribution
”), within twenty
(20) Business Days of its engagement (the
“Submission Date
”) to both the Administrator and the
Audit Committee at the same time. If the independent accounting firm so engaged fails to deliver
its calculation of the Adjusted Profit Distribution Amount within the time required hereby, then
the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit
Committee by the Administrator pursuant to Section 5.2(c) shall be deemed an Approved Profit
Distribution. In making its calculation of the Adjusted Profit Distribution Amount, the
independent accounting firm shall (i) review and consider any documentation submitted by the
Administrator and the Audit Committee in support of their respective calculations of the Adjusted
Profit Distribution Amount, and (ii) be based on the most recently available consolidated financial
statements of the Company and its Subsidiaries (audited or unaudited). The Independently
Calculated Profit Distribution shall be final, conclusive and binding on the Administrator, the
Audit Committee, the Company and the Allocation Member.
(e)
Payment of Profit Distributions
. Subject to 5.2(l), the Company shall pay, on the
applicable Profit Distribution Payment Date with respect to any Calculation Date, Profit
Distribution in the following manner:
(i)
First
, one of the following amounts of Profit Distribution:
33
(A) if the calculation of the Adjusted Profit Distribution Amount as of such Calculation Date
submitted by the Administrator to the Audit Committee is deemed approved in accordance with Section
5.2(c) or 5.2(d), then the Company shall pay to the Allocation Member on the Approved Profit
Distribution Payment Date an amount equal to the Approved Profit Distribution as of such
Calculation Date, or
(B) if (x) the calculation of the Adjusted Profit Distribution Amount as of such Calculation
Date submitted by the Administrator to the Audit Committee is disapproved by the Audit Committee
and recalculated by the Audit Committee and (y) the Administrator does not disagree with such
calculation of Disputed Profit Distribution pursuant to Section 5.2(d), then the Company shall pay
to the Allocation Member on the Disputed Profit Distribution Payment Date an amount equal to the
Disputed Profit Distribution as of such Calculation Date; or
(C) if (x) the calculation of the Adjusted Profit Distribution Amount as of such Calculation
Date submitted by the Administrator to the Audit Committee is disapproved by the Audit Committee
and recalculated by the Audit Committee and (y) the Administrator disagrees with such calculation
of Disputed Profit Distribution and directs the Audit Committee to engage an independent accounting
firm pursuant to Section 5.2(d) and the Audit Committee engages such independent accounting firm,
then the Company shall pay to the Allocation Member on the Disputed Profit Distribution Payment
Date the
lesser
of an amount equal to (A) the Profit Distribution Amount, as of such Calculation
Date, originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c),
and (B) the Disputed Profit Distribution as of the relevant Calculation Date; and
(ii)
Second,
one of the following amounts of Profit Distribution:
(A) if an independent accounting firm delivers its Independently Calculated Profit
Distribution as of such Calculation Date to the Administrator and the Audit Committee in accordance
with Section 5.2(d), then the Company shall pay to the Allocation Member on the Independently
Calculated Profit Distribution Payment Date an amount equal to the amount by which (x) the
Independently Calculated Profit Distribution as of such Calculation Date
exceeds
(y) the amount of
Profit Distribution, as the case may be and as of such Calculation Date, paid by the Company in
accordance with Section 5.2(e)(i)(C), or
(B) if (x) an independent accounting firm fails to delivers its calculation of Adjusted Profit
Distribution Amount as of such Calculation Date to the Administrator and the Audit Committee in
accordance with Section 5.2(d) and (y) the Profit Distribution Amount originally submitted to the
Audit Committee by the Administrator pursuant to Section 5.2(c) is greater than the Disputed Profit
Distribution, then the Company shall pay to the Allocation Member on the Submission Failure Payment
Date, the amount by which Approved Profit Distribution as of such Calculation Date
exceeds
(y) the
amount of Profit Distribution, as the case may be and as of such Calculation Date, paid by the
Company in accordance with Section 5.2(e)(i)(C).
34
Any Profit Distributions will be due and payable on the applicable Profit Distribution Payment
Date by the Company, in arrears, in immediately available funds by wire transfer to an account
designated by the Allocation Member from time to time.
(f)
Reserved.
(g)
True-Up and Review of Profit Distributions
. The calculation to be made by any
Person hereunder of any Profit Distribution or Adjusted Profit Distribution Amount, in each case,
as of any Calculation Date, shall be based on, in the following order (i) audited consolidated
financial statements to the extent available with respect to any Person underlying such calculation
of Profit Distribution, (ii) if audited consolidated financial statements are not available with
respect to such Person, then unaudited consolidated financial statements to the extent available
with respect to such Person, and (iii) if neither audited nor unaudited consolidated financial
statements are available with respect to such Person, then the books and records of such Person
then available;
provided
, that, with respect to any calculation of the Profit Distribution based on
the books and records of any Person related to such calculation of Profit Distribution, upon
availability of, in the first instance, audited consolidated financial statements
with respect to such Person or, in the second instance, unaudited consolidated financial
statements with respect to such Person, in each case, relating to amounts previously calculated on
such Calculation Date by reference to the books and records of such relevant Person, the Profit
Distribution Amount, and any components thereof, as of such Calculation Date shall be recalculated
to determine if any Over-Paid Profit Distributions or Under-Paid Profit Distributions were created
as of such Calculation Date. In making any determination under this Section 5.2 with respect to
any individual calculation of the Profit Distribution Amount or Adjusted Profit Distribution
Amount, in each case, as of any Calculation Date, such determination shall be based on only one of
the following, in the following order, with respect to such calculation of Profit Distribution
Amount or Adjusted Profit Distribution Amount, as the case may be: (x) the Independently Calculated
Profit Distribution calculated as of such Calculation Date, (y) if no Independently Calculated
Profit Distribution was calculated as of such Calculation Date, the Approved Profit Distribution as
of such Calculation Date, and (z) if no Approved Profit Distribution or Independently Calculated
Profit Distribution, in each case, was calculated as of such Calculation Date (
i.e.
, if the
Profit Distribution Amount calculated by the Administrator as of such Calculation Date was not
approved by the Audit Committee, automatically or otherwise, or the Administrator did not disagree
with the Audit Committee’s calculated of Disputed Profit Distribution as of such Calculation Date),
the Disputed Profit Distribution as calculated as of the Calculation Date.
(h)
Payment of Tax Distributions
. With respect to any calendar year in which the
Allocation Member shall be allocated income pursuant to Article 4, but with respect to which the
Allocation Member has not, prior to April 15 of the following year, received Profit Distributions
from the Company pursuant to Section 5.2(e) in amounts at least equal to the Allocation Member’s
tax liability arising from allocations of income hereunder to the Allocation Member with respect to
such calendar year, the Company shall make a distribution to the Allocation Member in an amount
calculated in accordance with Section 5.2(i) (the “
Tax Distribution
”) by April 15 of such following
year (such date of payment, the “
Tax Distribution Payment Date
”).
35
(i)
Calculation of Tax Distributions
. The amount of Tax Distributions to be paid on
any Tax Distribution Payment Date pursuant to Section 5.2(h) shall be calculated as if the items of
income, gain, deduction, loss and credit in respect of the Company were the only such items
entering into the computation of tax liability of the Allocation Member for the calendar year and
as if the Allocation Member were subject to tax at the highest marginal effective rate of Federal,
state and local income tax applicable to an individual resident in New York City, taking account of
any difference in rates applicable to ordinary income and long terms capital gains and any
allowable deductions in respect of such state and local taxes in computing the Allocation Member’s
liability for Federal income taxes.
(j)
Books and Records
. The Administrator shall maintain cumulative books and records
with respect to the details of any calculations made pursuant to this Section 5.2, which records
shall be available for inspection and reproduction at any time upon request by the Board of
Directors and the Allocation Member.
(k)
Sufficient Liquidity
. If the Company does not have sufficient liquid assets to pay
the entire amount of Profit Distributions and/or Tax Distributions, including any accrued
and unpaid Profit Distributions and/or Tax Distribution to date, on any applicable Profit
Distribution Date, the Company shall liquidate assets or incur indebtedness in order to pay such
Profit Distribution and/or Tax Distribution, as the case may be, in full on such Profit
Distribution Payment Date;
provided
, that the Allocation Member may elect, in its sole discretion,
on such Profit Distribution Payment Date and/or Tax Distribution Payment Date, as the case may be,
to allow the Company to defer the payment of all or any portion of the Profit Distribution and/or
Tax Distribution, as the case may be, then accrued and unpaid until the next succeeding Profit
Distribution Payment Date or Tax Distribution Payment Date, as the case may be, and, thereby,
enable to the Company to avoid such liquidation or incurrence. For the avoidance of doubt, the
Allocation Member may make such election to allow the Company to defer the payment of the Profit
Distributions and/or Tax Distributions more than once.
(l)
Distribution Entitlement
. The Allocation Member shall have the right to elect, in
its sole discretion, on any applicable Profit Distribution Payment Date to defer payment by the
Company of all or any portion of the amount of Profit Distribution payable by the Company in
accordance with Section 5.2(e) on such Profit Distribution Payment Date. Such election shall
become effective upon the delivery of a written notice to the Company indicating the amount of
Profit Distribution that the Allocation Member is electing to defer (such amount, the “
Distribution
Entitlement
”). Once deferred, the Company shall pay, on twenty (20) Business Days prior written
notice delivered by the Allocation Member and received by the Company (the “
Distribution
Entitlement Notice
”), all or any portion of the Distribution Entitlement Amount as designated by
the Allocation Member in the Distribution Entitlement Notice (the “
Distribution Entitlement
Payment
”) on the date specified in the Distribution Entitlement Notice (the “
Distribution
Entitlement Payment Date
”). Any Distribution Entitlement Notice delivered by the Allocation Member
pursuant to this Section 5.2(l) shall specify (i) the Distribution Entitlement Amount as of the
date of such Distribution Entitlement Notice, (ii) the calculation of the Distribution Entitlement
Amount, (iii) the portion of the Distribution Entitlement that the Allocation Member is electing to
receive, and (iv) the Distribution Entitlement Payment Date with respect to the amount so elected
to be received by the Allocation Member.
36
Section 5.3
Amounts Withheld.
All amounts withheld pursuant to the Code or any provision of any
state, local or foreign tax law with respect to any payment, dividend or other distribution or
allocation to the Company or the Members shall be treated as amounts paid to the Members with
respect to which such amounts were withheld pursuant to this Section 5.3 for all purposes under
this Agreement. The Company is authorized to withhold from payments or with respect to allocations
to the Members, and to pay over to any U.S. federal, state and local government or any foreign
government, any amounts required to be so withheld pursuant to the Code or any provisions of any
other U.S. federal, state or local law or any foreign law, and shall allocate any such amounts to
the Members with respect to which such amounts were withheld. For so long as the Trust is the sole
Trust Member, all amounts withheld in accordance with this Section 5.3 will be treated as amounts
paid to holders of the Trust Shares and any such amounts shall be allocated to the holders of the
Trust Shares in the same proportion as any such allocations were made per Trust Interest.
Section 5.4
Limitations on Dividends and Distributions.
(a) The Company shall pay no distributions to the Members except as provided in this Article 5
and Article 14.
(b) A Member may not receive, and the Company, and Board of Directors on behalf of the Company
may not make, distributions from the Company to the extent such distribution is inconsistent with,
or in violation of, the Act or any provision of this Agreement.
ARTICLE 6
BOARD OF DIRECTORS
Section 6.1
Initial Board.
The Board of Directors is comprised of the seven following individuals:
I. Joseph Massoud, C. Sean Day, James J. Bottiglieri, D. Eugene Ewing, Ted Waitman, Mark H. Lazarus
and Harold S. Edwards (each, an
“Initial Director”
and, collectively, the
“Initial Board”
). Each
Initial Director shall hold office until his successor is elected or appointed and qualified, or
until his or her earlier death, resignation or removal in accordance with this Article 6. The
Initial Board shall have all of the powers and authorities accorded to the Board of Directors, and
each Initial Director shall have all of the powers and authorities accorded the directors of the
Company under the terms of this Agreement.
Section 6.2
General Powers.
The business and affairs of the Company shall be managed by or under
the direction of its Board of Directors. Each director of the Company, when acting in such
capacity, is a “manager” within the meaning of Section 18-402 of the Act and as such is vested with
the powers and authorities necessary for the management of the Company, subject to the terms of
this Agreement and the Management Services Agreement;
provided
, that no director is authorized to
act individually on behalf of the Company and the Board of Directors shall only take action in
accordance with the requirements of this Agreement. In addition to the powers and authorities
expressly conferred upon it by this Agreement, the Board of Directors may exercise all such powers
of the Company and do all such lawful acts and things as are not prohibited by applicable law,
including the Rules and Regulations, or by this Agreement required to be
37
exercised or done by the Members. Without limiting the generality of the foregoing, it shall be the responsibility of the
Board of Directors to establish broad objectives and the general course of the business, determine
basic policies, appraise the adequacy of overall results, and generally represent and further the
interests of the Members.
Section 6.3
Duties of Directors.
Except as provided in this Agreement or otherwise required by the
Act, each director of the Company shall have the same fiduciary duties to the Company and the
Members as a director of a corporation incorporated under the DGCL has to such corporation and its
stockholders, as if such directors of the Company were directors of a corporation incorporated
under the DGCL. Except as provided in this Agreement, the parties intend that the fiduciary
duties of the directors of the Company shall be interpreted consistently with the jurisprudence
regarding such fiduciary duties of directors of a corporation under the DGCL. It shall be expressly
understood that, to the fullest extent permitted by law, no director of the Company has any duties
(fiduciary or otherwise) with respect to any action or inaction of the Manager, and that, to the
fullest extent permitted by law, any actions or inactions of the directors of the Company that
cause the Company to act in compliance or in accordance with the Management Services Agreement
shall be deemed consistent and compliant with the fiduciary duties of such directors and shall not
constitute a breach of any duty hereunder or existing in law, in equity or otherwise.
Section 6.4
Number, Tenure and Qualifications.
As provided by Section 6.1, the Initial Board
shall be comprised of seven (7) Initial Directors and at all times from and after the closing of
the Initial Public Offering the composition of the Board of Directors shall consist of at least a
majority of Independent Directors. Subject to this Section 6.4, the number of directors shall be
fixed from time to time exclusively pursuant to a resolution adopted by the Board of Directors, but
shall consist of not less than five (5) nor more than thirteen (13) directors. However, no decrease
in the number of directors constituting the Board of Directors shall shorten the term of any
incumbent director.
Subject to the next sentence, the Board of Directors shall be divided into three classes:
Class I, Class II, Class III, with the holders of Trust Interests entitled to elect or appoint the
Class I, II, and III directors. In addition, the Board of Directors shall include one (1) director
(or, if there are nine (9) or more directors then serving on the Board of Directors, two (2)
directors), who shall not be a member of any class (each, an “
Appointed Director
”), and who shall
be elected or appointed by the Allocation Member.
Classes I, II and III shall be divided as nearly equal in numbers as the then total number of
directors constituting such classes permits, with the term of office of each class expiring in
succeeding years, so that (except for the initial terms provided below) each such director shall be
elected for a three year term. If the number of such directors is not evenly divisible by three,
the greatest number of such directors shall be in Class III and the least number in Class I. The
initial Class I directors shall hold office for a term expiring at the first annual meeting of the
Members following closing of the Initial Public Offering, the initial Class II directors shall hold
office for a term expiring at the second succeeding annual meeting of the Members following closing
of the Initial Public Offering, and the initial Class III directors shall hold office for a term
expiring at the third succeeding annual meeting of the Members following closing of the Initial
Public Offering. The initial Class I directors are Mark H. Lazarus and
38
Harold S. Edwards. The initial Class II directors are James J. Bottiglieri and Ted Waitman. The initial Class III
directors are C. Sean Day and D. Eugene Ewing. Any director filling any Class I, II or III vacancy
pursuant to Section 6.8 shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected and qualified. The
term of each director in Classes I, II and III shall be the period from the effective date of such
director’s election until the end of the term provided in this paragraph, or until such director’s
successor is duly elected and qualified, or until such director’s earlier death, resignation or
removal. Directors need not be residents of the State of Delaware or Members.
The Allocation Member has designated I. Joseph Massoud as the initial Appointed Director. The
Appointed Director shall hold office until his successor is elected or appointed and qualified, or
until his or her earlier death, resignation or removal in accordance with this Article 6. Any
director filling a Appointed Director vacancy pursuant to Section 6.8 shall hold office until his
successor is elected or appointed and qualified, or until his or her earlier death, resignation or
removal in accordance with this Article 6.
Section 6.5
Election of Directors.
Except as provided in Sections 6.1, 6.4 and 6.8, the Class I,
II and III directors shall be elected at the annual meeting of Members. At any meeting of Members
duly called and held for the election of directors at which a quorum is present, directors shall be
elected by a plurality of the Trust Interests present in person or represented by proxy at the
meeting of Members. Except as provided in Sections 6.1 and 6.8, the Appointed Director shall be
elected or appointed at such time or times as the Allocation Member so determines, pursuant to
written notice delivered to the Chairman or, if none then serving, the Board of Directors as
constituted immediately prior to such election or appointment.
Section 6.6
Removal.
Any director may be removed from office, with or without cause, by the
affirmative vote of the Members holding at least eighty-five percent (85%) of the applicable issued
and Outstanding Trust Interests that so elected or appointed such director. In the case of an
Appointed Director, any such removal shall be evidenced in writing by the Allocation Member, which
shall be delivered to the Chairman or, if none then serving, the Board of Directors as constituted
immediately after such removal.
Section 6.7
Resignations.
Any director, whether elected or appointed, may resign at any time upon
notice of such resignation to the Company. An Independent Director who ceases to be independent
shall promptly resign to the extent required for the Company or the Allocation Member to comply
with applicable laws, rules and regulations.
Section 6.8
Vacancies and Newly Created Directorships.
Until the second annual election of
directors following the Initial Public Offering and other than with respect to the Appointed
Director, any vacancies on the Board of Directors, including vacancies resulting from any increase
in the authorized number of directors, shall be filled by the Chairman for the applicable term
relating to director position so filled. Thereafter, subject to Section 6.9 and other than with
respect to an Appointed Director and except as otherwise provided herein, any vacancies on the
Board of Directors, including vacancies resulting from any increase in the authorized number of
directors, shall be filled by a majority vote of the directors then in office, although less than a
quorum, or by a sole remaining director. Notwithstanding anything to the contrary contained in the
preceding sentences of this Section 6.8, any director filling any such
39
vacancy shall satisfy the Applicable Listing Standards and the Rules and Regulations, and any necessary or required
qualifications under the Applicable Listing Standards and the Rules and Regulations for applicable
committee membership. Subject to Section 6.9, any vacancies in the Appointed Director for any reason, and any newly created
directorships resulting from any increase in the authorized number of Appointed Directors may be
filled by the Allocation Member at such time or times as the Allocation Member so determines,
pursuant to written notice delivered to the Chairman or, if none then serving, the Board of
Directors as constituted immediately prior to filling such vacancy, or such election or
appointment.
Section 6.9
Appointment of or Nomination and Election of Chairman.
C. Sean Day shall be the
initial Chairman, and shall hold office for a term expiring at the second annual meeting of the
Members following the closing of the Initial Public Offering, or until such Chairman’s successor is
duly elected and qualified, or until such Chairman’s earlier death, resignation or removal. As of
the expiration of the term of the initial Chairman (and of any subsequent Chairman) or upon any
such Chairman’s earlier death, resignation or removal, a majority of the Board of Directors shall
elect a Chairman, who shall hold office for at least one (1) year, or until such Chairman’s
successor is duly elected and qualified, or until such Chairman’s earlier death, resignation or
removal.
Section 6.10
Chairman of the Board.
The Chairman shall be a member of the Board of Directors. The
Chairman is not required to be an employee of the Company. The Chairman, if present, shall preside
at all meetings of the Board of Directors. If the Chairman is unavailable for any reason, the
duties of the Chairman shall be performed, and the Chairman’s authority may be exercised, by a
director designated for this purpose by the remaining directors of the Board of Directors. The
Chairman shall perform such other duties and have such other powers as may be prescribed by the
Board of Directors or this Agreement, all in accordance with basic policies as may be established
by the Company, and subject to the approval and oversight of the Board of Directors.
Section 6.11
Regular Meetings.
A regular meeting of the Board of Directors shall be held without
any other notice than this Agreement, immediately after, and at the same place (if any) as, each
annual meeting of Members. The Board of Directors may, by resolution, provide the time and place
(if any) for the holding of additional regular meetings without any other notice than such
resolution. Unless otherwise determined by the Board of Directors, the Secretary of the Company
shall act as Secretary at all regular meetings of the Board of Directors and in the Secretary’s
absence a temporary Secretary shall be appointed by the chairman of the meeting.
Section 6.12
Special Meetings.
Special meetings of the Board of Directors shall be called at the
request of the Chief Executive Officer, the Chairman or of eighty-five percent (85%) of the
directors of the Board of Directors. The Person or Persons authorized to call special meetings of
the Board of Directors may fix the place and time of the meetings. Unless otherwise determined by
the Board of Directors, the Secretary of the Company shall act as Secretary at all special meetings
of the Board of Directors and in the Secretary’s absence a temporary Secretary shall be appointed
by the chairman of the meeting.
Section 6.13
Notice for Special Meetings.
Notice of any special meeting of the Board of Directors
shall be mailed by first class mail, postage paid, to each director at his or her business
40
or residence or shall be sent by telegraph, express courier service (including, without limitation,
Federal Express) or facsimile (directed to the facsimile number to which the director has consented
to receive notice) or other electronic transmission (including, but not limited to, an e-mail
address at which the director has consented to receive notice) not later than three (3) days before
the day on which such meeting is to be held if called by the Chief Executive Officer or the
Chairman and twenty one (21) days before the day on which such meeting is to be held in all other
cases. Except in the case where the business to be transacted at such special meeting includes a
proposed amendment to this Agreement, neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the Board of Directors need be specified in the notice of such
meeting. A meeting may be held at any time without notice if all the directors are present or if
those not present waive notice of the meeting in accordance with Section 9.12, either before or
after such meeting.
Section 6.14
Waiver of Notice.
Whenever any notice is required to be given to any director of the
Company under the terms of this Agreement, a waiver thereof in writing, signed by the Person or
Persons entitled to such notice, or a waiver thereof by electronic transmission by the Person or
Persons entitled to notice, whether before or after the time stated in such notice, shall be deemed
equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose
of, any meeting of the Board of Directors or committee thereof need be specified in any written
waiver of notice or any waiver by electronic transmission of notice of such meeting.
Section 6.15
Action Without Meeting.
Any action required or permitted to be taken at any meeting by
the Board of Directors or any committee or subcommittee thereof, as the case may be, may be taken
without a meeting, without a vote and without prior notice if a consent thereto is signed or
transmitted electronically, as the case may be, by the Chairman and at least eighty-five percent
(85%) of the directors of the Board of Directors or of such committee or subcommittee, as the case
may be, and the writing or writings or electronic transmission or transmissions are filed with the
minutes of proceedings of the Board of Directors or such committee or subcommittee;
provided
,
however
, that such electronic transmission or transmissions must either set forth or be submitted
with information from which it can be determined that the electronic transmission or transmissions
were authorized by the director. Such filing shall be in paper form if the minutes are maintained
in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 6.16
Conference Telephone Meetings.
Directors of the Board of Directors, or any committee
or subcommittee thereof, may participate in a meeting of the Board of Directors or such committee
or subcommittee by means of conference telephone or other communications equipment by means of
which all Persons participating in the meeting can hear each other, and such participation in a meeting
shall constitute presence in person at such meeting.
Section 6.17
Quorum.
Except as otherwise provided in this Agreement, at all meetings of the Board
of Directors, at least thirty-five percent (35%) of the then total number of directors in office
(such total number of directors, the
“Entire Board of Directors”
) shall constitute a quorum for the
transaction of business. At all meetings of any committee of the Board of Directors, the presence
of a majority of the total number of members of such committee (assuming no vacancies) shall
constitute a quorum. The act of a majority of the directors or
41
committee members present at any meeting at which there is a quorum shall be the act of the Board of Directors or such committee, as
the case may be. If a quorum shall not be present at any meeting of the Board of Directors or any
committee, a majority of the directors or members, as the case may be, present thereat may adjourn
the meeting from time to time without further notice other than announcement at the meeting. The
directors of the Board of Directors present at a duly organized meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding the withdrawal of
enough directors of the Board of Directors to leave less than a quorum.
Section 6.18
Committees.
(a) Upon the effectiveness of the Initial Public Offering, the Company shall have three
standing committees: the Nominating and Governance Committee, the Audit Committee and the
Compensation Committee, as set out below. Each of the Nominating and Governance Committee, the
Audit Committee and the Compensation Committee shall adopt by resolution a charter to establish the
rules and responsibilities of such committee in accordance with applicable law, including the Rules
and Regulations and the Applicable Listing Rules.
(i)
Nominating and Corporate Governance Committee
. The Board of Directors, by
resolution adopted by a majority of the Entire Board of Directors, has designated a
Nominating and Corporate Governance Committee comprised solely of Independent Directors,
which committee shall oversee the Company’s commitment to good corporate governance, develop
and recommend to the Board a set of corporate governance principles and oversee the
evaluation of the performance of the Board of Directors. The Nominating and Corporate
Governance Committee shall have the duties and responsibilities enumerated in its charter,
as amended from time to time by the Board of Directors.
Subject to Section 6.8, the Nominating and Corporate Governance Committee will solicit
recommendations for director nominees (other than the Appointed Director) from the Chairman
and the Chief Executive Officer. The Nominating and Corporate Governance Committee may also
recommend to the Board specific policies or guidelines concerning the structure and
composition of the Board of Directors or committees of the Board of Directors, and the
tenure and retirement of directors (other than the Appointed Director) and matters related
thereto.
(ii)
Audit Committee
. The Board of Directors, by resolution adopted by a
majority of the Entire Board of Directors, has designated an Audit Committee comprised of
not fewer than three (3) nor more than seven (7) directors, all of whom shall be Independent
Directors, who shall collectively meet the financial literacy requirements of the Exchange
Act, the Rules and Regulations and of the Applicable Listing Rules. At least one member of
the Audit Committee will meet the accounting or related financial management expertise
required to be established by the Board of Directors. The Audit Committee shall have the
duties and responsibilities enumerated in its charter, as amended from time to time by the
Board of Directors.
42
The Company shall provide appropriate funding, as determined by the Audit Committee, in
its capacity as a committee of the Board of Directors for payment of:
(A) compensation to any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audit, review or
attest services for the Company;
(B) compensation to independent counsel and other advisors engaged for any
reason by the Audit Committee; and
(C) ordinary administrative expenses of the Audit Committee that are necessary
or appropriate in carrying out its duties.
(iii)
Compensation Committee
. The Board of Directors, by resolution adopted by
a majority of the Entire Board of Directors, has designated a Compensation Committee
comprised solely of Independent Directors. The Compensation Committee shall have the duties
and responsibilities enumerated in its charter, as amended from time to time by the Board of
Directors.
(b) In addition, the Board of Directors may designate one or more additional committees or
subcommittees, with each such committee or subcommittee consisting of such number of directors of
the Company and having such powers and authority as shall be determined by resolution of the Board
of Directors.
(c) All acts done by any committee or subcommittee within the scope of its powers and
authority pursuant to this Agreement and the resolutions adopted by the Board of Directors in
accordance with the terms hereof shall be deemed to be, and may be certified as being, done or
conferred under authority of the Board of Directors. The Secretary is empowered to certify that any
resolution duly adopted by any such committee is binding upon the Company and to execute and
deliver such certifications from time to time as may be necessary or proper to the conduct of the
business of the Company.
(d) Regular meetings of committees shall be held at such times as may be determined by
resolution of the Board of Directors or the committee or subcommittee in question and no notice
shall be required for any regular meeting other than such resolution. A special meeting of any
committee or subcommittee shall be called by resolution of the Board of Directors or by the
Secretary upon the request of the Chief Executive Officer, the Chairman or a
majority of the members of any committee. Notice of special meetings shall be given to each
member of the committee in the same manner as that provided for in Section 6.13.
Section 6.19
Committee Members.
(a) Each member of any committee of the Board of Directors shall hold office until such
member’s successor is elected and has qualified, unless such member sooner dies, resigns or is
removed.
43
(b) Subject to Section 6.8, the Board of Directors may designate one or more directors as
alternate members of any committee to fill any vacancy on a committee and to fill a vacant
chairmanship of a committee, occurring as a result of a member or chairman leaving the committee,
whether through death, resignation, removal or otherwise.
Section 6.20
Committee Secretary.
The Secretary of the Company shall act as Secretary of any
committee or subcommittee, unless otherwise provided by the Board of Directors or the committee or
subcommittee, as applicable.
Section 6.21
Compensation.
The directors may be paid their expenses, if any, incurred with respect
to their attendance at each meeting of the Board of Directors in their capacities as directors, any
expenses reasonably incurred in their capacities as directors and, other than an Appointed Director
or any executive officer serving in a director capacity who is an employee of the Manager, may be
paid compensation as director or chairman of any committee or subcommittee, as the case may be, as
determined by the Initial Board or, following the first annual meeting of Members, the Compensation
Committee, as the case may be;
provided
,
however
, that the directors shall not receive any
compensation prior to the issuance of the Trust Interests. Members of special or standing
committees may be allowed like compensation and payment of expenses for attending committee
meetings.
Section 6.22
Indemnification, Advances and Insurance.
(a) Each Person who was or is made a party or is threatened to be made a party to or is
involved in any manner in any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he, she or a Person of
whom he or she is the legal representative is or was a director, officer, manager, Member of the
Company or the Manager of the Company, or is or was serving at the request of the Company as a
director, officer, manager, member of a Subsidiary of the Company or the Manager of the Company, if
the Person acted in good faith and in a manner the Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the Person’s conduct was unlawful, shall be
indemnified against expenses (including attorneys’ fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the Person in connection with any such action, suit
or proceeding, and held harmless by the Company to the fullest extent permitted from time to time
as such Person would be if the Company were a corporation incorporated under the DGCL as the same exists or may hereafter be amended (but,
if permitted by applicable law, in the case of any such amendment, only to the extent that such
amendment permits the Company to provide broader indemnification rights than said law permitted the
Company to provide prior to such amendment) or any other applicable laws as presently or hereafter
in effect, and such indemnification shall continue as to a Person who has ceased to be a director,
officer, manager, Member (or member) or the Manager of the Company and shall inure to the benefit
of his or her heirs, executors and administrators (if applicable);
provided
,
however
, that the
Company shall indemnify any such Person seeking indemnification in connection with any such action,
suit or proceeding (or part thereof) initiated by such Person only if such action, suit or
proceeding (or part thereof) was authorized by the Board of Directors or is an action, suit or
proceeding to enforce such Person’s claim to indemnification pursuant to the rights granted by this
Agreement. The Company shall pay, to the fullest extent permitted by
44
law, the expenses (including attorneys’ fees) incurred by such Person in defending any such action, suit or proceeding in
advance of its final disposition upon receipt (unless the Company upon authorization of the Board
of Directors waives such requirement to the extent permitted by applicable law) of an undertaking
by or on behalf of such Person to repay such amount if it shall ultimately be determined by final
judicial decision from which there is no further right of appeal that such Person is not entitled
to be indemnified by the Company as authorized in this Agreement or otherwise.
With respect to any Person who is a present or former director, officer, manager, Member of
the Company or the Manager of the Company, the undertaking required by this Section 6.22(a) shall
be an unlimited general obligation but need not be secured and shall be accepted without reference
to financial ability to make repayment;
provided
,
however
, that such present or former director,
officer, manager, Member of the Company or the Manager of the Company does not transfer assets with
the intent of avoiding such repayment. With respect to any Person who is a present or former
director, officer, manager, Member of the Company or the Manager of the Company, the provisions of
Section 6.22(b) relating to a determination that indemnification is proper in the circumstances
shall not be a condition to such Person’s right to receive advances pursuant to this Section
6.22(a).
(b) Any indemnification of a present or former director, officer, manager, Member or the
Manager of the Company under this Section 6.22 shall be made by the Company only as authorized in
the specific case upon a determination that indemnification of the present or former director,
officer, manager, Member or the Manager of the Company is proper in the circumstances because the
Person has met the applicable standard of conduct set forth in Section 6.3 or the applicable
section of Article 7, as the case may be, and acted in good faith and in a manner the Person
reasonably believed to be in, or not opposed to, the best interests of the Company and, with
respect to any criminal action or proceeding, had no reasonable cause to believe that its conduct
was unlawful. Such determination shall be made, with respect to a Person who is a director,
officer, manager, Member or the Manager of the Company at the time of such determination, (1) by a
majority vote of the directors who are not parties to any such action, suit or proceeding, even
though less than a quorum, (2) by a committee of such directors designated by a majority vote of
such directors, even though less than a quorum, (3) if there are no such directors, or if a
majority, even though less than a quorum, of such directors so direct, by independent legal counsel
in a written opinion, or (4) by the Members. The indemnification and the advancement of expenses
incurred in defending a action, suit or proceeding prior to its final disposition provided by or granted pursuant to this Agreement shall not be exclusive of any
other right which any Person may have or hereafter acquire under any statute, provision of the
Certificate, other provision of this Agreement, vote of Members or Disinterested Directors (as
defined below) or otherwise. No repeal, modification or amendment of, or adoption of any provision
inconsistent with, this Section 6.22, nor, to the fullest extent permitted by applicable law, any
modification of law, shall adversely affect any right or protection of any Person granted pursuant
hereto existing at, or with respect to any events that occurred prior to, the time of such repeal,
amendment, adoption or modification.
(c) The Company may maintain insurance, at its expense, to protect itself and any Person who
is or was a director, officer, partner, the Manager (or manager), Member (or member), employee or
agent of the Company or a Subsidiary of the Company or of another
45
corporation, partnership, limited liability company, joint venture, trust or other enterprise against any expense, liability or loss,
whether or not the Company would have the power to indemnify such Person against such expense,
liability or loss under the DGCL (if the Company were a corporation incorporated thereunder) or the
Act.
(d) The Company may, to the extent authorized from time to time by the Board of Directors,
grant rights to indemnification, and rights to be paid by the Company the expenses incurred in
defending any such action, suit or proceeding in advance of its final disposition, to any Person
who is or was an employee or agent of the Company or any Subsidiary of the Company (other than
those Persons indemnified pursuant to clause (a) of this Section 6.22) and to any Person who is or
was serving at the request of the Company or a Subsidiary of the Company as a director, officer,
partner, manager, member, employee or agent of another corporation, partnership, limited liability
company, joint venture, trust or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Company or a Subsidiary of the Company, to the fullest
extent of the provisions of this Agreement with respect to the indemnification and advancement of
expenses of directors, officers, managers and Members of the Company. The payment of any amount to
any Person pursuant to this clause (d) shall subrogate the Company to any right such Person may
have against any other Person or entity.
(e) The indemnification provided in this Section 6.22 is intended to comply with the
requirements of, and provide indemnification rights substantially similar to those available to
corporations incorporated under, the DGCL as it relates to the indemnification of officers,
directors, employees and agents of a Delaware corporation and, as such (except to the extent
greater rights are expressly provided in this Agreement), the parties intend that they should be
interpreted consistently with the provisions of, and jurisprudence regarding, the DGCL.
(f) Any notice, request or other communications required or permitted to be given to the
Company under this Section 6.22 shall be in writing and either delivered in person or sent by
facsimile, telex, telegram, overnight mail or courier service, or certified or registered mail,
postage prepaid, return receipt requested, to the Secretary of the Company and shall be effective
only upon receipt by the Secretary, as the case may be.
(g) To the fullest extent permitted by the law of the State of Delaware, each Member, manager,
director, officer, employee and agent of the Company agrees that all actions for the advancement of
expenses or indemnification brought under this Section 6.22 or under any vote of Members or
Disinterested Directors or otherwise shall be a matter to which Section 18-111 of the Act shall
apply and which shall be brought exclusively in the Court of Chancery of the State of Delaware.
Each of the parties hereto agree that the Court of Chancery may summarily determine the Company’s
obligations to advance expenses (including attorneys’ fees) under this Section 6.22.
Section 6.23
Reliance; Limitations in Liability.
(a) Each director of the Company shall, in the performance of such director’s duties, be fully
protected in relying in good faith upon the records of the Company and upon
46
such information, opinions, reports or statements presented to the Company by the Manager, or
employees of the Manager, or any of the officers of the Company, or committees of the Board of
Directors, or by any other Person as to matters the director reasonably believes are within such
other Person’s professional or expert competence, including, without limitation, information,
opinions, reports or statements as to the value and amount of the assets, liabilities, profits or
losses of the Company, or the value and amount of assets or reserves or contracts, agreements or
other undertakings that would be sufficient to pay claims and obligations of the Company or to make
reasonable provision to pay such claims or obligations, or any other facts pertinent to the
existence and amount of the assets of the Company from which distributions to Members might
properly be paid.
(b) No director shall be liable to the Company or the Members for monetary damages for any
breach of fiduciary duty by such director as a director;
provided
,
however
, that a director shall
be liable to the same extent as if he or she were a director of a Delaware corporation pursuant to
the DGCL (i) for breach of the director’s duty of loyalty to the Company or its Members, (ii) for
acts or omissions not in good faith or a knowing violation of applicable law, or (iii) for any
transaction for which the director derived an improper benefit. To the extent the provisions of
this Agreement restrict or eliminate the duties and liabilities of a director of the Company or the
Members or the Manager otherwise existing at law or in equity, the provisions of this Agreement
shall replace such duties and liabilities.
(c) To the fullest extent permitted by law, a director of the Company shall not be liable to
the Company, any Member, the Trust or any other Person for: (i) any action taken or not taken as
required by this Agreement; (ii) any action taken or not taken as permitted by this Agreement and,
with respect to which, such director acted on an informed basis, in good faith and with the honest
belief that such action, taken or not taken, was in the best interests of the Company; or (iii) the
Company’s compliance with an obligation incurred or the performance of any agreement entered into
prior to such director having become a director of the Company.
(d) Any director shall not be liable to the Company or to any other director or Member of the
Company or any such other Person for breach of fiduciary duty for the director’s good faith
reliance on the provisions of this Agreement.
(e) Except as otherwise required by the Act, the debts, obligations and liabilities of the
Company shall be solely the debts, obligations and liabilities of the Company and no director shall
be obligated personally for any such debt, obligation or liability of the Company solely by reason
of being a director of the Company.
ARTICLE 7
OFFICERS
Section 7.1
General.
(a) The officers of the Company shall be elected by the Board of Directors, subject to Section
7.1(b) and Article 8. The officers of the Company shall consist of a Chief Executive Officer, a
Chief Financial Officer and a Secretary and, subject to Section 7.1(b), such
47
other officers as in the judgment of the Board of Directors may be necessary or desirable. All
officers elected by the Board of Directors shall have such powers and duties as generally pertain
to their respective offices for a corporation incorporated under the DGCL, subject to the specific
provisions of this Article 7. Such officers shall also have powers and duties as from time to time
may be conferred by the Board of Directors or any committee thereof. Any number of offices may be
held by the same Person, unless otherwise prohibited by applicable law or this Agreement. The
officers of the Company need not be Members or directors of the Company.
(b) For so long as the Management Services Agreement is in effect, the Manager shall second
personnel to serve as the Chief Executive Officer and the Chief Financial Officer and in such other
capacities as set forth in the Management Services Agreement, subject to Section 8.5. The Board of
Directors shall elect nominated personnel as officers of the Company in accordance with this
Article 7. Upon termination of the Management Services Agreement, if no replacement manager is
retained by the Company to assume the Manager’s rights and obligations hereunder, the Nominating
and Corporate Governance Committee shall nominate and the Board of Directors shall elect the
officers of the Company.
Section 7.2
Duties of Officers.
Except as provided in this Agreement (or as required
by the Act), each officer of the Company shall have the same fiduciary duties applicable to
officers of a corporation incorporated under the DGCL, as if such officers were officers of a
corporation incorporated under the DGCL. Except as provided in this Agreement, the parties hereto
intend that the fiduciary duties of the officers of the Company shall be interpreted consistently
with the jurisprudence regarding such fiduciary duties of officers of a corporation under the DGCL.
It shall be expressly understood that, to the fullest extent permitted by law, no officer of the
Company owes any duties (fiduciary or otherwise) to the Members or the Company with respect to any
action or inaction of the Manager pursuant to the terms of the Management Services Agreement.
Section 7.3
Election and Term of Office.
Subject to Section 7.1(b), the elected
officers of the Company shall be elected annually by the Board of Directors at the regular meeting
of the Board of Directors held after each annual meeting of the Members. If the election of
officers shall not be held at such meeting, such election shall be held as soon thereafter as is
convenient. Each officer shall hold office until his or her successor shall have been duly elected
and qualified or until his or her death or resignation or removal.
Section 7.4
Chief Executive Officer.
The Chief Executive Officer of the Company shall,
subject to the oversight of the Board of Directors, supervise, coordinate and manage the Company’s
business and operations, and supervise, coordinate and manage its activities, operating expenses
and capital allocation, shall have general authority to exercise all the powers necessary for the
Chief Executive Officer of the Company and shall perform such other duties and have such other
powers as may be prescribed by the Board of Directors or this Agreement, all in accordance with
basic policies as may be established by the Board of Directors.
Section 7.5
Chief Financial Officer.
The Chief Financial Officer shall have
responsibility for the financial affairs of the Company, including the preparation of financial
reports, managing financial risk and overseeing accounting and internal control over financial
reporting, subject to the responsibilities of the Audit Committee. The Chief Financial Officer
shall also be the
48
Company’s chief compliance officer, with responsibility for overseeing and managing compliance
issues, including, without limitation, ensuring compliance with regulatory requirements, and
internal controls, policies and procedures. In the absence of a Secretary, the Chief Financial
Officer shall be responsible for the performance of the duties of Secretary. The Chief Financial
Officer shall perform such other duties and have such other powers as may be prescribed by the
Board of Directors or this Agreement, all in accordance with basic policies as may be established
by the Board of Directors and subject to the oversight of the Board of Directors and the Chief
Executive Officer.
Section 7.6
Reserved.
Section 7.7
Secretary.
The Secretary shall act as secretary of all meetings of Members
and the Board of Directors and any meeting of any committee of the Board of Directors. The
Secretary shall prepare and keep or cause to be kept in books provided for such purpose minutes of
all meetings of Members and the Board of Directors and any meeting of any committee of the Board of
Directors, ensure that all notices are duly given in accordance with the provisions of this
Agreement and applicable laws, and perform all duties incident to the office of Secretary and as
required by law and such other duties as may be assigned to him or her from time to time by the
Board of Directors.
Section 7.8
Resignations.
Any officer of the Company may resign at any time upon
notice of such resignation to the Company.
Section 7.9
Vacancies.
