AMENDED AND RESTATED
CERTIFICATE OF FORMATION AND OPERATING AGREEMENT
OF
MUNICIPAL MORTGAGE & EQUITY, LLC
(a Delaware limited liability company)
THIS AMENDED AND RESTATED CERTIFICATE OF FORMATION AND OPERATING AGREEMENT
(the "Agreement") of Municipal Mortgage & Equity, LLC, a Delaware limited
liability company (the "Company"), dated as of May 9 , 2002, is entered into by
and among the Shareholders (as defined herein) of the Company and any Person (as
defined herein) who becomes a Shareholder pursuant to the terms of this
Agreement.
The Company's Certificate of Formation filed with the Delaware Secretary of
State on July 6, 1995, is hereby amended to amend and restate all of the
provisions thereof so that said Certificate, as amended and restated hereby,
reads in its entirety as follows; and the Company's Operating Agreement is
hereby amended so that said Operating Agreement reads in its entirety as
follows:
FIRST: The name of the limited liability company is Municipal Mortgage &
Equity, LLC.
SECOND: The address of the limited liability company's registered office in
the State of Delaware is Corporation Service Company, 2711 Centerville Road,
Suite 400, in the City of Wilmington, County of New Castle, 19808. The name of
its registered agent at such address is Corporation Service Company.
THIRD: The remainder of the Certificate of Formation and Operating
Agreement is as follows:
W I T N E S S E T H :
WHEREAS, the Shareholders of the Company have approved the amendment and
restatement of the Certificate (as defined herein) of the Company and the
Operating Agreement (as defined herein) of the Company to remove provisions and
references that are no longer operative; and
WHEREAS, this Agreement shall constitute the Certificate of the Company and
shall also constitute the Operating Agreement of the Company, and shall be
binding upon all Persons now or at any time hereafter who are Shareholders of
the Company.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, and of other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending legally
to be bound, hereby agree as follows:
ARTICLE I
Definitions
Capitalized terms used in this Agreement shall have the meanings set forth
below or in the Section of this Agreement referred to below, except as otherwise
expressly indicated or limited by the context in which they appear in this
Agreement. All terms defined in this Article 1 or in the preamble to this
Agreement in the singular have the same meanings when used in the plural and
vice versa.
1.1 "Acquiring Person" shall have the meaning set forth in Section 13.1 of
this Agreement.
1.2 "Act" means the Delaware Limited Liability Company Act, Del. Code
Ann.ss.ss.18-101 et seq., as amended from time to time.
1.3 "Affiliate" means, with respect to any Person, any Relative of such
Person, any trust for the benefit of such Person or such Person's Relative, any
beneficiary of such a trust and any other Person that directly, or indirectly
through one or more intermediaries, controls (including without limitation all
officers and directors of such Person), is controlled by, or is under common
control with, such Person or a Relative of such Person. The term "control" (or
any form thereof), as used in the preceding sentence, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.4 "Agreement" means this Agreement, as may be amended, restated,
supplemented or otherwise modified from time to time as herein provided.
1.5 "Announcement Date" shall have the meaning set forth in Section 12.3 of
this Agreement.
1.6 "Associate" shall have the meaning set forth in Sections 12.1 and 13.1
of this Agreement.
1.7 "Beneficial Owner" shall have the meaning set forth in Section 12.1 of
this Agreement.
1.8 "Board of Directors" or "Board of Managers" means the board on which
all of the Company's Managers sit, in their capacities as Managers.
1.9 "Bond" means a mortgage revenue bond owned at a particular time by the
Company as part of the Property; and the term "Bond" shall include working
capital loans associated with such mortgage revenue bond.
1.10 "Book Gain" or "Book Loss" means the gain or loss recognized by the
Company for book purposes in any Fiscal Year by reason of any sale or
disposition with respect to any of the assets of the Company. Such Book Gain or
Book Loss shall be computed by reference to the Book Value of such property or
assets as of the date of such sale or disposition (determined in accordance with
Section 1.11 of this Agreement), rather than by reference to the tax basis of
such property or assets as of such date, and each and every reference herein to
"gain" or "loss" shall be deemed to refer to Book Gain or Book Loss, rather than
to tax gain or tax loss, unless the context manifestly otherwise requires.
1.11 "Book Value" of an asset means, as of any particular date, the value
at which the asset is properly reflected on the books and records of the Company
as of such date in accordance with Section 1.704-1(b)(2)(iv) of the Treasury
Regulations. The initial Book Value of each asset shall be its cost, unless such
asset was contributed to the Company by a Shareholder, in which case the initial
Book Value shall be the fair market value for such asset as reasonably
determined by the Board of Directors, and, in each case, such Book Value shall
thereafter be adjusted for cost recovery deductions to which the Company is
entitled for federal income tax purposes with respect thereto, in the amount
that bears the same relationship to the Book Value of such asset as the cost
recovery deduction computed for tax purposes bears to the adjusted tax basis of
such assets. The Book Values of all Company assets shall be adjusted to equal
their respective fair market values, as reasonably determined by the Board of
Directors under appropriate circumstances, which circumstances may include but
are not limited to the following: (a) the acquisition, by any new or existing
Shareholder, of any interest issued after August 1, 1996 by the Company; (b) the
distribution by the Company to a Shareholder of more than a de minimis amount of
Company assets, including money, if, as a result of such distribution, such
Shareholder's interest in the Company is reduced; and (c) the termination of the
Company for federal income tax purposes pursuant to Section 708(b)(1)(B) of the
Code.