Subject to Section 7.1(b), a newly created office and a vacancy
in any office because of death, resignation or removal may be filled by the Board of Directors for
the unexpired portion of the term at any meeting of the Board of Directors.
ARTICLE 8
MANAGEMENT
Section 8.1
Duties of the Manager.
For so long as the Management Services Agreement is
in effect and subject at all times to the oversight of the Board of Directors, the Manager will
manage the business of the Company and provide its services to the Company in accordance with the
terms and conditions of the Management Services Agreement.
Section 8.2
Secondment of the Chief Executive Officer and Chief Financial Officer.
Pursuant to the terms of the Management Services Agreement, the Manager will second to the Company
natural Persons to serve as the Chief Executive Officer and Chief Financial Officer. The Chief
Executive Officer and the Chief Financial Officer shall report directly to the Board.
Section 8.3
Secondment of Additional Officers.
Pursuant to the terms of the Management
Services Agreement, the Manager and the Company may agree from time to time that the Manager will
second to the Company one or more additional natural Persons to serve as officers of the Company,
upon such terms as the Manager and the Company may mutually agree. Any such natural Persons will
have such titles and fulfill such functions as the Manager and the Company may mutually agree.
49
Section 8.4
Status of Seconded Officers and Employees.
Any officers or employees of
the Manager seconded to the Company pursuant to Section 8.3 shall not be employees of the Company;
provided
, that, except as provided in this Agreement (or as required by the Act), any such seconded
officers and employees of the Manager shall have the same fiduciary duties with respect to the
Company applicable to officers or similarly situated employees, as the case may be, of a
corporation incorporated under the DGCL, as if such officers or employees, as the case may be, were
officers or employees, as the case may be, of a corporation incorporated under the DGCL. Except as
provided in this Agreement, the parties hereto intend that the fiduciary duties of any such
seconded officers and employees of the Manager shall be interpreted consistently with the
jurisprudence regarding such fiduciary duties of officers or similarly situated employees, as the
case may be, of a corporation under the DGCL. It shall be expressly understood that, to the fullest
extent permitted by applicable law, no seconded officer or employee of the Manager owes any duties
(fiduciary or otherwise) to the Members or the Company with respect to any action or inaction of
the Manager except in accordance with the terms of the Management Services Agreement.
Section 8.5
Removal of Seconded Officers.
The Board of Directors shall have the right
to remove any officer of the Company at any time, with or without cause;
provided
,
however
, that
for so long as the Management Services Agreement is in effect, the Board of Directors may remove
officers of the Company seconded by the Manager only pursuant to the terms of the Management
Services Agreement.
Section 8.6
Replacement Manager.
In the event that the Management Services Agreement
is terminated and the Board of Directors determines that a replacement manager should be retained
to provide for the management of the Company pursuant to a management or other services agreement,
the affirmative vote of a majority of the holders of Trust Interests present in person or
represented by proxy at the meeting of Members shall be required to retain such replacement
manager.
ARTICLE 9
THE MEMBERS
Section 9.1
Rights or Powers.
The Members acting as such shall not have any right or
power to take part in the management or control of the Company or its business and affairs or to
act for or bind the Company in any way. Notwithstanding the foregoing, the Members have all the
rights and powers specifically set forth in this Agreement, including, without limitation, those
rights and powers set forth in Article 12 and, to the extent not inconsistent with this Agreement,
in the Act.
Section 9.2
Annual Meetings of Members.
The annual meeting of the Members of the
Company shall be held at such date, at such time and at such place (if any) within or without the
State of Delaware as may be fixed by resolution of the Board of Directors. Any other business may
be transacted at the annual meeting;
provided
, that it is properly brought before the meeting.
50
Section 9.3
Special Meetings of Members.
Special meetings of the Members of the
Company shall be held on such date, at such time and at such place (if any) within or without the
State of Delaware as shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Special meetings of the Members may be called at any time only by the
Chairman or by the Board of Directors pursuant to a resolution adopted by the Board of Directors.
Business transacted at any special meeting of Members shall be limited to the purposes stated in
such notice.
Section 9.4
Place of Meeting.
The Board of Directors may designate the place (if any)
of meeting for any meeting of the Members. If no designation is made by the Board of Directors, the
place of meeting shall be the principal executive office of the Company. In lieu of holding any
meeting of Members at a designated place, the Board of Directors may, in its sole discretion,
determine that any meeting of Members may be held solely by means of remote communication.
Section 9.5
Notice of Meeting.
(a) A notice of meeting, stating the place (if any), day and hour of the meeting, and the
means of remote communication, if any, by which Members and proxy holders may be deemed to be
present in person and vote at such meeting, shall be prepared and delivered by the Company not less
than twenty (20) days and not more than sixty (60) days before the date of the meeting, either
personally, by mail or, to the extent and in the manner permitted by applicable law,
electronically, to each Member of record. In the case of special meetings, the notice shall state
the purpose or purposes for which such special meeting is called. Such further notice shall be
given as may be required by applicable law. Any previously scheduled meeting of the Members may be
postponed, and (unless this Agreement otherwise provides) any special meeting of the Members may be
canceled, by resolution of the Board of Directors upon public notice given prior to the time
previously scheduled for such meeting of Members. Any notice of meeting given to Members pursuant
to this Section 9.5 shall be effective if given by a form of electronic transmission consented to
by the Member to whom the notice is given. Any such consent shall be revocable by the Member by
written notice to the Company and shall also be deemed revoked if (1) the Company is unable to
deliver by electronic transmission two consecutive notices given by the Company in accordance with
such consent, and (2) such inability becomes known to the Secretary of the Company, the Transfer
Agent or other person responsible for the giving of notice;
provided
, that, the inadvertent failure
to treat such inability as a revocation shall not invalidate any meeting or other action.
(b) Notice to Members shall be given personally, by mail or, to the extent and in the manner
permitted by applicable law, electronically to each Member of record. If mailed, such notice shall
be delivered by postage prepaid envelope directed to each holder at such Member’s address as it
appears in the records of the Company and shall be deemed given when deposited in the United States
mail.
(c) In order that the Company may determine the Members entitled to notice of or to vote at
any meeting of Members or any adjournment thereof, the Board of Directors may fix a record date,
which record date shall not precede the date upon which the resolution fixing the record date is
adopted by the Board of Directors, and which record date shall not be more than sixty (60) or fewer
than twenty (20) days before the date of such meeting. If no record date
51
is fixed by the Board of Directors, the record date for determining Members entitled to notice
of or to vote at any meeting of Members or any adjournment thereof shall be at the close of
business on the day next preceding the day on which notice is given or, if notice is waived, at the
close of business on the day next preceding the day on which the meeting is held.
(d) Notice given by electronic transmission pursuant to this subsection shall be deemed given:
(1) if by facsimile telecommunication, when directed to a facsimile telecommunication number at
which the Member has consented to receive notice; (2) if by electronic mail, when directed to an
electronic mail address at which the Member has consented to receive notice; (3) if by posting on
an electronic network together with separate notice to the Member of such specific posting, upon
the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other
form of electronic transmission, when directed to the Member. An affidavit of the Secretary or an
assistant Secretary or of the Transfer Agent or other agent of the Company that the notice has been
given by personal delivery, mail or a form of electronic transmission shall, in the absence of
fraud, be
prima facie
evidence of the facts stated therein.
Section 9.6
Quorum and Adjournment.
Except as otherwise provided by applicable law or
by the Certificate or this Agreement, the Members present in person or by proxy holding a majority
of each class of the Outstanding LLC Interests entitled to vote hereunder, shall constitute a
quorum at a meeting of Members. The Chairman or the holders of a majority of each class of the LLC
Interests entitled to vote hereunder so represented may adjourn the meeting from time to time,
whether or not there is such a quorum. The Members present at a duly organized meeting at which a
quorum is present in person or by proxy may continue to transact business until adjournment,
notwithstanding the withdrawal of enough Members to leave less than a quorum.
When a meeting is adjourned to another time and place, if any, unless otherwise provided by
this Agreement, notice need not be given of the reconvened meeting if the date, time and place, if
any, thereof and the means of remote communication, if any, by which Members and proxyholders may
be deemed to be present in person and vote at such reconvened meeting are announced at the meeting
at which the adjournment is taken. If the time, date and place of the reconvened meeting are not
announced at the meeting at which the adjournment is taken, then the Secretary of the Company shall
give written notice of the time, date and place of the reconvened meeting not less than twenty (20)
days prior to the date of the reconvened meeting. At the reconvened meeting, the Members may
transact any business that might have been transacted at the original meeting. A determination of
Members of record entitled to notice of or to vote at a meeting of Members shall apply to any
adjournment of such meeting;
provided
,
however
, that the Board of Directors may fix a new record
date for the reconvened meeting. If an adjournment is for more than thirty (30) days or if, after
an adjournment, a new record date is fixed for the reconvened meeting, a notice of the reconvened
meeting shall be given to each Member entitled to vote at the meeting.
Section 9.7
Proxies.
For so long as the Trust is the sole holder of Trust Interests,
actions by Trust Members required to be taken hereunder will be taken by the Trust pursuant to
instructions given to the Trust by the holders of the Trust Shares in accordance with the Trust
Agreement or otherwise pursuant to terms set forth in the Trust Agreement. In addition, for so
52
long as the Trust is the sole holder of Trust Interests, the Company shall provide to the
Trust, for transmittal to the holders of Trust Shares, the appropriate form of proxy to enable the
holders of Trust Shares to direct, in proportion to their percentage ownership of the Trust Shares,
the vote of the Trust Member, and the Trust Member shall vote its Trust Interests in the same
proportion as the vote of holders of Trust Shares. At all meetings of Members, a Member may vote by
proxy as may be permitted by law;
provided
, that no proxy shall be voted after three (3) years from
its date unless, in the case of the Trust Member and for so long as the Trust is the sole holder of
Trust Interests, the proxy provides for a longer period in accordance with the Trust Agreement. Any
proxy to be used at a meeting of Members must be filed with the Secretary of the Company or his or
her representative at or before the time of the meeting. A Member may revoke any proxy which is
not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of
the Company a revocation of the proxy or a new proxy bearing a later date.
Section 9.8
Notice of Member Business and Nominations.
(a)
Annual Meetings of Members
.
(i) Except in the case of the Initial Board, nominations of individuals for election to
the Board of Directors by a Member (other than any Appointed Director, who shall be
appointed by the Manager for so long as the Manager is entitled to appoint one or more
directors to the Board of Directors pursuant to the terms of this Agreement), and the
proposal of business to be considered by the Members, may be made at an annual meeting of
Members (A) pursuant to the Company’s notice of meeting delivered pursuant to Section 9.5,
(B) by or at the direction of the Board of Directors or (C) by any Member of the Company who
is entitled to vote at the meeting, who complies with the notice procedures set forth in
clauses (ii) and (iii) of this Section 9.8(a).
In addition to any other applicable requirements, for a nomination for election of a
director to be made by a Member (other than any Appointed Director, who shall be appointed
by the Manager for so long as the Manager is entitled to appoint one or more directors to
the Board of Directors pursuant to the terms of this Agreement) or for business to be
properly brought before an annual meeting by a Member, such Member must (A) be a Member of
record on both (1) the date of the delivery of such nomination or the date of the giving of
the notice provided for in this Section 9.8(a) and (2) the record date for the determination
of Members entitled to vote at such annual meeting, and (B) have given timely notice thereof
in proper written form in accordance with the requirements of this Section 9.8(a) to the
Secretary.
(ii) For nominations or other business to be properly brought before an annual meeting
by a Member pursuant to Section 9.8(a)(i)(C), the Member must have given timely notice
thereof in writing to the Secretary of the Company and, in the case of business other than
nominations, such other business must otherwise be a proper matter for Member action.
Except to the extent otherwise required by applicable law, to be timely, a Member’s notice
shall be delivered to the Secretary at the principal executive offices of the Company not
less than one hundred and twenty (120) days nor more than one hundred and fifty (150) days
prior to the first anniversary of the preceding year’s annual meeting;
provided
,
however
,
that, in the event that the date of the annual meeting
53
is more than thirty (30) days before or more than seventy (70) days after such
anniversary date, notice by a Member must be so delivered not earlier than the close of
business on the one hundred twentieth (120th) day prior to such annual meeting or the tenth
(10th) day following the day on which public announcement of the date of such meeting is
first made by the Company. In the case of the first annual meeting of Members, a Member’s
notice shall be timely if it is delivered to the Secretary at the principal executive
offices of the Company not earlier than the one hundred and twentieth (120th) day prior to
such annual meeting and not later than the close of business on the later of the ninetieth
(90th) day prior to such annual meeting or the tenth (10th) day following the day on which
public announcement of the date of such meeting is first made. In no event shall the public
announcement or an adjournment or postponement of an annual meeting commence a new time
period for the giving of a Member’s notice as described in this Section 9.8(a).
Subject to Section 9.8(a)(i), such Member’s notice shall set forth: (A) as to each
individual whom the Member proposes to nominate for election or reelection as a director,
all information relating to such individual that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or is otherwise
required, pursuant to Regulation 14A under the Exchange Act, including such individual’s
written consent to being named in the proxy statement as a nominee and to serving as a
director if elected; (B) as to any other business that the Member proposes to bring before
the meeting, a brief description of the business desired to be brought before the meeting,
the text of the proposal or business (including the text of any resolutions proposed for
consideration), the reasons for conducting such business at the meeting and any material
interest in such business of such Member and the Beneficial Owner or holder of Trust Shares,
if any, on whose behalf the proposal is made; and (C) as to the Member giving the notice and
the Beneficial Owner, if any, on whose behalf the nomination or proposal is made, (1) the
name and address of such Member as they appear on the Company’s books and of such Beneficial
Owner, (2) the number of, and evidence of such number of, LLC Interests which are owned
beneficially and of record by such Member and such Beneficial Owner, (3) a representation
that the Member intends to appear in person or by proxy at the meeting to propose such
business or nomination, and (4) a representation whether the Member or the Beneficial Owner,
if any, intends or is part of a group which intends (i) to deliver a proxy statement and/or
form of proxy to holders of at least the percentage of the LLC Interests required to approve
or adopt the proposal or elect the nominee and/or (ii) otherwise to solicit proxies from
Members in support of such proposal or nomination. The foregoing notice requirements shall
be deemed satisfied by a Member if the Member has notified the Company of the Member’s
intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any
successor thereof) promulgated under the Exchange Act and such Member’s proposal has been
included in a proxy statement that has been prepared by the Company to solicit proxies for
such annual meeting. The Company may require any proposed nominee to furnish such other
information as it may reasonably require to determine the eligibility of such proposed
nominee to serve as a director of the Company or on any committee of the Board of Directors.
54
(iii) Notwithstanding anything in the second sentence of clause (ii) of this Section
9.8(a) to the contrary, in the event that the number of directors to be elected to the Board
of Directors is increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by the Company at
least one hundred (100) days prior to the first anniversary of the preceding year’s annual
meeting, a Member’s notice required by this Section 9.8 shall also be considered timely, but
only with respect to nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the Company not later than
the close of business on the tenth (10th) day following the day on which such public
announcement is first made by the Company.
(b)
Special Meeting of Members
. Only such business shall be conducted at a special
meeting of Members as shall have been brought before the meeting pursuant to the Company’s notice
of meeting pursuant to Section 9.5. Nominations of individuals for election to the Board of
Directors by a Member (other than any Appointed Director, who shall be appointed by the Manager for
so long as the Manager is entitled to appoint one or more directors to the Board of Directors
pursuant to the terms of this Agreement) may be made at a special meeting of Members at which
directors are to be elected pursuant to the Company’s notice of meeting (i) by or at the direction
of the Board of Directors, or (ii) by any Member who is entitled to vote at the meeting who
complies with the notice procedures set forth in this Section 9.8.
In addition to any other applicable requirements, for a nomination for election of a director
to be made by a Member, such Member must (A) be a Member of record on both (1) the date of the
delivery of such nomination and (2) the record date for the determination of Members entitled to
vote at such special meeting, and (B) have given timely notice thereof in proper written form in
accordance with the requirements of this Section 9.8(b) to the Secretary.
In the event the Company calls a special meeting of Members for the purpose of electing one or
more directors to the Board of Directors, any Member entitled to vote thereon may nominate such
number of individuals for election to such position(s) as are specified in the Company’s Notice of
Meeting, if such Member’s notice as required by Section 9.8(a)(ii) shall be delivered to the
Secretary at the principal executive offices of the Company not earlier than the one hundred and
twentieth (120th) day prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following
the day on which public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no event shall the
public announcement of an adjournment or postponement of a special meeting commence a new time
period for the giving of a Member’s notice as described above.
(c)
General.
(i) Only individuals who are nominated in accordance with the procedures set forth in
this Section 9.8 shall be eligible to be considered for election as directors at a meeting
of Members and only such business shall be conducted at a meeting of Members as shall have
been brought before the meeting in accordance with the procedures set forth in this Section
9.8. Except as otherwise provided by applicable
55
law or this Section 9.8, the Chairman shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 9.8 and, if any proposed nomination
or business is not in compliance with this Section 9.8, to declare that such defective
proposal or nomination shall be disregarded.
(ii) For purposes of this Section 9.8, “public announcement” shall mean disclosure in a
press release reported by the Dow Jones News Service, Associated Press or comparable
national news service or in a document publicly filed by the Company with the Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 9.8, a Member shall also
comply with all applicable requirements of the Exchange Act, the Rules and Regulations
thereunder and the Listing Rules with respect to the matters set forth in this Section 9.8.
Nothing in this Section 9.8 shall be deemed to affect any rights of Members to request
inclusion of proposals in the Company’s proxy statement pursuant to Rule 14a-8 under the
Exchange Act.
Section 9.9
Procedure for Election of Directors; Voting.
The election of directors
submitted to Members at any meeting shall be decided by a plurality of the votes cast by the
Members entitled to vote thereon. Except as otherwise provided by applicable law or this Agreement,
all matters other than the election of directors submitted to the Members at any meeting shall be
decided by the affirmative vote of the holders of a majority of the then Outstanding LLC Interests
entitled to vote thereon present in person or represented by proxy at the meeting of Members. The
vote on any matter at a meeting, including the election of directors, shall be by written ballot.
Each ballot shall be signed by the Member voting, or by such Member’s proxy, and shall state the
number of LLC Interests voted.
Section 9.10
Inspectors of Elections; Opening and Closing the Polls.
(a) The Board of Directors by resolution shall appoint one or more inspectors, which inspector
or inspectors shall not be directors, officers or employees of the Company, to act at the meeting
and make a written report thereof. One or more individuals may be designated as alternate
inspectors to replace any inspector who fails to act. If no inspector or alternate has been so
appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at
a meeting of Members, the Chairman shall appoint one or more inspectors to act at the meeting. Each
such inspector, before discharging his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall have the duties prescribed by the DGCL as if the Company were a
Delaware corporation.
(b) The Chairman shall fix and announce at the meeting the date and time of the opening and
the closing of the polls for each matter upon which the Members will vote at the meeting.
Section 9.11
Confidential Member Voting.
All proxies, ballots and votes, in each case
to the extent they disclose the specific vote of an identified Member, shall be tabulated and
certified
56
by an independent tabulator, inspector of elections and/or other independent parties and shall
not be disclosed to any director, officer or employee of the Company;
provided
,
however
, that,
notwithstanding the foregoing, any and all proxies, ballots and voting tabulations may be
disclosed: (a) as necessary to meet legal requirements or to assist in the pursuit or defense of
legal action; (b) if the Company concludes in good faith that a bona fide dispute exists as to the
authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of
such proxies, ballots or votes; (c) in the event of a proxy, consent or other solicitation in
opposition to the voting recommendation of the Board of Directors; and (d) if a Member requests or
consents to disclosure of such Member’s vote or writes comments on such Member’s proxy card or
ballot.
Section 9.12
Waiver of Notice.
Whenever any notice is required to be given to any
Member by the terms of this Agreement, a waiver thereof in writing, signed by the Person or Persons
entitled to such notice, or a waiver thereof by electronic transmission by the Person or Persons
entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at, nor the purpose of, any annual
or special meeting of the Members need be specified in any written waiver of notice or any waiver
by electronic transmission of such meeting. Notice of any meeting of Members need not be given to
any Member if waived by such Member either in a writing signed by such Member or by electronic
transmission, whether such waiver is given before or after such meeting is held. If any such waiver
is given by electronic transmission, the electronic transmission must either set forth or be
submitted with information from which it can be determined that the electronic transmission was
authorized by the Member.
Section 9.13
Remote Communication.
For the purposes of this Agreement, if authorized
by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as
the Board of Directors may adopt, Members and proxyholders may, by means of remote communication:
(a) participate in a meeting of Members; and
(b) to the fullest extent permitted by applicable law, be deemed present in person and vote at
a meeting of Members, whether such meeting is to be held at a designated place or solely by means
of remote communication;
provided
,
however
, that (i) the Company shall implement reasonable measures to verify that each
Person deemed present and permitted to vote at the meeting by means of remote communication is a
Member or proxyholder, (ii) the Company shall implement reasonable measures to provide such Members
and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters
submitted to the Members, including an opportunity to read or hear the proceedings of the meeting
substantially and concurrently with such proceedings, and (iii) if any Member or proxyholder votes
or takes other action at the meeting by means of remote communication, a record of such vote or
other action shall be maintained by the Company.
Section 9.14
Member Action Without a Meeting.
For so long as the Trust remains the
sole holder of Trust Interests, the Trust shall take any action required or permitted to be taken
at any meeting of Members, by executing a written consent that shall reflect the vote of the
holders
57
of Trust Shares as required by the terms of the Trust Agreement, without such meeting, without
prior notice, and without a vote. Proxy materials completed by the holders of Trust Shares
evidencing the result of a vote taken at a meeting of the holders of Trust Shares with at least the
minimum number of votes required to constitute an affirmative vote of the holders of Trust Shares
under the Trust Agreement shall be delivered to the Company indicating the vote or action being
approved or disapproved by such holders with respect to those matters reserved to the Trust Members
of the Company by this Agreement. If the Trust is not the sole owner of the Trust Interests,
Members shall take any action required or permitted only at a meeting of Members duly called and
noticed, and shall not be entitled to take any action by written consent.
Section 9.15
Return on Capital Contribution.
Except as otherwise provided in Article
14, no Member shall demand a return on or of its Capital Contributions.
Section 9.16
Member Compensation.
No Member shall receive any interest, salary or
draw with respect to its Capital Contributions or its Capital Account or for services rendered on
behalf of the Company, or otherwise, in its capacity as a Member, except as otherwise provided in
this Agreement or in the Management Services Agreement.
Section 9.17
Member Liability.
Except as required by the Act, no Member shall be
liable under a judgment, decree or order of a court, or in any other manner, for the Debts or any
other obligations or liabilities of the Company. A Member shall be liable only to make its Capital
Contributions and shall not be required to restore a deficit balance in its Capital Account or to
lend any funds to the Company or, after its Capital Contributions have been made, to make any
additional contributions, assessments or payments to the Company;
provided
,
however
, that a Member
may be required to repay any distribution made to it in contravention of Section 5.3 or Sections
18-607 or 18-804 of the Act. The Manager shall not have any personal liability for the repayment of
any Capital Contributions of any Member.
ARTICLE 10
MEMBER VOTE REQUIRED IN CONNECTION WITH
CERTAIN BUSINESS COMBINATIONS OR TRANSACTIONS
Section 10.1
Vote Generally Required.
Except as provided in Sections 2.3 and 2.4 and
subject to the provisions of Section 10.2, the Company shall not (a) merge or consolidate with or
into any limited liability company, corporation, statutory trust, business trust or association,
real estate investment trust, common-law trust or any other unincorporated business, including a
partnership, or (b) sell, lease or exchange all or substantially all of its Property and assets,
unless the Board of Directors shall adopt a resolution, by the affirmative vote of at least a
majority of the Entire Board of Directors, approving such action and unless such action shall be
approved by the affirmative vote of the holders of a majority of each class of LLC Interests, in
each case, Outstanding and entitled to vote thereon. The notice of the meeting at which such
resolution is to be considered will so state.
Section 10.2
Vote for Business Combinations.
The affirmative vote of the holders of
record of at least sixty-six and two-thirds percent (66 2/3%) of each class of LLC Interests then
58
Outstanding (excluding LLC Interests Beneficially Owned by the Interested Shareholder or any
Affiliate or Associate of the Interested Shareholder) shall be required to approve any Business
Combination. Such affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by applicable law or in any agreement with
any securities exchange or otherwise.
Section 10.3
Power of Continuing Directors.
The Continuing Directors shall have the
power and duty to determine, on the basis of information known to them after reasonable inquiry,
all facts necessary to determine compliance with this Article 10, including, without limitation,
(a) whether a Person is an Interested Shareholder, (b) the number of Trust Interests of the Company
beneficially owned by any Person, (c) whether a Person is an Affiliate or Associate of another, and
(d) the Fair Market Value of the equity securities of the Company or any Subsidiary thereof, and
the good faith determination of the Continuing Directors on such matters shall be conclusive and
binding for all the purposes of this Article 10.
Section 10.4
No Effect on Fiduciary Obligations.
Nothing contained in this Article
shall be construed to relieve the directors of the Board of Directors or an Interested Shareholder
from any fiduciary obligation imposed by applicable law.
ARTICLE 11
BOOKS AND RECORDS
Section 11.1
Books and Records; Inspection by Members.
(a) The Company, other than as provided in the Management Services Agreement, shall keep or
cause to be kept at its principal executive office appropriate books and records with respect to
the Company’s business, including, without limitation, all books and records necessary to provide
to the Members any information, lists and copies of documents required to be provided pursuant to
applicable law. Any books and records maintained by or on behalf of the Company in the regular
course of its business, including, without limitation, the record of the Members, books of account
and records of Company proceedings, may be kept in electronic or any other form;
provided
, that the
books and records so maintained are convertible into clearly legible written form within a
reasonable period of time.
(b) The Secretary shall make, at least ten (10) days before every meeting of Trust Members, a
complete list of the Trust Members entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each Trust Member and the number of Trust Interests registered in the
name of each Trust Member. Such list shall be open to the examination of any Trust Member, for any
purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on
a reasonably accessible electronic network;
provided
, that the information required to gain access
to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at
the principal place of business of the Company. In the event that the Company determines to make
the list available on an electronic network, the Company may take reasonable steps to ensure that
such information is available only to Members. The list
59
shall be produced and kept at the time and place of the meeting during the whole time thereof,
and may be inspected by any Member who is present.
(c) Any Member or Beneficial Owner, in person or by attorney or other agent, shall, upon
written demand stating the purpose thereof, have the right during the usual business hours to
inspect for any proper purpose, and to make copies and extracts from the Register, a list of the
Members, and its other books and records;
provided
, that as of the date of the making of the demand
inspection of such books and records would not constitute a breach of any confidentiality
agreement. In every instance where a person purports to be a Beneficial Owner of LLC Interests but
who is not the holder of record as identified on the Register, the demand shall state such Person’s
status as a Beneficial Owner of LLC Interests, be accompanied by documentary evidence of beneficial
ownership of LLC Interests, and state that such documentary evidence is a true and correct copy of
what it purports to be. A proper purpose shall mean a purpose reasonably related to such Person’s
interest as a Member or Beneficial Owner of LLC Interests.
Section 11.2
Reports.
(a)
In General
. The Chief Financial Officer of the Company shall be responsible for
causing the preparation of financial reports of the Company and the coordination of financial
matters of the Company with the Company’s accountants.
(b)
Periodic and Other Reports
. The Company shall cause to be delivered to each Member
the financial statements listed in clauses (i) and (ii) below, prepared in each case (other than
with respect to Members’ Capital Accounts, which shall be prepared in accordance with this
Agreement) in accordance with GAAP consistently applied (and, if required by any Member or its
controlled Affiliates for purposes of reporting thereunder, Regulation S-X of the Exchange Act).
The monthly and quarterly financial statements referred to in clause (ii) below may be subject to
normal year-end audit adjustments.
(i) As soon as practicable following the end of each Fiscal Year (and in any event not later
than the date on which the Rules and Regulations provide) and at such time as distributions are
made to the Members pursuant to Article 14 following the occurrence of a Dissolution Event, a
balance sheet of the Company as of the end of such Fiscal Year and the related statements of
operations, Members’ Capital Accounts and changes therein, and cash flows for such Fiscal Year,
together with appropriate notes to such financial statements and supporting schedules, all of which
shall be audited and certified by the Company’s accountants, and in each case, to the extent the
Company was in existence, setting forth in comparative form the corresponding figures for the
immediately preceding Fiscal Year end (in the case of the balance sheet) and the two (2)
immediately preceding Fiscal Years (in the case of the statements); and
(ii) As soon as practicable following the end of each of the first three Fiscal Quarters of
each Fiscal Year (and in any event not later than the date on which the Rules and Regulations
require), a balance sheet of the Company as of the end of such Fiscal Quarter and the related
statements of operations and cash flows for such Fiscal Quarter and for the Fiscal Year to date, in
each case, to the extent the Company was in existence, setting forth in
60
comparative form the corresponding figures for the prior Fiscal Year’s Fiscal Quarter and the
interim period corresponding to the Fiscal Quarter and the interim period just completed.
The quarterly statements described in clause (ii) above shall be accompanied by such written
certifications as the Rules and Regulations require.
Section 11.3
Preparation of Tax Returns.
The Company shall arrange for the preparation
and timely filing of all returns of Company income, gains, deductions, losses and other items
required of the Company for U.S. federal and state income tax purposes. The classification,
realization and recognition of income, gains, deductions, losses and other items shall be on the
accrual method of accounting for U.S. federal income tax purposes. The taxable year of the Company
shall be the calendar year.
Section 11.4
Tax Elections.
(a) The Board of Directors shall, without any further consent of the Members being required
(except as specifically required herein), make (i) the election to adjust the basis of Property
pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state, local or
foreign law, in connection with Transfers of LLC Interests and Company distributions; and (ii) any
and all other elections for U.S. federal, state, local and foreign tax purposes, including, without
limitation, any election, if permitted by applicable law: (x) to extend the statute of limitations
for assessment of tax deficiencies against the Members with respect to adjustments to the Company’s
U.S. federal, state, local or foreign tax returns; and (y) to the extent provided in Code Sections
6221 through 6231 and similar provisions of U.S. federal, state, local or foreign law, to represent
the Company and the Members before taxing authorities or courts of competent jurisdiction in tax
matters affecting the Company or the Members in their capacities as Members, and to file any tax
returns and execute any agreements or other documents relating to or affecting such tax matters,
including agreements or other documents that bind the Members with respect to such tax matters or
otherwise affect the rights of the Company and the Members. The Manager is specifically authorized
to act as the
“Tax Matters Member”
under the Code and in any similar capacity under state or local
law.
(b) In circumstances where the Trust has been dissolved, the Board of Directors may, by the
affirmative vote of at least a majority of the Entire Board of Directors, and without any further
consent of the Members being required, cause the Company to elect to be treated as a corporation
for U.S. federal income tax purposes;
provided
,
however
, that such action shall be taken only if
(i) the Board of Directors first obtains an opinion from a nationally recognized financial advisor
to the effect that it expects the market valuation of the Company to be significantly lower as a
result of the Company continuing to be treated as a partnership for U.S. federal income tax
purposes than if the Company instead elected to be treated as a corporation for U.S. federal income
tax purposes and (ii) the effective date for such election is no earlier than the date on which the
Trust has been dissolved pursuant to clause (i) of Section 10.02 of the Trust Agreement.
Section 11.5
Tax Information.
Necessary tax information shall be delivered to each
Member as soon as practicable after the end of the Fiscal Year of the Company but not later than
February 15.
61
ARTICLE 12
AMENDMENTS
The Board of Directors is authorized to amend the terms of this Agreement by resolution
adopted by the affirmative vote of a majority of the Entire Board of Directors;
provided
,
however
,
that Sections 1.3, 2.4, 2.5, 3.1(a), 5.1, 8.6, 14.1(i) or (ii), Article 10 and this Article 12 may
not be amended without the affirmative vote of Trust Members holding a majority of the Trust
Interests present in person or represented by proxy at a meeting of Trust Members;
provided
,
further
,
however
, that Sections 5.1, 5.2, 6.1 , 6.4 (excluding provisions relating to
classification of the Board of Directors), 6.5 (solely with respect to the provision relating to an
Appointed Director), 6.6 (solely with respect to the Allocation Member’s right to remove an
Appointed Director), 6.8 (solely with respect to the provision relating to an Appointed Director),
6.9 (solely with respect to the provision relating to the initial Chairman), 6.12 (solely with
respect to the Chief Executive Officer’s right to call special meetings of the Board of Directors),
6.17, 6.22, 6.23, Article 10 and this Article 12, and any other amendment that would adversely
affect the rights of the Allocation Member may not be amended without the prior written consent of
the Allocation Member. Notwithstanding anything to the contrary contained in this Agreement, the
Board of Directors is authorized by resolution adopted by the affirmative vote of a majority of the
Entire Board of Directors to (x) amend, modify or supplement this Agreement to correct any
administrative or ministerial error or omission contained in this Agreement or to clarify, or to
correct any error in, the calculation of the Profit Distribution Amount consistent with the intent
of the Company and the Allocation Member, as determined by the Board of Directors and the
Allocation Member in their sole discretion and (y) without limiting the generality of the foregoing
provisions of this Article 12, amend, modify or supplement the provisions of Section 6.18 (relating
to committees of the Board) from time to time.
ARTICLE 13
TRANSFERS; MONTHLY ALLOCATIONS
Profits, Losses, each item thereof and all other items attributable to LLC Interests for any
Allocation Year shall, for U.S. federal income tax purposes, be determined on an annual basis and
prorated on a monthly basis and the pro rata portion for each month shall be allocated to those
Persons who are Members as of the close of the Nasdaq National Market on the last day of the
preceding month. With respect to any LLC Interest that was not treated as Outstanding as of the
close of the Nasdaq National Market on the last day of the preceding month, the first Person who is
treated as the Member with respect to such LLC Interest will be treated as the Member with respect
to such LLC Interest for this purpose as of the close of the Nasdaq National Market on the last day
of the preceding month. All distributions having a record date on or before the date of a Transfer
of LLC Interests shall be made to the transferor, and all distributions having a record date
thereafter shall be made to the transferee. The Board of Directors may revise, alter or otherwise
modify such methods of allocation as it determines necessary, to the extent permitted or required
by Code Section 706 and the Regulations or rulings promulgated thereunder.
62
ARTICLE 14
DISSOLUTION AND WINDING UP
Section 14.1
Dissolution Events
. The Company shall dissolve and shall commence
winding up upon the first to occur of any of the following (each a
“Dissolution Event”
):
(i) the Board of Directors adopts a resolution, by the affirmative vote of at least a
majority of the Entire Board of Directors, approving the dissolution, winding up and
liquidation of the Company and such action has been approved by the affirmative vote of the
holders of a majority of the Outstanding Trust Interests and entitled to vote thereon;
(ii) the unanimous vote of the Trust Members to dissolve, wind up and liquidate the
Company;
(iii) the entry of a decree of judicial dissolution under Section 18-802 of the Act; or
(iv) upon the termination of the legal existence of the last remaining Member or the
occurrence of any other event that terminates the continued membership of the last
remaining Member unless the Company is continued without dissolution in a manner
permitted by this Agreement or the Act.
The Members hereby agree that, notwithstanding any provision of the Act, the Company shall not
dissolve prior to the occurrence of a Dissolution Event.
Section 14.2
Winding Up.
Upon the occurrence of a Dissolution Event, the Company shall
continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its
assets, and satisfying the claims of its creditors and Members, and no Member shall take any action
that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s
business and affairs;
provided
,
however
, that all covenants contained in this Agreement and
obligations provided for in this Agreement shall continue to be fully binding upon the Members
until such time as the Property has been distributed pursuant to this Section 14.2 and the
Certificate has been canceled pursuant to the Act. The Liquidator shall be responsible for
overseeing the winding up of the Company, which winding up shall be completed no later than ninety
(90) days after the later of the occurrence of the Dissolution Event. The Liquidator shall take
full account of the Company’s liabilities and Property and shall cause the Property or the proceeds
from the sale thereof (as determined pursuant to Section 14.9), to the extent sufficient therefor,
to be applied and distributed, to the maximum extent permitted by law, in the following order:
(a) First, to creditors (including the Manager and the Members who are creditors, to the
extent otherwise permitted by law) in satisfaction of all of the Company’s Debts and other
liabilities (whether by payment or the making of reasonable provision for payment thereof), other
than liabilities for distributions to Members under Section 18-601 or 18-604 of the Act;
63
(b) Second, except as provided in this Agreement, to Members and former Members of the Company
in satisfaction of liabilities for distributions under Section 18-601 or 18-604 of the Act; and
(c) The balance, if any, to the Members in accordance with the positive balance in their
Capital Accounts, after giving effect to all contributions, distributions and allocations for all
periods.
Notwithstanding Section 14.9, no Member or Manager shall receive additional compensation for any
services performed pursuant to this Article 14.
Section 14.3
Compliance with Certain Requirements of Regulations; Deficit Capital
Accounts
. In the event the Company is “liquidated” within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made pursuant to this Article 14 to the Members who
have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If
any Member has a deficit balance in its Capital Account (after giving effect to all contributions,
distributions and allocations for all Allocation Years, including the
Allocation Year during which such liquidation occurs), such Member shall have no obligation to
make any contribution to the capital of the Company with respect to such deficit, and such deficit
shall not be considered a debt owed to the Company or to any other Person for any purpose
whatsoever. In the discretion of the Liquidator, a pro rata portion of the distributions that would
otherwise be made to the Members pursuant to this Article 14 may be:
(a) Distributed to a trust established for the benefit of the Members for the purposes of
liquidating Company assets, collecting amounts owed to the Company, and paying any contingent,
conditional or unmatured liabilities or obligations of the Company; the assets of any such trust
shall be distributed to the Members from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to Section 14.2; or
(b) Withheld to provide a reasonable reserve for Company liabilities (contingent or otherwise)
and to reflect the unrealized portion of any installment obligations owed to the Company;
provided
,
however
, that such withheld amounts shall be distributed to the Members as soon as practicable.
Section 14.4
Deemed Distribution and Recontribution.
Notwithstanding any other
provision of this Article 14, in the event the Company is liquidated within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has occurred, the Property shall
not be liquidated, the Company’s Debts and other Liabilities shall not be paid or discharged, and
the Company’s affairs shall not be wound up. Instead, solely for U.S. federal income tax purposes,
the Company shall be deemed to have contributed all its Property and liabilities to a new limited
liability company in exchange for interests in such new company and, immediately thereafter, the
Company will be deemed to liquidate by distributing interests in the new company to the Members.
Section 14.5
Rights of Members.
Except as otherwise provided in this Agreement, each
Member shall look solely to the Property of the Company for the return of its Capital
64
Contribution and has no right or power to demand or receive Property other than cash from the Company. If the
assets of the Company remaining after payment or discharge of the debts or liabilities of the
Company are insufficient to return such Capital Contribution, the Members shall have no recourse
against the Company or any other Member or the Manager.
Section 14.6
Notice of Dissolution/Termination.
(a) In the event a Dissolution Event occurs or an event occurs that would, but for the
provisions of Section 14.1, result in a dissolution of the Company, the Board of Directors shall,
within thirty (30) days thereafter, provide written notice thereof to each of the Members and to
all other parties with whom the Company regularly conducts business (as determined in the
discretion of the Board of Directors) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Company regularly conducts business (as determined in the
discretion of the Board of Directors).
(b) Upon completion of the distribution of the Company’s Property as provided in this Article
14, the Board of Directors shall cause the filing of the Certificate of Cancellation pursuant to
Section 18-203 of the Act and shall take all such other actions as may be necessary to terminate
the Company.
Section 14.7
Allocations During Period of Liquidation.
During the period commencing on
the first day of the Fiscal Year during which a Dissolution Event occurs and ending on the date on
which all of the assets of the Company have been distributed to the Members pursuant to Section
14.2 (the
“Liquidation Period”
), the Members shall continue to share Profits, Losses, gain, loss
and other items of Company income, gain, loss or deduction in the manner provided in Article 4.
Section 14.8
Character of Liquidating Distributions.
All payments made in liquidation
of the interest of a Member in the Company shall be made in exchange for the interest of such
Member in Property pursuant to Section 736(b)(1) of the Code, including the interest of such Member
in Company goodwill.
Section 14.9
The Liquidator.
(a)
Fees
. Subject to Section 14.2, the Company is authorized to pay a reasonable fee
to the Liquidator for its services performed pursuant to this Article 14 and to reimburse the
Liquidator for its reasonable costs and expenses incurred in performing those services.
(b)
Indemnification
. The Company shall indemnify, hold harmless and pay all judgments
and claims against the Liquidator or any officers, directors, agents or employees of the Liquidator
relating to any liability or damage incurred by reason of any act performed or omitted to be
performed by the Liquidator or any officers, directors, agents or employees of the Liquidator in
connection with the liquidation of the Company, including reasonable attorneys’ fees incurred by
the Liquidator, officer, director, agent or employee in connection with the defense of any action
based on any such act or omission, which attorneys’ fees may be paid as incurred, except to the
extent such liability or damage is caused by the fraud or intentional
65
misconduct of, or a knowing
violation of the laws by, the Liquidator which was material to the cause of action.
Section 14.10
Form of Liquidating Distributions.
For purposes of making distributions
required by Section 14.2, the Liquidator may determine whether to distribute all or any portion of
the Property in kind or to sell all or any portion of the Property and distribute the proceeds
therefrom.
ARTICLE 15
MISCELLANEOUS
Section 15.1
Notices.
Subject to Sections 6.11, 6.13, 9.5 and 9.8, any notice,
payment, demand or communication required or permitted to be given by any provision of this
Agreement shall be in writing and delivered personally, or, when the same is actually received, if
sent either by registered or certified mail, postage and charges prepaid, or by facsimile, if such
facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by
registered or certified mail, postage and charges prepaid, addressed as follows, or to such other
address as such Person may from time to time specify by notice to the Members and the Manager:
(a) If to the Company:
61 Wilton Road
Westport CT 06880
Attention: I. Joseph Massoud
Facsimile No.: (212) 581-8037
(b) If to the Allocation Members:
61 Wilton Road
Westport CT 06880
Attention: I. Joseph Massoud
Facsimile No.: (212) 581-8037
(c) If to the Trust Members:
61 Wilton Road
Westport CT 06880
Attention: I. Joseph Massoud
Facsimile No.: (212) 581-8037
Section 15.2
Binding Effect.
Except as otherwise provided in this Agreement, every
covenant, term and provision of this Agreement shall be binding upon and inure to the benefit of
the Members and their respective successors, transferees and assigns.
66
Section 15.3
Construction.
It is the intent of the parties hereto that every covenant,
term and provision of this Agreement shall be construed simply according to its fair meaning and
not strictly for or against any Member.
Section 15.4
Time.
In computing any period of time pursuant to this Agreement, the day of the act, event or
default from which the designated period of time begins to run shall not be included, but the time
shall begin to run on the next succeeding day. The last day of the period so computed shall be
included, unless it is a Saturday, Sunday or any other day on which banks in The City of New York
are required or authorized by law or executive order to close, in which event the period shall run
until the end of the next day which is not a Saturday, Sunday or any other day on which banks in
The City of New York are required or authorized by law or executive order to close.
Section 15.5
Headings.
Section and other headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, define or limit the scope,
extent or intent of this Agreement or any provision hereof.
Section 15.6
Severability.
Except as otherwise provided in the succeeding sentence,
every provision of this Agreement is intended to be severable, and, if any term or provision of
this Agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall
not affect the validity or legality of the remainder of this Agreement. The preceding sentence of
this Section 15.6 shall be of no force or effect if the consequence of enforcing the remainder of
this Agreement without such illegal or invalid term or provision would be to cause any Member to
lose the material benefit of its economic bargain.
Section 15.7
Incorporation by Reference.
Every exhibit, schedule and other appendix
attached to this Agreement and referred to herein is not incorporated in this Agreement by
reference unless this Agreement expressly otherwise provides.
Section 15.8
Variation of Terms.
All terms and any variations thereof shall be deemed
to refer to masculine, feminine or neuter, singular or plural, as the identity of the Person or
Persons may require.
Section 15.9
Governing Law and Consent to Jurisdiction/Service of Process.
The laws of
the State of Delaware shall govern this Agreement, including the validity of this Agreement, the
construction of its terms and the interpretation of the rights and duties arising hereunder.
Each party hereto and any Person acquiring an LLC Interest, from time to time, (i) irrevocably
submits to the non-exclusive jurisdiction and venue of any Delaware state court or U.S. federal
court sitting in Wilmington, Delaware in any action arising out of this Agreement and (ii) consents
to the service of process by mail. Nothing herein shall affect the right of any party to serve
legal process in any manner permitted by law or affect its right to bring any action in any other
court.
Section 15.10
Waiver of Jury Trial.
Each of the Members irrevocably waives, to the
extent permitted by law, all rights to trial by jury and all rights to immunity by sovereignty or
otherwise in any action, proceeding or counterclaim arising out of or relating to this Agreement.
67
Section 15.11
Counterpart Execution.
This Agreement may be executed in any number of
counterparts with the same effect as if all of the Members had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
Section 15.12
Specific Performance.
Each Member agrees with the other Members that the
other Members would be irreparably damaged if any of the provisions of this Agreement were not
performed in accordance with their specific terms and that monetary damages would not provide an
adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to
which the nonbreaching Members may be entitled, at law or in equity, the nonbreaching Members shall
be entitled to injunctive relief to prevent breaches of the provisions of this Agreement and
specifically to enforce the terms and provisions hereof in any action instituted in any court of
the United States or any state thereof having subject matter jurisdiction thereof.
— Signature page follows —
68
IN WITNESS WHEREOF, the Members have executed and entered into this Amended and Restated
Operating Agreement of the Company as of the day first above set forth.
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COMPASS DIVERSIFIED TRUST
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By:
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/s/ James J. Bottiglieri
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Name: James J. Bottiglieri
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Title: Regular Trustee
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COMPASS GROUP MANAGEMENT LLC
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By:
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/s/ I. Joseph Massoud
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Name: I. Joseph Massoud
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69
EXHIBIT A
SPECIMEN LLC INTEREST CERTIFICATE
COMPASS GROUP DIVERSIFIED HOLDINGS LLC INTEREST
. . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .*
This Certifies that
is the owner of
Trust Interests or
Allocation Interests of Compass Group Diversified Holdings LLC, a Delaware limited liability
company (the “Company”), with such rights and privileges as are set forth in the Amended and
Restated Operating Agreement of the Company dated April 25, 2006 (the “Agreement”), as it may be
amended from time to time.
THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER SECURITIES ACT
OF 1933, AS AMENDED (THE SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE (THE “STATE ACTS”) OR
THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING OFFERED AND SOLD IN RELIANCE ON
EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE LLC
INTERESTS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, BY AN
STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE LLC INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER RESTRICTIONS
CONTAINED IN THE AGREEMENT. EVERY HOLDER OF THIS CERTIFICATE, BY HOLDING AND RECEIVING THE SAME,
AGREES WITH THE COMPANY TO BE BOUND BY THE TERMS OF THE AGREEMENT. THE AGREEMENT WILL BE FURNISHED
BY THE COMPANY TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . In Witness
Whereof, said Company has caused this Certificate to be signed by its Chief Executive Officer this
day of
, A.D.
.
,
. . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibit 10.1
FORM OF
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
COMPASS GROUP DIVERSIFIED HOLDINGS LLC,
AND
COMPASS GROUP MANAGEMENT LLC
Dated as of
l
, 2006
TABLE OF CONTENTS
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Page
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ARTICLE I
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DEFINITIONS
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1
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Section 1.1
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Definitions
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1
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ARTICLE II
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APPOINTMENT OF THE MANAGER
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5
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Section 2.1
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Appointment
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5
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Section 2.2
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Term
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5
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ARTICLE III
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OBLIGATIONS OF THE PARTIES
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6
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Section 3.1
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Obligations of the Manager
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6
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Section 3.2
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Obligations of the Company and its Subsidiaries
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7
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Section 3.3
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Acquisition and Disposition Opportunities
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8
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Section 3.4
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Offsetting Management Services
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9
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Section 3.5
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Change of Services
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9
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Section 3.6
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Transaction Services
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10
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ARTICLE IV
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POWERS OF THE MANAGER
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11
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Section 4.1
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Powers of the Manager
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11
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Section 4.2
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Delegation
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11
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Section 4.3
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Manager’s Duties Exclusive
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12
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ARTICLE V
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INSPECTION OF RECORDS
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12
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Section 5.1
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Books and Records of the Company and its Subsidiaries
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12
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Section 5.2
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Books and Records of the Manager
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12
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ARTICLE VI
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AUTHORITY OF THE COMPANY, THE SUBSIDIARIES OF THE COMPANY AND THE MANAGER
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13
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ARTICLE VII
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MANAGEMENT FEE; EXPENSES
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13
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Section 7.1
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IPO Expenses
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13
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Section 7.2
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Management Fee
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13
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Section 7.3
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Reimbursement of Expenses
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15
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ARTICLE VIII
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SECONDMENT OF OFFICERS BY THE MANAGER
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16
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Section 8.1
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Secondment of the Chief Executive Officer and Chief Financial Officer
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16
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Section 8.2
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Remuneration of the Chief Executive Officer and Chief Financial Officer
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Section 8.3
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Secondment of Additional Officers
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17
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Section 8.4
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Removal of Seconded Officers
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17
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Section 8.5
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Insurance
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18
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ARTICLE IX
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TERMINATION; RESIGNATION AND REMOVAL OF THE MANAGER
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18
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-i-
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Page
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Section 9.1
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Resignation by the Manager
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18
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Section 9.2
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Removal of the Manager
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18
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Section 9.3
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Termination
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19
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Section 9.4
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Seconded Individuals
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19
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Section 9.5
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Withdrawal of Branding
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19
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Section 9.6
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Directions
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19
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ARTICLE X
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INDEMNITY
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20
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ARTICLE XI
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LIMITATION OF LIABILITY OF THE MANAGER
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21
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Section 11.1
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Limitation of Liability
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21
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Section 11.2
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Reliance of Manager
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21
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ARTICLE XII
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LEGAL ACTIONS
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22
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Section 12.1
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Third Party Claims
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22
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ARTICLE XIII
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MISCELLANEOUS
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22
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Section 13.1
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Obligation of Good Faith; No Fiduciary Duties
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22
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Section 13.2
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Binding Effect
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22
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Section 13.3
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Compliance
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22
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Section 13.4
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Effect of Termination
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23
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Section 13.5
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Notices
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23
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Section 13.6
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Headings
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24
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Section 13.7
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Applicable Law
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24
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Section 13.8
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Submission to Jurisdiction; Waiver of Jury Trial
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24
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Section 13.9
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Amendment; Waivers
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25
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Section 13.10
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Remedies to Prevailing Party
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25
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Section 13.11
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Severability
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25
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Section 13.12
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Benefits Only to Parties
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26
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Section 13.13
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Further Assurances
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26
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Section 13.14
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No Strict Construction
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26
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Section 13.15
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Entire Agreement
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26
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Section 13.16
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Assignment
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26
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Section 13.17
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Counterparts
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28
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-ii-
MANAGEMENT SERVICES AGREEMENT
(as amended, revised, supplemented or otherwise modified from
time to time, this
“Agreement”
), dated as of
l
, 2006, by and between Compass Group Diversified
Holdings LLC, a Delaware limited liability company (the
“Company”
), and Compass Group Management
LLC, a Delaware limited liability company (the
“Manager”
). Each party hereto shall be referred to
as, individually, a
“Party”
and,
collectively, the
“Parties”
.
WHEREAS
, the Company has determined that it would be in its best interests to appoint a
manager to perform the Services described herein and have agreed, therefore, to appoint the Manager
to perform such Services; and
WHEREAS
, the Manager has agreed to act as Manager and to perform the Services described herein
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE
, in consideration of the mutual covenants, representations, warranties and
agreements contained herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
Except as otherwise noted, for all purposes of this Agreement, the following terms shall have
the respective meanings set forth in this Section 1.1, which meanings shall apply equally to the
singular and plural forms of the terms so defined and the words “herein,” “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to any particular
Article, Section or other subdivision:
“Adjusted Management Fee”
has the meaning set forth in Section 7.2(c) hereof.
“Adjusted
Net Assets”
means, as of any Calculation Date, the
sum
of (i) consolidated total
assets (as determined in accordance with GAAP) of the Company as of such Calculation Date,
plus
(ii) the absolute amount of consolidated accumulated
amortization of intangibles (as determined in accordance with GAAP) of the
Company as of such Calculation Date,
minus
(iii) the absolute amount of Adjusted Total Liabilities
of the Company as of such Calculation Date.
“Adjusted
Total Liabilities”
means, as of any Calculation Date, the Company’s consolidated
total liabilities (as determined in accordance with GAAP) as of such Calculation Date, after
excluding the effect of any outstanding Third Party Indebtedness of the Company.
“Adjustment Date”
has the meaning set forth in Section 7.2(c) hereof.
“Affiliate”
means, with respect to any Person, (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person or (ii) any officer, director,
general member, member or trustee of such Person. For purposes of this definition, the terms
“controlling,” “controlled by” or “under common control with” shall mean, with respect to any
Persons, the possession, direct or indirect, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise, or the power to elect at least 50% of the directors, managers, general
members, or Persons exercising similar authority with respect to such Person.
“Agreement”
has the meaning set forth in the preamble of this Agreement.
“Board of Directors”
means, with respect to the Company or any Subsidiary of the Company, as
the case may be, the Board of Directors of the Company, such Subsidiary of the Company, or, in each
case, any committee thereof that has been duly authorized by the Board of Directors to make a
decision on the matter in question or bind the Company or such Subsidiary of the Company, as the
case may be, as to the matter in question.
“Business Day”
means any day other than a Saturday, a Sunday or a day on which banks in The
City of New York are required, permitted or authorized, by applicable law or executive order, to be
closed for regular banking business.
“Calculation Date”
means, with respect to any Fiscal Quarter, the last day of such Fiscal
Quarter.
“Chief Executive Officer”
means the Chief Executive Officer of the Company, including any
interim Chief Executive Officer.
“Chief Financial Officer”
means the Chief Financial Officer of the Company, including any
interim Chief Financial Officer.
“Commencement Date”
means the date of the closing of the IPO by the Trust and the Company.
“Company”
has the meaning set forth in the preamble of this Agreement.
“Company Officers”
means the Chief Executive Officer and the Chief Financial Officer and any
other officer of the Company hereinafter appointed by the Board of Directors of the Company.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended.
“Federal Securities Laws”
means, collectively, the Securities Act, the Exchange Act and the
rules and regulations promulgated thereunder.
“Final Management Fee”
has the meaning set forth in Section 7.2(b) hereof.
“Fiscal Quarter”
means the Company’s fiscal quarter for purposes of its reporting obligations
under the Exchange Act.
“GAAP”
means generally accepted accounting principles in effect in the United States,
consistently applied.
-2-
“Incur
” means, with respect to any Indebtedness or other obligation of a Person, to create,
issue, acquire (by conversion, exchange or otherwise), assume, suffer, guarantee or otherwise
become liable in respect of such Indebtedness or other obligation.
“Indebtedness”
means, with respect to any Person, (i) any liability for borrowed money, or
under any reimbursement obligation relating to a letter of credit, (ii) all indebtedness (including
bond, note, debenture, purchase money obligation or similar instrument) for the acquisition of any
businesses, properties or assets of any kind (other than property, including inventory, and
services purchased, trade payables, other expenses accruals and deferred compensation items arising
in the Ordinary Course of Business), (iii) all obligations under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (iv) any liabilities of others described
in the preceding clauses (i) to (iii) (inclusive) that such Person has guaranteed or that is
otherwise its legal liability, and (v) (without duplication) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the types referred to
in clauses (i) through (iv) above.
“Indemnified Parties”
has the meaning set forth in Article X hereof.
“Independent Director”
means a director who (i)(a) is not an officer or employee of the
Company, or an officer, director or employee of any of the Subsidiaries of the Company or their
Subsidiaries, (b) was not appointed as a director pursuant to the terms of this Agreement and (c)
is not affiliated with the Manager or any of its Affiliates, and (ii) satisfies the independence
requirements under the Exchange Act and the rules and regulations of the Nasdaq National Market.
“Investment Advisers Act”
means the Investment Advisers Act of 1940, as amended.
“Investment Company Act”
means the Investment Company Act of 1940, as amended.
“IPO”
means the initial public offering of Trust Shares by the Trust, closing on the date
hereof.
“LLC Agreement”
means the Amended and Restated Operating Agreement of Compass Group
Diversified Holdings LLC, dated as of the date hereof, including all exhibits and schedules
attached thereto, as may be amended, revised, supplemented or otherwise modified from time to time.
“Losses”
has the meaning set forth in Article X hereof.
“Management Fee”
has the meaning set forth in Section 7.2(a) hereof.
“Management Fee Payment Date”
means, with respect to any Calculation Date, the date that is
ten (10) Business Days following the receipt by the Company of the calculation of the Management
Fee from the MSA Administrator with respect to such Calculation Date.
“Manager”
has the meaning set forth in the preamble of this Agreement.
“Manager Marks”
has the meaning set forth in Section 3.7 hereof.
-3-
“MSA Administrator”
means, as of any Calculation Date, (i) for so long as this Agreement
remains in full force and effect as of such Calculation Date, the Manager, and (ii) thereafter, the
Chief Financial Officer.
“Nasdaq National Market”
means the Nasdaq National Market (or any successor thereto).
“Offsetting Management Fees”
has the meaning specified in Section 3.4 hereof.
“Offsetting Management Services”
has the meaning specified in Section 3.4 hereof.
“Offsetting Management Services Agreement”
has the meaning specified in Section 3.4 hereof.
“Ordinary Course of Business”
means, with respect to any Person, an action taken by such
Person if such action is (i) consistent with the past practices of such Person and is taken in the
normal day-to-day business or operations of such Person and (ii) which is not required to be
specifically authorized or approved by the board of directors of such Person.
“Over-Paid Management Fees”
means, as of any Calculation Date, the amount by which (i)
Adjusted Management Fees that were actually paid on all Management Fee Payment Dates preceding such
Calculation Date,
exceeded
(ii) Adjusted Management Fees that were actually due and payable by the
Company on all such Management Fee Payment Dates, as determined by the MSA Administrator upon
availability of the Company’s final consolidated financial statements in accordance with Section
7.2(e);
provided
, that such amount shall not be less than zero.
“Party”
and
“Parties”
have the meaning set forth in the preamble of this Agreement.
“Person”
means any individual, company (whether general or limited), limited liability
company, corporation, trust, estate, association, nominee or other entity.
“Securities Act”
means the Securities Act of 1933, as amended.
“Services”
has the meaning set forth in Section 3.1(b) hereof.
“Subsidiary”
means, with respect to any Person, any corporation, company, joint venture,
limited liability company, association or other Person in which such Person owns, directly or
indirectly, more than 50% of the outstanding voting equity securities or interests, the holders of
which are generally entitled to vote for the election of the Board of Directors or other governing
body of such Person.
“Termination Fee”
means, as of any Termination Fee
Date, the amount equal to the
product
of (i) two (2)
multiplied by
(ii) the
sum
of the four
Management Fees calculated with respect to the four Fiscal Quarters immediately preceding such
Termination Fee Date.
“Termination Fee Date”
means the date upon which this Agreement is terminated pursuant to an
event described in Section 9.2(a) hereof.
-4-
“Third Party Indebtedness”
means, with respect to any Person, Indebtedness of such Person owed
to any lenders or other creditors that are not Affiliated with such Person.
“Transaction Fee”
has the meaning set forth in Section 3.6 hereof.
“Transaction Services”
has the meaning set forth in Section 3.6 hereof.
“Transaction Services Agreements”
has the meaning set forth in Section 3.6 hereof.
“Trust”
means Compass Diversified Trust, which holds one hundred percent (100%) of the Trust
Interest in the Company.
“Trust Certificate”
means the certificates representing Trust Shares.
“Trust Interest”
means the trust interests of the Company as provided for and described in the
LLC Agreement.
“Trust Shares”
means the shares of beneficial interest of the Trust where each such share
represents an undivided beneficial interest in one Trust Interest;
provided
, that in the event that
all outstanding shares of beneficial interest of the Trust are exchanged for Trust Interests in
accordance with the terms of the LLC Agreement, all references herein to “Trust Shares” shall
automatically be deemed to refer to Trust Interests upon such exchange.
“Under-Paid Management Fees”
means, as of any Calculation Date, the amount by which (i)
Adjusted Management Fees that were actually due and payable by the Company on all Management Fee
Payment Dates preceding such Calculation Date, as determined by the MSA Administrator upon
availability of the Company’s final consolidated financial statements in accordance with in Section
7.2(e)
exceeded
(ii) Adjusted Management Fees that were actually paid on all such Management Fee
Payment Dates;
provided
, that such amount shall not be less than zero.
ARTICLE II
APPOINTMENT OF THE MANAGER
Section 2.1 Appointment
The Company hereby agrees to, and hereby do, appoint the Manager to perform the Services as
set forth in Section 3.1 herein and in accordance with the terms of this Agreement.
Section 2.2 Term
The Manager shall provide Services to the Company from the Commencement Date until the
termination of this Agreement in accordance with Article IX hereof.
-5-
ARTICLE III
OBLIGATIONS OF THE PARTIES
Section 3.1 Obligations of the Manager
(a) Subject always to the oversight and supervision of the Board of Directors of the Company
and the terms and conditions of this Agreement, the Manager shall during the term of this Agreement
(i) perform the Services as set forth in Section 3.1(b) below and (ii) comply with the provisions
of the LLC Agreement, as amended from time to time, and the operational objectives and business
plans of the Company in existence from time to time. The Company shall promptly provide the Manager
with all amendments to the LLC Agreement and all stated operational objectives and business plans
of the Company approved by the Board of Directors of the Company and any other available
information reasonably requested by the Manager.
(b) Subject to Sections 3.4 and 3.6 hereof and Article VII, the Manager agrees and covenants
that it shall perform the following services (as may be modified from time to time pursuant to
Section 3.5 hereof, the
“Services”
):
(i) manage the Company’s day-to-day business and operations, including managing its
liquidity and capital resources and causing the Company to comply with applicable law;
(ii) identify, evaluate, manage, perform due diligence on, negotiate and oversee the
acquisitions of target businesses by the Company and any other investments of the Company;
(iii) evaluate, manage, negotiate and oversee the disposition of all or any part of the
property, assets or investments of the Company, including dispositions of all or any part of
the Company’s Subsidiaries;
(iv) evaluate and oversee the financial and operational performance of any of the
Company’s Subsidiaries, including monitoring the business and operations thereof, and the
financial performance of any of the Company’s other investments;
(v) provide, on the Company’s behalf, managerial assistance to its Subsidiaries;
(vi) provide or second, as determined necessary by the Manager and in accordance with
the terms and conditions of this Agreement and the LLC Agreement, employees of the Manager
to serve as executive officers or other employees of the Company or as members of the
Company’s Board of Directors; and
(vii) perform any other services for and on behalf of the Company to the extent that such
services are consistent with those that are customarily performed by the executive officers
and employees of a publicly listed or quoted Person.
-6-
The foregoing Services shall include, but are not limited to, the following: (1) establishing and
maintaining books and records of the company in accordance with customary practice and GAAP; (2)
recommend to the Company’s Board of Directors (x) capital raising activities, including the
issuance of debt or equity securities of the Company, the entry into credit facilities or other
credit arrangements, structured financings or other capital market transactions, (y) changes or
other modifications in the capital structure of the Company, including repurchases; (3) recommend
to the Company’s Board of Directors the engagement of or, if approval is not otherwise required
hereunder, engage agents, consultants or other third party service providers to the Company,
including accountants, lawyers or experts, in each case, as may be necessary by the Company from
time to time; (4) maintain the Company’s property and assets in the Ordinary Course of Business;
(5) make recommendations to the Company’s Board of Directors with respect to the exercise of voting
rights to which the Company is entitled to vote in respect of its investments; (6) manage or
oversee litigation, administrative or regulatory proceedings, investigations or any other reviews
of the Company’s business or operations that may arise in the Ordinary Course of Business or
otherwise, subject to the approval of the Company’s Board of Directors to the extent necessary in
connection with the settlement, compromise, consent to the entry of an order or judgment or other
agreement resolving any of the foregoing; (7) establish and maintain appropriate insurance policies
with respect to the Company’s business and operations; (8) recommend to the Company’s Board of
Directors the payment of dividends or other distributions on the equity interests of the Company;
and (9) attend to the timely calculation and payment of taxes payable, and the filing of all taxes
return due, by the Company.
(c) In connection with the performance of its obligations under this Agreement, the Manager
shall be required to obtain authorization and approval of the Company’s Board of Directors in
accordance with the Company’s internal policy regarding action requiring Board of Directors
approval, as otherwise required by any such Board of Directors (or any applicable committee
thereof) or the Company’s officers or as otherwise required by applicable law.
(d) In connection with the performance of the Services under this Agreement, the Manager shall
have all necessary power and authority to perform, or cause to be performed, such Services on
behalf of the Company.
(e) In connection with the performance of its obligations under this Agreement, the Manager is
not permitted to engage in any activities that would cause it to become an “investment adviser” as
defined in Section 202(a)(11) of the Investment Advisers Act, or any successor provision thereto.
(f) While the Manager is providing the Services under this Agreement, the Manager shall also
be permitted to provide services, including services similar to the Services covered hereby, to
other Persons, including Affiliates of the Manager. This Agreement and the Manager’s obligation to
provide the Services under this Agreement shall not create an exclusive relationship between the
Manager and its Affiliates, on the one hand, and the Company and its Subsidiaries, on the other.
Section 3.2 Obligations of the Company
-7-
(a) The Company shall, and the Company shall cause its Subsidiaries to, do all things
reasonably necessary on their part as requested by the Manager consistent with the terms of this
Agreement to enable the Company to fulfill its obligations under this Agreement.
(b) The Company shall, and the Company shall cause its Subsidiaries to, take reasonable steps
to ensure that:
(i) their officers and employees, and the officers and employees of their Subsidiaries,
act in accordance with the terms of this Agreement and the reasonable directions of the
Manager in fulfilling the Manager’s obligations hereunder and allowing the Manager to
exercise its powers and rights hereunder; and
(ii) the Company and its Subsidiaries provide to the Manager all reports (including
monthly management reports and all other relevant reports), which the Manager may reasonably
require and on such dates as the Manager may reasonably require.
(c) Without the prior written consent of the Manager, the Company shall not amend any
provision of the LLC Agreement that adversely affects, either directly or indirectly, the rights of
the Manager hereunder.
(d) The Company agrees that, in connection with the performance by the Manager of its
obligations hereunder, the Manager may recommend to the Company, and on behalf of the Company may
engage in, transactions with any of the Manager’s Affiliates;
provided
, that any such transactions
shall be subject to the authorization and approval of the Company’s nominating and corporate
governance committee.
(e) The Company shall maintain a Board of Directors consisting of a majority of Independent
Directors.
(f) The Company shall take any and all actions necessary to ensure that it does not become an
“investment company” as defined in Section 3(a)(1) of the Investment Company Act, or any successor
provision thereto.
Section 3.3 Acquisition and Disposition Opportunities
(a) The Company agrees that the Manager shall have, and do hereby grant to the Manager,
exclusive responsibility for reviewing and making recommendations to the Company’s Board of
Directors with respect to acquisition and disposition opportunities. In the event that any such
opportunity is not originated by the Manager, the Company’s Board of Directors shall seek a
recommendation from the Manager prior to making any decision concerning such opportunity.
(b) In the case of any acquisition or disposition opportunity that involves an Affiliate of
the Manager or the Company, the Company’s nominating and corporate governance committee shall be
required to authorize and approve such transaction.
(c) The Manager shall review each acquisition or disposition opportunity presented to the
Manager to determine, in its sole discretion, if such acquisition or disposition opportunity satisfies the Company’s
-8-
acquisition criteria, as established by the Company’s Board of Directors from time to time.
If the Manager determines, in its sole discretion, if such an opportunity satisfies such criteria,
the Manager shall refer such opportunity to the Company’s Board of Directors for its authorization
and approval prior to any consummation thereof.
(d) In the event that an acquisition opportunity is referred to the Company’s Board of
Directors by the Manager and the Company’s Board of Directors determines not to promptly pursue
such opportunity in whole or in part, any part of such opportunity that the Company does not promptly pursue may be
pursued by the Manager or may be referred by the Manager to any Person, including Affiliates of the
Manager, in the sole discretion of the Manager.
Section 3.4 Offsetting Management Services
Notwithstanding anything else to the contrary herein, the Company agrees that the Manager may,
at any time, enter into management services agreements with any one or more of the Subsidiaries of
the Company (
“Offsetting Management Services Agreement”
)
, including by assignment thereof, relating
to the performance by the Manager of management services for such Subsidiaries of the Company that
may or may not be similar to Services to be provided hereunder (
“Offsetting Management Services”
);
provided
, that such Offsetting Management Services Agreement shall be designated as such therein;
provided, further
, that any Offsetting Management Services provided to a Subsidiary of the Company
pursuant to an Offsetting Management Services Agreement shall not be deemed to be Services provided
hereunder. Any fee to be paid pursuant to such an Offsetting Management Services Agreement
(
“Offsetting Management Fee”
) shall be paid directly by the relevant Subsidiary of the Company to
the Manager and shall not be deemed an obligation of the Company. Notwithstanding anything else to
the contrary in any Offsetting Management Services Agreement, the Parties hereto agree (i) to use
commercially reasonable efforts so that Offsetting Management Fees to be paid with respect to any
Fiscal Quarter shall be paid at a time so as to permit such Offsetting Management Fees to be
utilized for adjustment in accordance Section 7.2(c) hereof with respect to such Fiscal Quarter and
(ii) that the aggregate amount of all Offsetting Management Fees to be paid by all of the
Subsidiaries of the Company with respect to any Fiscal Quarter shall not exceed the aggregate
amount of the Management Fee calculated with respect to such Fiscal Quarter;
provided
, that if the
aggregate amount of all Offsetting Management Fees to be paid by all of the Subsidiaries of the
Company with respect to any Fiscal Quarter exceed the aggregate amount of Management Fee calculated
with respect to such Fiscal Quarter, then the Manager agrees that it shall reduce, on a
pro rata
basis, the Offsetting Management Fees to be paid by each of the Subsidiaries of the Company under
each of the Offsetting Management Agreements, determined by reference to the Adjusted Net Assets of
each of the Subsidiaries of the Company, until the aggregate amount of all Offsetting Management
Fees to be paid by all of the Subsidiaries of the Company with respect to any Fiscal Quarter does
not exceed the aggregate amount of Management Fee calculated with respect to such Fiscal Quarter.
Each such Offsetting Management Services Agreement shall be terminable, without penalty (including
a termination fee), by the relevant Subsidiary of the Company upon 30 days prior written notice.
Entry into an Offsetting Management Services Agreement by any Subsidiary of the Company shall not
be subject to authorization and approval of the Company’s nominating and corporate governance
committee.
Section 3.5 Change of Services
-9-
(a) The Company and the Manager shall have the right at any time during the term of this
Agreement to change the Services provided by the Manager and such changes shall in no way otherwise
affect the rights or obligations of any Party hereunder.
(b) Any change in the Services shall be authorized in writing and evidenced by an amendment to
this Agreement, as provided in Section 13.9 hereof. Unless otherwise agreed in writing, the
provisions of this Agreement shall apply to all changes in the Services.
Section 3.6 Transaction Services
Notwithstanding anything else to the contrary herein, the Company agrees that the Manager may,
at any time, enter into transaction services agreements with one or more of its Subsidiaries
(“
Transaction Services Agreements
”) relating to the performance by the Manager of certain
transaction-related services that are customarily performed by a third-party investment banking
firm or similar financial advisor, which may or may not be similar to Services to be provided
hereunder, in connection with the acquisition of target businesses by the Company or the Company’s
Subsidiaries or dispositions of Subsidiaries of the Company or any property or assets of the
Company or its Subsidiaries (“
Transaction Services
”);
provided
, that such Transaction Services
Agreement shall be designated as such therein;
provided, further
, that any Transaction Services
provided to the Company’s Subsidiaries pursuant to Transaction Services Agreements shall not be
deemed to be Services provided hereunder. The Manager shall contract for the performance of such
Transaction Services on market terms and conditions. Entry into a Transaction Services Agreement
shall be subject to the authorization and approval of the Company’s nominating and corporate
governance committee, and the Company’s nominating and corporate governance committee shall have
the right to take whatever measures they deem prudent to confirm the market terms of any
Transaction Services Agreement. Any fee to be paid pursuant to a Transaction Services Agreement
(the “
Transaction Fee
”) shall be paid by the relevant Subsidiary of the Company that is a party to
the corresponding Transaction Services Agreement directly to the Manager. Transaction Fees are not
Offsetting Management Fees and shall not have the effect of Offsetting Management Fees as provided
herein. Any Transaction Services Agreement may also provide for the reimbursement of costs and
expenses of the Manager in the performance of any Transaction Services, including costs and
expenses referenced in Section 7.3(b)(iii) hereof.
Section 3.7 License
(a) The Manager hereby grants the Company, subject to the terms and conditions of this
Agreement, a non-exclusive, royalty-free right to use the following trademarked names (“
Manager
Marks
”) in connection with its business and operations or as may be required to comply with
applicable law:
|
|
(i)
|
|
Compass Diversified Trust
|
|
|
|
|
(ii)
|
|
Compass Group Diversified Holdings
|
|
|
|
|
(iii)
|
|
www.compassdiversifiedtrust.com
|
|
|
|
|
(iv)
|
|
www.compasstrust.com
|
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Notwithstanding the foregoing, the Company shall be permitted to (i) sublicense the use, on any
terms and conditions consistent and coextensive with this Section 3.7, of any of the Manager Marks
to the Trust to use in connection with its business and operations or as may be required to comply
with applicable law and (ii) sublicense the use, on any terms and conditions consistent and
co-extensive with this Section 3.7, of any of the Manager Marks to any of the Company’s
Subsidiaries to use in connection with its business and operations or as may be required to comply
with applicable law.
(b) The Company agrees to notify the Manager promptly upon notice of (a) any conflicting uses
of, or any applications of or registrations for, a trademark, service mark or logo that may
conflict with the Manager Marks, (b) any acts of infringement or unfair competition involving the
Manager Marks or (c) any allegations that the use of the Manager Marks by the Company or any of its
Affiliates infringe upon the trademark or service mark or other rights, including without
limitation, rights relating to unfair competition of any other Person.
(c) The Manager shall have the sole right to initiate any opposition, cancellation or
infringement proceedings necessary to enforce the Manager Marks. The Manager shall have the right
to include the Company or its Affiliates as a party in any such enforcement proceedings where
necessary, and the Company agrees to join in such proceedings, at the Manager’s sole cost and
expense as a voluntary plaintiff or claimant upon request of the Manager, and the Company shall
cooperate with the Manager in such proceedings, at the Manager’s sole cost and expense. The
Manager shall have the sole right to control and settle any such proceedings.
ARTICLE IV
POWERS OF THE MANAGER
Section 4.1 Powers of the Manager
(a) The Manager shall have no power to enter into any contract for or on behalf of the Company
or otherwise subject it to any obligation, such power to be the sole right and obligation of the
Company, acting through its Board of Directors and/or the Company Officers.
(b) Subject to Section 4.2 and for purposes other than to delegate its duties and powers to
perform the Services hereunder, the Manager shall have the power to engage any agents (including
real estate agents and managing agents), valuers, contractors and advisors (including accounting,
financial, tax and legal advisors) that it deems necessary or desirable in connection with the
performance of its obligations hereunder, which costs therefor shall be subject to reimbursement in
accordance with Section 7.3 hereto.
Section 4.2 Delegation
The Manager may delegate or appoint:
(a) Any of its Affiliates as its agent, at its own cost and expense, to perform any or all of
the Services hereunder; or
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(b) Any other Person, whether or not an Affiliate of the Manager, as its agent, at its own
cost and expense, to perform those Services hereunder which, in the sole discretion of the Manager,
are not critical to the ability of the Manager to satisfy its obligations hereunder;
provided, however
, that, in each case, the Manager shall not be relieved of any of its obligations
or duties owed to the Company hereunder as a result of such delegation. The Manager shall be
permitted to share Company information with its appointed agents subject to appropriate and
reasonable confidentiality arrangements. For the avoidance of doubt, any reference to Manager
herein shall include its delegates or appointees pursuant to this Section 4.2.
Section 4.3 Manager’s Obligations, Duties and Powers Exclusive
The Company agrees that during the term of this Agreement, the obligations, duties and powers
imposed on and granted to the Manager under Article III and this Article IV are to be performed or
held exclusively by the Manager or its delegates and the Company shall not, through the exercise of
the powers of their employees, Boards of Directors or their shareholders or members, as the case
may be, perform any of the Services except in circumstances where it is necessary to do so to
comply with applicable law or as otherwise agreed to or delegated, in accordance with Section 4.2
hereof, by the Manager in writing.
ARTICLE V
INSPECTION OF RECORDS
Section 5.1 Books and Records of the Company
At all reasonable times and on reasonable notice, the Manager and any Person authorized by the
Manager shall have access to, and the right to inspect, for any reasonable purpose, during the term
of this Agreement and for a period of five (5) years after termination hereof, the books, records
and data stored in computers and all documentation of the Company pertaining to all Services
performed by the Manager or the Management Fee to be paid by the Company to the Manager, in each
case, hereunder. There shall be no cost or expense charged by any Party to another Party pursuant
to the exercise of rights under this Section 5.1.
Section 5.2 Books and Records of the Manager
At all reasonable times and on reasonable notice, any Person authorized by the Company shall
have access to, and the right to inspect the books, records and data stored in computers and all
documentation of the Manager pertaining to all Services performed by the Manager or the Management
Fee to be paid by the Company to the Manager, in each case, hereunder. There shall be no cost or
expense charged by any Party to another Party pursuant to the exercise of rights under this Section
5.2.
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ARTICLE VI
AUTHORITY OF THE COMPANY
AND THE MANAGER
Each Party represents to the others that it is duly authorized with full power and authority
to execute, deliver and perform its obligations and duties under this Agreement. The Company
represents that the engagement of the Manager has been duly authorized by the Board of Directors of
the Company and is in accordance with all governing documents of the Company.
ARTICLE VII
MANAGEMENT FEE; EXPENSES
Section 7.1 IPO Expenses
The Company agrees to reimburse the Manager and its Affiliates, within five (5) Business Days
after the Commencement Date, for certain costs and expenses Incurred or to be Incurred prior to and
in connection with the IPO upon the provision of reasonably sufficient support for such
reimbursement. Any such reimbursement shall be made in U.S. dollars by wire transfer in
immediately available funds to an account or accounts designated by the Manager from time to time.
Section 7.2 Management Fee
(a)
Obligation.
Subject to the terms and conditions set forth in this Section 7.2,
for the term of this Agreement, (i) the MSA Administrator shall calculate the fee payable to the
Manager in accordance with this Section 7.2 (the “
Management Fee
”), and the components thereof, in
accordance with Section 7.2(b) hereof and (ii) the Company shall pay the Management Fee to the
Manager in accordance with Section 7.2(d) hereof.
(b)
Calculation of Management Fee.
Subject to Section 7.2(e) hereof, as payment to
the Manager for performing Services hereunder during any Fiscal Quarter or any part thereof, the
MSA Administrator, as of any Calculation Date with respect to such Fiscal Quarter, shall calculate,
on or promptly following such Calculation Date, the Management Fee with respect to such Fiscal
Quarter, which shall be equal to, as of such Calculation Date, the
product
of (i) 0.5%,
multiplied
by
(ii) Adjusted Net Assets as of such Calculation Date;
provided, however,
that, with respect to
the Fiscal Quarter in which the Commencement Date occurs, the Management Fee shall be equal to the
product
of (i)(x) 0.5%,
multiplied by
(y) the Adjusted Net Assets as of such Calculation Date,
multiplied by
(ii) a fraction, the numerator of which is the number of days from and including the
Commencement Date to and including the last day of such Fiscal Quarter and the denominator of which
is the number of days in such Fiscal Quarter;
provided, further, however,
that, with respect to the
Fiscal Quarter in which this Agreement is terminated, the Management Fee shall be equal to the
product
of (i)(x) 0.5%,
multiplied by
(y) the Adjusted Net Assets as of such Calculation Date,
multiplied by
(ii) a fraction, the numerator of which is the number of days from and including the
first day of such Fiscal Quarter to but excluding the date upon which this Agreement is terminated
and the denominator of which is the number of days in
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such Fiscal Quarter (such amount so calculated in accordance with this proviso, the “
Final
Management Fee
”).
(c)
Adjustment of Management Fee.
The amount of any Management Fee calculated in
accordance with Section 7.2(b) hereof as of any Calculation Date shall be adjusted, on a
dollar-for-dollar basis (such Management Fee, as adjusted, the “
Adjusted Management Fee
”), by the
MSA Administrator immediately prior to the Management Fee Payment Date with respect to such
Calculation Date (such date of adjustment, the “
Adjustment Date
”) as follows:
(i) reduced
, on a dollar-for-dollar basis, by the aggregate amount of all Offsetting
Management Fees, if any, received by the Manager from any of the Subsidiaries of the Company
with respect to such Fiscal Quarter as of the date of such adjustment;
(ii) reduced
, on a dollar-for-dollar basis, by the aggregate amount of all Over-Paid
Management Fees, if any, existing as of such Calculation Date;
(iii) increased
, on a dollar-for-dollar basis, by the aggregate amount of all
Under-Paid Management Fees, if any, existing as of such Calculation Date; and
(iv) increased
, on a dollar-for-dollar basis, by the aggregate amount of all accrued
and unpaid Management Fees, if any, as of such Calculation Date, without duplication of any
of the foregoing.
(d)
Payment of Adjusted Management Fee.
Subject to Section 7.2(f) hereof, the Company
shall pay to the Manager, on the Management Fee Payment Date with respect to any Calculation Date,
the Adjusted Management Fee as of such Calculation Date. Any such payment shall be made in U.S.
dollars by wire transfer in immediately available funds to an account or accounts designated by the
Manager from time to time.
(e)
Basis for Calculation of Management Fee and Adjusted Management Fee.
The
calculation of Management Fee, including the components thereof, with respect to any Fiscal Quarter
on any Calculation Date shall be based on (i) the Company’s audited consolidated financial
statements to the extent available, (ii) if audited consolidated financial statements are not
available, then the Company’s unaudited consolidated financial statements to the extent available,
and (iii) if neither audited nor unaudited consolidated financial statements are available, then
the Company’s books and records then available;
provided
, that, with respect to any calculation of
the Management Fee based on the Company’s books and records, upon availability of the earlier of
(x) the Company’s audited consolidated financial statements and (y) the Company’s unaudited
consolidated financial statements, in each case, relating to amounts previously calculated on such
Calculation Date by reference to the Company’s books and records, the MSA Administrator shall
recalculate (A) any Management Fees, and any components thereof, that were previously calculated
based on such books and records and (B) any Adjusted Management Fees that were calculated based on
such Management Fees, in each case, to determine if any Over-Paid Management Fee or Under-Paid
Management Fee were outstanding as of such Calculation Date;
provided, further,
that the amount so
recalculated shall be conclusive and binding on the Parties hereto and no further recalculations
shall be required or
-14-
permitted except that a further recalculation shall be required and performed (A) upon a
demonstration of clear error with respect to any prior calculation or recalculation or (B) upon the
restatement of the consolidated financial statements of the Company, or any amounts therein,
underlying any prior calculation or recalculation, in each case, at any time. The calculation of
Adjusted Management Fees, including the components thereof, as of any Adjustment Date shall be made
based on information that is available as of such Adjustment Date;
provided,
that if any events,
including the payment of Offsetting Management Fees, occur after such Adjustment Date that would
affect the amount of Adjusted Management Fees calculated as of such Adjustment Date, then the MSA
Administrator shall recalculate Adjusted Management Fees as of such Adjustment Date to determine if
any Over-Paid Management Fee or Under-Paid Management Fee were created as of the Calculation Date
immediately succeeding such Adjustment Date. Notwithstanding the foregoing, the calculation of the
Final Management Fee, including the components thereof, shall be made and based on the Company’s
unaudited consolidated financial statements for the applicable Fiscal Quarter when such unaudited
consolidated financial statements are available;
provided,
that, once calculated, no further
recalculation of Final Management Fee shall be required or permitted.
(f)
Sufficient Liquidity.
If the Company does not have sufficient liquid assets to
timely pay the entire amount of the Management Fee due on any Management Fee Payment Date, the
Company shall liquidate assets or Incur Indebtedness in order to pay such Management Fee in full on
such Management Fee Payment Date;
provided
, that the Manager may elect, in its sole discretion by
delivery of written notice to the Company prior to such Management Fee Payment Date, to allow the
Company to defer the payment of all or any portion of the Management Fee otherwise due and payable
on such Management Fee Payment Date until the next succeeding Management Fee Payment Date and,
thereby, enable the Company to avoid such liquidation or Incurrence. For the avoidance of doubt,
the Manager may make such election to allow the Company to defer the payment of Management Fees
more than once.
(g)
Books and Records.
The MSA Administrator shall maintain cumulative books and
records with respect to the details of any calculations made pursuant to this Section 7.2, which
records shall be available for inspection and reproduction at any time upon request by the Board of
Directors of the Company and, if the Manager is not the MSA Administrator, the Manager.