1.12 "Business Combination" shall have the meaning set forth in Section
12.1 of this Agreement.
1.13 "By-laws" means the by-laws of the Company, as amended from time to
time, governing various aspects of the operation of the Company and the rights
and obligations of its Shareholders, Board of Directors, officers and agents.
All provisions of the By-laws not inconsistent with law or this Agreement shall
be valid and binding.
1.14 "Capital Account" shall have the meaning ascribed thereto in Section
3.3 of this Agreement.
1.15 "Capital Contributions" means the total amount of cash and other
property contributed to the Company by the Shareholders.
1.16 "Capital Transactions" means (a) any Repayment, Sale, or other sale,
exchange, taking by eminent domain, damage, destruction or other disposition of
all or any part of the assets of the Company, other than tangible personal
property disposed of in the ordinary course of business; or (b) any financing or
refinancing of any Company indebtedness; provided, that the receipt by the
Company of Capital Contributions shall not constitute Capital Transactions.
1.17 "Certificate" means this Agreement, in its function as a "certificate
of formation" as provided for pursuant to the Act, as originally filed with the
office of the Secretary of State of the State of Delaware, as amended, restated,
supplemented or otherwise modified from time to time as herein provided.
1.18 "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any subsequent federal law of similar import, and, to the extent
applicable, any Treasury Regulations promulgated thereunder.
1.19 "Common Shareholders" means the holders of Common Shares.
1.20 "Common Shares" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.21 "Company" means the limited liability company hereby established in
accordance with this Agreement by the parties hereto, as such limited liability
company may from time to time be constituted.
1.22 "Company Interest" means an equity interest in the Company, and, if
the context so allows, the percentage of equity ownership interest in the
Company represented by the Capital Account attributable to such equity interest
as compared to all of the aggregate Capital Accounts of all Shareholders of the
Company (as such percentage may be changed from time to time to reflect
adjustments as provided for in this Agreement); it being understood and agreed
that this term shall not be deemed to apply to any debt incurred by the Company
(directly or indirectly), including but not limited to through custodial, trust
or similar or other arrangements.
1.23 "Consent" means either the consent given by vote at a duly called and
held meeting or the prior written consent, as the case may be, of a Person to do
the act or thing for which the consent is solicited, or the act of granting such
consent, as the context may require.
1.24 "Control Company Interest" shall have the meaning set forth in Section
13.1 of this Agreement.
1.25 "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period; provided, that if the Book
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of any such year or other period, Depreciation shall
be an amount that bears the same relationship to the Book Value of such asset as
the depreciation, amortization, or other cost recovery deduction computed for
tax purposes with respect to such asset for the applicable period bears to the
adjusted tax basis of such asset at the beginning of such period, or if such
asset has a zero adjusted tax basis, Depreciation shall be an amount determined
under any reasonable method selected by the Board of Directors.
1.26 "Determination Date" shall have the meaning set forth in Section 12.3
of this Agreement.
1.27 "Director" shall have the same meaning as "Manager."
1.28 "Dissolution Shareholder" means Shelter Development Holdings, Inc.,
for so long as such Person remains a Dissolution Shareholder under Section 6.4
of this Agreement, and shall also mean any other Person who agrees under Section
6.4 to be a Dissolution Shareholder.
1.29 "Entity" means any general partnership, limited partnership,
corporation, joint venture, trust, limited liability company, limited liability
partnership, business trust, cooperative, or association. An Entity may or may
not be an Affiliate of the Company or of a Company Affiliate.
1.30 "Financing" means the financing transaction which SCATEF consummated
on February 14, 1995 in which proceeds were raised through the offering of
$67,700,000 in aggregate principal amount of Multifamily Mortgage Revenue Bond
Receipts.
1.31 "Fiscal Year" means the fiscal year of the Company and shall be the
same as its taxable year, which shall be the calendar year unless otherwise
determined by the Board of Directors in accordance with the Code. Each Fiscal
Year shall commence on the day immediately following the last day of the
immediately preceding Fiscal Year.
1.32 "Five Year Tolling Period" shall have the meaning set forth in Section
12.2 of this Agreement.
1.33 "Future Shares" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.34 "General Partners" means the general partners of SCATEF.
1.35 "Initial Capital Contribution" means any Capital Contribution made in
accordance with Section 3.2 hereof.
1.36 "Interested Company Interests" shall have the meaning set forth in
Section 13.1 of this Agreement.
1.37 "Interested Party" shall have the meaning set forth in Section 12.1 of
this Agreement.
1.38 "Managers" means those individuals serving on the Board of Directors
of the Company, including successor or additional Managers duly elected in
accordance with the terms of this Agreement.
1.39 "Market Value" shall have the meaning set forth in Section 12.1 of
this Agreement.
1.40 "Members" means the Shareholders, together with all Persons who become
Members as herein provided and who are listed as Members of the Company in the
books and records of the Company, in such Persons' capacity as Members of the
Company.