Section 7.3 Reimbursement of Expenses
(a) Subject to Sections 7.1 and 8.2 hereof, the Company shall reimburse the Manager for the
following amounts that are actually Incurred by the Manager during the term of this Agreement:
(i) all costs and expenses of the Company that are Incurred by the Manager or its
Affiliates on behalf of the Company, including all out-of-pocket costs and expenses Incurred
in connection with performing Services hereunder, and all costs and expenses the
reimbursement of which is specifically approved by the Board of Directors of the Company;
and
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(ii) the compensation and other costs and expenses of the Chief Financial Officer and his or her
staff, as approved by the Company’s compensation committee.
(b) Notwithstanding the foregoing or anything else to the contrary herein, none of the
Company, any Subsidiary of the Company or their Subsidiaries shall be obligated or responsible for
reimbursing or otherwise paying for any costs or expenses relating to (i) the Manager’s overhead or
any other costs and expenses relating to the Manager’s conduct or maintenance of its business and
operations as a provider of services, (ii) costs and expenses Incurred by the Manager in connection
with the identification, evaluation, management, performance of due diligence on, negotiating and
oversight of potential acquisitions by the Company where the Company (or the Manager on behalf of
the Company) does not submit an indication of interest or letter of intent to pursue such potential
acquisition, including costs and expenses relating to travel, marketing and attendance at industry events and
retention of outside service providers relating thereto and (iii) costs and expenses Incurred by the Manager in connection with the
identification, evaluation, management, performance of due diligence on, negotiating and oversight
of an acquisition by the Company if both (x) such acquisition is actually closed by the Company and
(y) the Subsidiary so acquired, by any manner whatsoever, in connection with such acquisition has
entered into a Transaction Services Agreement with the Manager under which such costs and expenses
are being reimbursed.
(c) Any such reimbursement shall be made upon demand by the Manager in U.S. dollars by wire
transfer in immediately available funds to an account or accounts designated by the Manager from
time to time.
(d) Except as otherwise provided for in this Section 7.3, all reimbursements made pursuant to this Section 7.3 shall be reviewed by the Company’s
compensation committee on an annual basis in connection with the preparation of the Company’s
year-end audited consolidated financial statements. If the Company’s compensation committee
identifies any discrepancy in such reimbursements, then the Company’s compensation committee, on
behalf of the Company, and the Manager shall mutually resolve such discrepancy.
ARTICLE VIII
SECONDMENT OF OFFICERS BY THE MANAGER
Section 8.1 Secondment of the Chief Executive Officer and Chief Financial Officer
The Manager shall second to the Company individuals to serve as the Company’s Chief Executive
Officer and Chief Financial Officer. The Company’s Board of Directors shall elect the seconded
Chief Executive Officer and Chief Financial Officer as officers of the Company in accordance with
the terms of the LLC Agreement and the operational objectives and business plans of the Company in
existence from time to time. The seconded Chief Executive Officer and Chief Financial Officer
shall report directly, and be subject, to the Company’s Board of Directors.
Section 8.2 Remuneration of the Chief Executive Officer and Chief Financial Officer
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(a) The Chief Executive Officer and Chief Financial Officer seconded to the Company pursuant
to this Article VIII shall, at all times, remain employees of, and be remunerated by, the Manager
or an Affiliate of the Manager.
(b) Except as set forth in Section 8.2(c) hereof, the Services performed for the Company by
the Chief Executive Officer and all other personnel, if any, of the Manager or its Affiliates shall
be provided at the cost of the Manager or an Affiliate of the Manager. For the avoidance of doubt,
except as set forth in Section 8.2(c) hereof, the Company shall have no obligation to reimburse the
Manager for the compensation and other expenses of any employees, representatives, delegates and
seconded officers of the Manager and its Affiliates.
(c) The Services performed by the Chief Financial Officer and his or her staff shall be
provided at the cost of the Manager or an Affiliate of the Manager and reimbursed by the Company
pursuant to Section 7.3 of this Agreement.
(d) The remuneration of the Chief Financial Officer and any member of his or her
staff that serves as an executive officer of the Company shall be
determined and approved by the Company’s compensation committee
upon such Person’s engagement and on an annual basis thereafter,
with each annual determination and approval occurring in the year prior to the year to which such remuneration relates by reference to the following:
(i) The standard remuneration guidelines as adopted by the Company or the Manager from time to time;
(ii) The respective individual’s performance, the Manager’s performance and the
performance, financial or otherwise, of the Company and its Subsidiaries; and
(iii) The assessment by the Board of Directors of the Company of the respective
individual’s performance and the performance of the Manager.
(e) The Manager shall disclose the amount of remuneration of the Chief Financial Officer and
any other officer or employee seconded to the Company, including the Chief Executive Officer, to
the Board of Directors of the Company to the extent required for the Company to comply with the
requirements of applicable law, including the Federal Securities Laws.
Section 8.3 Secondment of Additional Officers
The Manager and the Company’s Board of Directors may agree from time to time that the Manager
shall second to the Company one or more additional individuals to serve as officers or otherwise of
the Company, upon such terms as the Manager and the Company’s Board of Directors may mutually
agree. Any such individuals shall have such titles and fulfill such functions as the Manager and
the Company may mutually agree.
Section 8.4 Removal of Seconded Officers
The Company’s Board of Directors, after due consultation with the Manager, may at any time
request that the Manager replace any individual seconded to the Company as provided in this Article
VIII and the Manager shall, as promptly as practicable, replace any individual with respect to whom
the Board of Directors shall have made its request, subject to the requirements for the election of
officers under the LLC Agreement.
-17-
Section 8.5 Insurance
The Company agrees it shall maintain adequate directors and officers insurance for any
individuals seconded to the Company, with liability coverage of no less than $15 million.
ARTICLE IX
TERMINATION; RESIGNATION AND REMOVAL OF THE MANAGER
Section 9.1 Resignation by the Manager
The Manager may resign and terminate this Agreement at any time with 90 days’ prior written
notice to the Company, which right shall not be contingent upon the finding of a replacement
manager. However, if the Manager resigns, until the date on which the resignation becomes
effective, the Manager shall, upon request of the Company’s Board of Directors, use reasonable
efforts to assist the Company’s Board of Directors to find a replacement manager at no cost and
expense to the Company.
Section 9.2 Removal of the Manager
The Company’s Board of Directors may terminate this Agreement and the Manager’s appointment
if, at any time:
(a) (i) a majority of the Company’s Board of Directors vote to terminate this Agreement and
(ii) the holders of at least a majority of the then outstanding Trust Shares (other than Trust
Shares beneficially owned by the Manager) vote to terminate this Agreement.
(b) neither I. Joseph Massoud nor his designated successor is the managing member of the
Manager, and such change occurred without the prior written consent of the Company’s Board of
Directors;
(c) there is a finding by a court of competent jurisdiction in a final, non-appealable order
that (i) the Manager materially breached the terms of this Agreement and such breach continued
unremedied for sixty (60) days after the Manager received written notice from the Company setting
forth the terms of such breach, or (ii) the Manager (x) acted with gross negligence, willful
misconduct, bad faith or reckless disregard in performing its duties and obligations under this
Agreement or (y) engaged in fraudulent or dishonest acts in connection with the business and
operations of the Company;
(d) (i) the Manager has been convicted of a felony under Federal or State law, (ii) the
Company’s Board of Directors finds that the Manager is demonstrably and materially incapable of
performing its duties and obligations under this Agreement, and (iii) the holders of at least
sixty-six and two-thirds percentage (66
2
/
3
%) of then outstanding Trust Shares (other than Trust
Shares beneficially owned by the Manager) vote to terminate this Agreement; or
(e) (i) there is a finding by a court of competent jurisdiction that the Manager has (x)
engaged in fraudulent or dishonest acts in connection with the business or operations of the
Company or (y) gross negligence, willful misconduct, bad faith or reckless disregard in
-18-
performing its duties and obligations under this Agreement, and (ii) the holders of at least
sixty-six and two-thirds percentage (66
2
/
3
%) of the then outstanding Trust Shares (other than Trust
Shares beneficially owned by the Manager) vote to terminate this Agreement.
Section 9.3 Termination
Subject to Section 13.4, this Agreement shall terminate upon the resignation or removal of the
Manager in accordance with Sections 9.1 or 9.2 hereof.
Section 9.4 Seconded Individuals
Upon the termination of this Agreement, all seconded officers, including the Chief Executive
Officer and Chief Financial Officer, employees, representatives and delegates of the Manager and
its Affiliates who perform Services hereunder, shall resign their respective positions with the
Company and cease working on behalf of the Company as of the date of such termination or at such
other time as determined by the Manager. Any Manager appointed director may continue to serve on
the Company’s Board of Directors subject to the terms of the LLC Agreement.
Section 9.5 Termination of License; Withdrawal of Branding
If this Agreement is terminated pursuant to Section 9.2 of this Agreement, the right granted
pursuant to Section 3.7 hereof shall terminate within 180 days of such termination and the Company
agrees, and the Company agrees to cause the Trust and its Subsidiaries, to cease using the term
“Compass” or any of the Manager Marks entirely in its or their business or operations, as the case
may be, within 180 days of such termination, including by changing its name to remove any reference
to the term “Compass” or the Manager Marks;
provided,
that, to the extent the Board of Directors of
the Company deems it necessary or advisable, the Manager agrees that the Trust, the Company and the
Subsidiaries of the Company may use the term “Compass” or any of the Manager Marks in referencing
their previous names.
Section 9.6 Directions
After a written notice of termination has been given under this Article IX, the Company may
direct the Manager to undertake any actions necessary to transfer any aspect of the ownership or
control of the assets of the Company to the Company or to any nominee of the Company and to do all
other things necessary to bring the appointment of the Manager to an end, and the Manager shall
comply with all such reasonable directions. In addition, the Manager shall, at the Company’s
expense, deliver to any new manager or the Company any books or records held by the Manager under
this Agreement and shall execute and deliver such instruments and do such things as may reasonably
be required to permit new management of the Company to effectively assume its responsibilities.
Section 9.7 Payments Upon Termination
(a) Notwithstanding anything in this Agreement to the contrary, the fees, costs and expenses
payable to the Manager pursuant to Article VII hereof shall be payable to the Manager upon, and
with respect to, the termination of this Agreement pursuant to this Article IX. All
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payments made pursuant to this Section 9.7(a) shall be made in accordance with Article VII
hereof.
(b) Upon termination of this Agreement pursuant to the event set forth in Section 9.2(a)
hereof, the Company shall pay the Termination Fee to the Manager. The Termination Fee shall be
payable in eight (8) equal quarterly installments, with the first such installment being paid on or
within five (5) Business Days of the last day of the Fiscal Quarter in which the Termination Fee
Date occurs and each subsequent installment being paid on or within five (5) Business Days of the
last day of each subsequent Fiscal Quarter, until such time as the Termination Fee is paid in full
to the Manager. Any payments made pursuant to this Section 9.7(b) shall be made in U.S. dollars by
wire transfer in immediately available funds to an account or accounts designated by the Manager
from time to time.
(c) Subject to Section 9.7(a) hereof, no termination fee shall be due or payable by the
Company to the Manager upon termination of this Agreement pursuant to any of the events set forth
in Section 9.2(b) to Section 9.2(e) hereof, inclusive.
ARTICLE X
INDEMNITY
Section 10.1 Indemnity
The Company shall indemnify, reimburse, defend and hold harmless the Manager and its
successors and permitted assigns, together with their respective employees, officers, members,
managers, directors, agents and representatives (collectively the “
Indemnified Parties
”), from and
against all losses (including lost profits), costs, damages, injuries, taxes, penalties, interests,
expenses, obligations, claims and liabilities (joint or severable) of any kind or nature whatsoever
(collectively “
Losses
”) that are Incurred by such Indemnified Parties in connection with, relating
to or arising out of (i) the breach of any term or condition of this Agreement, or (ii) the
performance of any Services hereunder;
provided
,
however
, that the Company shall not be obligated
to indemnify, reimburse, defend or hold harmless any Indemnified Party for any Losses Incurred, by
such Indemnified Party in connection with, relating to or arising out of:
(a) a breach by such Indemnified Party of this Agreement;
(b) the gross negligence, willful misconduct, bad faith or reckless disregard of such
Indemnified Party in the performance of any Services hereunder; or
(c) fraudulent or dishonest acts of such Indemnified Party with respect to the Company or
any of its Subsidiaries.
The rights of any Indemnified Party referred to above shall be in addition to any rights that
such Indemnified Party shall otherwise have at law or in equity.
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Without the prior written consent of the Company, no Indemnified Party shall settle,
compromise or consent to the entry of any judgment in, or otherwise seek to terminate any, claim,
action, proceeding or investigation in respect of which indemnification could be sought hereunder
unless (a) such Indemnified Party indemnifies the Company from any liabilities arising out of such
claim, action, proceeding or investigation, (b) such settlement, compromise or consent includes an
unconditional release of the Company and Indemnified Party from all liability arising out of such
claim, action, proceeding or investigation and (c) the parties involved agree that the terms of
such settlement, compromise or consent shall remain confidential.
Section 10.2 Insurance
The Company agrees it shall maintain adequate insurance in support of the indemnity obligation
set forth in this Article X.
ARTICLE XI
LIMITATION OF LIABILITY OF THE MANAGER
Section 11.1 Limitation of Liability
The Manager shall not be liable for, and the Company shall not take, or permit to be taken,
any action against the Manager to hold the Manager liable for, any error of judgment or mistake of
law or for any loss suffered by the Company or its Subsidiaries (including, without limitation, by
reason of the purchase, sale or retention of any security) in connection with the performance of
the Manager’s duties under this Agreement, except for a loss resulting from gross negligence,
willful misconduct, bad faith or reckless disregard on the part of the Manager in the performance
of its duties and obligations under this Agreement, or its fraudulent or dishonest acts with
respect to the Company or any of its Subsidiaries.
Section 11.2 Reliance of Manager
The Manager may take and may act and rely upon:
(a) the opinion or advice of legal counsel, which may be in-house counsel to the Company or
the Manager, any U.S.-based law firm, or other legal counsel reasonably acceptable to the Board of
Directors of the Company, in relation to the interpretation of this Agreement or any other document
(whether statutory or otherwise) or generally in connection with the Company;
(b) advice, opinions, statements or information from bankers, accountants, auditors, valuation
consultants and other Persons consulted by the Manager who are in each case believed by the Manager
in good faith to be expert in relation to the matters upon which they are consulted;
(c) a document which the Manager believes in good faith to be the original or a copy of an
appointment by the Trust in respect of any Trust Interest or holder of a Trust Certificate in
respect of a share of Trust Shares of a Person to act as such Person’s agent for any purpose
connected with the Company; and
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(d) any other document provided to the Manager in connection with the Company upon which it is
reasonable for the Manager to rely.
The Manager shall not be liable for anything done, suffered or omitted by it in good faith in
reliance upon such opinion, advice, statement, information or document.
ARTICLE XII
LEGAL ACTIONS
Section 12.1 Third Party Claims
(a) The Manager shall notify the Company promptly of any claim made by any third party in
relation to the assets of the Company and shall send to the Company any notice, claim, summons or
writ served on the Manager concerning the Company.
(b) The Manager shall not, without the prior written consent of the Board of Directors of the
Company, purport to accept or admit any claims or liabilities of which it receives notification
pursuant to Section 12.1(a) above on behalf of the Company or make any settlement or compromise
with any third party in respect of the Company.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Obligation of Good Faith; No Fiduciary Duties
The Manager shall perform its duties under this Agreement in good faith and for the benefit of
the Company. The relationship of the Manager to the Company is as an independent contractor and
nothing in this Agreement shall be construed to impose on the Manager an express or implied
fiduciary duty.
Section 13.2 Binding Effect
This Agreement shall be binding upon, shall inure to the benefit of and be enforceable by the
Parties hereto and their respective successors and permitted assigns.
Section 13.3 Compliance
(a) The Manager shall (and must ensure that each of its officers, agents and employees) comply
with any law, including the Federal Securities Laws and the securities laws of any applicable
jurisdiction and the Nasdaq National Market (or any successor thereto) rules and regulations, in
each case, as in effect from time to time, to the extent that it concerns the functions of the
Manager under this Agreement.
(b) The Manager shall maintain management systems, policies and internal controls and
procedures that reasonably ensure that the Manager and its employees comply with the terms and
conditions of this Agreement, as well as comply with the internal policies, controls and
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procedures established by the Company from time to time, including, without limitation, those
relating to trading policies, conflicts of interest and similar corporate governance measures.
Section 13.4 Effect of Termination
This Agreement shall be effective as of the date first above written and shall continue in
full force and effect thereafter until termination hereof in accordance with Article IX. The
obligations of the Company set forth in Articles VII, IX and X and Sections 8.2(c), 11.1, 13.5,
13.9 and 13.17 hereof shall survive such termination of this Agreement, subject to applicable law.
Section 13.5 Notices
Any notice or other communication required or permitted under this Agreement shall be deemed
to have been duly given (i) five (5) Business Days following deposit in the mails if sent by
registered or certified mail, postage prepaid, (ii) when sent, if sent by facsimile transmission,
if receipt thereof is confirmed by telephone, (iii) when delivered, if delivered personally to the
intended recipient and (iv) two (2) Business Days following deposit with a nationally recognized
overnight courier service, in each case addressed as follows:
If to the Company, to:
Attention: Chief Executive Officer
Compass Group Diversified Holdings LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Fax: 203-221-8253
with a copy (which shall not constitute notice) to its counsel:
Attention: Cynthia M. Krus
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004
Fax: 202-637-3593
If to the Manager, to:
Attention: I. Joseph Massoud
Compass Group Management LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Fax: 203-221-8253
with a copy (which shall not constitute notice) to its counsel:
Attention: Stephen C. Mahon
Squire Sanders & Dempsey LLP
312 Walnut Street, Suite 3500
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Cincinnati, OH 45202
Fax: 513-361-1201
and
Attention: Brian B. Snarr
Morrison Cohen, LLP
909 Third Avenue
New York, NY 10022
Fax: 212-735-8708
or to such other address or facsimile number as any such Party may, from time to time, designate in
writing to all other Parties hereto, and any such communication shall be deemed to be given, made
or served as of the date so delivered or, in the case of any communication delivered by mail, as of
the date so received.
Section 13.6 Headings
The headings in this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their construction or effect.
Section 13.7 Applicable Law
This Agreement, the legal relations between and among the Parties and the adjudication and the
enforcement thereof shall be governed by and interpreted and construed in accordance with the laws
of the State of New York, without regard to the conflicts of law provisions thereof to the extent
such principles or rules would require or permit the application of the laws of another
jurisdiction.
Section 13.8 Submission to Jurisdiction; Waiver of Jury Trial
Each of the Parties hereby irrevocably acknowledges and consents that any legal action or
proceeding brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York, County of New York or in the
United Stales District Court for the Southern District of New York and each of the Parties hereby
irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in
respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each Party hereby further irrevocably waives any claim that any such courts lack
jurisdiction over such Party, and agrees not to plead or claim, in any legal action or proceeding
with respect to this Agreement or the transactions contemplated hereby brought in any of the
aforesaid courts, that any such court lacks jurisdiction over such Party. Each Party irrevocably
consents to the service of process in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such party, at its address for notices
set forth in Section 13.5 hereof
,
such service to become effective ten (10) days after such
mailing. Each Party hereby irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding commenced hereunder
or under any other documents contemplated hereby that service of
-24-
process was in any way invalid or ineffective. The foregoing shall not limit the rights of any
Party to serve process in any other manner permitted by applicable law. The foregoing consents to
jurisdiction shall not constitute general consents to service of process in the State of New York
for any purpose except as provided above and shall not be deemed to confer rights on any Person
other than the respective Parties.
Each of the Parties hereby waives any right it may have under the laws of any jurisdiction to
commence by publication any legal action or proceeding with respect this Agreement. To the fullest
extent permitted by applicable law, each of the Parties hereby irrevocably waives the objection
which it may now or hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement in any of the courts referred to in this Section 13.8
and hereby further irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
The Parties agree that any judgment obtained by any Party or its successors or assigns in any
action, suit or proceeding referred to above may, in the discretion of such Party (or its
successors or assigns), be enforced in any jurisdiction, to the extent permitted by applicable law.
The Parties agree that the remedy at law for any breach of this Agreement may be inadequate
and that should any dispute arise concerning any matter hereunder, this Agreement shall be
enforceable in a court of equity by an injunction or a decree of specific performance. Such
remedies shall, however, be cumulative and nonexclusive, and shall be in addition to any other
remedies which the Parties may have.
Each Party hereby waives, to the fullest extent permitted by applicable law, any right it may
have to a trial by jury in respect of any litigation as between the Parties directly or indirectly
arising out of, under or in connection with this Agreement or the transactions contemplated hereby
or disputes relating hereto. Each Party (i) certifies that no representative, agent or attorney of
any other Party has represented, expressly or otherwise, that such other Party would not, in the
event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the
other Parties have been induced to enter into this Agreement by, among other things, the mutual
waivers and certifications in this Section 13.8.
Section 13.9 Amendment; Waivers
No term or condition of this Agreement may be amended, modified or waived without the prior
written consent of the Party against whom such amendment,
modification or waiver will be enforced;
provided
, that any amendment of Article VII or Section 8.2 hereof shall not be effective
as to any Party hereto unless such amendment was authorized and
approved by the Company’s compensation committee.
Any waiver granted hereunder shall be deemed a specific waiver relating only to the specific event
giving rise to such waiver and not as a general waiver of any term or condition hereof.
Section 13.10 Remedies to Prevailing Party
If any action at law or equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs, and
necessary disbursements in addition to any other relief to which such party may be entitled.
Section 13.11 Severability
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Each provision of this Agreement is intended to be severable from the others so that if, any
provision or term hereof is illegal, invalid or unenforceable for any reason whatsoever, such
illegality, invalidity or unenforceability shall not affect or impair the validity of the remaining
provisions and terms hereof;
provided, however
, that the provisions governing payment of the
Management Fee described in Article VII hereof are not severable.
Section 13.12 Benefits Only to Parties
Nothing expressed by or mentioned in this Agreement is intended or shall be construed to give
any Person other than the Parties and their respective successors or permitted assigns, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being intended to be and being
for the sole and exclusive benefit of the Parties and their respective successors and permitted
assigns, and for the benefit of no other Person.
Section 13.13 Further Assurances
Each Party hereto shall take any and all such actions, and execute and deliver such further
agreements, consents, instruments and any other documents as may be necessary from time to time to
give effect to the provisions and purposes of this Agreement.
Section 13.14 No Strict Construction
The Parties have participated jointly in the negotiation and drafting of this Agreement. In
the event any ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by all Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
Section 13.15 Entire Agreement
This Agreement constitutes the sole and entire agreement of the Parties with regards to the
subject matter of this Agreement. Any written or oral agreements, statements, promises,
negotiations or representations not expressly set forth in this Agreement are of no force and
effect.
Section 13.16 Assignment
This Agreement shall not be assignable by either party except by the Manager to any Person
with which the Manager may merge or consolidate or to which the Manager transfers substantially all
of its assets, and then only in the event that such assignee assumes all of the obligations to the
Company and the Subsidiaries of the Company hereunder.
Section 13.17 Confidentiality
(a) The Manager shall not, and the Manager shall cause its Affiliates and their respective
agents and representatives not to, at any time from and after the date of this Agreement, directly
or indirectly, disclose or use any confidential or proprietary information involving or relating to
(x) the Company, including any information contained in the books and records of the Company and
(y) the Company’s Subsidiaries, including any information contained in the books and records of any
such Subsidiaries;
provided, however
, that disclosure
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and use of any information shall be permitted (i) with the prior written consent of the
Company, (ii) as, and to the extent, expressly permitted by this Agreement, any Offsetting
Management Services Agreement, any Transaction Services Agreement or any other agreement between
the Manager and the Company or any of the Company’s Subsidiaries (but only to the extent that such
information relates to such Subsidiaries), (iii) as, and solely to the extent, necessary or
required for the performance by the Manager, any of its Affiliates or its delegates of any of their
respective obligations under this Agreement, (iv) as, and to the extent, necessary or required in
the operation of the Company’s business or operations in the Ordinary Course of Business, (v) to
the extent such information is generally available to, or known by, the public or otherwise has
entered the public domain (other than as a result of disclosure in violation of this Section 13.17
by the Manager or any of its Affiliates), (vi) as, and to the extent, necessary or required by any
governmental order, applicable law or any governmental authority, subject to Section 13.17(d), and
(vii) as, and to the extent, necessary or required or reasonably appropriate in connection with the
enforcement of any right or remedy relating to this Agreement, any Offsetting Management Services
Agreement, any Transaction Services Agreement or any other agreement between the Manager and the
Company or any of the Company’s Subsidiaries.
(b) The Manager shall produce and implement policies and procedures that are reasonably
designed to ensure compliance by the Manager’s directors, officers, employees, agents and
representatives with the requirements of this Section 13.17.
(c) For the avoidance of doubt, confidential information includes business plans, financial
information, operational information, strategic information, legal strategies or legal analysis,
formulas, production processes, lists, names, research, marketing, sales information and any other
information similar to any of the foregoing or serving a purpose similar to any of the foregoing
with respect to the business or operations of the Company or any of its Subsidiaries. However, the
Parties are not required to mark or otherwise designate information as “confidential or proprietary
information,” “confidential” or “proprietary” in order to receive the benefits of this Section
13.17.
(d) In the event that the Manager is required by governmental order, applicable law or any
governmental authority to disclose any confidential information of the Company or any of its
Subsidiaries that is subject to the restrictions of this Section 13.17, the Manager shall (i)
notify the Company or any of its Subsidiaries in writing as soon as possible, unless it is
otherwise affirmatively prohibited by such governmental order, applicable law or such governmental
authority from notifying the Company or any such Subsidiaries, as the case may be, (ii) cooperate
with the Company or any such Subsidiaries to preserve the confidentiality of such confidential
information consistent with the requirements of such governmental order, applicable law or such
governmental authority and (iii) use its reasonable best efforts to limit any such disclosure to
the minimum disclosure necessary or required to comply with such governmental order, applicable law
or such governmental authority, in each case, at the cost and expense of the Company.
(e) Nothing in this Section 13.17 shall prohibit the Manager from keeping or maintaining any
copies of any records, documents or other information that may contain information that is
otherwise subject to the requirements of this Section 13.17, subject to its compliance with this
Section 13.17.
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(f) The Manager shall be responsible for any breach or violation of the requirements of this
Section 13.17 by any of its agents or representatives.
Section 13.18 Counterparts
This Agreement may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF
, the Parties have executed this Agreement as of the date first set forth
above,
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COMPASS GROUP MANAGEMENT LLC
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By:
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Name:
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Title:
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COMPASS GROUP DIVERSIFIED HOLDINGS LLC
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By:
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Name:
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Title:
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Exhibit 10.4
FORM OF
SUPPLEMENTAL PUT AGREEMENT
BY AND BETWEEN
COMPASS GROUP MANAGEMENT LLC
AND
COMPASS GROUP DIVERSIFIED HOLDINGS LLC
Dated as of
l
, 2006
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS
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1
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Section 1.1
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Definitions.
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1
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ARTICLE II PUT RIGHT
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4
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Section 2.1
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Put Right.
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4
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ARTICLE III OBLIGATION ABSOLUTE AND UNCONDITIONAL
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6
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ARTICLE IV COVENANTS
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6
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Section 4.1
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Best Efforts
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6
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Section 4.2
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Board Observer
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7
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Section 4.3
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Access to Books and Records
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7
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Section 4.4
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Limitation on Sale of Assets
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7
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Section 4.5
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Limitation on Indebtedness
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7
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Section 4.6
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Limitation on Merger or Consolidation
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8
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Section 4.7
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Restriction on Dividends and Other Distributions
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8
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ARTICLE V INDEMNITY
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8
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ARTICLE VI MISCELLANEOUS
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9
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Section 6.1
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Binding Effect
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9
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Section 6.2
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Effect of Termination
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9
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Section 6.3
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Notices
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9
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Section 6.4
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Headings
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10
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Section 6.5
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Applicable Law
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10
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Section 6.6
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Submission to Jurisdiction; Waiver of Jury Trial
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10
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Section 6.7
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Amendments; Waivers
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11
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Section 6.8
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Remedies to Prevailing Party
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12
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Section 6.9
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Severability
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12
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Section 6.10
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Benefits Only to Parties
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12
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Section 6.11
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Further Assurances
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12
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Section 6.12
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No Strict Construction
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12
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Section 6.13
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Entire Agreement
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12
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Section 6.14
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Counterparts
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13
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SUPPLEMENTAL PUT AGREEMENT
(as amended, revised, supplemented or otherwise modified from time
to time, this “
Agreement
”), dated as of ___, 2006 is made by and between COMPASS GROUP
MANAGEMENT LLC, a Delaware limited liability company (the “
Holder
”) and COMPASS GROUP DIVERSIFIED
HOLDINGS LLC, a Delaware limited liability company (the “
Issuer
”). Each party hereto shall be
referred to as, individually, a “
Party
” and, collectively, the “
Parties
”.
WHEREAS
, the Issuer was formed for the purpose of engaging in an initial public offering of
shares of Compass Diversified Trust (the “
IPO
”), a Delaware statutory trust (the “
Trust
”), and the
other transactions relating thereto (together with the IPO, the “
IPO Transactions
”), all as
described in the Trust’s and Issuer’s prospectus, dated as of ___, 2006 (the
"
Prospectus
”);
WHEREAS
, in connection with the formation of the Issuer, Holder acquired 100% of the
Allocation Interests of the Issuer for a capital investment of $100,000 (the “
Capital Investment
”);
provided
, that the receipt of liquidity rights with respect to the Allocation Interests pursuant to
this Agreement was a condition to the Holder’s making of such Capital Investment and acquiring of
such Allocation Interests;
WHEREAS
, Holder made such Capital Investment for the purpose of providing funds to the Issuer
to engage in the IPO Transactions, and Issuer believes that it was in Issuer’s best interest to
receive such Capital Investment and to use such Capital Investment to fund its activities relating
to the IPO Transactions;
WHEREAS
, Issuer has determined that it would be unable to engage in and consummate the IPO
Transactions without the Capital Investment from the Holder; and
WHEREAS
, Issuer agrees that in consideration of Holder having made such Capital Investment and
Holder’s participation in the consummation of the IPO Transactions for the benefit of the Issuer,
Issuer desires to, and Issuer hereby does, grant the liquidity rights specified herein to the
Holder with respect to the Allocation Interests.
NOW THEREFORE
, in consideration of the mutual covenants contained herein, and of other good
and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the Parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions
.
Except as otherwise noted, for all purposes of this Agreement, the following terms shall have
the respective meanings set forth in this Section 1.1, which meanings shall apply equally to the
singular and plural forms of the terms so defined and the words “herein,” “hereof” and
“hereunder” and other words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision:
“Agreement”
has the meaning set forth in the preamble of this Agreement.
“Allocation Interests”
has the meaning set forth in the LLC Agreement.
“Board of Directors”
means the Board of Directors of the Issuer, or any committee thereof that
has been duly authorized by the Board of Directors to make a decision on the matter in question or
bind the Issuer as to the matter in question.
"
Business Day
” means any day other than a Saturday, a Sunday or a day on which banks in The
City of New York are required, permitted or authorized, by applicable law or executive order, to be
closed for regular banking business.
“Capital Investment”
has the meaning set forth in the recitals of this Agreement.
“Code”
means the United States Internal Revenue Code of 1986, as amended and in effect from
time to time. Any reference herein to a specific section of the Code shall be deemed to include a
reference to any corresponding provision of law in effect in the future.
“Engagement Date”
has the meaning set forth in Section 2.1(b) hereof.
“Fiscal Quarter”
means the Issuer’s fiscal quarter for purposes of its reporting obligations
under the Exchange Act.
“GAAP”
means generally accepted accounting principles in effect in the United States,
consistently applied.
“Holder”
has the meaning set forth in the preamble of this Agreement.
"
Holder Approved Investment Banks
”
has the meaning set forth in Section 2.1(a) hereof.
“Incur
” means, with respect to any Indebtedness or other obligation of a Person, to create,
issue, acquire (by conversion, exchange or otherwise), assume, suffer, guarantee or otherwise
become liable in respect of such Indebtedness or other obligation.
“Indebtedness”
means, with respect to any Person, (i) any liability for borrowed money, or
under any reimbursement obligation relating to a letter of credit, (ii) all indebtedness (including
bond, note, debenture, purchase money obligation or similar instrument) for the acquisition of any
businesses, properties or assets of any kind (other than property, including inventory, and
services purchased, trade payables, other expenses accruals and deferred compensation items arising
in the Ordinary Course of Business), (iii) all obligations under leases that have been or should
be, in accordance with GAAP, recorded as capital leases, (iv) any liabilities of others described
in the preceding clauses (i) to (iii) (inclusive) that such Person has guaranteed or that is
otherwise its legal liability, and (v) (without duplication) any amendment, supplement,
modification, deferral, renewal, extension or refunding of any liability of the types referred to
in clauses (i) through (iv) above.
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“Indemnified Parties”
has the meaning set forth in Article V hereof.
“IPO”
has the meaning set forth in the recitals of this Agreement.
“IPO Transactions”
has the meaning set forth in the recitals of this Agreement.
“Issuer”
has the meaning set forth in the preamble of this Agreement.
"
LLC Agreement
” means the Amended and Restated Operating Agreement of Compass Group
Diversified Holdings LLC, dated as of the date hereof, including all exhibits and schedules
attached thereto, as may be amended, revised, supplemented or otherwise modified from time to time.
“Managed Subsidiary’
means any Subsidiary of the Issuer.
"
Management Services Agreement
” means the Management Services Agreement entered into by and
among the Holder, the Issuer and the other parties thereto, dated as of the date hereof, as amended
or otherwise modified from time to time.
"
Manager
”
means the Holder in its capacity as manager of the Issuer under the Management
Services Agreement.
“Maturity Amount”
has the meaning set forth in Section 2.1(d) hereof.
“Maturity Date”
has the meaning set forth in Section 2.1(d) hereof.
“Ordinary Course of Business”
means, with respect to any Person, an action taken by such
Person if such action is (i) consistent with the past practices of such Person and is taken in the
normal day-to-day business or operations of such Person and (ii) which is not required to be
specifically authorized or approved by the board of directors of such Person.
“Over-Paid Profit Distributions”
has the meaning set forth in the LLC Agreement.
“Party”
and
“Parties”
have the meaning set forth in the preamble of this Agreement.
"
Person
” means any individual, company (whether general or limited), limited liability
company, corporation, trust, estate, association, nominee or other entity.
"
Profit Distribution Amount
”
has the meaning set forth in the LLC Agreement.
“Prospectus”
has the meaning set forth in the recitals of this Agreement.
"
Put Closing
”
means the consummation of the purchase of the Put Securities for the Put Price
on the Put Right Closing Date.
“Put Note”
has the meaning set forth in Section 2.1(d) hereof.
“Put Notice”
has the meaning set forth in Section 2.1(a) hereof.
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“Put Price”
has the meaning set forth in Section 2.1(b) hereof.
“Put Right”
has the meaning set forth in Section 2.1(a) hereof.
“Put Right Closing Date
” means the date that is the twentieth (20
th
) Business Day
immediately following the day on which the second of the Holder Approved Investment Banks delivers
its calculation of the Profit Distribution Amount to the Holder and Issuer in accordance with
Section 2.1(b) hereof, or such other day as may be agreed upon by the Parties.
“Put Right Event”
means the earlier of (i) the termination of the Management Services
Agreement other than as a result of the Holder’s resignation as Manager therefrom, and (ii) the
Holder’s resignation as Manager under the Management Services Agreement on any date that is at
least three (3) years after the date hereof.
“Put Right Event Date”
means the date upon which the Put Right Event occurs.
“Put Right Exercise Date”
means the date upon which the Holder provides written notice to the
Issuer exercising its Put Right in accordance with Section 2.1(a) hereof.
“Put Securities”
has the meaning set forth in Section 2.1(a) hereof.
"
Subsidiary
” means, with respect to any Person, any corporation, company, joint venture,
limited liability company, association or other entity in which such Person owns, directly or
indirectly, more than 50% of the outstanding voting equity securities or interests, the holders of
which are generally entitled to vote for the election of the Board of Directors or other governing
body of such entity.
“Trust”
has the meaning set forth in the recitals of this Agreement.
“Under-Paid Profit Distributions”
has the meaning set forth in the LLC Agreement.
ARTICLE II
PUT RIGHT
Section 2.1 Put Right.
(a)
Obligation; Exercise.
Subject to the other terms and conditions set forth in this
Section 2.1 hereof, upon the occurrence of the Put Right Event, the Holder shall have the right,
but not the obligation (the “
Put Right
”), which right is exercisable by providing written notice to
the Issuer in accordance with this Section 2.1(a) hereof (the “
Put Notice
”), to elect to cause the
Issuer to purchase all, but not less than all, of the Allocation Interests then held by the Holder
(the “
Put Securities
”) for the Put Price, as of the Put Right Exercise Date, on the Put Right
Closing Date;
provided, however
, that Holder must exercise its Put Right by providing the Put
Notice during the one (1) year period immediately following the Put Right Event Date. The Put
Notice shall specify (i) the Holder’s intention to exercise the Put Right granted hereunder, (ii)
the Put Right Event giving rise to the Put Right, (iii) the Put Right Event Date, (iv) the names of
four independent, nationally recognized investment banks, as well as specific contact persons
thereof, acceptable to the Holder for purposes of the calculations required by Section 2.1(b)
hereof (each
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a
“
Holder Approved Investment Bank
”)
, (v) the location of the Put Closing, (vi) wire
instructions for payment of the Put Price on the Put Right Closing Date, and (vii) whether or not
the Holder will be electing to receive a Put Note in accordance with Section 2.1(d) hereof.
(b)
Calculation of Put Price.
The “Put Price” shall be equal to, as of the Put Right
Exercise Date:
(i) if the Management Services Agreement is terminated other than as a result of the
Holder’s resignation as Manager of the Issuer therefrom, the
sum
of two separate,
independently made calculations of the Profit Distribution Amount as of the Put Right
Exercise Date; or
(ii) if the Holder resigns from serving as Manager of the Issuer under the Management
Services Agreement and terminates the Management Services Agreement, the
average
of two
separate, independently made calculations of the Profit Distribution Amount as of the Put
Right Exercise Date;
provided,
that, except as set forth herein, the Profit Distribution Amount shall be calculated in
accordance with the applicable terms of the LLC Agreement;
provided, further,
that, in each case,
the Put Price shall be calculated assuming that (x) all of the Managed Subsidiaries owned by the
Issuer as of the Put Right Exercise Date are sold in an orderly fashion for fair market value as of
the Put Right Exercise Date in the order in which the controlling interest in each Managed
Subsidiary was acquired by the Issuer and (y) the last day of the Fiscal Quarter ending immediately
prior to the Put Right Exercise Date is the relevant calculation date for purposes of calculating
the Profit Distribution Amount as of the Put Right Exercise Date;
provided, further,
that each of
the two separate, independently made calculations of the Profit Distribution Amount for purposes of
calculating the Put Price shall be performed by a different Holder Approved Investment Bank that
shall be engaged by the Issuer within fifteen (15) Business Days of the Put Right Exercise Date
(the “
Engagement Date
”);
provided, further,
that the Put Price shall be, on a dollar-for-dollar
basis (A)
reduced
by the aggregate amount of any Over-Paid Profit Distributions, if any, existing
as of the relevant calculation date or (B)
increased
by the aggregate amount of any Under-Paid Profit
Distributions, if any, existing as of the relevant calculation date, in each case, as determined in
the manner set forth in the LLC Agreement or, if disputed, as determined finally and conclusively for all purposes hereunder by either one of the Holder Approved Investment Banks. The Issuer shall be responsible for paying any fees,
costs and expenses associated with the engagement of the Holder Approved Investment Banks. The
Issuer shall instruct each Holder Approved Investment Bank to deliver its calculation of the Profit
Distribution Amount within twenty (20) Business Days of the Engagement Date simultaneously to each
of the Issuer and the Holder.
(c)
Put Closing.
Subject to Section 2.1(d) hereof, the Put Closing shall occur at
10:00 a.m., New York City time, on the Put Right Closing Date at such location designated by the
Holder in the Put Notice. On the Put Right Closing Date, (i) the Holder shall sell, and the Issuer
shall purchase, all of the Put Securities then held by the Holder, free and clear of any liens or
other encumbrances (other than restrictions on transfer imposed by federal and state securities
laws), for the Put Price. Subject to Section 2.1(d) hereof, the Holder shall deliver certificates
evidencing the Put Securities then held by the Holder against delivery by the Issuer of the Put
Price. Subject to Section 2.1(d), the delivery of the Put Price by the Issuer shall be made in
U.S.
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dollars by wire transfer in immediately available funds to the account or accounts designated
by the Holder in the Put Notice.
(d)
Put Note; Terms.
The Holder and the Issuer may mutually agree that the Holder
will receive, in lieu of immediately available funds due pursuant to Section 2.1(c) hereof, a
promissory note of the Issuer with an aggregate principal amount equal to the Put Price (the “
Put
Note
”);
provided,
that if the Holder resigns as Manager of the Issuer and terminates the Management
Services Agreement, then the Issuer shall have the right, in its sole discretion, to issue a Put
Note to the Holder in lieu of delivering immediately available funds to the Holder as due pursuant
to Section 2.1(c) hereof . The Put Note shall (i) mature on the first (1
st
) anniversary
of the Put Right Closing Date (the “
Maturity Date
”), (ii) accrue interest from and including the
Put Right Closing Date to but excluding the date of repayment at a rate of 8.00% per annum, (iii)
contain customary events of default, including a cross-default provision, (iv) contain customary
covenants, including those set forth herein, and (v) otherwise be in form and substance reasonably
satisfactory to Issuer and Holder. The aggregate principal amount of the Put Note, together with
all accrued and unpaid interest thereon (the “
Maturity Amount
”), shall be due and payable on the
Maturity Date in U.S. dollars by wire transfer in immediately available funds to the account or
accounts designated by the Holder in the Put Note;
provided,
that the Issuer shall have the option
to prepay the Maturity Amount at any time prior to the Maturity Date without penalty. The Issuer’s
obligations under the Put Note shall be secured by a first priority lien (or, if not possible due
to a pre-existing obligation of the Issuer, the next highest priority lien) on the equity interests
then owned by the Issuer in each of the Managed Subsidiaries.
(e)
Sufficient Liquidity.
Subject to Section 2.1(d) hereof, if the Issuer does not
have sufficient liquid assets to timely pay the entire amount of the Put Price or Maturity Amount,
as the case may be, due on the Put Right Closing Date or the Maturity Date, as the case may be, the
Issuer shall liquidate assets or Incur Indebtedness in order to pay such Put Price or Maturity
Amount, as the case may be, in full on such Put Right Closing Date or the Maturity Date, as the
case may be.