1.41 "Mortgage Loans" means the mortgage loans which have been assigned to
the Company to secure the repayment of a Bond.
1.42 "Operating Agreement" means this Agreement, in its function as an
"operating agreement" as provided for pursuant to the Act, as amended, restated,
supplemented or otherwise modified from time to time as herein provided.
1.43 "Original Shareholders" means MME I Corporation, a Delaware
corporation, and MME II Corporation, a Delaware corporation.
1.44 "Person" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such Person
where the context so admits.
1.45 "Profit" and "Loss" means, for each Fiscal Year or other period for
which allocations to Shareholders are made, an amount equal to the Company's
taxable income or loss for such year or period, determined in accordance with
Section 703(a) of the Code (provided, that for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(a) Any income of the Company that is exempt from federal income tax and
not otherwise taken into account in computing Profit or Loss pursuant to this
provision shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Section 705(a)(2)(B) of
the Code or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not otherwise
taken into account in computing Profit or Loss pursuant to this provision, shall
be subtracted from such taxable income or loss;
(c) Book Gain or Book Loss from a Capital Transaction shall be taken into
account in lieu of any tax gain or tax loss recognized by the Company by reason
of such Capital Transaction; and
(d) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year, computed as
provided in this Agreement.
If the Company's taxable income or loss for such Fiscal Year or other period, as
adjusted in the manner provided above, is a positive amount, such amount shall
be the Company's Profit for such Fiscal Year or other period; and if a negative
amount, such amount shall be the Company's Loss for such Fiscal Year or other
period.
1.46 "Property" means the land and the buildings thereon upon which the
Company holds a mortgage or other similar encumbrance at a particular time, and
the Bonds held by the Company at a particular time.
1.47 "Relative" means, with respect to any Person, any parent, spouse,
brother, sister, or natural or adopted lineal descendant or spouse of such
descendant of such Person.
1.48 "Repayment" shall have the meaning set forth in Section 1.49 below.
1.49 "Sale" or "Repayment" means the sale or other disposition of a
Property (a "Sale") or, in the absence of a Sale, the repayment of the principal
and interest, if any, payable upon the redemption or remarketing of a Bond which
was included within the Property (a "Repayment"); provided, however, that these
terms shall not include the pledge of a Property in connection with the
financing, refinancing or other leveraging of such Property or otherwise. The
term "Sale" shall include (a) a foreclosure by a third party which is
unaffiliated with the current operating partnership (or respective general
partner) owning a Property, (b) a deed-in-lieu of foreclosure to a third party
which is unaffiliated with the current operating partnership (or respective
general partner) owning a Property, or (c) a sale or transfer of a Property to a
third party which is unaffiliated with the current operating partnership (or
respective general partner) owning a Property; and a "Sale" shall not be deemed
to occur if the Company forecloses on a Property or if the Company directs a
deed-in-lieu of foreclosure on a Property.
1.50 "SCATEF" means the SCA Tax Exempt Fund Limited Partnership, the entity
that was the predecessor to the Company.
1.51 "Shareholders" means all persons who hold Shares, and shall have the
same meaning as the word "Members."
1.52 "Shares" means Company Interests.
1.53 "Special Shareholder" means Shelter Development Holdings, Inc., for so
long as such Person is subject to certain liabilities as set forth in Section
6.1(b) of this Agreement, and shall also mean any other Person who agrees under
Article 6 to be a Special Shareholder.
1.54 "Specially Appointed Director(s)" shall have the meaning ascribed
thereto in Section 6.1(d) of this Agreement.
1.55 "Subsidiary" shall have the meaning set forth in Section 12.1 of this
Agreement.
1.56 "Tax Matters Partner" shall have the meaning ascribed thereto in
Section 3.5 of this Agreement.
1.57 "Transfer" (or "Transferred") means to give, sell, assign, encumber,
pledge, hypothecate, devise, bequeath, or otherwise dispose of, encumber,
transfer, or permit to be transferred, during life or at death. The word
"Transfer," when used as a noun, shall mean any Transfer transaction.
1.58 "Transferee" means any Person to whom Shares are Transferred for any
reason or by any means.
1.59 "Treasury Regulations" means the federal income tax regulations,
including any temporary or proposed regulations, promulgated under the Code, as
such Treasury Regulations may be amended from time to time (it being understood
that all references herein to specific sections of the Treasury Regulations
shall be deemed also to refer to any corresponding provisions of succeeding
Treasury Regulations).
1.60 "Valuation Date" shall have the meaning set forth in Section 12.3 of
this Agreement.
1.61 "Working Capital Reserves" means funds held in reserves which are
maintained as working capital for the Company and available for any
contingencies relating to the ownership of the Property and the operation of the
Company. Amounts held in the Working Capital Reserves may at any time, in the
discretion of the Board of Directors, be added to the respective Allocable
Portfolio Cash Flows or to liquidation proceeds allocable to the respective
Shares (depending upon the characterization of such amounts when received by the
Company), but may not be otherwise removed from the respective Working Capital
Reserve.
ARTICLE 2
Continuation, Purpose and Term
2.1 Continuation. The parties hereto hereby agree to continue the limited
liability company known as Municipal Mortgage & Equity, LLC, as a limited
liability company under the provisions of the Act.
2.2 Company Name. The name of the Company is "Municipal Mortgage & Equity,
LLC". The business of the Company shall be conducted under such name or such
other names as the Board of Directors or the Shareholders may from time to time
determine on and pursuant to the terms of this Agreement.
2.3 The Certificate. The Shareholders hereby agree to execute, file and
record all such certificates and documents, including amendments to the
Certificate, and to do such other acts as may be appropriate to comply with all
requirements for the formation, continuation, and operation of a limited
liability company, the ownership of property, and the conduct of business under
the laws of the State of Delaware and any other jurisdiction in which the
Company may own property or conduct business.
2.4 Principal Business Office. The principal business office of the Company
shall be located at 218 North Charles Street, Suite 500, Baltimore, Maryland
21201, or at such other location as may hereafter be determined by the Board of
Directors. The principal business office, as well as the registered office and
the registered agent, of the Company may be changed by the Board of Directors
from time to time in accordance with the then applicable provisions of the Act
and any other applicable laws, as well as the terms and conditions of this
Agreement.
2.5 Term of Company. The term of the Company shall continue until it is
wound up and dissolved pursuant to the provisions of Article 10 hereof.
2.6 Purposes. The purposes of the Company are (a) to invest in or engage
in activities related to investment in Bonds and in real estate, including but
not limited to loan servicing and loan origination (whether in connection with
loans to the Company or to others), and to generate returns from such
investments; this may include investing in entities which invest in bonds and in
real estate assets; provided, however, that the investment criteria shall be
established by the Board of Directors from time to time in its sole discretion
subject to the requirement that such criteria be consistent with the purposes of
the Company; (b) to engage in any other activities relating to, and compatible
with, the purposes set forth above; (c) to acquire, own and dispose of general
and limited partnership interests, membership interests, and stock or other
equity interests in Entities, and to exercise all rights and powers granted to
the owner of any such interests; (d) to take such other actions, or do such
other things, as are necessary or appropriate (in the sole discretion of the
Board of Directors) to carry out the provisions of this Agreement; and (e) to
invest in any type of investment and to engage in any other lawful act or
activity for which limited liability companies may be organized under the Act,
and by such statement all lawful acts and activities shall be within the
purposes of the Company, except for express limitations, if any.
2.7 Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Company shall have the power and is hereby
authorized to (a) invest (at any time during the term of the Company) in (i)
mortgage revenue bonds or portions of or interests in (including junior
positions) mortgage revenue bonds financing multifamily properties, senior
living facilities, manufactured housing communities, or congregate care
facilities, beneficial ownership certificates or any other securities of other
funds or investments with similar underlying investment objectives, (ii)
multifamily real estate, including senior living facilities, manufactured
housing communities, and congregate care facilities, and (iii) entities which
engage in any activities described in clauses (i) or (ii) of this sentence;
invest (at any time during the term of the Company) in other assets which are
designed to accomplish any of the foregoing investment purposes or in any manner
consistent with the Company's then-existing investment criteria and objectives;
and to reinvest the proceeds of any sales by the Company of Company assets, in
any permitted investments; (b) act as a general or limited partner, member,
joint venturer, manager or shareholder of any Entity (including but not limited
to an operating partnership), and to exercise all of the powers, duties, rights
and responsibilities associated therewith; (c) take any and all actions
necessary, convenient or appropriate as the holder of any such interests or
positions; (d) operate, purchase, maintain, finance, improve, own, sell, convey,
assign, mortgage, lease, demolish or otherwise dispose of any real or personal
property that may be necessary, convenient or incidental to the accomplishment
of the purposes of the Company; (e) borrow money and issue evidences of
indebtedness in furtherance of any or all of the purposes of the Company, and
secure the same by mortgage, pledge or other lien on any assets of the Company;
(f) invest any funds of the Company pending distribution or payment of the same
pursuant to the provisions of this Agreement; (g) prepay in whole or in part,
refinance, recast, increase, modify or extend any indebtedness of the Company
and, in connection therewith, execute any extensions, renewals or modifications
of any mortgage or security agreement securing such indebtedness; (h) enter
into, perform and carry out contracts of any kind, including, without
limitation, contracts with any Person affiliated with any of the Shareholders,
necessary to, in connection with or incidental to the accomplishment of the
purposes of the Company; (i) establish reserves for capital expenditures,
working capital, debt service, taxes, assessments, insurance premiums, repairs,
improvements, depreciation, depletion, obsolescence and general maintenance of
buildings and other property out of the rents, profits or other income received;
(j) employ or otherwise engage employees, managers, contractors, advisors and
consultants, and pay reasonable compensation for such services, and enter into
employee benefit plans of any type; (k) enter into partnerships or other
ventures with other Persons in furtherance of the purposes of the Company; (l)
purchase or repurchase Shares from any Person for such consideration as the
Board of Directors may determine in its reasonable discretion (whether more or
less than the original issuance price of such Share or the then trading price of
such Share); (m) enter into rights plans or other plans relating to Shares,
options or bonuses, and to issue Shares, options or warrants thereunder (or
other derivatives relating thereto) for any consideration (even if such
consideration is less than the market value of such Shares); and (n) do such
other things and engage in such other activities as may be necessary, convenient
or advisable with respect to the conduct of the business of the Company, and
have and exercise all of the powers and rights conferred upon limited liability
companies formed pursuant to the Act.