ARTICLE III
OBLIGATION ABSOLUTE AND UNCONDITIONAL
Notwithstanding anything to the contrary herein, the obligation of the Issuer, upon exercise
of the Put Right by the Holder, to pay the Put Price on the Put Right Closing Date, or the Maturity
Amount on the Maturity Date if the Holder elects to receive a Put Note in accordance with Section
2.1(d) hereof, shall be absolute and unconditional and shall not be subject to any right of set-off
or defense whatsoever, whether in law or equity, including force majeure.
ARTICLE IV
COVENANTS
Section 4.1 Commercially Reasonable Efforts
Issuer shall use commercially reasonable efforts to (i) raise sufficient debt and equity
financing proceeds to permit the Issuer to pay the full Put Price on the Put Right Closing Date or
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Maturity Amount on the Maturity Date, as the case may be, and (ii) obtain approvals, waivers
and consents or otherwise remove any restrictions imposed under contractual obligations or
applicable law or regulations that have the effect of limiting or prohibiting the Issuer from (x)
paying the Put Price or purchasing all of the Put Securities at the Put Price, in each case, on the
Put Right Closing Date, or (y) purchasing all of the Put Securities at the Put Price by issuing the
Put Note on the Put Right Closing Date or paying the Maturity Amount on the Maturity Date.
Section 4.2 Board Observer
At all times after the occurrence of the Put Right Event until the satisfaction in full of the
Issuer’s obligations hereunder, including under the Put Note, if any, the Holder shall have the
right to designate a representative who shall (i) have the right to receive due notice of and to
attend and participate in discussions at (but not vote on any matters on which the directors are
entitled to vote) all meetings of the Board of Directors and (ii) have the right to receive copies
of all documents and other information, including notices, minutes, consents, business plans,
presentation materials, budgets and financial information, in each case, furnished to the Board of
Directors.
Section 4.3 Access to Books and Records
At all times after the occurrence of the Put Right Event until the satisfaction in full of the
Issuer’s obligations hereunder, including under the Put Note, if any, the Holder shall have the
right to review and copy any books and records of the Issuer during normal business hours,
including any books and records necessary for the calculation of the Profit Distribution Amount in
accordance with the terms hereof, upon five (5) Business Days notice.
Section 4.4 Limitation on Sale of Assets
At all times after the occurrence of the Put Right Exercise Date until the satisfaction in
full of the Issuer’s obligations hereunder, including under the Put Note, if any, Issuer shall not,
and Issuer shall cause its Managed Subsidiaries not to, other than in the Ordinary Course of
Business, sell or otherwise dispose of, in any manner whatsoever, any property or assets of the
Issuer or any Managed Subsidiary or portion thereof except that the Issuer and its Managed
Subsidiaries may sell or otherwise dispose of any property or assets of the Issuer or any its
Managed Subsidiary or portion thereof, as the case may be, if the Issuer or its Managed
Subsidiaries grants a first priority lien (or, if not possible due to a pre-existing obligation of
the Issuer, the next highest priority lien) on the proceeds thereof, including any receivables
relating thereto, to the Holder. Such lien shall secure the Issuer’s obligation hereunder to pay
the Put Price on the Put Right Closing Date or the Maturity Amount on the Maturity Date, as the
case may be, and shall be pursuant to such security instruments as shall be reasonably acceptable
to the Issuer and the Holder.
Section 4.5 Limitation on Indebtedness
At all times after the occurrence of the Put Right Exercise Date until the satisfaction in
full of the Issuer’s obligations hereunder, including under the Put Note, if any, Issuer shall not,
and Issuer shall cause its Managed Subsidiaries not to, other than in the Ordinary Course of
Business, Incur any Indebtedness, of any character whatsoever, except that the Issuer or its
-7-
Managed Subsidiaries may Incur Indebtedness if the Issuer or its Managed Subsidiaries, as the
case may be, grant a first priority lien (or, if not possible due to a pre-existing obligation of
the Issuer, the next highest priority lien) on the proceeds thereof to the Holder. Such lien shall
secure the Issuer’s obligation hereunder to pay the Put Price on the Put Right Closing Date or the
Maturity Amount on the Maturity Date, as the case may be, and shall be pursuant to such security
instrument as shall be reasonably acceptable to the Issuer and the Holder.
Section 4.6 Limitation on Merger or Consolidation
At all times after the occurrence of the Put Right Exercise Date until the satisfaction in
full of the Issuer’s obligations hereunder, including under the Put Note, if any, Issuer shall not
merge into or otherwise consolidate into any other Person, or permit any other Person to merge into
or otherwise consolidate with it (in each case, in any manner whatsoever, including by means of
reorganization or recapitalization), or sell, lease, transfer or otherwise dispose of (in any
manner whatsoever, including in a single transaction or a series of transactions) all or a
substantial part of its business, property or assets (in each case, whether now owned or hereafter
acquired) or all or a substantial portion of the stock or beneficial ownership of any of its
Managed Subsidiaries or portions thereof (in each case, whether now owned or hereafter acquired) or
liquidate, windup or dissolve or acquire by purchase or otherwise all or substantially all of the
business, property or assets of, or stock or other evidence of beneficial ownership of, any other
Person prior to paying the Put Price on the Put Right Closing Date or the Maturity Amount on the
Maturity Date, as the case may be.
Section 4.7 Restriction on Dividends and Other Distributions
At all times after the occurrence of the Put Right Exercise Date until the satisfaction in
full of the Issuer’s obligations hereunder, including under the Put Note, if any, Issuer shall not
declare or pay any dividends or other distributions to its equity owners, in any manner whatsoever,
prior to paying, in full, the Put Price on the Put Right Closing Date or the Maturity Amount on the
Maturity Date, as the case may be.
ARTICLE V
INDEMNITY
The Issuer shall indemnify, reimburse, defend and hold harmless the Holder and its successors
and permitted assigns, together with their respective employees, officers, members, managers,
directors and representatives (collectively the “
Indemnified Parties
”), from and against all losses
(including lost profits), costs, damages, injuries, taxes, penalties, interests, expenses,
obligations, claims and liabilities (joint or severable) of any kind or nature whatsoever that are
incurred by such Indemnified Parties in connection with, relating to or arising out of the (i) the
breach by the Issuer of any term or condition of this Agreement or the Put Note, or any other
agreement or instruments delivered in connection herewith, (ii) the exercise of the Put Right or
(iii) the enforcement of the Put Right.
The rights of any Indemnified Party referred to above shall be in addition to any rights that
such Indemnified Party shall otherwise have at law or in equity.
-8-
ARTICLE VI
MISCELLANEOUS
Section 6.1 Binding Effect
This Agreement shall be binding upon, shall inure to the benefit of and be enforceable by the
Parties hereto and their respective successors and permitted assigns.
Section 6.2 Effect of Termination
This Agreement shall be effective as of the date first above written and shall continue in
full force and effect thereafter until either (i) this Agreement is terminated by mutual agreement
of the Parties or (ii) Holder has received the full Put Price in accordance with the terms of this
Agreement. Notwithstanding the foregoing, the obligations of the Issuer set forth in Article V and
Section 6.15 hereof shall survive termination of this Agreement, subject to applicable law.
Section 6.3 Notices
Any notice or other communication required or permitted under this Agreement shall be deemed
to have been duly given (i) five (5) Business Days following deposit in the mails if sent by
registered or certified mail, postage prepaid, (ii) when sent, if sent by facsimile transmission,
if receipt thereof is confirmed by telephone, (iii) when delivered, if delivered personally to the
intended recipient and (iv) two (2) Business Days following deposit with a nationally recognized
overnight courier service, in each case addressed as follows:
If to the Issuer, to:
Attention: Chief Executive Officer
Compass Group Diversified Holdings LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Fax:203-221-8253
with a copy (which shall not constitute notice) to its counsel:
Attention: Cynthia M. Krus
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004
Fax:202-637-3593
If to the Holder, to:
Attention: I. Joseph Massoud
Compass Group Management LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Fax:203-221-8253
-9-
with a copy (which shall not constitute notice) to its counsel:
Attention: Stephen C. Mahon
Squire Sanders & Dempsey LLP
312 Walnut Street, Suite 3500
Cincinnati, OH 45202
Fax:513-361-1201
and
Attention: Brian B. Snarr
Morrison Cohen, LLP
909 Third Avenue
New York, NY 10022
Fax:212-735-8708
or to such other address or facsimile number as any such Party may, from time to time, designate in
writing to all other Parties hereto, and any such communication shall be deemed to be given, made
or served as of the date so delivered or, in the case of any communication delivered by mail, as of
the date so received.
Section 6.4 Headings
The headings in this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their construction or effect.
Section 6.5 Applicable Law
This Agreement, the legal relations between and among the Parties and the adjudication and the
enforcement thereof shall be governed by and interpreted and construed in accordance with the laws
of the State of New York, without regard to the conflicts of law provisions thereof to the extent
such principles or rules would require or permit the application of the laws of another
jurisdiction.
Section 6.6 Submission to Jurisdiction; Waiver of Jury Trial
Each of the Parties hereby irrevocably acknowledges and consents that any legal action or
proceeding brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York, County of New York or in the
United Stales District Court for the Southern District of New York and each of the Parties hereby
irrevocably submits to and accepts with regard to any such action or proceeding, for itself and in
respect of its property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts. Each Party hereby further irrevocably waives any claim that any such courts lack
jurisdiction over such Party, and agrees not to plead or claim, in any legal action or proceeding
with respect to this Agreement or the transactions contemplated hereby brought in any of the
aforesaid courts, that any such court lacks jurisdiction over such Party. Each Party
-10-
irrevocably consents to the service of process in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, to such party, at its address
for notices set forth in Section 6.3 hereof
,
such service to become effective ten (10) days after
such mailing. Each Party hereby irrevocably waives any objection to such service of process and
further irrevocably waives and agrees not to plead or claim in any action or proceeding commenced
hereunder or under any other documents contemplated hereby that service of process was in any way
invalid or ineffective. The foregoing shall not limit the rights of any Party to serve process in
any other manner permitted by applicable law. The foregoing consents to jurisdiction shall not
constitute general consents to service of process in the State of New York for any purpose except
as provided above and shall not be deemed to confer rights on any Person other than the respective
Parties.
Each of the Parties hereby waives any right it may have under the laws of any jurisdiction to
commence by publication any legal action or proceeding with respect this Agreement. To the fullest
extent permitted by applicable law, each of the Parties hereby irrevocably waives the objection
which it may now or hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement in any of the courts referred to in this Section 6.6
and hereby further irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
The Parties agree that any judgment obtained by any Party or its successors or assigns in any
action, suit or proceeding referred to above may, in the discretion of such Party (or its
successors or assigns), be enforced in any jurisdiction, to the extent permitted by applicable law.
The Parties agree that the remedy at law for any breach of this Agreement may be inadequate
and that should any dispute arise concerning any matter hereunder, this Agreement shall be
enforceable in a court of equity by an injunction or a decree of specific performance. Such
remedies shall, however, be cumulative and nonexclusive, and shall be in addition to any other
remedies which the Parties may have.
Each Party hereby waives, to the fullest extent permitted by applicable law, any right it may
have to a trial by jury in respect of any litigation as between the Parties directly or indirectly
arising out of, under or in connection with this Agreement or the transactions contemplated hereby
or disputes relating hereto. Each Party (i) certifies that no representative, agent or attorney of
any other Party has represented, expressly or otherwise, that such other Party would not, in the
event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the
other Parties have been induced to enter into this Agreement by, among other things, the mutual
waivers and certifications in this Section 6.6.
Section 6.7 Amendments; Waivers
No term or condition of this Agreement may be amended, modified or waived without the prior
written consent of the Party against whom such amendment, modification or waiver will be enforced.
Any waiver granted hereunder shall be deemed a specific waiver relating only to the specific event
giving rise to such waiver and not as a general waiver of any term or condition hereof.
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Section 6.8 Remedies to Prevailing Party
If any action at law or equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees, costs, and
necessary disbursements in addition to any other relief to which such party may be entitled.
Section 6.9 Severability
Each provision of this Agreement is intended to be severable from the others so that if, any
provision or term hereof is illegal, invalid or unenforceable for any reason whatsoever, such
illegality, invalidity or unenforceability shall not affect or impair the validity of the remaining
provisions and terms hereof;
provided, however
, that the provisions governing payment of the Put
Price described in Article II hereof are not severable.
Section 6.10 Benefits Only to Parties
Nothing expressed by or mentioned in this Agreement is intended or shall be construed to give
any Person other than the Parties and their respective successors or permitted assigns, any legal
or equitable right, remedy or claim under or in respect of this Agreement or any provision herein
contained, this Agreement and all conditions and provisions hereof being intended to be and being
for the sole and exclusive benefit of the Parties and their respective successors and permitted
assigns, and for the benefit of no other Person.
Section 6.11 Further Assurances
Each Party hereto shall take any and all such actions, and execute and deliver such further
agreements, consents, instruments and any other documents as may be necessary from time to time to
give effect to the provisions and purposes of this Agreement and, upon exercise of the Put Right by
the Holder, to effect and evidence the sale and transfer of the Put Securities by the Holder, on
the one hand, and the purchase and payment of the Put Price by the Issuer, on the other.
Section 6.12 No Strict Construction
The Parties have participated jointly in the negotiation and drafting of this Agreement. In
the event any ambiguity or question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by all Parties, and no presumption or burden of proof shall arise
favoring or disfavoring any Party by virtue of the authorship of any provision of this Agreement.
Section 6.13 Entire Agreement
This Agreement constitutes the sole and entire agreement of the Parties with regards to the
subject matter of this Agreement. Any written or oral agreements, statements, promises,
negotiations or representations not expressly set forth in this Agreement are of no force and
effect.
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Section 6.14 Taxes
The Parties acknowledge and agree that payment of the Put Price by the Issuer upon the
purchase of all, and not less than all, of the Allocation Interests of the Holder pursuant to the
terms of this Agreement shall be considered payment made in the liquidation of the interest of a
retiring partner (within the meaning of section 736 of the Code), and to the fullest extent
possible, shall be treated as having been made in exchange for the Holder’s interest in partnership
property (as that term is used in section 736(b) of the Code), thereby constituting to the fullest
extent possible a distribution by the Issuer and not a distributive share or guaranteed payment (as
those terms are used in section 736(a) of the Code).
Section 6.15 Confidentiality
The Holder shall comply with the requirements of Section 13.17 of the Management Services
Agreement with respect to any confidential information in the possession of the Holder or which
comes into the possession of the Holder through the exercise of any of Holder’s rights hereunder.
Section 6.16 Counterparts
This Agreement may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute but one and the same instrument.
* * *
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IN WITNESS WHEREOF
, the Parties have executed this Agreement as of the date first set forth
above,
COMPASS GROUP MANAGEMENT LLC
By:_________________________
Name:
Title:
COMPASS
GROUP DIVERSIFIED HOLDINGS LLC
By:_________________________
Name:
Title:
-14-
Exhibit 10.8
FORM OF CREDIT AGREEMENT
CREDIT AGREEMENT
dated as of ___, 2006
among
,
AS BORROWER,
and
COMPASS GROUP DIVERSIFIED HOLDINGS LLC,
as Lender
TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS; INTERPRETATION
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1
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1.1
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Definitions
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1
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1.2
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Interpretation
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17
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SECTION 2. CREDIT FACILITIES
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17
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2.1
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Commitments
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17
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2.2
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Loan Procedures
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18
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2.3
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[Reserved]
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19
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2.4
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Certain Conditions
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19
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2.5
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Loan Accounting
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19
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2.6
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Interest
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19
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2.7
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Fees
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20
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2.8
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Commitment Reduction
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21
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2.9
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Prepayment
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21
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2.10
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Repayment
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23
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2.11
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Payment
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23
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SECTION 3. YIELD PROTECTION
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26
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3.1
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Taxes
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26
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3.2
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Increased Cost
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27
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3.3
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Inadequate or Unfair Basis
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27
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3.4
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Change in Law
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28
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3.5
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Funding Losses
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28
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3.6
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Manner of Funding; Alternate Funding Offices
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28
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3.7
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Mitigation of Circumstances; Replacement of Lender
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29
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3.8
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Conclusiveness of Statements; Survival
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29
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SECTION 4. CONDITIONS PRECEDENT
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29
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4.1
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Initial Credit Extension
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29
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4.2
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All Credit Extensions
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32
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SECTION 5. REPRESENTATIONS AND WARRANTIES
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32
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5.1
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Organization
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32
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5.2
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Authorization; No Conflict
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32
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5.3
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Validity; Binding Nature
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33
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5.4
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Financial Condition
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33
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5.5
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No Material Adverse Change
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33
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5.6
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Litigation
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33
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5.7
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Ownership of Properties; Liens
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34
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5.8
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Capitalization
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34
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5.9
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Pension Plans
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34
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5.10
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Investment Company Act
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35
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5.11
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Public Utility Holding Company Act
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35
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i
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5.12
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Margin Stock
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35
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|
5.13
|
|
Taxes
|
|
|
35
|
|
|
5.14
|
|
Solvency
|
|
|
35
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|
|
5.15
|
|
Environmental Matters
|
|
|
35
|
|
|
5.16
|
|
Insurance
|
|
|
36
|
|
|
5.17
|
|
Information
|
|
|
36
|
|
|
5.18
|
|
Intellectual Property
|
|
|
36
|
|
|
5.19
|
|
Restrictive Provisions
|
|
|
37
|
|
|
5.20
|
|
Labor Matters
|
|
|
37
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|
|
5.21
|
|
No Default
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
SECTION 6. AFFIRMATIVE COVENANTS
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|
|
37
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|
|
6.1
|
|
Information
|
|
|
37
|
|
|
6.2
|
|
Books; Records; Inspections
|
|
|
39
|
|
|
6.3
|
|
Maintenance of Property; Insurance
|
|
|
40
|
|
|
6.4
|
|
Compliance with Laws; Payment of Taxes and Liabilities
|
|
|
41
|
|
|
6.5
|
|
Maintenance of Existence
|
|
|
41
|
|
|
6.6
|
|
Employee Benefit Plans
|
|
|
41
|
|
|
6.7
|
|
Environmental Matters
|
|
|
41
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|
|
6.8
|
|
Further Assurances
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
SECTION 7. NEGATIVE COVENANTS
|
|
|
42
|
|
|
7.1
|
|
Debt
|
|
|
42
|
|
|
7.2
|
|
Liens
|
|
|
43
|
|
|
7.3
|
|
Operating Leases
|
|
|
44
|
|
|
7.4
|
|
Restricted Payments
|
|
|
44
|
|
|
7.5
|
|
Mergers; Consolidations; Asset Sales
|
|
|
45
|
|
|
7.6
|
|
Modification of Organizational Documents
|
|
|
45
|
|
|
7.7
|
|
Use of Proceeds
|
|
|
45
|
|
|
7.8
|
|
Transactions with Affiliates
|
|
|
45
|
|
|
7.9
|
|
Inconsistent Agreements
|
|
|
45
|
|
|
7.10
|
|
Business Activities
|
|
|
46
|
|
|
7.11
|
|
Investments
|
|
|
46
|
|
|
7.12
|
|
Restriction of Amendments to Certain Documents
|
|
|
47
|
|
|
7.13
|
|
Fiscal Year
|
|
|
47
|
|
|
7.14
|
|
Financial Covenants
|
|
|
47
|
|
|
7.15
|
|
Bank Accounts
|
|
|
48
|
|
|
7.16
|
|
Subsidiaries
|
|
|
48
|
|
|
|
|
|
|
|
|
|
|
SECTION 8. EVENTS OF DEFAULT; REMEDIES
|
|
|
48
|
|
|
8.1
|
|
Events of Default
|
|
|
48
|
|
|
8.2
|
|
Remedies
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
SECTION 9. MISCELLANEOUS
|
|
|
51
|
|
|
9.1
|
|
Waiver; Amendments
|
|
|
51
|
|
|
9.2
|
|
Notices
|
|
|
51
|
|
|
9.3
|
|
Computations
|
|
|
52
|
|
ii
|
|
|
|
|
|
|
|
|
9.4
|
|
Costs; Expenses
|
|
|
52
|
|
|
9.5
|
|
Indemnification by Borrower
|
|
|
52
|
|
|
9.6
|
|
Marshaling; Payments Set Aside
|
|
|
53
|
|
|
9.7
|
|
Nonliability of Lender
|
|
|
53
|
|
|
9.8
|
|
Assignments; Participations
|
|
|
53
|
|
|
9.9
|
|
Confidentiality
|
|
|
55
|
|
|
9.10
|
|
Captions
|
|
|
56
|
|
|
9.11
|
|
Nature of Remedies
|
|
|
56
|
|
|
9.12
|
|
Counterparts
|
|
|
56
|
|
|
9.13
|
|
Severability
|
|
|
56
|
|
|
9.14
|
|
Entire Agreement
|
|
|
56
|
|
|
9.15
|
|
Successors; Assigns
|
|
|
56
|
|
|
9.16
|
|
Governing Law
|
|
|
57
|
|
|
9.17
|
|
Forum Selection; Consent to Jurisdiction
|
|
|
57
|
|
|
9.18
|
|
Waiver of Jury Trial
|
|
|
57
|
|
|
|
|
|
|
Annexes
|
|
|
|
|
|
|
|
Annex I
|
|
Commitments and Pro Rata Shares
|
|
Annex II
|
|
Addresses
|
|
|
|
|
|
Exhibits
|
|
|
|
|
|
|
|
Exhibit A
|
|
Form of Assignment Agreement
|
|
Exhibit B
|
|
Form of Compliance Certificate
|
|
[Exhibit C
|
|
Form of Availability Certificate]
|
|
Exhibit D
|
|
Form of Note
|
|
Exhibit E
|
|
Form of Borrowing Notice
|
|
Exhibit F
|
|
Conversion/Continuation Notice
|
|
|
|
|
|
Schedules
|
|
|
|
|
|
|
|
Schedule 4.1.3
|
|
Debt to be Repaid
|
|
Schedule 5.6
|
|
Litigation
|
|
Schedule 5.8
|
|
Capitalization
|
|
Schedule 5.16
|
|
Insurance
|
|
Schedule 5.20
|
|
Labor Matters
|
|
Schedule 7.1
|
|
Existing Debt
|
|
Schedule 7.2
|
|
Existing Liens
|
|
Schedule 7.11
|
|
Existing Investments
|
|
Schedule 7.15
|
|
Bank Accounts
|
iii
CREDIT AGREEMENT
This Credit Agreement dated as of
[
___, 2006
]
(as amended, restated or otherwise modified
from time to time, this “
Agreement
”) by and between
[
___
]
, a
[
___
]
corporation (“
Borrower
”), and Compass Group Diversified Holdings LLC, (together with its
successors and assigns, “
Lender
”), as lender.
In consideration of the mutual agreements herein contained, the parties hereto agree as
follows:
Section 1.
Definitions; Interpretation.
1.1
Definitions.
When used herein the following terms shall have the following meanings:
Acceleration Event
means the occurrence of any of the following: (i) an Event of
Default under
Section 8.1.3
; (ii) an Event of Default under
Section 8.1.1
and
the termination of the Commitments; or (iii) any other Event of Default under
Section
8.1
and the election by the Lender to declare the Obligations to be due and payable or to
terminate the Revolving Loan Commitment.
Account
has the meaning set forth in the Guarantee and Collateral Agreement.
Account Debtor
means any Person who is obligated to Borrower or any Subsidiary with
respect to any Account.
Acquisition
means any transaction or series of related transactions for the purpose
of or resulting, directly or indirectly, in (a) the acquisition of all or a substantial portion
of the assets of a Person, or of all or a substantial portion of any business or division of a
Person, (b) the acquisition of in excess of 50% of the capital stock, partnership interests,
membership interests or equity of any Person, or otherwise causing any Person to become a
Subsidiary, or (c) a merger or consolidation or any other combination with another Person (other
than a Person that is already a Subsidiary).
Adjusted Working Capital
means the remainder of (a) the consolidated current assets
of Borrower and the Subsidiaries minus the amount of cash and cash equivalents included in such
consolidated current assets, minus (b) the consolidated current liabilities of Borrower and the
Subsidiaries minus the amount of consolidated short-term Debt (including current maturities of
long-term Debt) of Borrower and the Subsidiaries included in such consolidated current
liabilities.
Affiliate
of any Person means (a) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person, (b) any officer or
director of such Person and (c) with respect to Lender, any entity administered or managed by
Lender or an Affiliate or investment advisor thereof which is engaged in
1
making, purchasing, holding or otherwise investing in commercial loans. A Person shall be
deemed to be “controlled by” any other Person if such Person possesses, directly or indirectly,
power to vote 10% or more of the securities (on a fully diluted basis) having ordinary voting
power for the election of directors or managers or power to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise. Unless expressly
stated otherwise herein, Lender shall not be deemed an Affiliate of Borrower or of any
Subsidiary.
Agreement
has the meaning set forth in the
Preamble
.
Applicable Margin
1
means the applicable rate per annum as set forth in
the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revolving Loans
|
|
Term A Loans
|
|
Term B Loans
|
|
Commitment
|
|
|
|
|
|
|
|
Base Rate
|
|
LIBOR
|
|
Base Rate
|
|
LIBOR
|
|
Base Rate
|
|
LIBOR
|
|
Fee
|
|
1
|
|
[ratio]
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
2
|
|
[ratio]
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
3
|
|
[ratio]
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
—
|
%
|
Initially, each Applicable Margin shall be that percentage set forth above for Level [_] in
the table above. On and after July 1, 2006, each Applicable Margin shall be equal to the
applicable rate per annum set forth in the table above opposite the applicable Total Debt to EBITDA
Ratio.
Assignment Agreement
means an agreement substantially in the form of
Exhibit
A
.
[Availability Certificate
means a certificate substantially in the form of
Exhibit C
.]
Balance Sheet Date
has the meaning set forth in
Section 5.4
.
Base Rate
means, for any day, the greater of (a) the rate of interest which is
identified as the “Prime Rate” and normally published in the Money Rates Section of
The Wall
Street Journal
(or, if such rate ceases to be so published, as quoted from such other
generally available and recognizable source as Lender may select) and (b) the sum of the Federal
Funds Rate plus 0.5%. Any change in the Base Rate due to a change in such Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such change in such Prime Rate or
the Federal Funds Rate.
Base Rate Loan
means any Loan which bears interest at or by reference to the Base
Rate.
Borrower
has the meaning set forth in the
Preamble
.
|
|
|
|
|
1
|
|
Note: Pricing will be based on Debt to EBITDA
ratios for each of CBS Personnel, Crosman and Silvue. Advanced Circuits’
pricing will not be subject to a grid (i.e., the rates will not vary based on
any financial ratio).
|
2
[Borrowing Availability
means, at the time of determination, an amount equal to the
lesser of (a) the Revolving Loan Commitment and (b) the sum of (i) 85% of the unpaid amount of
all Eligible Accounts plus (ii) 50% of the value of all Eligible Inventory valued at the lower
of cost or market, in each case less such reserves and allowances as Lender deems necessary in
its reasonable discretion; provided, however, that any increase in such reserves and allowances
shall not be effective until 10 days after Lender notifies Borrower of such
increase.]
2
Borrowing Notice
means a notice in substantially the form of
Exhibit E
.
Business Day
means any day other than any Saturday and Sunday on which commercial
banks are open for commercial banking business in New York, New York, and, in the case of a
Business Day which relates to a LIBOR Loan, any day on which dealings are carried out in the
London interbank Eurodollar market.
Capital Expenditures
means all expenditures which, in accordance with GAAP, would
be required to be capitalized and shown on the consolidated balance sheet of Borrower, but
excluding expenditures made in connection with the replacement, substitution or restoration of
assets to the extent financed (a) from insurance proceeds (or other similar recoveries) paid on
account of the loss of or damage to the assets being replaced or restored, (b) with cash awards
of compensation arising from the taking by eminent domain or condemnation of the assets being
replaced or (c) with cash proceeds of Dispositions that are reinvested in accordance with
Section 2.9.2(a)(i)
.
Capital Lease
means, with respect to any Person, any lease of (or other agreement
conveying the right to use) any real or personal property by such Person that, in conformity
with GAAP, is accounted for as a capital lease on the balance sheet of such Person.
Cash Equivalent Investment
means, at any time, (a) any evidence of Debt, maturing
not more than one year after such time, issued or guaranteed by the United States Government or
any agency thereof, (b) commercial paper, or corporate demand notes, in each case (unless issued
by a Lender or its holding company) rated at least A-l by Standard & Poor’s Ratings Group or P-l
by Moody’s Investors Service, Inc., (c) any certificate of deposit (or time deposit represented
by a certificate of deposit) or banker’s acceptance maturing not more than one year after such
time, or any overnight Federal Funds transaction that is issued or sold by Lender (or by a
commercial banking institution that is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than $500,000,000), (d) any repurchase
agreement entered into with Lender (or commercial banking institution of the nature referred to
in clause (c) above) which (i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c) above and (ii) has a market
value at the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of Lender (or other commercial banking institution) thereunder, (e) money
market accounts or mutual funds
|
|
|
|
|
2
|
|
Note: “Borrowing Availability”
and related terms and provisions (e.g., Availability Certificate, Eligible
Account and Eligible Inventory) will be included only in the Credit Agreements
for CBS Personnel and Crosman.
|
3
which invest exclusively in assets satisfying the foregoing requirements and (f) other
short term liquid investments approved in writing by Lender.
Closing Date
means the date on which all conditions precedent set forth in
Section 4.1
have been satisfied or waived in writing by Lender.
Collateral
has the meaning set forth in the Guarantee and Collateral Agreement.
Collateral Access Agreement
means an agreement in form and substance reasonably
satisfactory to Lender pursuant to which a mortgagee or lessor of real property on which
Collateral is stored or otherwise located, or a warehouseman, processor or other bailee of
Inventory or other property owned by Borrower or any Subsidiary, acknowledges the Liens of
Lender and waives (or, if approved by Lender, subordinates) any Liens held by such Person on
such property, and, in the case of any such agreement with a mortgagee or lessor, permits Lender
reasonable access to and use of such real property during the continuance of an Event of Default
to assemble, complete and sell any Collateral stored or otherwise located thereon.
Collateral Documents
means, collectively, the Guarantee and Collateral Agreement,
each Mortgage, each Collateral Access Agreement, and each other agreement or instrument pursuant
to or in connection with which Borrower, any Subsidiary or any other Person grants a security
interest in any Collateral to Lender, each as amended, restated or otherwise modified from time
to time.
Commitment
means the Revolving Loan Commitment, the Term A Loan Commitment and the
Term B Loan Commitment.
Commitment Fee
means the fee payable by Borrower to Lender pursuant to
Section
2.7.1
.
Compliance Certificate
means a certificate substantially in the form of
Exhibit
B
.
Computation Period
means each period of four consecutive Fiscal Quarters ending on
the last day of a Fiscal Quarter.
Consolidated Net Income
means, with respect to Borrower and the Subsidiaries for
any period, the consolidated net income (or loss) of Borrower and the Subsidiaries for such
period,
excluding
any gains or losses from Dispositions, any extraordinary or
non-recurring gains or extraordinary or non-recurring losses and any gains or losses from
discontinued operations.
Contingent Obligation
means any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon (by direct or
indirect agreement, contingent or otherwise, to provide funds for payment, to supply funds to or
otherwise to invest in a debtor, or otherwise to assure a creditor against loss) any
indebtedness, obligation or other liability of any other Person (other than by
4
endorsements of instruments in the course of collection), or guarantees the payment of
dividends or other distributions upon the shares of any other Person. The amount of any
Person’s obligation in respect of any Contingent Obligation shall (subject to any limitation set
forth therein) be deemed to be the principal amount of the debt, obligation or other liability
supported thereby.
Controlled Group
means all members of a controlled group of corporations and all
members of a controlled group of trades or businesses (whether or not incorporated) under common
control which, together with Borrower, are treated as a single employer under Section 414 of the
IRC or Section 4001 of ERISA.
Conversion/Continuation Notice
means a notice in substantially the form of
Exhibit F
.
Debt
of any Person means, without duplication, (a) all indebtedness of such Person
for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments,
(b) all obligations of such Person as lessee under Capital Leases which have been or should be
recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all
obligations of such Person to pay the deferred purchase price of property or services (excluding
trade accounts payable in the ordinary course of business), (d) all indebtedness secured by a
Lien on the property of such Person, whether or not such indebtedness shall have been assumed by
such Person (with the amount thereof being measured as the fair market value of such property),
(e) all obligations, contingent or otherwise, with respect to the face amount of all letters of
credit (whether or not drawn) and banker’s acceptances issued for the account of such Person,
(f) all Hedging Obligations of such Person, (g) all Contingent Obligations of such Person, (h)
all indebtedness of any partnership of which such Person is a general partner and (i) all
obligations of such Person under any synthetic lease transaction, where such obligations are
considered borrowed money indebtedness for tax purposes but the transaction is classified as an
operating lease in accordance with GAAP.
Debt to be Repaid
means the Debt listed on
Schedule 4.1.3
.
Default
means any event that, if it continues uncured, will, with the lapse of time
or the giving of notice or both, constitute an Event of Default.
Disposition
means, as to any asset or right of Borrower or any Subsidiary, (a) any
sale, lease, assignment or other transfer (other than to Borrower or any Subsidiary), (b) any
loss, destruction or damage thereof or (c) any actual or threatened condemnation, confiscation,
requisition, seizure or taking thereof, in each case excluding (i) assets subject to a
Disposition which are replaced within 180 days with assets performing the same or a similar
function, (ii) Dispositions in any Fiscal Year, the Net Cash Proceeds of which do not in the
aggregate exceed $150,000 and (iii) the sale or other transfer of Inventory in the ordinary
course of business.
Dollar
and
$
mean lawful money of the United States of America.
5
Domestic Subsidiary
means any Subsidiary that is incorporated or organized under
the laws of a State within the United States of America or the District of Columbia. Unless the
context otherwise requires, each reference to Domestic Subsidiary or Domestic Subsidiaries
herein shall be a reference to Subsidiary or Subsidiaries of Borrower.
EBITDA
means, for any period, Consolidated Net Income for such period plus, to the
extent deducted in determining such Consolidated Net Income, (i) Interest Expense, income tax
expense, depreciation and amortization for such period, and (ii) management fees paid to or
accrued for the benefit of Manager in such period to the extent permitted pursuant to
Section 7.4
;
provided
, that, notwithstanding anything to the contrary contained
herein, for each of the calendar quarters listed below, EBITDA shall be deemed to be the amount
set forth below opposite such quarter:
|
|
|
|
|
Calendar Quarter
|
|
EBITDA
|
|
September 30, 2005
|
|
$___
|
|
December 31, 2005
|
|
$___
|
|
March 31, 2006
|
|
$___
|
Provided, further, that notwithstanding anything to the contrary contained herein, for the
calendar quarter ending June 30, 2006, EBITDA shall be determined to be EBITDA, as calculated
above, for the month of June, 2006 plus the amounts set forth below for April, 2006 plus the
amount set forth below for May, 2006:
|
|
|
|
|
April, 2006
|
|
$___
|
|
May, 2006
|
|
$___
|
ECF Percentage
means, for any fiscal year, 90%.
[Eligible Account
means an Account owing to Borrower or any Domestic Subsidiary
which meets each of the following requirements:
(a) it arises from the sale of goods (which goods comply in all material respects with
such Account Debtor’s specifications (if any) and have been delivered to such Account Debtor
and not returned by such Account Debtor) or the rendering of services by Borrower or the
applicable Subsidiary;
(b) it (i) is subject to a perfected Lien in favor of Lender and (ii) is not subject to
any other assignment, claim or Lien;
(c) it is a valid, legally enforceable and unconditional obligation of the Account
Debtor with respect thereto and is not subject to any counterclaim, credit, allowance,
discount, rebate or adjustment by the Account Debtor or to any claim by such Account Debtor
denying liability thereunder in whole or in part; provided, that in the
6
event any counterclaim, credit, allowance, rebate or adjustment is asserted, or
discount is granted, the Account shall only be ineligible pursuant to this clause (c) to the
extent thereof;
(d) there is no bankruptcy, insolvency or liquidation proceeding pending by or against
the Account Debtor with respect thereto;
(e) the Account Debtor with respect thereto is a resident or citizen of, and is located
within, the United States or Canada, unless the sale of goods or services giving rise to
such Account is on letter of credit, banker’s acceptance or other credit support terms
reasonably satisfactory to Lender;
(f) it is not an Account arising from a “sale on approval,” “sale or return,”
“consignment” or “bill and hold” or subject to any other repurchase or return agreement;
(g) it is not an Account with respect to which possession and/or control of the goods
sold giving rise thereto is held, maintained or retained by Borrower or any Subsidiary (or
by any agent or custodian of Borrower or any Subsidiary) for the account of or subject to
further and/or future direction from the Account Debtor with respect thereto;
(h) it arises in the ordinary course of business of Borrower or the applicable
Subsidiary;
(i) if the Account Debtor is the United States or any department, agency or
instrumentality thereof, it does not, when aggregated with other such Accounts, exceed
$50,000 or, if the aggregate of such Accounts exceeds $50,000, to the extent of such excess,
Borrower or the applicable Subsidiary has assigned its right to payment of such Account to
Lender pursuant to the Assignment of Claims Act of 1940, as amended;
(j) if Borrower or applicable Subsidiary maintains a credit limit for an Account
Debtor, the aggregate dollar amount of Accounts due from such Account Debtor, including such
Account, does not exceed such credit limit; provided, that, in the event that such Account
exceeds such credit limit, the Account shall only be ineligible pursuant to this clause (j)
to the extent of such excess;
(k) if the Account is evidenced by chattel paper or an instrument, the original copy of
such chattel paper or instrument shall have been endorsed and/or assigned and delivered to
Lender in a manner reasonably satisfactory to Lender;
(l) such Account is not more than (i) 60 days past the due date thereof or (ii) 90 days
past the original invoice date thereof, in each case according to the original terms of
sale;
(m) the Account Debtor with respect thereto is not Borrower or an Affiliate of
Borrower;
7
(n) it is not owed by an Account Debtor with respect to which 25% or more of the
aggregate amount of outstanding Accounts owed at such time by such Account Debtor and its
Affiliates is classified as ineligible under clause (l) above;
(o) if the aggregate amount of the Accounts owed by the Account Debtor and its
Affiliates thereon exceeds
[
25%
]
of the aggregate amount of all Accounts at such time, then
all Accounts owed by such Account Debtor in excess of such amount shall be deemed
ineligible; and
(p) it is an Account denominated in Dollars.
An Account which is at any time an Eligible Account, but which subsequently fails to meet any
of the foregoing requirements, shall forthwith cease to be an Eligible Account. Further, with
respect to any Account, if Lender at any time hereafter determines in its reasonable discretion
that the prospect of payment or performance by the Account Debtor with respect thereto is
materially impaired for any reason whatsoever, such Account shall cease to be an Eligible Account
after notice of such determination is given to Borrower.]
Eligible Institution
means (a) any Person that (i) is organized for the purpose of
making equity or debt investments in one or more other Persons and (ii) is an Affiliate of Lender
or Manager, (b) any Person that invests in, or extends credit pursuant to, commercial loans in the
ordinary course of business and is approved by Lender, and (c) any finance company, insurance
company or other financial institution which temporarily warehouses Loans for Lender or any Person
described in clauses (a) or (b) above.
[Eligible Inventory
means Inventory of Borrower or any Domestic Subsidiary which meets
each of the following requirements:
(a) it (i) is subject to a perfected Lien in favor of Lender and (ii) is not subject to
any other assignment, claim or Lien;
(b) it is salable;
(c) it is in the possession and control of Borrower or any Domestic Subsidiary and it
is stored and held in facilities in the United States owned by Borrower or any Domestic
Subsidiary or, if such facilities are not so owned, Lender is in possession of a Collateral
Access Agreement with respect thereto;
(d) it is not Inventory produced in violation of the Fair Labor Standards Act and
subject to the “hot goods” provisions contained in Title 29 U.S.C. §215;
(e) it is not subject to any agreement which would restrict Lender’s ability to sell or
otherwise dispose of such Inventory;
(f) it is located in the United States or in any territory or possession of the United
States that has adopted Article 9 of the Uniform Commercial Code;
8
(g) it is not “in transit” to Borrower or any Domestic Subsidiary or held or delivered
by Borrower or any Domestic Subsidiary on consignment;
(h) it is not “work-in progress” Inventory; and
(i) Lender shall not have determined in its discretion that it is unacceptable due to
age, type, category, quality, quantity and/or any other reason whatsoever.
Inventory which is at any time Eligible Inventory but which subsequently fails to meet any of
the foregoing requirements shall forthwith cease to be Eligible Inventory.]
Environmental Claims
means all claims, however asserted, by any governmental,
regulatory or judicial authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the environment or any Person or
property.
Environmental Laws
means all present or future federal, state or local laws, statutes,
common law duties, rules, regulations, ordinances and codes, together with all administrative
orders, directed duties, requests, licenses, authorizations and permits of, and agreements with,
any governmental authority, in each case relating to any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace, including any of the
foregoing relating to the presence, use, production, generation, handling, transport, treatment,
storage, disposal, distribution, discharge, release, control or cleanup of any Hazardous Substance.
ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
Event of Default
means any of the events described in
Section 8.1
.
Excess Cash
means, with respect to Holdings, Borrower and their Subsidiaries, the
excess of (i) the combined cash and Cash Equivalent Instruments of Holdings, Borrower and the
Subsidiaries over (ii) $[___].
Excess Cash Flow
means, with respect to each Fiscal Year, for any period, the
remainder of EBITDA for such Fiscal Year, minus the sum, without duplication, of (i) scheduled
repayments of principal of Term Loans and other Debt of Borrower and the Subsidiaries (in respect
of Debt permitted in accordance with
Section 7.1
) made during such Fiscal Year, plus (ii)
voluntary prepayments of the Term Loans pursuant to
Section 2.9.1
during such Fiscal Year,
plus (iii) cash payments (not financed with the proceeds of Debt other than Revolving Loans) made
in such Fiscal Year with respect to Capital Expenditures permitted under
Section 7.14.4
plus (iv) all federal, state, local and foreign income taxes paid in cash by Borrower and the
Subsidiaries, or paid in cash by Holdings with the proceeds of the tax distributions by Borrower
permitted under
Section 7.4
, during such Fiscal Year or payable with respect to such Fiscal
Year by any of them within 75 days after the last day of such Fiscal Year, plus (v) all Interest
Expense in respect of Debt permitted in accordance with
Section 7.1
paid in cash by
Borrower and the Subsidiaries during such Fiscal Year or payable with respect to such Fiscal Year
by any of them
9
within 30 days after the last day of such Fiscal Year, plus (vi) to the extent permitted under
Section 7.4
, management fees paid in cash to Manager during such Fiscal Year or payable to
Manager with respect to such Fiscal Year within 30 days of the last day of such Fiscal Year.
Federal Funds Rate
means, for any day, a rate per annum (rounded upward to the nearest
1/100th of 1%) equal to the rate published by the Federal Reserve Bank of New York on the preceding
Business Day or, if no such rate is so published, the average rate per annum, as determined by
Lender, quoted for overnight Federal Funds transactions last arranged prior to such day.
Fiscal Quarter
means a fiscal quarter of a Fiscal Year.
Fiscal Year
means the fiscal year of Borrower and the Subsidiaries, which period shall
be the [12-month period ending on December 31][___] of each year.
Fixed Charge Coverage Ratio
means, for any Computation Period, the ratio of (a) the
total for such period of EBITDA minus the sum for such period of (i) all income taxes and tax
distributions described in
Section 7.4
paid by Borrower and the Subsidiaries within 75 days
of the end of such period, (ii) all Capital Expenditures and (iii) management fees paid in cash to
Manager during such period or payable to Manager within 30 days of the end of such period (other
than management fees paid concurrent with the Closing Date or within 15 days after the Closing
Date)
to
(b) the sum for such period of (i) Interest Expense paid in cash by Borrower and
the Subsidiaries, plus (ii) required payments of principal of Debt (including the Term Loans but
excluding the Revolving Loans).
Foreign Subsidiary
means any Subsidiary that is not incorporated or organized under
the laws of a State within the United States of America or the District of Columbia.
FRB
means the Board of Governors of the Federal Reserve System or any successor
thereto.
Funded Debt
means, as to any Person, all Debt of such Person that matures more than
one year from the date of its creation (or is renewable or extendible, at the option of such
Person, to a date more than one year from such date).
GAAP
means generally accepted accounting principles in effect in the United States of
America set forth from time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board (or agencies with similar functions of comparable
stature and authority within the U.S. accounting profession), which are applicable to the
circumstances as of the date of determination.
Guarantee and Collateral Agreement
means the Guarantee and Collateral Agreement, dated
as of the Closing Date, by each Loan Party (other than Borrower) in favor of Lender, as amended,
restated or otherwise modified from time to time.
10
Hazardous Substances
means hazardous waste, hazardous substance, pollutant,
contaminant, toxic substance, oil, hazardous material, chemical or other substance regulated by any
Environmental Law.
Hedging Obligation
means, with respect to any Person, any liability of such Person
under any interest rate, currency or commodity swap agreement, cap agreement or collar agreement,
and any other agreement or arrangement designed to protect a Person against fluctuations in
interest rates, currency exchange rates or commodity prices. The amount of any Person’s obligation
in respect of any Hedging Obligation shall be deemed to be the incremental obligation that would be
reflected in the financial statements of such Person in accordance with GAAP.
Holdings
means
[
___
]
, a Delaware corporation.
Interest Expense
means for any period the consolidated interest expense of Borrower
and the Subsidiaries for such period (including all imputed interest on Capital Leases).
Interest Period
means, as to any LIBOR Loan, the period commencing on the date such
Loan is borrowed or continued as, or converted into, a LIBOR Loan and ending on the date one, two
or three months thereafter, as selected by Borrower pursuant to
Section 2.2.2
or
2.2.3
, as the case may be; provided, that: (a) if any Interest Period would otherwise end
on a day that is not a Business Day, such Interest Period shall be extended to the following
Business Day unless the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the preceding Business
Day; (b) any Interest Period that begins on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period shall end on the last Business Day of
the calendar month at the end of such Interest Period; (c) Borrower may not select any Interest
Period for a Revolving Loan which would extend beyond the scheduled Termination Date; and (d)
Borrower may not select any Interest Period for a Term Loan if, after giving effect to such
selection, the aggregate principal amount of all Term Loans having Interest Periods ending after
any date on which an installment of the Term Loans is scheduled to be repaid would exceed the
aggregate principal amount of the Term Loans scheduled to be outstanding after giving effect to
such repayment.
Inventory
has the meaning set forth in the Guarantee and Collateral Agreement.
Investment
means, with respect to any Person, (a) the purchase of any debt or equity
security of any other Person, (b) the making of any loan or advance to any other Person, (c)
becoming obligated with respect to a Contingent Obligation in respect of obligations of any other
Person (other than travel and similar advances to employees in the ordinary course of business) or
(d) the making of an Acquisition.
Investment Affiliate
means, with respect to Manager, any fund or investment vehicle
that (a) is organized by Manager for the purpose of making equity or debt investments in one or
more companies and (b) is controlled by Manager. For purposes of this definition “control” means
the power to direct or cause the direction of management and policies of a Person, whether by
contract or otherwise.
11
IRC
means the Internal Revenue Code of 1986, as amended.
Legal Costs
means, with respect to any Person, (a) all reasonable fees and charges of
any counsel, accountants, auditors, appraisers, consultants and other professionals to such Person,
(b) the reasonable allocable cost of internal legal services of such Person and all reasonable
disbursements of such internal counsel and (c) all court costs and similar legal expenses.
Lender
has the meaning set forth in the
Preamble
.
LIBOR Loan
means any Loan which bears interest at a rate determined by reference to
the LIBOR Rate.
LIBOR Rate
means, with respect to any LIBOR Loan for any Interest Period, a rate per
annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to (i) the offered rate for
deposits in Dollars for the applicable Interest Period and for the amount of the applicable LIBOR
Loan that appears on Telerate Page 3750 at 11:00 a.m. London time (or, if not so appearing, as
published in the “Money Rates” section of
The Wall Street Journal
or another national
publication selected by Lender) two Business Days prior to the first day of such Interest Period,
divided by (ii) the sum of one minus the daily average during such Interest Period of the aggregate
maximum reserve requirement (expressed as a decimal) then imposed under Regulation D of the FRB for
“Eurocurrency Liabilities” (as defined therein).
Lien
means, with respect to any Person, any interest granted by such Person in any
real or personal property, asset or other right owned or being purchased or acquired by such Person
which secures payment or performance of any obligation and shall include any mortgage, lien,
encumbrance, charge or other security interest of any kind, whether arising by contract, as a
matter of law, by judicial process or otherwise.
Loan Documents
means this Agreement, the Notes, the Collateral Documents and all
documents, instruments and agreements delivered in connection with the foregoing, all as amended,
restated or otherwise modified from time to time.
Loan Party
means Holdings, Borrower and each Subsidiary.
Loans
means Revolving Loans and Term Loans.
Manager
means Compass Group Management LLC, a Delaware limited liability company.
Margin Stock
means any “margin stock” as defined in Regulation T, U or X of the FRB.
Material Adverse Effect
means (a) a material adverse change in, or a material adverse
effect upon, the financial condition, operations, assets, business, properties or prospects of Loan
Parties taken as a whole, (b) a material impairment of the ability of any Loan Party to perform any
of its Obligations under any Loan Document or (c) a material adverse effect upon
12
any substantial portion of the Collateral under the Collateral Documents or upon the legality,
validity, binding effect or enforceability against any Loan Party of any Loan Document.
Mortgage
means a mortgage, deed of trust, leasehold mortgage or similar instrument
granting Lender a Lien on a real property interest of any Loan Party, each as amended, restated or
otherwise modified from time to time.
Multiemployer Pension Plan
means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which Borrower or any member of the Controlled Group may have any
liability.
Net Cash Proceeds
means:
(a) with respect to any Disposition, the aggregate cash proceeds (including cash
proceeds received pursuant to policies of insurance and by way of deferred payment of
principal pursuant to a note, installment receivable or otherwise, but only as and when
received) received by any Loan Party pursuant to such Disposition net of (i) the reasonable
direct costs relating to such Disposition (including sales commissions and legal, accounting
and investment banking fees, commissions and expenses and, in the case of a Disposition of
any asset, costs of preparing such asset for sale), (ii) any portion of such proceeds
deposited in an escrow account pursuant to the documentation relating to such Disposition
(provided that such amounts shall be treated as Net Cash Proceeds upon their release from
such escrow account to the applicable Loan Party), (iii) taxes paid or reasonably estimated
by Borrower to be payable as a result thereof (after taking into account any available tax
credits or deductions and any tax sharing arrangements), (iv) amounts required to be applied
to the repayment of any Debt secured by a Lien prior to the Lien of Lender on the asset
subject to such Disposition and (v) with respect to any Disposition described in clause (b)
or (c) of the definition thereof, all money actually applied within 180 days to repair,
replace or reconstruct damaged property or property affected by loss, destruction, damage,
condemnation, confiscation, requisition, seizure or taking, all of the costs and expenses
reasonably incurred in connection with the collection of such proceeds, award or other
payments, and any amounts retained by or paid to parties having superior rights to such
proceeds, awards or other payments; and
(b) with respect to any issuance of equity securities, the aggregate cash proceeds
received by Holdings, Borrower or any Subsidiary pursuant to such issuance, net of the
reasonable direct costs relating to such issuance (including reasonable sales and
underwriter’s commission).
Non-Senior Debt
means the Term B Loans plus all any unsecured Debt of Holdings,
Borrower or a Subsidiary which has subordination terms, covenants, pricing and other terms which
have been approved in writing by Lender.
Note
means a promissory note substantially in the form of
Exhibit D
, as the
same may be amended, restated or otherwise modified from time to time.
13
Obligations
means all liabilities, indebtedness and obligations (monetary (including
post-petition interest, allowed or not) or otherwise) of any Loan Party under this Agreement, any
other Loan Document, any Collateral Document or any other document or instrument executed in
connection herewith or therewith and all Hedging Obligations permitted hereunder which are owed to
Lender or its Affiliates, in each case howsoever created, arising or evidenced, whether direct or
indirect, absolute or contingent, now or hereafter existing, or due or to become due.
Operating Lease
means any lease of (or other agreement conveying the right to use) any
real or personal property by Borrower or any Subsidiary, as lessee, other than any Capital Lease.
Paid in Full
means, with respect to any Obligations, (a) the payment in full in cash
and performance of all such Obligations, and (b) the termination of all Commitments relating to
such Obligations.
PBGC
means the Pension Benefit Guaranty Corporation and any entity succeeding to any
or all of its functions under ERISA.
Pension Plan
means a “pension plan”, as such term is defined in Section 3(2) of ERISA,
which is subject to Title IV of ERISA (other than a Multiemployer Pension Plan), and to which
Borrower or any member of the Controlled Group may have any liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any
time during the preceding five years, or by reason of being deemed to be a contributing sponsor
under Section 4069 of ERISA.
Person
means any natural person, corporation, partnership, trust, limited liability
company, association, governmental authority or unit, or any other entity, whether acting in an
individual, fiduciary or other capacity.
Pro Rata Revolving Share
means, with respect to Lender or any Assignee, the applicable
percentage (as adjusted from time to time in accordance with the terms hereof) specified opposite
such Person’s name on
Annex I
which corresponds to the Revolving Loan Commitment, which
percentage shall be with respect to Revolving Loans outstanding if the Revolving Loan Commitment
has terminated.
Pro Rata Share
means, with respect to Lender or any Assignee, the applicable
percentage (as adjusted from time to time in accordance with the terms hereof) obtained by dividing
(a) the sum of (i) such Person’s Pro Rata Revolving Share of the Revolving Loan Commitment (or if
the Revolving Loan Commitment has terminated, such Person’s Pro Rata Revolving Share of the
Revolving Loans outstanding), (ii) such Person’s Pro Rata Term A Loan Share of the Term A Loans)
and (iii) such Person’s Pro Rata Term B Loan Share of the Term B Loans, by (b) the Total Loan
Commitment.
Pro Rata Term A Loan Share
means, with respect to Lender or any Assignee, the
applicable percentage (as adjusted from time to time in accordance with the terms hereof) specified
opposite such Person’s name on
Annex I
which corresponds to the Term A Loans.
14
Pro Rata Term B Loan Share
means, with respect to Lender or any Assignee, the
applicable percentage (as adjusted from time to time in accordance with the terms hereof) specified
opposite such Person’s name on
Annex I
which corresponds to the Term B Loans.
Related Transactions
means the transactions contemplated by the Stock Purchase
Agreement, dated as of even date herewith, by and among Compass Group Diversified Holdings, Inc.,
Compass Group Investments, Inc., Compass CS Partners, L.P., Compass CS II Partners, L.P., Compass
Crosman Partners, L.P., Compass Advanced Partners, L.P. and Compass Silvue Partners, L.P.,
including the Ancillary Purchase and Redemption Transactions as defined therein.
Revolving Loan Commitment
means
[
$___
]
(as reduced from time to time pursuant to
the terms hereof), plus such additional amounts, if any, that Lender may, in its sole discretion,
from time to time commit to advance as Revolving Loans in connection with one or more Acquisitions;
provided, however, that no advance in respect of any such additional Revolving Loan Commitment
shall exceed that amount that would result in Borrower’s: (i) Senior Debt to EBITDA Ratio exceeding
3.0 to 1.0; or (ii) Total Debt to EBITDA Ratio exceeding 4.0 to 1.0, with both such ratios
calculated as of the last day of the Fiscal Quarter immediately proceeding the Fiscal Quarter in
which such additional amount is to be advanced and on a pro forma basis based on EBITDA for the
Computation Period as if the applicable Acquisition had been consummated on the calculation date,
with such adjustments thereto as may be determined necessary or appropriate by Lender.
Revolving Loans
has the meaning set forth in
Section 2.1.1
.
Senior Debt
means, as of any day, the Revolving Loans, to the extent outstanding at
the end of such day, plus the aggregate principal amount of the Term A Loans outstanding at the end
of such day, plus all obligations, contingent or otherwise, with respect to the face amount of all
letters of credit (whether or not drawn) and banker’s acceptances, if any, issued for the account
of Borrower and outstanding at the end of such day.
Senior Debt to EBITDA Ratio
means, as of the last day of any Fiscal Quarter, the ratio
of (i) Senior Debt as of such day to (ii) EBITDA for the Computation Period ending on such day.
Subsidiary
means, with respect to any Person, a corporation, partnership, limited
liability company or other entity of which such Person owns, directly or indirectly, such number of
outstanding shares or other equity interests as to have more than 50% of the ordinary voting power
for the election of directors or other managers of such corporation, partnership, limited liability
company or other entity. Unless the context otherwise requires, each reference to Subsidiary or
Subsidiaries herein shall be a reference to Subsidiary or Subsidiaries of Borrower.
Term A Loan Commitment
means
[
$___
]
plus, after the Closing Date, such additional
amounts, if any, that Lender may, in its sole discretion, from time to time advance as Term A Loans
in connection with one or more Acquisitions; provided, however, that no such additional Term A Loan
Commitment shall exceed that amount which would result in Borrower’s: (i) Senior Debt to EBITDA
Ratio exceeding 3.0 to 1.0; or (ii) Total Debt to EBITDA Ratio exceeding 4.0 to 1.0, with both such
ratios calculated as of the last day of the
15
Fiscal Quarter immediately proceeding the Fiscal Quarter in which such additional amount is to
be advanced and on a pro forma basis based on EBITDA for the Computation Period as if the
applicable Acquisition had been consummated on the calculation date, with such adjustments thereto
as may be determined necessary or appropriate by Lender.
Term A Loan Maturity Date
means
[
___, 2012
]
or such earlier date on which the
Commitments terminate pursuant to
Section 8
.
Term A Loans
means a loan from Lender to Borrower in the principal amount of the Term
A Loan Commitment on the Closing Date, together with such other loans, if any, pursuant to the Term
A Loan Commitment.
Term B Loan Commitment
means
[
$___
]
plus, after the Closing Date, such additional
amounts, if any, that Lender may, in its sole discretion, from time to time advance as Term B Loans
in connection with one or more Acquisitions; provided, however, that no such additional Term B Loan
Commitment shall exceed that amount which would result in Borrower’s Total Debt to EBITDA Ratio
exceeding 4.0 to 1.0, with such ratio to be calculated as of the last day of the Fiscal Quarter
immediately proceeding the Fiscal Quarter in which such additional amount is to be advanced and on
a pro forma basis based on EBITDA for the Computation Period as if the applicable Acquisition had
been consummated on the calculation date, with such adjustments thereto as may be determined
necessary or appropriate by Lender.
Term B Loan Maturity Date
means
[
___, 2013
]
or such earlier date on which the
Commitments terminate pursuant to
Section 8
.
Term B Loans
means a loan from Lender to Borrower in the principal amount of the Term
B Loan Commitment on the Closing Date, together with such other loans, if any, pursuant to the Term
B Loan Commitment.
Term Loans
means the Term A Loans and the Term B Loans, collectively.
Termination Date
means
[
___, 2012
]
or such earlier date on which the Revolving
Loan Commitment terminates pursuant to
Section 2.9
or
Section 8
.
Total Debt
means, as of any day, all Debt (other than Debt described in clause (g) of
the definition thereof and Debt of any Loan Party to another Loan Party) of Borrower and the
Subsidiaries at the end of such day, determined on a consolidated basis.
Total Debt to EBITDA Ratio
means, as of the last day of any Fiscal Quarter, the ratio
of (a) Total Debt as of such day to (b) EBITDA for the Computation Period ending on such day.
Total Loan Commitment
means at any date of determination, the sum of (i) the Revolving
Loan Commitment (or if the Revolving Loan Commitment has terminated, the Revolving Loans then
outstanding) at the end of such date plus (ii) the outstanding principal balance of the Term Loans
at the end of such date.
16
[U. S. Bank Letter of Credit Obligations
means all obligations of Borrower to
U.S. Bank National Association under that certain [Loan Facility], dated as of ___; provided,
however, such obligations shall not exceed $25,000,000 and shall be secured by a first priority
lien on the Accounts of Borrower.]
Wholly-Owned Subsidiary
means, as to any Person, another Person all of the equity
interests of which (except directors’ qualifying shares) are at the time directly or indirectly
owned by such Person and/or another Wholly-Owned Subsidiary of such Person. Unless the context
otherwise requires, each reference to Wholly-Owned Subsidiary or Wholly-Owned Subsidiaries herein
shall be a reference to Wholly-Owned Subsidiary or Wholly-Owned Subsidiaries of Borrower.
1.2
Interpretation.
In the case of this Agreement and each other Loan Document, (a) the meanings of defined terms
are equally applicable to the singular and plural forms of the defined terms; (b) Annex, Exhibit,
Schedule and Section references are to such Loan Document unless otherwise specified; (c) the term
“including” is not limiting and means “including but not limited to”; (d) in the computation of
periods of time from a specified date to a later specified date, the word “from” means “from and
including”; the words “to” and “until” each mean “to but excluding”, and the word “through” means
“to and including”; (e) unless otherwise expressly provided in such Loan Document, (i) references
to agreements and other contractual instruments shall be deemed to include all subsequent
amendments and other modifications thereto, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document, and (ii) references to any
statute or regulation shall be construed as including all statutory and regulatory provisions
amending, replacing, supplementing or interpreting such statute or regulation; (f) this Agreement
and the other Loan Documents may use several different limitations, tests or measurements to
regulate the same or similar matters, all of which are cumulative and each shall be performed in
accordance with its terms; and (g) this Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to Lender, Borrower and the other parties
thereto and are the products of all parties; accordingly, they shall not be construed against
Lender merely because of Lender’s involvement in their preparation.
Section 2.
Credit Facilities
.
2.1
Commitments
.
On and subject to the terms and conditions of this Agreement, Lender agrees as follows:
2.1.1
Revolving Loan Commitments.
Lender will make loans to Borrower on a revolving basis (“
Revolving Loans
”) from time
to time and Borrower may repay such loans from time to time until the Termination Date in such
amounts as Borrower may request from Lender; provided, that after giving effect to
such Revolving Loans, the Revolving Loans outstanding will not at any time exceed the
Revolving Loan Commitment [or, if less, the Borrowing Availability].
17
2.1.2
Term Loan Commitments.
Lender agrees to make (a) a Term A Loan to Borrower on the Closing Date in an amount equal to
the Term A Loan Commitment as of the Closing Date, and (b) a Term B Loan to Borrower on the Closing
Date in an amount equal to the Term B Loan Commitment as of the Closing Date. The Lender shall
have no obligation to make Term Loans after the Closing Date. Term Loans which are repaid or
prepaid by Borrower, in whole or in part, may not be re-borrowed.
2.2
Loan Procedures
.
2.2.1
Loan Types
.
Each Loan shall be either a Base Rate Loan or a LIBOR Loan, as Borrower shall specify in the
related notice of borrowing or conversion pursuant to
Section 2.2.2
or
2.2.3
. Base
Rate Loans and LIBOR Loans may be outstanding at the same time, provided that not more than three
different Interest Periods shall exist among outstanding LIBOR Loans at any one time. All
borrowings, conversions and repayments of Revolving Loans shall be effected so that Lender and each
Assignee will have a ratable share (according to its Pro Rata Revolving Share) of all Revolving
Loans and all Interest Periods of LIBOR Loans. Notwithstanding the foregoing or any other
provision of this Agreement, Borrower may not make more than one Revolving Loan borrowing during
any single calendar week.
2.2.2
Borrowing.
Borrower shall give written notice or telephonic notice (followed immediately by written
confirmation thereof) to Lender of each proposed borrowing of a Revolving Loan not later than (a)
in the case of a Base Rate borrowing, 11:00 a.m. New York City time at least two (2) Business Days
prior to the proposed date of such borrowing, and (b) in the case of a LIBOR borrowing, 11:00 a.m.
New York City time at least four (4) Business Days prior to the proposed date of such borrowing;
provided, however, that Lender shall have no obligation to advance such borrowings more than one
time each week. Each such notice shall be effective upon receipt by Lender, shall be irrevocable,
and shall specify, in the form of a Borrowing Notice, the date, amount and type of borrowing and,
in the case of LIBOR borrowing, the initial Interest Period therefor. So long as Borrower’s
request is timely made and the conditions precedent set forth in
Section 4
with respect to
such borrowing have been satisfied, Lender shall pay over the proceeds of such borrowing request to
Borrower on the requested borrowing date. Each borrowing shall be on a Business Day. Each Base
Rate borrowing shall be in an aggregate amount of $250,000 or of any integral multiple of $50,000
in excess thereof, and each LIBOR borrowing shall be in an aggregate amount of $250,000 or of any
integral multiple of $50,000 in excess thereof.
2.2.3
Conversion; Continuation.
(a) Subject to
Section 2.2.1
, Borrower may, upon irrevocable written notice to Lender
in accordance with clause (b) below, elect (i) as of any Business Day, to convert any
Loans (or any part thereof in an aggregate amount of not less than $250,000 or a higher
integral multiple of $50,000) into Loans of the other type or (ii) as of the last day of the
applicable Interest Period, to continue any LIBOR Loans having Interest Periods expiring on such
day (or
18
any part thereof in an aggregate amount not less than $250,000 or a higher integral
multiple of $50,000) for a new Interest Period; provided, that any conversion of a LIBOR Loan on a
day other than the last day of an Interest Period therefor shall be subject to Section 3.5.
(b) Borrower shall give written or telephonic notice (followed immediately by written
confirmation thereof) to Lender of each proposed conversion or continuation not later than (i) in
the case of conversion into Base Rate Loans, 11:00 a.m. New York City time at least one Business
Day prior to the proposed date of such conversion and (ii) in the case of conversion into or
continuation of LIBOR Loans, 11:00 a.m. New York City time at least four Business Days prior to the
proposed date of such conversion or continuation, specifying in each case in the form of a
Conversion/Continuation Notice: (i) the proposed date of conversion or continuation; (ii) the
aggregate amount of Loans to be converted or continued; (iii) the type of Loans resulting from the
proposed conversion or continuation; and (iv) in the case of conversion into, or continuation of,
LIBOR Loans, the duration of the requested Interest Period therefor.
(c) If upon the expiration of any Interest Period applicable to LIBOR Loans, Borrower has
failed to select timely a new Interest Period to be applicable to such LIBOR Loans, Borrower shall
be deemed to have elected to convert such LIBOR Loans into Base Rate Loans effective on the last
day of such Interest Period.
2.3
[Reserved]
2.4
Certain Conditions.
Notwithstanding any other provision of this Agreement, Lender shall not have an obligation to
make any Loan, or to permit the continuation of any expiring LIBOR Loan as a LIBOR Loan, or to
permit any conversion into any LIBOR Loans, if an Event of Default or Default exists.
2.5
Loan Accounting
.
2.5.1
Recordkeeping
.
Lender shall record in its records the date and amount of each Loan made and each repayment or
conversion thereof and, in the case of each LIBOR Loan, the dates on which each Interest Period for
such Loan shall begin and end. The aggregate unpaid principal amount so recorded shall be
rebuttably presumptive evidence of the principal amount of the Loans owing and unpaid. The failure
to so record any such amount or any error in so recording any such amount shall not, however, limit
or otherwise affect the Obligations of Borrower hereunder or under any Note to repay the principal
amount of the Loans hereunder, together with all interest accruing thereon.
2.6
Interest
.
2.6.1
Interest Rates
.
Borrower promises to pay interest on the unpaid principal amount of each Loan for the period
commencing on the date of such Loan until such Loan is paid in full as follows:
19
(a) at all times
which such Loan is a Base Rate Loan, at a rate per annum equal to the sum of the Base Rate from
time to time in effect plus the Applicable Margin; and (b) at all times while such Loan is a LIBOR
Loan, at a rate per annum equal to the LIBOR Rate applicable to each Interest Period for such Loan
plus the Applicable Margin; provided, that (i) at any time an Event of Default exists, if requested
by Lender, the Applicable Margin corresponding to each Loan shall be increased by two percentage
points per annum (and, in the case of Obligations not subject to an Applicable Margin, such
Obligations shall bear interest at the Base Rate applicable to Revolving Loans plus the Applicable
Margin plus two percentage points per annum), (ii) any such increase may thereafter be rescinded by
Lender, and (iii) upon the occurrence of an Event of Default under
Section 8.1.1
or
8.1.3
, any such increase described in the foregoing clause (i) shall occur automatically.
In no event shall interest payable by Borrower to Lender hereunder exceed the maximum rate
permitted under applicable law, and if any such provision of this Agreement is in contravention of
any such law, such provision shall be deemed modified to limit such interest to the maximum rate
permitted under such law.
2.6.2
Interest Payment Dates.
Accrued interest on each Base Rate Loan shall be payable in arrears on the last day of each
calendar month and at maturity in cash. Accrued interest on each LIBOR Loan shall be payable (a)
on the last day of each Interest Period relating to such Loan, (b) upon a prepayment of such Loan
in accordance with
Section 2.9
and (c) at maturity in cash. After maturity and at any time
an Event of Default exists, all accrued interest on all Loans shall be payable in cash on demand at
the rates specified in
Section 2.7.1
.
2.6.3
Setting and Notice of LIBOR Rates.
The applicable LIBOR Rate for each Interest Period shall be determined by Lender, and notice
thereof shall be given by Lender promptly to Borrower. Each determination of the applicable LIBOR
Rate by Lender shall be conclusive and binding upon the parties hereto, in the absence of
demonstrable error. Lender shall, upon written request of Borrower, deliver to Borrower a
statement showing the computations used by Lender in determining any applicable LIBOR Rate
hereunder.
2.6.4
Computation of Interest.
Interest shall be computed for the actual number of days elapsed on the basis of a year of (a)
365/366 days for interest calculated at the Base Rate and (b) 360 days for interest calculated at
the LIBOR Rate. The applicable interest rate for each Base Rate Loan shall change simultaneously
with each change in the Base Rate.
2.7
Fees
.
2.7.1
Commitment Fee
.
For the period from the Closing Date to the Termination Date, Borrower agrees to pay to Lender
a Commitment Fee equal to the Applicable Margin multiplied by the amount by which the Revolving
Loan Commitment exceeds the average daily Revolving Loans outstanding. The Commitment Fee shall be
payable in arrears on the last day of each calendar month and on
20
the Termination Date for any
period then ending for which the Commitment Fee shall not have previously been paid. The
Commitment Fee shall be computed for the actual number of days elapsed on the basis of a year of
360 days.
2.7.2
Additional Commitment Fees.
Borrower agrees to pay to Lender on each date, if any, on which (i)Term A Loans or Revolving
Loans are advanced or Revolving Loan Commitments made after the Closing Date an amount equal to
1.0% multiplied by the amount of each such post-Closing Date advance or commitment, and (ii) Term B
Loans are advanced after the Closing Date an amount equal to 2.0% multiplied by the amount of each
such post-Closing Date advance.
2.7.3
[
Origination Fee].
3
2.8
Commitment Reduction
.
2.8.1
Voluntary Reduction or Termination of Revolving Loan Commitment
.
Borrower may from time to time on at least five Business Days’ prior written notice received
by Lender permanently reduce the Revolving Loan Commitment to an amount not less than the Revolving
Loans. Any such reduction shall be in an amount not less than $500,000 or a higher integral
multiple of $100,000. Concurrently with any reduction of the Revolving Loan Commitment to zero,
Borrower shall pay all interest on the Revolving Loans and all commitment fees.
2.8.2
Mandatory Reduction of Revolving Loan Commitment.
On the date of any mandatory prepayment pursuant to
Section 2.9.2(a)(i)
or
(ii)
, the Revolving Loan Commitment shall be permanently reduced by the amount of such
mandatory prepayment applied to prepay the Revolving Loans pursuant to
Section 2.9.2(a)(i)
or
(ii)
.
2.9
Prepayment
.
2.9.1
Voluntary Prepayment
.
Borrower may from time to time, on at least one Business Day’s written notice or telephonic
notice (if a telephonic notice, followed immediately by written confirmation thereof) to Lender not
later than 11:00 a.m. New York City time on such day, prepay the Term Loans in whole or in part;
provided that Borrower may not prepay all or any portion of the Term B Loans if, either immediately
prior to or after giving effect to any such prepayment, any portion of the Revolving Loans or Term
A Loans are outstanding. Such notice to Lender shall specify the Loans to be prepaid and the date
and amount of prepayment. Any such partial prepayment shall
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Applicable only to the CBS Credit Agreement.
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21
be in an amount equal to $500,000 or a
higher integral multiple of $100,000. All prepayments of Term Loans pursuant to this
Section
2.9.1
shall be applied pursuant to
Section 2.9.3
.
2.9.2
Mandatory Prepayment.
(a) Subject to
Section 2.9.2(c)
, Borrower shall prepay, first, the Term A Loans until
Paid in Full and, then, the Term B Loans until Paid in Full (in each case in the inverse order of
maturity to the remaining installments thereof), at the following times and in the following
amounts:
(i) concurrently with the receipt by Holdings, Borrower or any Subsidiary of any Net
Cash Proceeds from any Disposition, in an amount equal to such Net Cash Proceeds;
(ii) concurrently with the receipt by Holdings, Borrower or any Subsidiary of any Net
Cash Proceeds from any issuance of its equity securities (other than equity securities that
are issued pursuant to
Section 7.11(a)
), in an amount equal to such Net Cash
Proceeds; and
(iii) within 90 days after the end of each Fiscal Year (commencing with Fiscal Year
2006), in an amount equal to the ECF Percentage of Excess Cash Flow for such Fiscal Year.
(b) If on any day the Revolving Loans then outstanding exceed Borrowing Availability, whether
pursuant to a reduction of the Revolving Loan Commitment pursuant to
Section 2.8.1
or
otherwise, Borrower shall immediately prepay Revolving Loans in an amount sufficient to eliminate
such excess.
(c) Notwithstanding
Section 2.9.2(a)
, on each Monday during the term of the Revolving
Loan Commitment and for so long as there are Revolving Loans outstanding, Borrower shall prepay the
Revolving Loans until Paid in Full in an amount equal to the Excess Cash at the time of such
payment. Payments pursuant to this
Section 2.9.2(c)
shall not result in a reduction in the
Revolving Loan Commitment.
2.9.3
All Prepayments.
(a) Any prepayment of a LIBOR Loan on a day other than the last day of an Interest Period
therefor shall include interest on the principal amount being repaid and shall be subject to
Section 3
. All prepayments of a Loan shall be applied first to that portion of such Loan
comprised of Base Rate Loans and then to that portion of such Loan comprised of LIBOR Loans, in
direct order of Interest Period maturities. All prepayments of Term Loans shall be applied first
to Term A Loans until Paid in Full and then to Term B Loans and, in each case, in the inverse order
of maturity to the remaining installments thereof.
(b) Borrower shall give written notice or telephonic notice (followed immediately by written
confirmation thereof) to Lender not later than 11:00 a.m. New York City time at least one Business
Day prior to each mandatory prepayment pursuant to clause (a) of
Section 2.9.2
.
22
2.10
Repayment.
2.10.1
Revolving Loans.
The Revolving Loans shall be paid, for the account of Lender and any Assignee according to its
respective Pro Rata Revolving Share, in full on the Termination Date.
2.10.2
Term A Loans.
The Term A Loans shall amortize as provided in the following table, with each annualized
amount being due and payable in equal quarterly installments on the last day of each Fiscal
Quarter, commencing June 30, 2006 and continuing to the Term Loan A Maturity Date, on which date
the then outstanding Term A Loans shall be paid in full:
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Annual Amortization
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$
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—
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2
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$
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—
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3
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$
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—
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4
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$
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5
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$
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6
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$
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2.10.3
Term B Loans
.
The Term B Loans shall be paid in full on the Term B Loan Maturity Date.
2.11
Payment
.
2.11.1
Making Payments
.
All payments of principal of or interest on the Notes, and of all fees, shall be made by
Borrower to Lender without setoff, recoupment or counterclaim and in immediately available funds at
the office specified by Lender not later than 12:00 noon New York City time on the date due, and
funds received after that hour shall be deemed to have been received by Lender on the following
Business Day.
2.11.2
Application of Payments and Proceeds.
(a) Except as set forth in
Section 2.9.2
and
Section 2.9.3
, and subject to the
provisions of
Sections 2.11.2(b)
and
2.11.2(c)
below, each payment of principal
shall be applied to such Loans as Borrower shall direct by notice to be received by Lender on or
before the date of such payment or, in the absence of such notice, as Lender shall determine in its
discretion.
23
(b) If an Acceleration Event shall have occurred and be continuing, notwithstanding anything
herein or in any other Loan Document to the contrary, Lender shall apply all or any part of
payments in respect of the Obligations and proceeds of Collateral, in each case as received by
Lender, to the payment of the Obligations in the following order:
(i) FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to
Lender under this Agreement or any other Loan Document, and any other Obligations owing to
Lender in respect of sums advanced by Lender to preserve or protect the Collateral or to
preserve or protect its security interest in the Collateral (whether or not such Obligations
are then due and owing to Lender), until Paid in Full;
(ii) SECOND, to the payment of all fees, costs, expenses and indemnities due and owing
to Lender, other than in respect of Term B Loans, until Paid in Full;
(iii) THIRD, to the payment of all accrued and unpaid interest due and owing to Lender,
other than in respect of Term B Loans, until Paid in Full;
(iv) FOURTH, to the payment of all principal of the Loans, other than Term B Loans, due
and owing until Paid in Full;
(v) FIFTH, to the payment of all Hedging Obligations due and owing to Lender or its
Affiliates;
(vi) SIXTH, to the payment of all other Obligations owing to Lender, other than
Obligations owing in respect of Term B Loans, until Paid in Full;
(vii) SEVENTH, to the payment of all fees, costs, expenses and indemnities due and
owing to Lender in respect of Term B Loans until Paid in Full;
(viii) EIGHTH, to the payment of all accrued and unpaid interest due and owing to
Lender in respect of Term B Loans until Paid in Full;
(ix) NINTH, to the payment of all principal of Term B Loans due and owing until Paid in
Full; and
(x) TENTH, to the payment of all other Obligations owing to Lender in respect of Term B
Loans until Paid in Full.
(c) If an Event of Default shall have occurred and be continuing but an Acceleration Event
shall not exist, notwithstanding anything herein or in any other Loan Document to the contrary,
Lender shall apply all or any part of payments in respect of the obligations and proceeds of
Collateral, in each case as received by Lender, to the payment of the Obligations in such order as
Lender may elect. In the absence of a specific determination by Lender, payments in respect of the
Obligations and proceeds of Collateral received by Lender shall be applied in the following order:
(i) FIRST, to the payment of all fees, costs, expenses and indemnities due and owing to
Lender under this Agreement or any other Loan Document, and any other
24
Obligations owing to
Lender in respect of sums advanced by Lender to preserve or protect the Collateral or to
preserve or protect its security interest in the Collateral (whether or not such Obligations
are then due and owing to Lender), until Paid in Full;
(ii) SECOND, to the payment of all fees, costs, expenses and indemnities due and owing
to Lender, other than in respect of Term B Loans, until Paid in Full;
(iii) THIRD, to the payment of all accrued and unpaid interest due and owing to Lender,
other than in respect of Term B Loans, until Paid in Full;
(iv) FOURTH, to the payment of all principal of the Loans, other than Term B Loans,
then due and owing until Paid in Full;
(v) FIFTH, to the payment of Revolving Loans not then due and owing until Paid in Full;
(vi) SIXTH, to the payment of all Hedging Obligations owing to Lender or its
Affiliates, pro rata in accordance with Lender’s or one of its Affiliate’s share thereof,
until Paid in Full;
(vii) SEVENTH, to the payment of all other Obligations owing to Lender, other than
Obligations owing in respect of Term B Loans, until Paid in Full;
(viii) EIGHTH, to the payment of all fees, costs, expenses and indemnities due and
owing to Lender in respect of Term Loans until Paid in Full;
(ix) NINTH, to the payment of all accrued and unpaid interest due and owing to Lender
in respect of Term B Loans until Paid in Full;
(x) TENTH, to cash collateralize Obligations consisting of Term B Loans not yet due and
owing until Paid in Full; and
(xi) ELEVENTH, to the payment of all other Obligations owing to Lender in respect of
Term B Loans until Paid in Full.
2.11.3
Payment Dates.
If any payment of principal or interest with respect to any of the Loans, or of any fees,
falls due on a day which is not a Business Day, then such due date shall be extended to the
immediately following Business Day (unless, in the case of a LIBOR Loan, such immediately following
Business Day is the first Business Day of a calendar month, in which case such due date shall be
the immediately preceding Business Day) and, in the case of principal, additional interest shall
accrue and be payable for the period of any such extension.
2.11.4
Set-off.
Borrower agrees that Lender and its Affiliates have all rights of set-off and bankers’ lien
provided by applicable law, and in addition thereto, Borrower agrees that at any
25
time an Event of
Default has occurred and is continuing, Lender may apply to the payment of any Obligations of
Borrower hereunder, whether or not then due, any and all balances, credits, deposits, accounts or
moneys of Borrower then or thereafter with Lender.
Section 3.
Yield Protection
.
3.1
Taxes
.
(a) All payments of principal and interest on the Loans and all other amounts payable
hereunder shall be made free and clear of and without deduction for any present or future income,
excise, stamp, documentary, property or franchise taxes and other taxes, fees, duties, levies,
withholdings or other charges of any nature whatsoever imposed by any taxing authority, excluding
taxes imposed on or measured by Lender’s net income by the jurisdiction under which Lender is
organized or conducts business (all non-excluded items being called “
Taxes
”). If any
withholding or deduction from any payment to be made by Borrower hereunder is required in respect
of any Taxes pursuant to any applicable law, rule or regulation, then Borrower will: (i) pay
directly to the relevant authority the full amount required to be so withheld or deducted; (ii)
promptly forward to Lender an official receipt or other documentation satisfactory to Lender
evidencing such payment to such authority; and (iii) pay to Lender such additional amount or
amounts as is necessary to ensure that the net amount actually received by Lender will equal the
full amount Lender would have received had no such withholding or deduction been required. If any
Taxes are directly asserted against Lender with respect to any payment received by Lender
hereunder, Lender may pay such Taxes and Borrower will promptly pay such additional amounts
(including any penalty, interest or expense) as is necessary in order that the net amount received
by such Person after the payment of such Taxes (including any Taxes on such additional amount)
shall equal the amount such Person would have received had such Taxes not been asserted so long as
such amounts have accrued on or after the day which is 180 days prior to the date on which Lender
first made demand therefor; provided, that if the event giving rise to such costs or reductions has
retroactive effect, such 180 day period shall be extended to include the period of retroactive
effect.
(b) If Borrower fails to pay any Taxes when due to the appropriate taxing authority or fails
to remit to Lender the required receipts or other required documentary evidence, Borrower shall
indemnify Lender for any incremental Taxes, interest or penalties that may become payable by Lender
as a result of any such failure.
(c) Each Assignee that (i) is organized under the laws of a jurisdiction other than the United
States of America and (ii) becomes an assignee of an interest under this Agreement under
Section 9.8.1
after the Closing Date (unless such Person was already a Lender hereunder
immediately prior to such assignment) shall execute and deliver to Borrower and Lender one or more
(as Borrower or Lender may reasonably request) Forms W-8ECI, W-8BEN, W-8IMY (as applicable) or
other applicable form, certificate or document prescribed by the United States Internal Revenue
Service certifying as to such Person’s entitlement to exemption from withholding or deduction of
Taxes. Borrower shall not be required to pay additional amounts to any Person pursuant to this
Section 3.1
to the extent that the obligation to pay such additional amounts would not have
arisen but for the failure of such Person or Lender to comply with this paragraph.
26
3.2
Increased Cost.
(a) If, after the Closing Date, the adoption of, or any change in, any applicable law, rule or
regulation, or any change in the interpretation or administration of any applicable law, rule or
regulation by any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Lender with any request or directive
(whether or not having the force of law) of any such authority, central bank or comparable agency
shall impose on Lender any other condition affecting its LIBOR Loans, its Note or its obligation to
make LIBOR Loans; and the result of anything described above is to increase the cost to (or to
impose a cost on) Lender of making or maintaining any LIBOR Loan, or to reduce the amount of any
sum received or receivable by Lender under this Agreement or under its Note with respect thereto,
then upon demand by Lender (which demand shall be accompanied by a statement setting forth the
basis for such demand and a calculation of the amount thereof in reasonable detail), Borrower shall
pay directly to Lender such additional amount as will compensate Lender for such increased cost or
such reduction, so long as such amounts have accrued on or after the day which is 180 days prior to
the date on which Lender first made demand therefor; provided, that if the event giving rise to
such costs or reductions has retroactive effect, such 180 day period shall be extended to include
the period of retroactive effect.
(b) If Lender shall reasonably determine that any change in, or the adoption or phase-in of,
any applicable law, rule or regulation regarding capital adequacy, or any change in the
interpretation or administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or the compliance by Lender or
any Person controlling Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on Lender’s or such controlling Person’s capital as
a consequence of Lender’s obligations hereunder to a level below that which Lender or such
controlling Person could have achieved but for such change, adoption, phase-in or compliance
(taking into consideration Lender’s or such controlling Person’s
policies with respect to capital adequacy) by an amount deemed by Lender or such controlling
Person to be material, then from time to time, upon demand by Lender (which demand shall be
accompanied by a statement setting forth the basis for such demand and a calculation of the amount
thereof in reasonable detail), Borrower shall pay to Lender such additional amount as will
compensate Lender or such controlling Person for such reduction, so long as such amounts have
accrued on or after the day which is 180 days prior to the date on which Lender first made demand
therefor; provided, that if the event giving rise to such costs or reductions has retroactive
effect, such 180 day period shall be extended to include the period of retroactive effect.