2.8 Effectiveness of this Agreement. This Agreement shall govern the
operations of the Company and the rights and restrictions applicable to the
Shareholders, to the extent permitted by law. Pursuant to Section
18-101(7)(a)(2) of the Act, all Persons who become holders of Shares in the
Company shall be bound by the provisions of this Agreement and shall be deemed
to be parties hereto, whether or not such Persons execute a counterpart of this
Agreement. The payment for any Shares acquired by any Person, or the action of
becoming an assignee or Transferee of such Shares, shall be deemed to constitute
a request that the records of the Company reflect such admission, assignment or
Transfer, and shall be deemed to be sufficient acts to comply with the
requirements of Section 18-101(7)(a)(2) of the Act and to so cause that Person
to become a Shareholder and to bind that Person to the terms and conditions of
this Agreement (and to entitle that Person to the rights of a Shareholder
hereunder), without the requirement for execution of this Agreement by such
Person.
ARTICLE 3
Classes of Shares; Admission of Shareholders; Capitalization
3.1 Classes of Shares.
(a) The Company shall have the authority to issue the following
classes and series of Shares:
(i) shares which are designated "Common Shares"; and
(ii) one or more other classes or series of Shares, as to
which the Board of Directors shall have the exclusive authority,
by resolution or resolutions providing for the issuance of Shares
or of a particular class or series thereof, to fix and determine
the voting powers, full or limited or no voting power, and such
designations, preferences, and relative, participating, optional
or other special rights, and qualifications, limitations, or
restrictions thereof, as may be desired by the Board of Directors
from time to time, to the fullest extent now or hereafter
permitted by the laws of the State of Delaware (collectively, all
such other classes and series to be referred to as the "Future
Shares"). Nothing in this Section 3.1(a)(ii) shall be deemed to
restrict the ability of the Company to incur secured or unsecured
debt (directly or indirectly), including but not limited to
through custodial, trust or similar or other arrangements.
(b) Each Common Share shall (i) have no stated par value per
Share, and (ii) have the rights and be governed by the provisions set
forth in this Agreement; and none of such shares shall have any
preemptive rights, or give the holders thereof any rights to convert
into any other securities of the Company, or give the holders thereof
any cumulative voting rights, except as specifically set forth herein.
(c)The Board of Directors may cause the Company to issue such
numbers of Common Shares and Future Shares from time to time as the
Board of Directors may determine in its sole discretion, and the
number of such shares is not limited.
(d) If the Board of Directors determines that it is necessary or
desirable to amend this Agreement or to make any filings under the Act
or otherwise in order to reference the existence or creation of a
class or series of Future Shares, the Board of Directors may cause
such amendments and filings to be made, which filings might take the
form of amendments to the Company's Certificate; provided, however,
that, unless specifically required by the Act or this Agreement, no
approval or Consent of any Shareholders shall be required in
connection with the making of any such filing, instrument or
amendment.
(e) No Future Share shall have any preemptive rights or give the
holder thereof any rights to convert into any other securities of the
Company, or give any holders thereof any cumulative voting rights,
unless such rights are specifically provided for in the Board of
Directors' resolution creating the class of which such Future Share is
a part.
(f) The Board of Directors, without any Consent of any
Shareholders being required, may effect a split or reverse split of
Shares of any series or class, by adopting a resolution therefor. If
the Board of Directors determines that it is necessary or desirable to
make any filings under the Act or otherwise in order to reference the
existence of such a split or reverse split, the Board of Directors may
cause such filings to be made, which filings might take the form of
amendments to the Company's Certificate; provided, however, that,
unless specifically required by the Act or this Agreement, no approval
or Consent of any Shareholders shall be required in connection with
the making of any such filing or amendment.
(g) Notwithstanding any other provisions of this Agreement, the
Board of Directors may, without the Consent of Shareholders, amend
this Agreement to the extent required to allow the Board of Directors
to exercise the powers granted to it by this Section 3.1.
3.2 Additional Provisions Relating to Additional Shareholders. In the
event that the Board of Directors determines that additional funds are
required by the Company for any Company purpose, or that the Company should
for any reason seek to raise additional capital, the Board may cause the
Company to sell Future Shares for a price equal to what the Board of
Directors determines to be the fair value of such Shares, in exchange for
cash, other property, services or any other lawful consideration to be
received by the Company in consideration of such Shares (to be valued by
the Board of Directors in its discretion), or may cause the Company to
obtain funds as a loan from any third party upon such terms and conditions
as the Board of Directors deems appropriate, or any combination thereof
from time to time. The Initial Capital Contribution of any such additional
Shareholders shall be specified by the Board of Directors at the time of
admission of such additional Shareholder.