3.3
Inadequate or Unfair Basis.
If Lender reasonably determines (which determination shall be binding and conclusive on
Borrower) that, by reason of circumstances affecting the interbank Eurodollar market, adequate and
reasonable means do not exist for ascertaining the applicable LIBOR Rate, then Lender shall
promptly notify the Borrower thereof and, so long as such circumstances shall continue, (a) Lender
shall be under no obligation to make or convert any Base Rate Loans into
27
LIBOR Loans and (b) on the
last day of the current Interest Period for each LIBOR Loan, such Loan shall, unless then repaid in
full, automatically convert to a Base Rate Loan.
3.4
Change in Law.
If any change in, or the adoption of any new, law or regulation, or any change in the
interpretation of any applicable law or regulation by any governmental or other regulatory body
charged with the administration thereof, would make it (or in the good faith judgment of Lender
cause a substantial question as to whether it is) unlawful for Lender to make, maintain or fund
LIBOR Loans, then Lender shall promptly notify each of the other parties hereto and, so long as
such circumstances shall continue, (a) Lender shall have no obligation to make or convert any Base
Rate Loan into a LIBOR Loan (but shall make Base Rate Loans in each case in an amount equal to the
amount of LIBOR Loans which would be made or converted into by Lender at such time in the absence
of such circumstances) and (b) on the last day of the current Interest Period for each LIBOR Loan
of Lender (or, in any event, on such earlier date as may be required by the relevant law,
regulation or interpretation), such LIBOR Loan shall, unless then repaid in full, automatically
convert to a Base Rate Loan. Each Base Rate Loan made by Lender which, but for the circumstances
described in the foregoing sentence, would be a LIBOR Loan shall remain outstanding for the period
corresponding to the Interest Period originally applicable to such LIBOR Loan absent such
circumstances.
3.5
Funding Losses.
Borrower hereby agrees that upon demand by Lender (which demand shall be accompanied by a
statement setting forth the basis for the amount being claimed), Borrower will indemnify Lender
against any net loss or expense which Lender may sustain or incur (including any net loss or
expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired
by Lender to fund or maintain any LIBOR Loan), as reasonably determined by Lender, as a result of
(a) any payment, prepayment or conversion of any LIBOR Loan of Lender on a date other than the last
day of an Interest Period for such Loan (including any conversion pursuant to
Section 3.3
or
3.4
) or (b) any failure of Borrower to borrow, convert or
continue any Loan on a date specified therefor in a notice of borrowing, conversion or
continuation pursuant to this Agreement. For the purposes of this
Section 3.5
, all
determinations shall be made as if Lender had actually funded and maintained each LIBOR Loan during
each Interest Period for such Loan through the purchase of deposits having a maturity corresponding
to such Interest Period and bearing an interest rate equal to the LIBOR Rate for such Interest
Period.
3.6
Manner of Funding; Alternate Funding Offices.
Notwithstanding any provision of this Agreement to the contrary, Lender shall be entitled to
fund and maintain its funding of all or any part of its Loans in any manner it may determine at its
sole discretion. Lender may, if it so elects, fulfill its commitment to make any LIBOR Loan by
causing any branch or Affiliate of Lender to make such Loan; provided that in such event for the
purpose of this Agreement, such Loan shall be deemed to have been made by Lender, the obligation of
Borrower to repay such Loan shall nevertheless be to Lender and shall
28
be deemed held by Lender, to
the extent of such Loan, for the account of such branch or Affiliate.
3.7
Mitigation of Circumstances; Replacement of Lender.
(a) Lender shall promptly notify Borrower of any event of which it has knowledge which will
result in, and will use reasonable commercial efforts available to it (and not, in Lender’s sole
judgment, otherwise disadvantageous to Lender) to mitigate or avoid any obligation by Borrower to
pay any amount pursuant to
Sections 3.1
or
3.2
or the occurrence of any
circumstances described in
Sections 3.3
or
3.4
(and, if Lender has given notice of
any such event and thereafter such event ceases to exist, Lender shall promptly so notify
Borrower).
(b) If (i) Borrower becomes obligated to pay additional amounts to Lender pursuant to
Sections 3.1
or
3.2
or the occurrence of any circumstances described in
Sections 3.3
or
3.4
, or (ii) Lender defaults in its obligation to make Revolving
Loans under
Section 2.1.1
, then Borrower may within 90 days thereafter designate another
bank which is acceptable to Lender in Lender’s reasonable discretion (such other bank being called
a “
Replacement Lender
”) to purchase the Loans of Lender and Lender’s rights hereunder,
without recourse to or warranty by, or expense to, Lender, for a purchase price equal to the
outstanding principal amount of the Loans payable to Lender plus any accrued but unpaid interest on
such Loans and all accrued but unpaid fees owed to Lender and any other amounts payable to Lender
under this Agreement, and to assume all the obligations of Lender hereunder, and, upon such
purchase and assumption (pursuant to an Assignment Agreement), Lender shall no longer be a party
hereto or have any rights hereunder (other than rights with respect to indemnities and similar
rights applicable to Lender prior to the date of such purchase and assumption) and shall be
relieved from all obligations to Borrower hereunder, and the Replacement Lender shall succeed to
the rights and obligations of Lender hereunder.
3.8
Conclusiveness of Statements; Survival.
Determinations and statements of Lender pursuant to
Sections 3.1
,
3.2
,
3.3
,
3.4
or
3.5
shall be conclusive absent demonstrable error. Lender may
use reasonable averaging and
attribution methods in determining compensation under
Sections 3.1
,
3.2
and
3.5
and the provisions of such Sections shall survive repayment of the Loans, cancellation
of the Notes and termination of this Agreement.
Section 4.
Conditions Precedent.
The obligation of Lender to make its Loans is subject to the following conditions precedent:
4.1
Initial Credit Extension.
The obligation of Lender to make the initial Loans hereunder is, in addition to the conditions
precedent specified in
Section 4.2
, subject to the following conditions precedent, each of
which shall be satisfactory in all respects to Lender:
29
4.1.1
EBITDA.
EBITDA, as adjusted by adjustments satisfactory to Lender, for the 12 month period ending
[
, 200___
]
shall not be less than
[
$
]
.
4.1.2
Initial Loans; Availability.
Not more than
[
$
]
in Revolving Loans shall be advanced or issued (as applicable) on
the Closing Date, and after giving effect to the consummation of the Related Transactions and
funding of the initial Loans on the Closing Date, Borrowing Availability shall exceed the Revolving
Loans outstanding by at least
[
$
]
.
4.1.3
Debt to be Repaid.
The Debt to be Repaid has been (or concurrently with the initial borrowing will be) paid in
full.
4.1.4
Fees.
Borrower shall have paid all fees, costs and expenses due and payable under this Agreement and
the other Loan Documents on the Closing Date.
4.1.5
Delivery of Loan Documents.
Borrower shall have delivered the following documents in form and substance satisfactory to
Lender (and, as applicable, duly executed by each Loan Party a party thereto and dated the Closing
Date or an earlier date satisfactory to Lender):
(a)
Agreement
. This Agreement.
(b)
Notes
. Notes in favor of Lender representing the Loans.
(c)
Collateral Documents
. The Guarantee and Collateral Agreement, all other
Collateral Documents, and all instruments, documents, certificates and agreements executed or
delivered pursuant thereto (including intellectual property assignments and pledged
Collateral, with undated irrevocable transfer powers executed in blank).
(d)
Financing Statements
. Properly completed Uniform Commercial Code financing
statements and other filings and documents required by law or the Loan Documents to provide Lender
perfected Liens (subject only to Liens permitted pursuant to
Section 7.2
) in the
Collateral.
(e)
Lien Searches
. Copies of Uniform Commercial Code search reports listing all
effective financing statements filed against any Loan Party, with copies of such financing
statements.
(f)
Mortgages
. Mortgages providing Lender perfected Liens (subject only to Liens
permitted pursuant to
Section 7.2
) in the real property Collateral owned by Borrower or
30
any
Subsidiary of Borrower, with ALTA loan title insurance policies issued by insurers reasonably
acceptable to Lender, ALTA surveys and such flood and/or earthquake insurance as Lender may
reasonably request. Additionally, in the case of any leased real property of Borrower or any
Subsidiary of Borrower, a consent, in form and substance satisfactory to Lender, from the
[
owner
and/or mortgagee
]
(a) consenting to the Mortgage of the leasehold interest in favor of Lender with
respect to such property and (b) waiving any landlord’s Lien in respect of personal property kept
at the premises subject to such lease.
(g)
Collateral Access Agreements
. Collateral Access Agreements reasonably requested
by Lender with respect to the Collateral.
(h)
Payoff; Release
. Payoff letters evidencing repayment in full of all Debt to be
Repaid, termination of all agreements relating thereto and the release of all Liens granted in
connection therewith, with Uniform Commercial Code or other appropriate termination statements and
documents effective to evidence the foregoing.
(i)
Letter of Direction
. A letter of direction containing funds flow information,
with respect to the proceeds of the Loans on the Closing Date.
(j)
Authorization Documents
. For each Loan Party, such Person’s (i) charter (or
similar formation document), certified by the appropriate governmental authority, (ii) good
standing certificates in its state of incorporation (or formation) and in each other state
requested by Lender, (iii) bylaws (or similar governing document), (iv) resolutions of its board of
directors (or similar governing body) approving and authorizing such Person’s execution, delivery
and performance of the Loan Documents to which it is party and the transactions contemplated
thereby, and (v) signature and incumbency certificates of its officers executing any of the Loan
Documents, all certified by its secretary or an assistant secretary (or similar officer) as being
in full force and effect without modification.
(k)
Insurance
. Certificates or other evidence of insurance in effect as required by
Section 6.3(b)
, with endorsements naming Lender as loss payee and/or additional insured, as
applicable.
(l)
Financials
. The financial statements, projections and pro forma balance sheet
described in
Section 5.4
.
(m)
Appraisals
. Appraisals of Collateral as reasonably requested by Lender, prepared
by appraisers reasonably satisfactory to Lender.
(n)
Environmental Reports
. Environmental site assessment reports reasonably requested
by Lender, prepared by environmental engineers reasonably satisfactory to Lender.
(o)
Consents
. Evidence that all necessary consents, permits and approvals
(governmental or otherwise, including pursuant to the Hart-Scott-Rodino Act and all related state
anti-trust laws and regulations) required for the execution, delivery and performance by each Loan
Party of the Loan Documents and the Related Transactions have been duly obtained and are in full
force and effect.
31
(p)
[Availability Certificate
. Availability Certificate reflecting required
information as of a date not more than 5 days prior to the Closing Date.]
(q)
Other Documents
. Such other certificates, documents and agreements as Lender may
reasonably request.
4.2
All Credit Extensions.
The obligation of Lender to make each Loan is subject to the additional conditions precedent
that (unless such conditions are waived by Lender), both before and after giving effect to any
borrowing, (a) the representations and warranties of Borrower and each other Loan Party set forth
in this Agreement and the other Loan Documents shall be true and correct in all material respects
with the same effect as if then made (except to the extent stated to relate to a specific earlier
date, in which case such representations and warranties shall be true and correct as of such
earlier date) and (b) no Event of Default or Default shall have then occurred and be continuing.
Each request by Borrower for the making of a Loan shall be deemed to constitute a representation
and warranty by Borrower that the conditions precedent set forth in
Section 4.2
will be
satisfied at the time of the making of such Loan.
Section 5.
Representations and Warranties.
To induce Lender to enter into this Agreement and to induce Lender to make Loans hereunder,
Borrower represents and warrants to Lender that, both before and after giving effect to the Related
Transactions:
5.1
Organization.
Borrower is a corporation validly existing and in good standing under the laws of the State of
[
];
each other Loan Party is validly existing and in good standing under the laws of the
jurisdiction of its organization; and each Loan Party is duly qualified to do business in each
jurisdiction where, because of the nature of its activities or properties, such qualification is
required, except for such jurisdictions where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect.
5.2
Authorization; No Conflict.
Each of Borrower and each other Loan Party is duly authorized to execute and deliver each Loan
Document and each Related Agreement to which it is a party, Borrower is duly authorized to borrow
monies hereunder, and each of Borrower and each other Loan Party is duly authorized to perform its
Obligations under each Loan Document to which it is a party. The execution, delivery and
performance by Borrower of this Agreement and by each of Borrower and each other Loan Party of each
Loan Document to which it is a party, and the borrowings by Borrower hereunder, do not and will not
(a) require any consent or approval of any governmental agency or authority (other than any consent
or approval which has been obtained and is in full force and effect), (b) conflict with (i) any
provision of applicable law, (ii) the charter, by-laws or other organizational documents of
Borrower or any other Loan Party or (iii) any agreement, indenture, instrument or other document,
or any judgment, order or decree, which is binding upon Borrower or any other Loan Party or any of
their respective properties or (c) require, or
32
result in, the creation or imposition of any Lien on
any asset of Borrower, any Subsidiary or any other Loan Party (other than Liens in favor of Lender
created pursuant to the Collateral Documents).
5.3
Validity; Binding Nature.
Each of this Agreement and each other Loan Document to which Borrower or any other Loan Party
is a party is the legal, valid and binding obligation of such Person, enforceable against such
Person in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting
the enforceability of creditors’ rights generally and to general principles of equity.
5.4
Financial Condition.
(a) The audited consolidated financial statements of Borrower and the Subsidiaries as at its
Fiscal Years ending
[
]
(the “
Balance Sheet Date
”) and
[
]
, and the
unaudited consolidated financial statements of Borrower and the Subsidiaries as at
[
]
,
copies of each of which have been delivered pursuant hereto, were prepared in accordance with GAAP
(subject, in the case of such unaudited statements, to the absence of footnotes and to normal
year-end adjustments) and present fairly the consolidated financial condition of such Persons as at
such dates and the results of their operations for the periods then ended.
(b) The consolidated financial projections (including an operating budget and a cash flow
budget) of Borrower and the Subsidiaries for the
[
___
]
year period commencing
[
___, 2006
]
delivered to Lender on or prior to the Closing Date (i) were prepared by Borrower in good faith and
(ii) were prepared in accordance with assumptions for which Borrower has a reasonable basis, and
the accompanying consolidated pro forma balance sheet of Borrower and the Subsidiaries as at the
Closing Date, adjusted to give effect to the consummation of the Related Transactions and the
financings contemplated hereby as if such transactions had occurred on such date, is consistent in
all material respects with such projections.
5.5
No Material Adverse Change.
Since the Balance Sheet Date, there has been no material adverse change in the financial
condition, operations, assets, business, properties or prospects of the Loan Parties taken as a
whole.
5.6
Litigation.
No litigation (including derivative actions), arbitration proceeding or governmental
investigation or proceeding is pending or, to Borrower’s knowledge, threatened against any Loan
Party which could reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect, except as set forth in
Schedule 5.6
. As of the Closing Date,
other than any liability incident to such litigation or proceedings, neither Borrower nor any other
Loan Party has any material Contingent Obligations not listed on
Schedule 7.1
.
33
5.7
Ownership of Properties; Liens.
Each of Borrower and each other Loan Party owns good and, in the case of real property,
marketable title to all of its properties and assets, real and personal, tangible and intangible,
of any nature whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and claims (including infringement claims with
respect to patents, trademarks, service marks, copyrights and the like), except as permitted by
Section 7.2
.
5.8
Capitalization.
All issued and outstanding equity securities of Borrower and the other Loan Parties are duly
authorized and validly issued, fully paid, non-assessable, and free and clear of all Liens other
than those in favor of Lender, and such securities were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
Schedule 5.8
sets forth the
authorized equity securities of each Loan Party as of the Closing Date. All of the issued and
outstanding equity of Holdings is owned as set forth on
Schedule 5.8
as of the Closing
Date, all of the issued and outstanding equity of Borrower is owned by Holdings, and all of the
issued and outstanding equity of each Subsidiary is, directly or indirectly, owned by Borrower. As
of the Closing Date, except as set forth on
Schedule 5.8
, there are no pre-emptive or other
outstanding rights, options, warrants, conversion rights or other similar agreements or
understandings for the purchase or acquisition of any equity interests of Borrower or any other
Loan Party.
5.9
Pension Plans.
During the twelve-consecutive-month period prior to the Closing Date or the making of any
Loan, (i) no steps have been taken to terminate any Pension Plan and (ii) no contribution failure
has occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with respect to any
Pension Plan which could result in the incurrence by Borrower or any other Loan Party of any
material liability, fine or penalty. All contributions (if any) have been made to any
Multiemployer Pension Plan that are required to be made by any Loan Party or any other member of
the Controlled Group under the terms of the plan or of any collective bargaining
agreement or by applicable law; neither any Loan Party nor any member of the Controlled Group
has withdrawn or partially withdrawn from any Multiemployer Pension Plan, incurred any withdrawal
liability with respect to any such plan or received notice of any claim or demand for withdrawal
liability or partial withdrawal liability from any such plan, and no condition has occurred which,
if continued, could result in a withdrawal or partial withdrawal from any such plan, and neither
any Loan Party nor any member of the Controlled Group has received any notice that any
Multiemployer Pension Plan is in reorganization, that increased contributions may be required to
avoid a reduction in plan benefits or the imposition of any excise tax, that any such plan is or
has been funded at a rate less than that required under Section 412 of the IRC, that any such plan
is or may be terminated, or that any such plan is or may become insolvent.
34
5.10
Investment Company Act.
Neither Borrower nor any other Loan Party is an “investment company” within the meaning of the
Investment Company Act of 1940.
5.11
Public Utility Holding Company Act.
Neither Borrower nor any other Loan Party is a “holding company”, or a “subsidiary company” of
a “holding company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a
“holding company”, within the meaning of the Public Utility Holding Company Act of 1935.
5.12
Margin Stock.
Neither Borrower nor any other Loan Party is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or carrying Margin
Stock. No portion of the Obligations is secured directly or indirectly by Margin Stock.
5.13
Taxes.
Each of Borrower and each other Loan Party has filed all tax returns and reports required by
law to have been filed by it and has paid all taxes and governmental charges thereby shown to be
owing, except any such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set
aside on its books.
5.14
Solvency.
On the Closing Date, and immediately prior to and after giving effect to each borrowing
hereunder and the use of the proceeds thereof, with respect to each of Borrower and each other Loan
Party, individually, (a) the fair value of its assets is greater than the amount of its liabilities
(including disputed, contingent and unliquidated liabilities) as such value is established and
liabilities evaluated, (b) the present fair saleable value of its assets is not less than the
amount that will be required to pay the probable liability on its debts as they become absolute and
matured, (c) it is able to realize upon its assets and pay its debts and other liabilities
(including disputed, contingent and unliquidated liabilities) as they mature in the normal course
of business, (d) it does not intend to, and does not believe that it will, incur debts or
liabilities
beyond its ability to pay as such debts and liabilities mature and (e) it is not engaged in
business or a transaction, and is not about to engage in business or a transaction, for which its
property would constitute unreasonably small capital.
5.15
Environmental Matters.
The on-going operations of Borrower and each other Loan Party comply in all respects with all
Environmental Laws, except such non-compliance which could not (if enforced in accordance with
applicable law) reasonably be expected to result in a Material Adverse Effect. Borrower and each
other Loan Party have obtained, and maintained in good standing, all licenses, permits,
authorizations and registrations required under any Environmental Law and
35
necessary for their
respective ordinary course operations, and Borrower and each other Loan Party are in compliance
with all material terms and conditions thereof, except where the failure to do so could not
reasonably be expected to result in material liability to Borrower or any other Loan Party and
could not reasonably be expected to result in a Material Adverse Effect. None of Borrower, any
other Loan Party or any of their respective properties or operations is subject to any outstanding
written order from or agreement with any Federal, state or local governmental authority, nor
subject to any judicial or docketed administrative proceeding, respecting any Environmental Law,
Environmental Claim or Hazardous Substance. There are no Hazardous Substances or other conditions
or circumstances existing with respect to any property, or arising from operations prior to the
Closing Date, of Borrower or any other Loan Party that could reasonably be expected to result in a
Material Adverse Effect. Neither Borrower nor any other Loan Party has any underground storage
tanks that are not properly registered or permitted under applicable Environmental Laws or that are
leaking or disposing of Hazardous Substances.
5.16
Insurance.
Borrower and each other Loan Party and their respective properties are insured with
financially sound and reputable insurance companies which are not Affiliates of Borrower, in such
amounts, with such deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where Borrower or such
other Loan Party operates. A true and complete listing of such insurance as of the Closing Date,
including issuers, coverages and deductibles, is set forth on
Schedule 5.16
.
5.17
Information.
All information heretofore or contemporaneously herewith furnished in writing by Borrower or
any other Loan Party to Lender for purposes of or in connection with this Agreement and the
transactions contemplated hereby is, and all written information hereafter furnished by or on
behalf of Borrower or any Loan Party to Lender pursuant hereto or in connection herewith will be,
true and accurate in every material respect on the date as of which such information is dated or
certified, and none of such information is or will be incomplete by omitting to state any material
fact necessary to make such information not misleading in light of the circumstances under which
made (it being recognized by Lender that any projections and forecasts provided by Borrower are
based on good faith estimates and assumptions believed by Borrower to be reasonable as of the date
of the applicable projections or assumptions and that
actual results during the period or periods covered by any such projections and forecasts may
differ from projected or forecasted results).
5.18
Intellectual Property.
Borrower and each other Loan Party owns and possesses or has a license or other right to use
all patents, patent rights, trademarks, trademark rights, trade names, trade name rights, service
marks, service mark rights and copyrights as are necessary for the conduct of the business of
Borrower and the other Loan Parties, without any infringement upon rights of others which could
reasonably be expected to have a Material Adverse Effect.
36
5.19
Restrictive Provisions.
Neither Borrower nor any other Loan Party is a party to any agreement or contract or subject
to any restriction contained in its operative documents which could reasonably be expected to have
a Material Adverse Effect.
5.20
Labor Matters.
Except as set forth on
Schedule 5.20
, neither Borrower nor any other Loan Party is
subject to any labor or collective bargaining agreement. There are no existing or threatened
strikes, lockouts or other labor disputes involving Borrower or any other Loan Party that singly or
in the aggregate could reasonably be expected to have a Material Adverse Effect. Hours worked by
and payment made to employees of Borrower and the other Loan Parties are not in any material
respect in violation of the Fair Labor Standards Act or any other applicable law, rule or
regulation dealing with such matters.
5.21
No Default.
No Event of Default or Default exists or would result from the incurrence by any Loan Party of
any Debt hereunder or under any other Loan Document.
Section 6.
Affirmative Covenants.
Until the expiration or termination of the Commitments and thereafter until all Obligations
(other than contingent indemnification obligations to the extent no claim giving rise thereto has
been asserted) of Borrower and the other Loan Parties hereunder and under the other Loan Documents
are Paid in Full, Borrower agrees that, unless at any time Lender shall otherwise expressly consent
in writing, it will:
6.1
Information
.
Furnish to Lender:
6.1.1 Annual Report.
—
Promptly when available and in any event within 90 days after the close of each Fiscal Year:
(a) a copy of the annual audit report of Holdings, Borrower and the Subsidiaries for
such Fiscal Year, including therein a consolidated balance sheet and statement of earnings and
cash flows of Holdings, Borrower and the Subsidiaries as at the end of such Fiscal Year, certified
without qualification (except for qualifications relating to changes in accounting principles or
practices reflecting changes in generally accepted principles of accounting and required or
approved by Borrower’s independent certified public accountants) by independent auditors of
recognized standing selected by Borrower and reasonably acceptable to Lender; and (b) a
consolidating balance sheet of Holdings, Borrower and the Subsidiaries as of the end of such Fiscal
Year and consolidating statements of earnings and cash flows for Holdings, Borrower and the
Subsidiaries for such Fiscal Year, together with a comparison of actual results for such Fiscal
Year with the budget for such Fiscal Year, each certified by the chief financial officer of
Borrower.
37
6.1.2
Interim Reports.
Promptly when available and in any event within 30 days after the end of each month, (i)
consolidated and consolidating balance sheets of Holdings, Borrower and the Subsidiaries as of the
end of such month, together with consolidated and consolidating statements of earnings and a
consolidated and consolidating statement of cash flows for such month and for the period beginning
with the first day of such Fiscal Year and ending on the last day of such month, together with a
comparison with the corresponding period of the previous Fiscal Year and a comparison with the
budget for such period of the current Fiscal Year, certified by the chief financial officer of
Borrower, and (ii) a written statement of Borrower’s management setting forth a discussion of
Borrower’s financial condition, changes in financial condition and results of operations.
6.1.3
Compliance Certificate.
Contemporaneously with the furnishing of a copy of each annual audit report pursuant to
Section 6.1.1
and each set of interim reports issued at the end of each Fiscal Quarter
pursuant to
Section 6.1.2
a duly completed Compliance Certificate, with appropriate
insertions, dated the date of such annual report or such quarterly statements, and signed by the
chief financial officer of Borrower, containing a computation of the financial ratios and
restrictions set forth in
Section 7.14
and to the effect that such officer has not become
aware of any Event of Default or Default that has occurred and is continuing or, if there is any
such event, describing it and the steps, if any, being taken to cure it
6.1.4
Notice of Default; Litigation; ERISA Matters.
Promptly upon becoming aware of any of the following, written notice describing the same and
the steps being taken by Borrower or the applicable Loan Party affected thereby with respect
thereto:
(a) the occurrence of an Event of Default or a Default;
(b) any litigation, arbitration or governmental investigation or proceeding not previously
disclosed by Borrower to Lender which has been instituted or, to the knowledge of Borrower, is
threatened against Borrower or any other Loan Party or to which any of the
properties of any thereof is subject which could reasonably be expected to have a Material
Adverse Effect;
(c) the institution of any steps by any member of the Controlled Group or any other Person to
terminate any Pension Plan, or the failure of any member of the Controlled Group to make a required
contribution to any Pension Plan (if such failure is sufficient to give rise to a Lien under
Section 302(f) of ERISA) or to any Multiemployer Pension Plan, or the taking of any action with
respect to a Pension Plan which could result in the requirement that Borrower or any other Loan
Party furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any
event with respect to any Pension Plan or Multiemployer Pension Plan which could result in the
incurrence by any member of the Controlled Group of any material liability, fine or penalty
(including any claim or demand for withdrawal liability or partial withdrawal from any
Multiemployer Pension Plan), or any material increase in the
38
contingent liability of Borrower or
any other Loan Party with respect to any post-retirement welfare plan benefit, or any notice that
any Multiemployer Pension Plan is in reorganization, that increased contributions may be required
to avoid a reduction in plan benefits or the imposition of an excise tax, that any such plan is or
has been funded at a rate less than that required under Section 412 of the IRC, that any such plan
is or may be terminated, or that any such plan is or may become insolvent;
(d) any cancellation or material change in any insurance maintained by Borrower or any other
Loan Party; or
(e) any other event (including (i) any violation of any Environmental Law or the assertion of
any Environmental Claim or (ii) the enactment or effectiveness of any law, rule or regulation)
which could reasonably be expected to have a Material Adverse Effect.
6.1.5
Management Report.
Promptly upon receipt thereof, copies of all detailed financial and management reports
submitted to Borrower or any other Loan Party by independent auditors in connection with each
annual or interim audit made by such auditors of the books of Borrower or any other Loan Party.
6.1.6
[Reserved].
6.1.7
Non-Senior Debt Notices.
Promptly following receipt, copies of any notices (including notices of default or
acceleration) received from any holder or trustee of, under or with respect to any Non-Senior Debt.
6.1.8
Other Information.
Promptly from time to time, such other information concerning Borrower and any other Loan
Party as Lender may reasonably request.
6.1.9
[Availability Certificate.
Within 10 days of the end of each month, an Availability Certificate dated as of the end of
the most recently ended month and executed by the chief financial officer of Borrower on behalf of
Borrower; provided that at any time an Event of Default exists, Lender may require Borrower to
deliver Availability Certificates more frequently.]
6.2
Books; Records; Inspections.
Keep, and cause each other Loan Party to keep, its books and records in accordance with sound
business practices sufficient to allow the preparation of financial statements in accordance with
GAAP; permit, and cause each other Loan Party to permit, Lender or any representative thereof to
inspect the properties and operations of Borrower or such other Loan Party; and permit, and cause
each other Loan Party to permit, at any reasonable time and
39
with reasonable notice (or at any time
without notice if an Event of Default exists), Lender or any representative thereof to visit any or
all of its offices, to discuss its financial matters with its officers and its independent auditors
(and Borrower hereby authorizes such independent auditors to discuss such financial matters with
Lender or any representative thereof), and to examine (and, at the expense of Borrower or the
applicable Loan Party, photocopy extracts from) any of its books or other records; and permit, and
cause each other Loan Party to permit, Lender and its representatives to inspect the Collateral and
other tangible assets of Borrower or such Loan Party, to perform appraisals of the equipment of
Borrower or such Party, and to inspect, audit, check and make copies of and extracts from the
books, records, computer data, computer programs, journals, orders, receipts, correspondence and
other data relating to any Collateral. All such inspections or audits by Lender shall be at
Borrower’s expense, provided that so long as no Event of Default or Default exists, Borrower shall
not be required to reimburse Lender for appraisals more frequently than once each Fiscal Year.
6.3
Maintenance of Property; Insurance.
(a) Keep, and cause each other Loan Party to keep, all property useful and necessary in the
business of Borrower or such other Loan Party in good working order and condition, ordinary wear
and tear excepted.
(b) Maintain, and cause each other Loan Party to maintain, with responsible insurance
companies, such insurance coverage as shall be required by all laws, governmental regulations and
court decrees and orders applicable to it and such other insurance, to such extent and against such
hazards and liabilities, as is customarily maintained by companies similarly situated; provided
that in any event, such insurance shall insure against all risks and liabilities of the type
insured against as of the Closing Date and shall have insured amounts no less than, and deductibles
no higher than, those amounts provided for as of the Closing Date. Upon request of Lender,
Borrower shall furnish to Lender a certificate setting forth in reasonable detail the nature and
extent of all insurance maintained by Borrower and each other Loan Party. Borrower shall cause
each issuer of an insurance policy to provide Lender with an endorsement (i) showing Lender as a
loss payee with respect to each policy of property or casualty insurance and naming Lender as an
additional insured with respect to each policy of liability insurance, (ii) providing that 30 days’
notice will be given to Lender prior to any cancellation of, or reduction or change
in coverage provided by or other material modification to such policy and (iii) reasonably
acceptable in all other respects to Lender. Borrower shall execute and deliver to Lender a
collateral assignment, in form and substance satisfactory to Lender, of each business interruption
insurance policy maintained by the Loan Parties.
(c) Unless Borrower provides Lender with evidence of the continuing insurance coverage
required by this Agreement, Lender may purchase insurance at Borrower’s expense to protect Lender’s
interests in the Collateral. This insurance may, but need not, protect Borrower’s and each other
Loan Party’s interests. The coverage that Lender purchases may, but need not, pay any claim that
is made against Borrower or any other Loan Party in connection with the Collateral. Borrower may
later cancel any insurance purchased by Lender, but only after providing Lender with evidence that
Borrower has obtained the insurance coverage required by this Agreement. If Lender purchases
insurance for the Collateral, as set forth above, Borrower will be responsible for the costs of
that insurance, including interest and any other charges that
40
may be imposed with the placement of
the insurance, until the effective date of the cancellation or expiration of the insurance and the
costs of the insurance may be added to the principal amount of the Loans owing hereunder.
6.4
Compliance with Laws; Payment of Taxes and Liabilities.
Comply, and cause each other Loan Party to comply, in all material respects with all
applicable laws, rules, regulations, decrees, orders, judgments, licenses and permits, except where
failure to comply could not reasonably be expected to have a Material Adverse Effect; (b) without
limiting clause (a) above, ensure, and cause each other Loan Party to ensure, that no person who
owns a controlling interest in or otherwise controls a Loan Party is or shall be (i) listed on the
Specially Designated Nationals and Blocked Person List maintained by the Office of Foreign Assets
Control (“
OFAC
”), Department of the Treasury, and/or any other similar lists maintained by
OFAC pursuant to any authorizing statute, Executive Order or regulation or (ii) a person designated
under Section 1(b), (c) or (d) or Executive Order No. 13224 (September 23, 2001), any related
enabling legislation or any other similar Executive Orders; (c) without limiting clause (a) above,
comply and cause each other Loan Party to comply, with all applicable Bank Secrecy Act and
anti-money laundering laws and regulations and (d) pay, and cause each other Loan Party to pay,
prior to delinquency, all taxes and other governmental charges against it or any of its property,
as well as claims of any kind which, if unpaid, could become a Lien on any of its property;
provided that the foregoing shall not require Borrower or any other Loan Party to pay any such tax
or charge so long as it shall contest the validity thereof in good faith by appropriate proceedings
and shall set aside on its books adequate reserves with respect thereto in accordance with GAAP.
6.5
Maintenance of Existence.
Maintain and preserve, and (subject to
Section 7.5
) cause each other Loan Party to
maintain and preserve, (a) its existence and good standing in the jurisdiction of its organization
and (b) its qualification to do business and good standing in each jurisdiction where the nature of
its business makes such qualification necessary, other than any such jurisdiction where the failure
to be qualified or in good standing could not reasonably be expected to have a Material Adverse
Effect.
6.6
Employee Benefit Plans.
Maintain, and cause each other Loan Party to maintain, each Pension Plan in substantial
compliance with all applicable requirements of law and regulations.
6.7
Environmental Matters.
If any release or disposal of Hazardous Substances shall occur or shall have occurred on any
real property or any other assets of Borrower or any other Loan Party, cause, or direct the
applicable Loan Party to cause, the prompt containment and removal of such Hazardous Substances and
the remediation of such real property or other assets as is necessary to comply with all
Environmental Laws and to preserve the value of such real property or other assets. Without
limiting the generality of the foregoing, Borrower shall, and shall cause each other Loan Party to,
comply with each valid Federal or state judicial or administrative order
41
requiring the performance
at any real property by Borrower or any other Loan Party of activities in response to the release
or threatened release of a Hazardous Substance.
6.8
Further Assurances.
Take, and cause each other Loan Party to take, such actions as are necessary or as Lender may
reasonably request from time to time to ensure that the Obligations of Borrower and each other Loan
Party under the Loan Documents are secured by substantially all of the assets of Borrower and each
Loan Party (as well as all equity interests of Borrower and each Subsidiary) and guaranteed by each
Loan Party (including, promptly upon the acquisition or creation thereof, any Subsidiary acquired
or created after the Closing Date), in each case including (a) the execution and delivery of
guaranties, security agreements, pledge agreements, mortgages, deeds of trust, financing statements
and other documents, and the filing or recording of any of the foregoing and (b) the delivery of
certificated securities and other Collateral with respect to which perfection is obtained by
possession.
Section 7.
Negative Covenants.
Until the expiration or termination of the Commitments and thereafter until all Obligations
(other than contingent indemnification obligations to the extent no claim giving rise thereto has
been asserted) of Borrower and the other Loan Parties hereunder and under the other Loan Documents
are Paid in Full, Borrower agrees that, unless at any time Lender shall otherwise expressly consent
in writing, it will:
7.1
Debt.
Not, and not permit any other Loan Party to, create, incur, assume or suffer to exist any
Debt, except:
(a) Obligations under this Agreement and the other Loan Documents;
(b) Debt secured by Liens permitted by
Section 7.2(d)
, and extensions, renewals and
refinancings thereof; provided that the aggregate amount of all such Debt at any time outstanding
shall not exceed $250,000;
(c) Debt of Borrower to any domestic Wholly-Owned Subsidiary or Debt of any domestic
Wholly-Owned Subsidiary to Borrower or another domestic Wholly-Owned Subsidiary; provided that such
Debt shall be evidenced by a demand note in form and substance reasonably satisfactory to Lender
and pledged and delivered to Lender pursuant to the Guarantee and Collateral Agreement as
additional collateral security for the Obligations, and the obligations under such demand note
shall be subordinated to the Obligations hereunder in a manner reasonably satisfactory to Lender;
(d) Debt described on
Schedule 7.1
as of the Closing Date, and any extension, renewal
or refinancing thereof so long as the principal amount thereof is not increased;
(e) an aggregate outstanding amount of unsecured Non-Senior Debt not at any time exceeding
$200,000 (exclusive of Debt permitted under
Section 7.1(c)
);
42
(f) Contingent Obligations arising with respect to customary indemnification obligations in
favor of purchasers in connection with Dispositions permitted under
Section 7.5
;
(g) [the U. S. Bank Letter of Credit Obligations
4
];
(h) other Debt, in addition to the Debt listed above, in an aggregate outstanding amount not
at any time exceeding $100,000.
7.2
Liens.
Not, and not permit any other Loan Party to, create or permit to exist any Lien on any of its
real or personal properties, assets or rights of whatsoever nature (whether now owned or hereafter
acquired), except:
(a) Liens for taxes or other governmental charges not at the time delinquent or thereafter
payable without penalty or being diligently contested in good faith by appropriate proceedings and,
in each case, for which it maintains adequate reserves in accordance with GAAP and the execution or
other enforcement of which is effectively stayed;
(b) Liens arising in the ordinary course of business (such as (i) Liens of carriers,
warehousemen, mechanics, landlords and materialmen and other similar Liens imposed by law and (ii)
Liens incurred in connection with worker’s compensation, unemployment compensation and other types
of social security (excluding Liens arising under ERISA) or in connection with surety bonds, bids,
performance bonds and similar obligations) for sums not overdue or being diligently contested in
good faith by appropriate proceedings and not involving any deposits or advances or borrowed money
or the deferred purchase price of property or services and, in each case, for which it maintains
adequate reserves in accordance with GAAP and the execution or other enforcement of which is
effectively stayed;
(c) Liens described on
Schedule 7.2
as of the Closing Date;
(d) subject to the limitation set forth in
Section 7.1(b)
, (i) Liens arising in
connection with Capital Leases (and attaching only to the property being leased), (ii) Liens
existing on property at the time of the acquisition thereof by Borrower or any Subsidiary (and not
created in contemplation of such acquisition) and (iii) Liens that constitute purchase money
security interests on any property securing debt incurred for the purpose of financing all or any
part of the cost of acquiring such property, provided that any such Lien attaches to such property
within 60 days of the acquisition thereof and attaches solely to the property so acquired;
(e) attachments, appeal bonds, judgments and other similar Liens, for sums not exceeding
$100,000 arising in connection with court proceedings; provided that the execution or other
enforcement of such Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
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4
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Note: Applicable only to the CBS Personnel
Credit Agreement; capitalized term to be defined]
|
43
(f) easements, rights of way, restrictions, minor defects or irregularities in title and other
similar Liens not interfering in any material respect with the ordinary conduct of the business of
Borrower or any Subsidiary;
(g) Liens arising under the Loan Documents;
(h) [Liens on Accounts and securing the Indebtedness permitted under
Section 7.1(g)
;]
and
(i) the replacement, extension or renewal of any Lien permitted by clause (c) above upon or in
the same property subject thereto arising out of the extension, renewal or replacement of the Debt
secured thereby (without increase in the amount thereof).
7.3
Operating Leases.
Not permit the aggregate amount of all rental payments under Operating Leases made (or
scheduled to be made) by Borrower and the Subsidiaries (on a consolidated basis) to exceed
[
$
]
in any Fiscal Year.
7.4
Restricted Payments.
Not, and not permit any other Loan Party to, (a) make any dividend or other distribution to
any of its equity holders, (b) purchase or redeem any of its equity interests or any warrants,
options or other rights in respect thereof, (c) except for payments to Manager and
[
]
, pay
any management fees or similar fees to any of its equity holders or any Affiliate thereof, (d) make
any redemption, prepayment (whether mandatory or optional), defeasance, repurchase or any other
payment in respect of any Non-Senior Debt or (e) set aside funds for any of the foregoing.
Notwithstanding the foregoing, (i) any Subsidiary may pay dividends or make other distributions to
Borrower or to a domestic Wholly-Owned Subsidiary; (ii) so long as no Event of Default exists or
would result therefrom, Borrower may make distributions to Holdings to permit Holdings to pay
federal and state income taxes then due and owing by Holdings (or its equity holders), so long as
the amount of such distributions shall not be greater, nor the receipt by Borrower of tax benefits
less, than they would have been had Borrower not filed consolidated income tax returns with such
Person; (iii) in each case to the extent due and payable on a non-accelerated basis and permitted
under any applicable subordination provisions thereof, Borrower
may make regularly scheduled payments of interest in respect of Non-Senior Debt; (iv) any Loan
Party may make repurchases of capital stock deemed to occur upon the exercise of options or
warrants (i.e., a cashless exercise); and (v) any Loan Party may repurchase or redeem capital stock
from any former officers, directors and employees (or their estates, spouses or former spouses) of
any Loan Party in connection with the termination of such Person’s employment (or such directors’
directorship) with the Loan Party; provided that, in connection with such transactions, the total
cash payments under this
Section
shall not exceed
[
$
]
in the aggregate during any
Fiscal Year; provided, further, that all Term B Loans shall be paid in accordance with the terms of
this Agreement and any restriction imposed on Non-Senior Debt by this
Section 7.4
shall not
apply to the Term B Loans.
44
7.5
Mergers; Consolidations; Asset Sales.
(a) Not, and not permit any other Loan Party to, be a party to any merger or consolidation,
except for any such merger or consolidation of any Subsidiary into Borrower or any domestic
Wholly-Owned Subsidiary.
(b) Not, and not permit any other Loan Party to, sell, transfer, dispose of, convey or lease
any of its assets or equity interests, or sell or assign with or without recourse any receivables,
except for (i) sales of Inventory in the ordinary course of business and (ii) sales and
dispositions of assets (excluding any equity interests of Borrower or any Subsidiary) for at least
fair market value (as determined by the Board of Directors of Borrower) so long as the net book
value of all assets sold or otherwise disposed of in any Fiscal Year does not exceed 10% of the net
book value of the consolidated assets of Borrower and the Subsidiaries as of the last day of the
preceding Fiscal Year.
7.6
Modification of Organizational Documents.
Not permit the charter, by-laws or other organizational documents of Borrower or any other
Loan Party to be amended or modified in any way which could reasonably be expected to materially
adversely affect the interests of Lender.
7.7
Use of Proceeds.
Use the proceeds of the Loans solely to prepay or repay the Debt to be Repaid, for working
capital, for Capital Expenditures and for other general business purposes of Borrower and the
Subsidiaries [and to redeem common stock and terminate stock options of CBS Personnel Holdings,
Inc. on the Closing Date pursuant to the Related Transactions]; and not use or permit any proceeds
of any Loan to be used, either directly or indirectly, for the purpose, whether immediate,
incidental or ultimate, of “purchasing or carrying” any Margin Stock.