3.3 Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Shareholder, including any
Transferee or additional Shareholder who shall hereafter acquire a Company
Interest, in accordance with the following provisions:
(a) To each Shareholder's Capital Account there shall be credited
the amount of cash and fair market value of the property actually
contributed to the Company by such Shareholder pursuant to Section 3.2
hereof, such Shareholder's allocable share of Profit, and the amount
of any Company liabilities that are assumed by such Shareholder or
that are secured by any Company property distributed to such
Shareholder.
(b) To each Shareholder's Capital Account there shall be debited
the amount of cash and the fair market value of any Company property
distributed to such Shareholder pursuant to any provision of this
Agreement, such Shareholder's allocable share of Loss, and the amount
of any liabilities of such Shareholder that are assumed by the Company
or that are secured by any property contributed by such Shareholder to
the Company.
(c) If any asset of the Company is distributed in kind, the
Company shall be deemed to have realized Profit or Loss thereon in the
same manner as if the Company had sold such asset for an amount equal
to the greater of (i) the fair market value of such asset, or (ii) the
fair market value of any debts to which such asset is then subject, in
each case as determined by the Board of Directors. If at any time
after the date of this Agreement, the Book Value of any Company asset
is adjusted pursuant to the last sentence of the definition of Book
Value set forth in Section 1 hereof, the Capital Accounts of all
Shareholders shall be adjusted simultaneously to reflect the aggregate
net adjustments, as if the Company recognized Profit or Loss equal to
the respective amounts of such aggregate net adjustments.
(d) The provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Section
1.704-1(b)(2)(iv) of the Treasury Regulations, and shall be
interpreted and applied in a manner consistent with such Treasury
Regulations.
(e) A Shareholder shall not be entitled to withdraw any part of
its Capital Account or to receive any distributions from the Company,
except as provided in Article 5 hereof, nor shall a Shareholder be
entitled to make any loan or Capital Contribution to the Company other
than as expressly provided herein. No loan made to the Company by any
Shareholder shall constitute a capital contribution to the Company for
any purpose.
(f) Except as required by the Act, no Shareholder shall have any
liability for the return of the Capital Contribution of any other
Shareholder. A Shareholder who has more than one interest in the
Company may have a separate Capital Account for each different class
of interest owned.
3.4 Transfer of Capital Accounts. The original Capital Account
established for each Transferee shall be in the same amount as the Capital
Account of the Shareholder which such Transferee succeeds, at the time such
Transferee is admitted to the Company. The Capital Account of any
Shareholder whose Company Interest shall be increased by means of the
Transfer to it of all or part of the Company Interest of another
Shareholder shall be appropriately adjusted to reflect such Transfer. Any
reference in this Agreement to a Capital Contribution of, or distribution
to, a then-Shareholder shall include a Capital Contribution or distribution
previously made by or to any prior Shareholder on account of the Company
Interest of such then-Shareholder.
3.5 Tax Matters Partner.
(a) Shelter Development Holdings, Inc. or its assignee shall be
the Company's "tax matters partner" (as such term is defined in
Section 6231(a)(7) of the Code) (the "Tax Matters Partner"), for
purposes of Section 6231 of the Code, with all of the powers that
accompany such status (except as otherwise provided in this
Agreement). Promptly following the written request of the Tax Matters
Partner, the Company shall, to the fullest extent permitted by law,
reimburse and indemnify the Tax Matters Partner for all reasonable
expenses, including reasonable legal and accounting fees, claims,
liabilities, losses and damages incurred by the Tax Matters Partner in
connection with any administrative or judicial proceeding with respect
to the tax liability of the Shareholders. The provisions of this
Section 3.7 shall survive the termination of the Company and shall
remain binding on the Shareholders for as long as a period of time as
is necessary to resolve with the Internal Revenue Service any and all
matters regarding the federal income taxation of the Company or the
Shareholders.
(b) Notwithstanding Section 3.5(a) hereof, the Tax Matters
Partner shall have no fiduciary duty whatsoever to any other
Shareholder, and shall be treated in exactly the same manner as any
other Shareholder other than as specifically provided in Section
3.5(a) hereof.
ARTICLE 4
Allocations
4.1 General Rules Concerning Allocations. Within 45 days after the end
of each calendar month, the Company shall conduct an interim closing of the
books as of the end of the last day of that calendar month. On the basis of
the closing of the books for each calendar month, the Company shall
determine the amount of Profit and Loss attributable to that calendar
month. Profits and Losses shall be determined in accordance with the
accounting methods followed by the Company for federal income tax purposes.
4.2 Allocations of Profits and Losses. All allocations to the
Shareholders of items included within the Company's Profits and Losses
attributable to each calendar month shall be allocated solely among the
Shareholders recognized as Shareholders as of the last day of that calendar
month, as follows:
(a) The Company's Profit or Loss for the applicable period shall
be allocated among the Common Shareholders in proportion to their
relative ownership of Common Shares.
(b) The Tax Matters Partner is authorized to make reasonable
determinations regarding the allocation of Profit and Loss under this
Section 4.2, including determinations relating to the calculation of
Profit or Loss, and such other items of the Company's income, gain,
loss, deduction and credit as may be appropriate to carry out the
intent of this Section 4.2.