7.8
Transactions with Affiliates.
Not, and not permit any other Loan Party to, enter into, or cause, suffer or permit to exist
any transaction, arrangement or contract with any of its other Affiliates, which is on terms which
are less favorable than are obtainable from any Person which is not one of its Affiliates.
7.9
Inconsistent Agreements.
Not, and not permit any other Loan Party to, enter into any agreement containing any provision
which would (a) be violated or breached by any borrowing by Borrower hereunder or by the
performance by Borrower or any other Loan Party of any of its Obligations hereunder or under any
other Loan Document, (b) prohibit Borrower or any other Loan Party from granting to Lender a Lien
on any of its assets or (c) create or permit to exist or become effective any encumbrance or
restriction on the ability of any other Loan Party to (i) pay dividends or make other distributions
to Borrower or any other Subsidiary, or pay any Debt owed to Borrower or any other Subsidiary, (ii)
make loans or advances to Borrower or any other Loan Party or (iii) transfer any of its assets or
properties to Borrower or any other Loan Party other than
45
(A) customary restrictions and conditions contained in agreements relating to the sale of all or a
substantial part of the capital stock or assets of any Subsidiary pending such sale, provided such
restrictions and conditions apply only to the Subsidiary to be sold and such sale is permitted
hereunder (B) restrictions or conditions imposed by any agreement relating to purchase money Debt,
Capital Leases and other secured Debt permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Debt and (C) customary provisions in
leases and other contracts restricting the assignment thereof.
7.10
Business Activities.
Not, and not permit any other Loan Party to, engage in any line of business other than the
businesses engaged in on the Closing Date and businesses reasonably related thereto. Not, and not
permit any other Loan Party to, issue any equity interest other than (a) any issuance of shares of
Holdings’ common equity securities pursuant to any employee or director option or stock purchase
program, benefit plan or compensation program, or (b) any issuance by a Subsidiary to Borrower or
another Subsidiary in accordance with
Section 7.4
.
7.11
Investments.
Not, and not permit any other Loan Party to, make or permit to exist any Investment in any
other Person or create or establish any Subsidiary (other than any Subsidiary formed in compliance
with
Section 7.16
), except the following:
(a) contributions by Borrower to the capital of any Wholly-Owned Subsidiary in existence on
the Closing Date that is also a Domestic Subsidiary, or by any Subsidiary to the capital of any
other Wholly-Owned Subsidiary in existence on the Closing Date that is also a Domestic Subsidiary,
so long as the recipient of any such capital contribution has guaranteed the Obligations and such
guaranty is secured by a pledge of all of its equity interests and substantially all of its real
and personal property, in each case in accordance with
Section 6.8
;
(b) Investments constituting Debt permitted by
Section 7.1(c)
;
(c) Contingent Obligations constituting Debt permitted by
Section 7.1
or Liens
permitted by
Section 7.2
;
(d) Cash Equivalent Investments;
(e) bank deposits in the ordinary course of business;
(f) Investments in securities of Account Debtors received pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy or insolvency of such Account Debtors;
(g) Investments listed on
Schedule 7.11
as of the Closing Date; and
(h) any purchase or other acquisition by Borrower or any Wholly-Owned Subsidiary that is also
a Domestic Subsidiary of the assets or equity interests of any Domestic Subsidiary.
46
7.12
Restriction of Amendments to Certain Documents.
Not amend or otherwise modify, or
waive any rights under (a) any Related Agreement, other than
immaterial amendments, modifications and waivers not adverse to the interests of Lender or (b) any
provisions of any Non-Senior Debt (other than Term B Loans, which amendment, modification or waiver
of rights shall be governed by this Agreement).
7.13
Fiscal Year.
Not change its Fiscal Year.
7.14
Financial Covenants.
1
7.14.1
Fixed Charge Coverage Ratio.
Not permit the Fixed Charge Coverage Ratio for any Computation Period to be less than the
applicable ratio set forth below for such Computation Period:
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Computation
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Fixed Charge
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Period Ending
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|
Coverage Ratio
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[dates and levels to
come]
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7.14.2
Senior Debt to EBITDA Ratio.
Not permit the Senior Debt to EBITDA Ratio as of the last day of any Computation Period to
exceed the applicable ratio set forth below for such Computation Period:
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Computation
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|
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|
Senior Debt to
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Period Ending
|
|
|
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EBITDA Ratio
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[dates and levels to come]
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7.14.3
Total Debt to EBITDA Ratio.
Not permit the Total Debt to EBITDA Ratio as of the last day of any Computation Period to
exceed the applicable ratio set forth below for such Computation Period:
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Computation
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|
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|
Total Debt to
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Period Ending
|
|
|
|
EBITDA Ratio
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[dates and levels to come]
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1
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Note: One or more of these financial
covenants will be included in each of the Credit Agreements.
|
47
7.14.4
Capital Expenditures.
Not permit the aggregate amount of all Capital Expenditures made by Borrower and the
Subsidiaries in any Fiscal Year to exceed the applicable amount set forth below for such Fiscal
Year:
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Capital
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Fiscal Year
|
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Expenditures
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[dates and levels to come]
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If Borrower does not utilize the entire amount of Capital Expenditures permitted in any Fiscal
Year, so long as no Default or Event of Default exists or would be caused thereby, Borrower may
carry forward to the immediately succeeding Fiscal Year only, 50% of such un-utilized amount (with
Capital Expenditures made by Borrower in such succeeding Fiscal Year applied last to such
unutilized amount).
7.15
Bank Accounts.
Not, and not permit any other Loan Party, to maintain or establish any new bank accounts other
than the bank accounts set forth on
Schedule 7.15
without prior written notice to Lender
and unless Lender, Borrower or such other Loan Party and the bank at which the account is to be
opened enter into a tri-party agreement regarding such bank account pursuant to which such bank
acknowledges the security interest and control of Lender in such bank account and agrees to limit
its set-off rights on terms satisfactory to Lender and otherwise acceptable to Lender.
7.16
Subsidiaries.
Not, and not permit any other Loan Party, to establish or acquire any Subsidiary unless the
Loan Parties shall have caused such new Subsidiary to take all actions pursuant to
Section
6.8
hereof with respect to such Subsidiary and such other actions as reasonably requested by
Lender, including (a) execution by such Subsidiary of a joinder to the Guarantee and Collateral
Agreement, (b) a pledge to Lender of the capital securities of such Subsidiary, (c) such amendments
to this Agreement and the other Loan Documents related to the addition of such Subsidiary as may be
requested by Lender, and (d) such certificates, resolutions, instruments, copies of filings and
notices, and other materials relating to such Subsidiary as Lender may reasonably request.
Section 8.
Events of Default; Remedies.
8.1
Events of Default.
Each of the following shall constitute an Event of Default under this Agreement:
48
8.1.1
Non-Payment of Credit.
Default in the payment when due of the principal of any Loan; or default, and continuance
thereof for 2 days, in the payment when due of any interest, fee or other amount payable by any
Loan Party hereunder or under any other Loan Document.
8.1.2
Default Under Other Debt.
Any default shall occur and continue until the termination of any applicable cure period under
the terms applicable to any other Debt of any Loan Party in an aggregate amount (for all such Debt
so affected and including un-drawn committed or available amounts and amounts owing to all
creditors under any combined or syndicated credit arrangement) exceeding $250,000 and such default
shall (a) consist of the failure to pay such Debt when due, whether by acceleration or otherwise,
or (b) accelerate the maturity of such Debt or permit the holder or holders thereof, or any trustee
or agent for such holder or holders, to cause such Debt to become due and payable (or require
Borrower or any other Loan Party to purchase or redeem such Debt or post cash collateral in respect
thereof) prior to its expressed maturity.
8.1.3
Bankruptcy; Insolvency.
Any Loan Party becomes insolvent or generally fails to pay, or admits in writing its inability
or refusal to pay, debts as they become due; or any Loan Party applies for, consents to, or
acquiesces in the appointment of a trustee, receiver or other custodian for such Loan Party or any
property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of
such application, consent or acquiescence, a trustee, receiver or other custodian is appointed for
any Loan Party or for a substantial part of the property of any thereof and is not discharged
within 60 days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced
in respect of any Loan Party, and if such case or proceeding is not commenced by such Loan Party,
it is consented to or acquiesced in by such Loan Party, or remains for 60 days un-dismissed; or any
Loan Party takes any action to authorize, or in furtherance of, any of the foregoing.
8.1.4
Non-Compliance with Loan Documents.
(a) Failure by Borrower to comply with or to perform any covenant set forth in
Sections
6.1.1
,
6.1.2
,
6.1.3
,
6.1.4
,
6.1.9
,
6.1.6
,
6.1.7
,
6.3(b)
and
6.3(c)
,
6.5
,
6.7
and
Section 7
;
or (b) failure by any Loan Party to comply with or to perform any other provision of this Agreement
or any other Loan Document applicable to it (and not constituting an Event of Default under any
other provision of this
Section 8
) and continuance of such failure described in this clause
(b) for 30 days.
8.1.5
Representations; Warranties.
Any representation or warranty made by any Loan Party herein or any other Loan Document is
breached or is false or misleading in any material respect, or any schedule, certificate, financial
statement, report, notice or other writing furnished by any Loan Party to
49
Lender in connection herewith is false or misleading in any material respect on the date as of
which the facts therein set forth are stated or certified.
8.1.6
Pension Plans.
Institution of any steps by any Person to terminate a Pension Plan if as a result of such
termination any Loan Party or any member of the Controlled Group could be required to make a
contribution to such Pension Plan, or could incur a liability or obligation to such Pension Plan,
in excess of $100,000; (b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a Lien under Section 302(f) of ERISA; or (c) there shall occur any
withdrawal or partial withdrawal from a Multiemployer Pension Plan and the withdrawal liability
(without unaccrued interest) to Multiemployer Pension Plans as a result of such withdrawal
(including any outstanding withdrawal liability that Borrower or any other Loan Party or any member
of the Controlled Group have incurred on the date of such withdrawal) exceeds $100,000.
8.1.7
Judgments.
Final judgments which exceed an aggregate of $250,000 shall be rendered against any Loan Party
and shall not have been paid, discharged or vacated or had execution thereof stayed pending appeal
within 30 days after entry or filing of such judgments.
8.1.8
Invalidity of Collateral Documents.
Any Collateral Document shall cease to be in full force and effect; or any Loan Party (or any
Person by, through or on behalf of any Loan Party) shall contest in any manner the validity,
binding nature or enforceability of any Collateral Document.
8.1.9
Invalidity of Subordination Provisions.
Any subordination provision in any document or instrument governing Non-Senior Debt, or any
subordination provision in any subordination agreement that relates to any Non-Senior Debt or any
subordination provision in any guaranty by any Loan Party of any Non-Senior Debt, shall cease to be
in full force and effect, or any Person (including the holder of any applicable Non-Senior Debt)
shall contest in any manner the validity, binding nature or enforceability of any such provision.
8.1.10
Change of Control.
(a) Manager and its Investment Affiliates shall collectively cease to, directly or indirectly,
(i) own and control at least 51% of the outstanding equity interests of Holdings owned by them on
the Closing Date (after giving effect to the Related Transactions) or (ii) possess the right to
elect (through contract, ownership of voting securities or otherwise) at all times a majority of
the board of directors (or similar governing body) of Holdings and to direct the management
policies and decisions of Holdings, (b) Holdings shall cease to directly own and control 100% of
each class of the outstanding equity interests of Borrower, or (c) a “Change of Control” or other
similar event shall occur, as defined in, or under, any documentation evidencing or otherwise
relating to any Non-Senior Debt.
50
8.1.11
Activities of Holdings.
Holdings (i) conducts any business other than its ownership of equity securities of Borrower,
or (ii) incurs any Debt or liabilities other than liabilities incidental to the conduct of its
business as a holding company.
8.2
Remedies.
If any Event of Default described in
Section 8.1.3
shall occur, the Commitments shall
immediately terminate and the Loans and all other Obligations shall become immediately due and
payable, all without presentment, demand, protest or notice of any kind; and, if any other Event of
Default shall occur and be continuing, Lender shall declare the Commitments to be terminated in
whole or in part and/or declare all or any part of the Loans and other Obligations to be due and
payable, whereupon the Commitments shall immediately terminate (or be reduced, as applicable)
and/or the Loans and other Obligations shall become immediately due and payable (in whole or in
part, as applicable), all without presentment, demand, protest or notice of any kind. Lender shall
promptly advise Borrower of any such declaration, but failure to do so shall not impair the effect
of such declaration. Notwithstanding the foregoing, the effect as an Event of Default of any event
described in
Section 8.1.1
may only be waived by the written concurrence of Lender, and the
effect as an Event of Default of any other event described in this
Section 8
may be waived
by the written concurrence of Lender. Any cash collateral delivered hereunder shall be held by
Lender (without liability for interest thereon) and applied to the Obligations and any excess shall
be delivered to Borrower or as a court of competent jurisdiction may elect.
Section 9.
Miscellaneous.
9.1
Waiver; Amendments.
No delay on the part of Lender in the exercise of any right, power or remedy shall operate as
a waiver thereof, nor shall any single or partial exercise by it any right, power or remedy
preclude other or further exercise thereof, or the exercise of any other right, power or remedy.
No amendment, modification or waiver of, or consent with respect to, any provision of this
Agreement, the Notes or any of the other Loan Documents (or any subordination and intercreditor
agreement or other subordination provisions relating to any Non-Senior Debt) shall in any event be
effective unless the same shall be in writing and approved by Lender, and then any such amendment,
modification, waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.
9.2
Notices.
Except as otherwise provided in
Sections 2.2.2
, all notices hereunder shall be in
writing (including facsimile transmission) and shall be sent to the applicable party at its address
shown on
Annex II
or at such other address as such party may, by written notice received by
the other parties, have designated as its address for such purpose. Notices sent by facsimile
transmission shall be deemed to have been given when sent; notices sent by mail shall be deemed to
have been given three Business Days after the date when sent by registered or certified mail,
postage prepaid; and notices sent by hand delivery or overnight courier service shall be deemed
51
to have been given when received. For purposes of
Sections 2.2.2
, Lender shall be
entitled to rely on telephonic instructions from any person that Lender in good faith believes is
an authorized officer or employee of Borrower, and Borrower shall hold Lender harmless from any
loss, cost or expense resulting from any such reliance. Each of Borrower and Lender hereby agree
that Lender may, in its discretion, deliver information and notices to such financial institutions
as may be a party hereto from time to time using the internet service “Intralinks.”
9.3
Computations.
Unless otherwise specifically provided herein, any accounting term used in this Agreement
shall have the meaning customarily given such term in accordance with GAAP, and all financial
computations hereunder shall be computed in accordance with GAAP consistently applied. The
explicit qualification of terms or computations by the phrase “in accordance with GAAP” shall in no
way be construed to limit the foregoing.
9.4
Costs; Expenses.
Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of Lender
(including Legal Costs) in connection with the preparation, execution, syndication, delivery and
administration (including perfection and protection of Collateral) of this Agreement, the other
Loan Documents and all other documents provided for herein or delivered or to be delivered
hereunder or in connection herewith (including any proposed or actual amendment, supplement or
waiver to any Loan Document), and all reasonable out-of-pocket costs and expenses (including Legal
Costs) incurred by Lender after an Event of Default in connection with the collection of the
Obligations and enforcement of this Agreement, the other Loan Documents or any such other
documents. In addition, Borrower agrees to pay, and to save Lender harmless from all liability
for, any fees of Borrower’s auditors in connection with any reasonable exercise by Lender of their
rights pursuant to
Section 6.4
. All Obligations provided for in this
Section 9.4
shall survive repayment of the Loans, cancellation of the Notes and termination of this Agreement).
9.5
Indemnification by Borrower.
In consideration of the execution and delivery of this Agreement by Lender and the agreement
to extend the Commitments provided hereunder, Borrower hereby agrees to indemnify, exonerate and
hold Lender, and each of the officers, directors, employees, Affiliates and agents of Lender (each
a “
Lender Party
”) free and harmless from and against any and all actions, causes of action,
suits, losses, liabilities, damages and expenses, including Legal Costs (collectively, the
“
Indemnified Liabilities
”), incurred by Lender Parties or any of them as a result of, or
arising out of, or relating to (a) any tender offer, merger, purchase of equity interests, purchase
of assets (including the Related Transactions) or other similar transaction financed or proposed to
be financed in whole or in part, directly or indirectly, with the proceeds of any of the Loans, (b)
the use, handling, release, emission, discharge, transportation, storage, treatment or disposal of
any Hazardous Substance at any property owned or leased by Borrower or any other Loan Party, (c)
any violation of any Environmental Laws with respect to conditions at any property owned or leased
by any Loan Party or the operations conducted thereon, (d) the investigation, cleanup or
remediation of offsite locations at which any Loan Party or their
52
respective predecessors are alleged to have directly or indirectly disposed of Hazardous
Substances or (e) the execution, delivery, performance or enforcement of this Agreement or any
other Loan Document by Lender, except to the extent any such Indemnified Liabilities result from
the applicable Lender Party’s own gross negligence or willful misconduct as determined by a court
of competent jurisdiction. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is permissible under
applicable law. All Obligations provided for in this
Section 9.5
shall survive repayment
of the Loans, cancellation of the Notes, any foreclosure under, or any modification, release or
discharge of, any or all of the Collateral Documents and termination of this Agreement.
9.6
Marshaling; Payments Set Aside.
Lender shall be under no obligation to marshal any assets in favor of Borrower or any other
Person or against or in payment of any or all of the Obligations. To the extent that Borrower
makes a payment or payments to Lender, or Lender enforces its Liens or exercises its rights of
set-off, and such payment or payments or the proceeds of such enforcement or set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or
required (including pursuant to any settlement entered into by Lender in its discretion) to be
repaid to a trustee, receiver or any other party in connection with any bankruptcy, insolvency or
similar proceeding, or otherwise, then to the extent of such recovery, the obligation hereunder or
part thereof originally intended to be satisfied shall be revived and continued in full force and
effect as if such payment had not been made or such enforcement or setoff had not occurred.
9.7
Nonliability of Lender.
The relationship between Borrower on the one hand and Lender on the other hand shall be solely
that of borrower and lender. Lender shall have no fiduciary responsibility to Borrower. Lender
undertakes no responsibility to Borrower to review or inform Borrower of any matter in connection
with any phase of Borrower’s business or operations. Execution of this Agreement by Borrower
constitutes a full, complete and irrevocable release of any and all claims which Borrower may have
at law or in equity in respect of all prior discussions and understandings, oral or written,
relating to the subject matter of this Agreement and the other Loan Documents. Lender shall not
have any liability with respect to, and Borrower hereby waives, releases and agrees not to sue for,
any special, indirect, punitive or consequential damages or liabilities.
9.8
Assignments; Participations.
9.8.1
Assignments.
(a) Lender may at any time assign to one or more Persons (any such Person, an
“
Assignee
”) all or any portion of Lender’s Loans and Commitments. Borrower shall be
entitled to continue to deal solely and directly with Lender in connection with the interests so
assigned to an Assignee until Lender shall have received and accepted an effective Assignment
Agreement executed, delivered and fully completed by the applicable parties thereto. No assignment
may be made to any Person if at the time of such assignment Borrower would be obligated to pay any
53
greater amount under
Section 3
to the Assignee than Borrower is then obligated to pay
to the assigning Lender under such
Section 3
(and if any assignment is made in violation of
the foregoing, Borrower will not be required to pay such greater amounts). Any attempted
assignment not made in accordance with this
Section 9.8.1
shall be treated as the sale of a
participation under
Section 9.8.2
. Borrower shall be deemed to have granted its consent to
any assignment hereunder unless Borrower has expressly objected to such assignment within three
Business Days after notice thereof.
(b) From and after the date on which the conditions described above have been met, (i) such
Assignee shall be deemed automatically to have become a party hereto and, to the extent that rights
and obligations hereunder have been assigned to such Assignee pursuant to such Assignment
Agreement, shall have the rights and obligations of a “Lender” hereunder and (ii) the assigning
Lender, to the extent that rights and obligations hereunder have been assigned by it pursuant to
such Assignment Agreement, shall be released from its rights (other than its indemnification
rights) and obligations hereunder. For the avoidance of doubt, upon Lender’s assignment of any or
all of its Loans and/or Commitments to an Assignee, such Assignee shall have all of the rights and
obligations of Lender in respect of such assigned Loans and/or Commitments, and shall be deemed to
be “Lender” hereunder, as if such Person were an original party hereto. Upon the request of the
Assignee (and, as applicable, the assigning Lender) pursuant to an effective Assignment Agreement,
Borrower shall execute and deliver to Lender for delivery to the Assignee (and, as applicable, the
assigning Lender) a Note in the principal amount of the Assignee’s Pro Rata Share of the Revolving
Loan Commitment plus the principal amount of the Assignee’s Term Loans (and, as applicable, a Note
in the principal amount of the Pro Rata Share of the Revolving Loan Commitment retained by the
assigning Lender plus the principal amount of the Term Loans retained by the assigning Lender).
Each such Note shall be dated the effective date of such assignment. Upon receipt by the assigning
Lender of such Note, the assigning Lender shall return to Borrower any prior Note held by it.
(c) Lender, acting solely for this purpose as an agent of Borrower, shall maintain at one of
its offices in the United States a copy of each Assignment Agreement delivered to it and a register
for the recordation of the names and addresses of Lender and each Assignee, and the Commitments of,
and principal amount of the Loans owing to, Lender and each Assignee pursuant to the terms hereof.
The entries in such register shall be conclusive, and Borrower and Lender may treat each Person
whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes
of this Agreement, notwithstanding notice to the contrary. Such register shall be available for
inspection by Borrower, Lender and any Assignee, at any reasonable time upon reasonable prior
notice to Lender.
(d) Notwithstanding the foregoing provisions of this
Section 9.8.1
or any other
provision of this Agreement, Lender may at any time assign all or any portion of its Loans and its
Notes (i) as collateral security to a Federal Reserve Bank or, as applicable, to Lender’s trustee
for the benefit of its investors (but no such assignment shall release Lender from any of its
obligations hereunder) and (ii) to (x) an Affiliate of Lender or (y) an Eligible Institution.
54
9.8.2
Participations.
Lender may at any time sell to one or more Persons participating interests in its Loans,
Commitments or other interests hereunder (any such Person, a “
Participant
”). In the event
of a sale by Lender of a participating interest to a Participant, (a) Lender’s obligations
hereunder shall remain unchanged for all purposes, (b) Borrower shall continue to deal solely and
directly with Lender in connection with Lender’s rights and obligations hereunder and (c) all
amounts payable by Borrower shall be determined as if Lender had not sold such participation and
shall be paid directly to Lender. No Participant shall have any direct or indirect voting rights
hereunder. Borrower agrees that if amounts outstanding under this Agreement are due and payable
(as a result of acceleration or otherwise), each Participant shall be deemed to have the right of
set-off in respect of its participating interest in such amounts to the same extent as if the
amount of its participating interest were owing directly to it as Lender under this Agreement;
provided that such right of set-off shall be subject to the obligation of each Participant to share
with Lender, and Lender agrees to share with each Participant, as provided in
Section
2.11.4
. Borrower also agrees that each Participant shall be entitled to the benefits of
Section 3
as if it were a Lender (provided that no Participant shall receive any greater
compensation pursuant to
Section 3
than would have been paid to Lender if no participation
had been sold).
9.9
Confidentiality.
Lender agrees to use commercially reasonable efforts (equivalent to the efforts Lender applies
to maintain the confidentiality of its own confidential information) to maintain as confidential
all information provided to them by any Loan Party and designated as confidential, except that
Lender may disclose such information (a) to Persons employed or engaged by Lender or any of its
Affiliates (including collateral managers of Lender) in evaluating, approving, structuring or
administering the Loans and the Commitments; (b) to any assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained in this
Section
9.9
(and any such assignee or participant or potential assignee or participant may disclose
such information to Persons employed or engaged by them as described in clause (a) above); (c) as
required or requested by any federal or state regulatory authority or examiner, or any insurance
industry association, or as reasonably believed by Lender to be compelled by any court decree,
subpoena or legal or administrative order or process; (d) as, on the advice of Lender’s counsel, is
required by law; (e) in connection with the exercise of any right or remedy under the Loan
Documents or in connection with any litigation to which Lender is a party; (f) to any nationally
recognized rating agency or investor of Lender that requires access to information about Lender’s
investment portfolio in connection with ratings issued or investment decisions with respect to
Lender; (g) that ceases to be confidential through no fault of Lender; (h) to a Person that is an
investor or prospective investor in a Securitization that agrees that its access to information
regarding the Borrower and the Loans and Commitments is solely for purposes of evaluating an
investment in such Securitization and who agrees to treat such information as confidential; or (i)
to a Person that is a trustee, collateral manager, servicer, noteholder or secured party in a
Securitization in connection with the administration, servicing and reporting on the assets serving
as collateral for such Securitization. For purposes of this Section, “
Securitization
”
means a public or private offering by Lender or any of its Affiliates or their respective
successors and assigns, of securities which represent an interest in, or which are collateralized,
in whole or in part, by the Loans or the Commitments. Notwithstanding the
55
foregoing, Borrower consents to the publication by Lender of a tombstone or similar
advertising material relating to the financing transactions contemplated by this Agreement, and
Lender reserves the right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements.
9.10
Captions.
Captions used in this Agreement are for convenience only and shall not affect the construction
of this Agreement.
9.11
Nature of Remedies.
All Obligations of Borrower and rights of Lender expressed herein or in any other Loan
Document shall be in addition to and not in limitation of those provided by applicable law. No
failure to exercise and no delay in exercising, on the part of Lender, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege.
9.12
Counterparts.
This Agreement may be executed in any number of counterparts and by the different parties
hereto on separate counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement. Receipt by
telecopy of any executed signature page to this Agreement or any other Loan Document shall
constitute effective delivery of such signature page.
9.13
Severability.
The illegality or unenforceability of any provision of this Agreement or any instrument or
agreement required hereunder shall not in any way affect or impair the legality or enforceability
of the remaining provisions of this Agreement or any instrument or agreement required hereunder.
9.14
Entire Agreement.
This Agreement, together with the other Loan Documents, embodies the entire agreement and
understanding among the parties hereto and supersedes all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject matter hereof and
thereof and any prior arrangements made with respect to the payment by Borrower of (or any
indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or
on behalf of Lender.
9.15
Successors; Assigns.
This Agreement shall be binding upon Borrower and Lender and their respective successors and
assigns, and shall inure to the benefit of Borrower and Lender and the successors and assigns of
Lender. No other Person shall be a direct or indirect legal beneficiary of, or have
56
any direct or indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents. Borrower may not assign or transfer any of its rights or Obligations
under this Agreement without the prior written consent of Lender.
9.16
Governing Law.
THIS AGREEMENT AND EACH NOTE SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS
OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES TO THE EXTENT THAT SUCH PRINCIPLES WOULD
REQUIRE THE APPLICATION OF LAWS OF ANOTHER JURSIDICTION.
9.17
Forum Selection; Consent to Jurisdiction.
ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF
NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK (IN EACH
CASE, SITTING IN THE BOROUGH OF MANHATTAN); PROVIDED THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY
COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION
WHERE SUCH COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER HEREBY EXPRESSLY AND IRREVOCABLY
SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE. BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK. BORROWER HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
9.18
Waiver of Jury Trial.
EACH OF BORROWER AND LENDER HEREBY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT
AND ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN
CONNECTION WITH ANY OF THE FOREGOING, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED
BEFORE A COURT AND NOT BEFORE A JURY.
57
[
SIGNATURE PAGES FOLLOW
]
58
The parties hereto have caused this Agreement to be duly executed and delivered by their duly
authorized officers as of the date first set forth above.
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as Borrower
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Name:
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Title:
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COMPASS GROUP DIVERSIFIED HOLDINGS LLC,
as Lender
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By:
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Name:
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Title:
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59
ANNEX I
Commitments and Pro Rata Shares
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Revolving
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Commitment
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Pro Rata
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Term A Loan
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Pro Rata
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Term B Loan
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Pro Rata
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Lender
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Amount
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Share
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Amounts
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Share
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Amounts
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Share
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Compass Group Diversified
Holdings LLC
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[
$
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100
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%
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$
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100
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%
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100
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%
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TOTALS
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%
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Annex
I
Annex II
Addresses
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Attention:
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Telephone:
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Telecopy:
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Compass Group Diversified Holdings LLC,
as Lender
Address for Notices:
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Sixty One Wilton Road, Second Floor
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Westport, Connecticut 06880
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Attention:
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I. Joseph Massoud
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Telephone:
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(203) 221-1703
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Telecopy:
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(203) 221-8253
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Address for Payments:
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Bank:
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ABA #:
[
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Account #:
[
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Reference: Compass Group Diversified Holdings LLC
Address:
[
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Annex
II
Exhibit A
Form of Assignment Agreement
This Assignment Agreement (this “
Assignment Agreement
”) is entered into as of
by and between the Assignor named on the signature page hereto (“
Assignor
”) and
the Assignee named on the signature page hereto (“
Assignee
”). Reference is made to the
Credit Agreement dated as of
[
, 200___
]
(as amended or otherwise modified from time to time,
the “
Credit Agreement
”) by and between
[
]
(“
Borrower
”) and Compass
Group Diversified Holdings LLC, as lender (together with any successors or assigns, the “Lender”).
Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in
the Credit Agreement.
Assignor and Assignee agree as follows:
1. Assignor hereby sells and assigns to Assignee, and Assignee hereby purchases and assumes
from Assignor the interests set forth on the schedule attached hereto, in and to Assignor’s rights
and obligations under the Credit Agreement and the other Loan Documents as of the Effective Date
(as defined below). Such purchase and sale is made without recourse, representation or warranty
except as expressly set forth herein.
2. Assignor (i) represents that, as of the Effective Date, it is the legal and beneficial
owner of the interests assigned hereunder free and clear of any adverse claim; (ii) makes no other
representation or warranty and assumes no responsibility with respect to any statement, warranties
or representations made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any Loan
Documents or any other instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the financial condition of
any Loan Party or any other Person or the performance or observance by any Loan Party of its
Obligations under the Credit Agreement or the Loan Documents or any other instrument or document
furnished pursuant thereto.
3. Assignee (i) represents and warrants that it is legally authorized to enter into this
Assignment Agreement; (ii) confirms that it has received a copy of the Credit Agreement, together
with copies of the most recent financial statements delivered pursuant thereto and such other
documents and information as it has deemed appropriate to make its own credit analysis and decision
to enter into this Assignment Agreement; (iii) agrees that it will, independently and without
reliance upon Assignor or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in taking or not taking
action under the Credit Agreement; (iv) agrees that it will perform in accordance with their terms
all obligations which by the terms of the Credit Agreement are required to be performed by it as a
Lender; (vi) represents that on the date of this Assignment Agreement it is not presently aware of
any facts that would cause it to make a claim under the Credit Agreement; and (vii) if organized
under the laws of a jurisdiction outside the United States, attaches the forms prescribed by the
Internal Revenue Service of the United States, which have been duly executed, certifying as to
Assignee’s exemption from United States withholding taxes with respect to all payments to be made
to Assignee under the Agreement or
A-1
such other documents as are necessary to indicate that all such payments are subject to such
tax at a rate reduced by an applicable tax treaty.
4. The effective date for this Assignment Agreement shall be as set forth on the schedule
attached hereto (the “
Effective Date
”).
5. Upon such acceptance and recording, from and after the Effective Date, (i) Assignee shall
be a party to the Credit Agreement and, to the extent provided in this Assignment Agreement, have
the rights and obligations of a Lender thereunder and (ii) Assignor shall, to the extent provided
in this Assignment Agreement, relinquish its rights (other than indemnification rights) and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording, from and after the Effective Date, Borrower shall make
all payments in respect of the interest assigned hereby (including payments of principal, interest,
fees and other amounts) to Assignee. Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Effective Date with respect to the making of this assignment
directly between themselves.
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
8. This Assignment may be executed in any number of counterparts and by the different parties
hereto on separate counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Assignment. Receipt by
telecopy of any executed signature page to this Assignment shall constitute effective delivery of
such signature page.
A-2
The parties hereto have caused this Agreement to be executed and delivered as of the date
first written above.
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ASSIGNOR:
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By:
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Title:
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ASSIGNEE:
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By:
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Title:
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[Consented to:
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[
,
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as Borrower
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By:
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Title:
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]
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A-3
Schedule to Assignment Agreement
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Assignor:
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Assignee:
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Effective Date:
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Credit Agreement dated as of
[
, 2006
]
(as amended or otherwise
modified from time to time, the “
Credit Agreement
”) among
[
]
(“
Borrower
”) and Compass Group Diversified
Holdings LLC, as Lender
Interests Assigned:
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Revolving Loan
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Term A Loan
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Term B Loan
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Commitment/Loan
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Commitment
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Commitment
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Commitment
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Assignor Amounts
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$
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$
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$
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Amounts Assigned
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$
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$
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$
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Assignee Amounts
(post-assignment)
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$
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$
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$
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Assignee Information:
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Address for Notices:
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Address for Payments:
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Bank:
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Attention:
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ABA #:
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Telephone:
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Account #:
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Telecopy:
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Reference:
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A-4
Exhibit B
Form of Compliance Certificate
Please refer to the Credit Agreement dated as of
[
, 2006
]
(as amended or otherwise
modified from time to time, the “
Credit Agreement
”) between the undersigned
(“
Borrower
”) and Compass Group Diversified Holdings LLC, as lender (together with any
successors or assigns, the “Lender”). This certificate (this “
Certificate
”), together with
supporting calculations attached hereto, is delivered to Lender pursuant to the terms of the Credit
Agreement. Terms used but not otherwise defined herein are used herein as defined in the Credit
Agreement.
Enclosed herewith is a copy of the
[annual audited/quarterly]
report of Borrower as at
[
, 200___
] (the “
Computation Date
”), which report fairly presents in all material
respects the financial condition and results of operations
[(subject to the absence of footnotes
and to normal year-end adjustments)]
of Borrower as of the Computation Date and has been prepared
in accordance with GAAP consistently applied.
Borrower hereby certifies and warrants that the computations set forth on the schedule
attached hereto correspond to the ratios and/or financial restrictions contained in the Credit
Agreement and such computations are true and correct as at the Computation Date.
Borrower further certifies that no Event of Default or Default has occurred and is continuing.
Borrower has caused this Certificate to be executed and delivered by its officer thereunto
duly authorized on [
, 200___
].
[
]
By:
Title:
B-1
Schedule to Compliance Certificate
Dated as of [
______, 200__
]
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A.
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Section 7.14.1 - Minimum Fixed Charge Coverage Ratio
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1.
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Consolidated Net Income
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$
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2.
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Plus:
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Interest Expense
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$
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income tax expense
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$
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depreciation
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$
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amortization
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$
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other non-cash charges
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$
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management fees paid or accrued
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$
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3.
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Total (EBITDA)
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$
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4.
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Income taxes paid
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$
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5.
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Tax distributions
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$
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6.
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Capital Expenditures
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$
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7.
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Sum of (4), (5) and (6)
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$
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8.
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Remainder of (3) minus (7)
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$
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9.
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Interest Expense paid in cash
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$
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10.
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Required payments of principal of
Funded Debt (including Term Loans but
excluding Revolving Loans)
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$
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11.
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Management fees paid in cash
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$
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12.
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Sum of (9), (10) and (11)
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$
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13.
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Ratio of (8) to (12)
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____ to 1
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12.
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Minimum Required
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____ to 1
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B.
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Section 7.14.2 - Maximum Total Debt to EBITDA Ratio
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1.
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Total Debt
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$
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2.
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EBITDA
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$
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(from Item A(3) above)
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3.
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Ratio of (1) to (2)
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____ to 1
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4.
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Maximum allowed
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____ to 1
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C.
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Section 7.14.3 - Capital Expenditures
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1.
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Capital Expenditures for the Fiscal Year
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$
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2.
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Maximum Permitted Capital Expenditures
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$
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B-2
Exhibit C
Form of Availability Certificate
Please refer to the Credit Agreement dated as of
[
, 2006
]
(as amended or otherwise
modified from time to time, the “
Credit Agreement
”) between the undersigned
(“
Borrower
”) and Compass Group Diversified Holdings LLC, as lender (together with any
successors or assigns, the “Lender”). This certificate (this “
Certificate
”), together with
supporting calculations attached hereto, is delivered to Lender pursuant to the terms of the Credit
Agreement. Capitalized terms used but not otherwise defined herein shall have the same meanings
herein as in the Credit Agreement.
Borrower hereby certifies and warrants that at the close of business on [
, 200___
] (the
“
Calculation Date
”), Borrowing Availability was [$
], computed as set forth on the
schedule attached hereto.
Borrower has caused this Certificate to be executed and delivered by its officer thereunto
duly authorized on [
, 200___
].
[
]
By:
Title:
C-1
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1.
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Gross Accounts
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$
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2.
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Less Ineligibles
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- Does not arise from sale of goods or services
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$
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- Lender’s Lien not perfected/Subject to other Lien
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$
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- Subject to offset, etc.
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$
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- Account Debtor in bankruptcy
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$
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- Account Debtor not in U.S. or Canada
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$
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- Sale on approval, sale or return, bill and hold or consignment
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$
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- Arises outside the ordinary course
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$
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- Governmental Accounts
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$
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- Exceeds credit limits
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$
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- Chattel Paper
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$
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- Over 60 days past due or over 90 days past invoice date
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$
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- Affiliate receivables
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$
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- Cross-age
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$
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- Concentration
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$
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- Not denominated in Dollars
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$
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- Other
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$
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- Total
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$
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3.
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Eligible Accounts
[
Item 1 minus Item 2
]
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$
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4.
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Item 3 times 85%
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$
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5.
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Gross Inventory
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$
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6.
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Less Ineligibles
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- Lender’s Lien not
perfected/Subject to other Lien
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$
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- Not Salable
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$
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- Located off-site and no
Collateral Access Agreement
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$
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- Arises outside the ordinary course
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$
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- “Hot Goods”
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$
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- Restrictive Agreement
|
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$
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- Not located in U.S.
|
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$
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- In-transit or held or delivered on consignment
|
|
$
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- Other
|
|
$
|
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|
- Total
|
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|
$
|
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7.
|
|
Eligible Inventory
[
Item 5 minus Item 6
]
|
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$
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8.
|
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Item 7 times 50%
|
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$
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9.
|
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Item 4 plus Item 8
|
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$
|
C-2
|
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10.
|
|
Lesser of Item 9 and Revolving Loan Commitment
|
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|
$
|
|
11.
|
|
Reserves and allowances
|
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|
|
$
|
|
12.
|
|
Borrowing Availability
[Item 10 minus Item 11]
|
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$
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13.
|
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Revolving Loans
|
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|
$
|
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14.
|
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Net Availability
[Excess of Item 12 over Item 13]
|
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$
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15.
|
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Required Prepayment
[Excess of Item 13 over Item 12]
|
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$
|
C-3
Exhibit D
Form of Note
|
|
|
|
|
|
|
[
, 200___
]
|
|
$
|
|
[
Westport, Connecticut
]
|
The undersigned (“
Borrower
”), for value received, promises to pay to the order of
Compass Group Diversified Holdings LLC (“
Lender
”) at its principal office of 61 Wilton
Road, Westport, Connecticut 06880, the aggregate unpaid amount of all Loans made to Borrower by
Lender pursuant to the Credit Agreement referred to below, such principal amount to be payable on
the dates set forth in the Credit Agreement.
Borrower further promises to pay interest on the unpaid principal amount of each Loan from the
date of such Loan until such Loan is paid in full, payable at the rate(s) and at the time(s) set
forth in the Credit Agreement. Payments of both principal and interest are to be made in lawful
money of the United States of America.
This Note evidences indebtedness incurred under, and is subject to the terms and provisions
of, the Credit Agreement, dated as of
[
, 2006
]
(as amended or otherwise modified from time
to time, the “
Credit Agreement
”; terms not otherwise defined herein are used herein as
defined in the Credit Agreement), between Borrower and Compass Group Diversified Holdings LLC, as
lender, to which Credit Agreement reference is hereby made for a statement of the terms and
provisions under which this Note may or must be paid prior to its due date or its due date
accelerated.
This Note is made under and governed by the laws of the State of New York applicable to
contracts made and to be performed entirely within such State.
[
]
By:
Title:
D-1
Exhibit E
Form of Notice of Borrowing
Please refer to the Credit Agreement dated as of
[
, 2006
]
(as amended or
otherwise modified from time to time, the “
Credit Agreement
”) between the undersigned
(“
Borrower
”) and Compass Group Diversified Holdings LLC, as Lender. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in the Credit Agreement.
This notice is given pursuant to
Section 2.2.2
of the Credit Agreement. Borrower hereby
requests a borrowing under the Credit Agreement as follows:
The aggregate amount of the proposed borrowing is [$
]. The requested borrowing date
for the proposed borrowing (which is a Business Day) is
[
, 200___
]
. The Revolving Loans
comprising the proposed borrowing are
[Base Rate][LIBOR]
Loans. The duration of the Interest
Period for each LIBOR Loan made as part of the proposed borrowing, if applicable, is
[
]
months
(which shall be 1, 2, 3 or 6 months).
Borrower has caused this Notice to be executed and delivered by its officer thereunto duly
authorized on [
, 200___
].
[
]
By:
Title:
E-1
Exhibit F
Form of Notice of Conversion/Continuation
Please refer to the Credit Agreement dated as of
[
, 2006
]
(as amended or otherwise
modified from time to time, the “
Credit Agreement
”) between the undersigned
(“
Borrower
”) and Compass Group Diversified Holdings LLC, as Lender. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in the Credit Agreement.
This notice is given pursuant to
Section 2.2.3
of the Credit Agreement. Borrower hereby
requests a [
conversion
][
continuation
] of [
Term
A
Loans
][
Term
B
Loans
][
Revolving Loans
] as follows:
The date of the proposed [
conversion
] [
continuation
] is [
, 200___
] (which shall be a
Business Day). The aggregate amount of the [
Term
[
A
][
B
]
Loans
] [
Revolving Loans
] proposed to be
[
converted
] [
continued
] is $
. [
Specify which part is to be converted and which part
is to be continued, if appropriate.
] The Loans to be [
continued
] [
converted
] are [
Base Rate Loans
]
[
LIBOR Loans
] and the Loans resulting from the proposed [
conversion
] [
continuation
] will be [
Base
Rate Loans
] [
LIBOR Loans
]. The duration of the requested Interest Period for each LIBOR Loan made
as part of the proposed [
conversion
] [
continuation
] is [
___
] months (which shall be 1, 2, 3 or 6
months).
Borrower has caused this Notice to be executed and delivered by its officer thereunto duly
authorized on [
, 200___
].
[
]
By:
Title:
F-1