4.3 Special Allocations. Notwithstanding any other provision of this
Agreement, to the extent an allocation of Profit or Loss or any item
thereof to any Shareholder pursuant to Sections 4.1 or 4.2 of this
Agreement would be in violation of the requirements of the Treasury
Regulations under Section 704(b) of the Code, the Tax Matters Partner shall
comply with the requirements of such Treasury Regulations and adjust such
allocations to comply with such requirements in a manner that will, in the
reasonable judgment of the Tax Matters Partner, have the least effect on
the amounts to be allocated and distributed under this Agreement. In the
event a Shareholder unexpectedly receives any adjustment, allocation or
distribution described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)
(4), (5) and (6) that causes or increases a negative balance in a
Shareholder's Capital Account, items of Profit shall be specially allocated
to such Shareholder so as to eliminate such negative balance as quickly as
possible. The Shareholders agree that if this Section 4.3 becomes
applicable, the Tax Matters Partner is authorized to review and adjust the
allocations made pursuant to Sections 4.1 or 4.2 of this Agreement.
4.4 Additional Allocations.
(a) If there is a net decrease in "partnership minimum gain"
(within the meaning of Treasury Regulation Section 1.704-2(d)) during
a taxable year, a Shareholder shall be allocated, before any other
allocation of the Company's items for such taxable year (and if
necessary, subsequent years), items of the Company's income and gain
in the amount equal to the Shareholder's share of such net decrease in
partnership minimum gain (within the meaning of Treasury Regulations
Section 1.704-2(g)).
(b) The Tax Matters Partner, in order to preserve uniformity of
Shares within a class, may, in its sole discretion, make a special
allocation of items of income, gain, loss or deduction but only if
such allocations would not have a material adverse effect on the
Shareholders and if they are consistent with the principles of Section
704 of the Code.
(c) If, and to the extent that any Shareholder is deemed to
recognize income as a result of any transaction between such
Shareholder and the Company pursuant to Sections 1272-1274, Section
7872, Section 483 or Section 482 of the Code, or any similar provision
now or hereafter in effect, any corresponding loss or deduction of the
Company shall be allocated to the Shareholder who was charged with
such income.
(d) Adjustments to the Capital Accounts of Shareholders with
respect to an adjustment to the tax basis of any asset of the Company
pursuant to Section 734(b) or Section 743(b) of the Code shall be made
in accordance with the provisions of Treasury Regulation Section
1.704-1(b)(2)(m).
4.5 Tax Allocations.
(a) For federal income tax purposes, except as otherwise provided
in this Section 4.5, each item of income, gain, loss and deduction of
the Company shall be allocated among the Shareholders in the same
proportion as the corresponding items are allocated pursuant to
Sections 4.3 and Section 4.4 hereof.
(b) In the event that the Book Value of any asset contributed to
and held by the Company differs from its basis for federal income tax
purposes ("Tax Basis"), allocations of income, gain, loss or deduction
with respect to such asset shall, solely for tax purposes, be
allocated among the Shareholders so as to take account of any
variation between Book Value and Tax Basis in accordance with the
provisions of Section 704(c) of the Code and Treasury Regulations
thereunder. The Tax Matters Partner may elect any reasonable method or
methods for making such allocations.
(c) If the Book Value of any asset of the Company is adjusted
pursuant to Section 1.11 hereof, subsequent allocations of income,
gain, loss and deductions with respect to such asset shall take into
account any variation between Book Value and Tax Basis in accordance
with the provisions of Section 704(c) of the Code and Treasury
Regulations thereunder.
(d) The Tax Matters Partner shall have the sole discretion to
make special allocations of items of income, gain, loss and deductions
that are consistent with the principles of Section 704(c) of the Code
and to amend the provisions of this Agreement (without Shareholder
action, notwithstanding Section 14.4 of this Agreement), as
appropriate, to reflect the proposal or promulgation of Treasury
Regulations under Subchapter K of the Code. The Tax Matters Partner
may adopt and employ such methods and procedures for (A) the
maintenance of capital accounts for book and tax purposes, (B) the
determination and allocation of adjustments under Sections 704(c), 734
and 743 of the Code, (C) the determination and allocation of taxable
income, tax loss and items thereof under this Agreement and pursuant
to the Code, (D) the determination of the identities and tax
classification of Shareholders, (E) the provision of tax information
and reports to the Shareholders, (F) the adoption of reasonable
conventions and methods for the valuation of assets and the
determination of tax basis, (G) the allocation of asset values and tax
basis, (H) conventions for the determination of depreciation, cost
recovery and amortization deductions and the adoption and maintenance
of accounting methods, (I) the recognition of the transfer of Shares,
and (J) compliance and other tax-related requirements, including
without limitation, the use of computer software, to use filing and
reporting procedures similar to those employed by publicly-traded
partnerships and limited liability companies, as it determines in its
sole discretion are necessary and appropriate to execute the
provisions of this Agreement and to comply with federal and state tax
law, and to achieve uniformity of Shares. The Tax Matters Partner
shall be indemnified and held harmless by the Company for any
expenses, penalties or other liabilities arising as a result of
decisions made in good faith on any of the matters referred to in the
preceding sentence. If the Tax Matters Partner determines, based on
advice of counsel, that no reasonable allowable convention or other
method is available to preserve the uniformity of Shares within a
class, or the Tax Matters Partner in its discretion so elects, Shares
may be separately identified as distinct classes to reflect
differences in tax consequences.
ARTICLE 5
Distributions, Liquidations and Priority
5.1 Distributions. The Board of Directors may from time to time
authorize the Company to pay distributions to holders of Common Shares from
cash of the Company which the Board of Directors determines is available
for distribution to the holders of Common Shares after taking into account
amounts determined by the Board of Directors to be necessary or advisable
to meet actual or anticipated expenses or liabilities of the Company or to
create reasonable reserves thereof.
5.2 Liquidation, Dissolution or Winding-Up.
(a) Liquidation. Upon the dissolution, liquidation or winding-up
of the Company, after payment of all of the Company's creditors, each
Shareholder shall receive an amount in cash or in kind equal to the
positive Capital Account balance of such Shareholder, as determined
after taking into account all Capital Account adjustments for the
taxable year of the dissolution, liquidation or winding-up of the
Company other than the distribution under this Section 5.2(a).
(b) A consolidation or merger of the Company with or into any
other Entity, or a sale, lease or exchange of any or all of the assets
of the Company in consideration for the issuance of equity securities
of another Entity, shall not be deemed to be a liquidation,
dissolution or winding up of the Company.
5.3 Priority. Notwithstanding any other provision of this Agreement,
it is specifically acknowledged and agreed by each Shareholder that the
Company's failure to pay any amounts to such Shareholder, whether as a
dividend, redemption payment or other distribution, even if such payment is
specifically required hereunder, shall not give such Shareholder creditor
status with regard to such unpaid amount; but rather, such Shareholder
shall be treated only as a shareholder of whatever class such person is a
Shareholder, and not as a creditor, of the Company. This Section 5.3 is, as
permitted by Section 18-606 of the Act, intended to override the provisions
of Section 18-606 of the Act relating to a member's status and remedies as
a creditor, to the extent that such provisions would be applicable in the
absence of this Section 5.3.
5.4 Payments to Shareholders for Services. Any payments by the Company
to a Shareholder for services rendered to or on behalf of the Company shall
be treated as guaranteed payments for services under Section 707(c) of the
Code.
ARTICLE 6
Shareholders
6.1 Limited Liability.
(a) Except as otherwise provided by the Act or in Section 6.1(b)
hereof, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts,
obligations and liabilities of the Company, and the Shareholders shall
not be obligated personally for any such debt, obligation or liability
of the Company solely by reason of being a Shareholder of the Company.
The Shareholders shall not be required to lend any funds to the
Company. Each of the Shareholders shall only be liable to make payment
of his, her or its respective contributions as and when due hereunder
and other payments as expressly provided in this Agreement. If and to
the extent a Shareholder's contribution shall be fully paid, such
Shareholder shall not, except as required by the express provisions of
the Act regarding repayment of sums wrongfully distributed to
Shareholders, be required to make any further contributions.
(b) Notwithstanding Section 6.1(a) hereof, the Special
Shareholder, for so long as such Person holds Shares (unless such
Person duly resigns as a Special Shareholder in accordance with this
Section 6.1 or Section 6.3 of this Agreement), shall have personal
liability to creditors of the Company (and any such creditor may seek
personal satisfaction from the Special Shareholder), to the extent
that the assets of the Company (including without limitation the
proceeds of any and all available insurance) are insufficient to
satisfy such creditor's claim (and, if there be more than one Special
Shareholder at any time, then such Special Shareholders shall be
jointly liable for all liabilities set forth in this Section 6.1(b));
provided, however, that, notwithstanding Section 6.3 of this
Agreement, any Special Shareholder may resign its status as a Special
Shareholder after (i) the consummation of a transaction in which a
Person acquires more than 10% of the then-outstanding Shares of any
class or series where such acquisition is not consented to by the
Special Shareholder, or (ii) any Shareholder or group of Shareholders
controls a majority of the seats on the Board of Directors in any case
where such control is not consented to by the Special Shareholder. In
the event of such a resignation, (x) the Special Shareholder's
personal liability under the first sentence of this Section 6.1(b)
shall, to the fullest extent permissible under law, terminate
immediately, automatically, and in full, although such Person may
continue to hold Shares, and (y) the Company shall pay to the Special
Shareholder, promptly after such resignation, the sum of $1,000,000 in
direct consideration for the Special Shareholder's prior service to
the Company.
(c) Notwithstanding Section 6.1(b) hereof, the Special
Shareholder shall have no fiduciary duty whatsoever to any other
Shareholder, and shall be treated in exactly the same manner as any
other Shareholder other than as specifically provided in Section
6.1(b) hereof. Without limiting the foregoing, it is agreed that (i)
the Special Shareholder has no responsibility to treat other
Shareholders as creditors of the Company toward which the Special
Shareholder would bear any responsibility or have any liability
whatsoever (including without limitation in the event of any Company
failure to pay any amounts to such Shareholders, whether as a
dividend, redemption payment or other distribution, even if such
amounts are specifically required hereunder to be paid), and (ii) the
Special Shareholder is entitled to act solely in its own self
interests without regard to the interests of other Shareholders.
(d) Notwithstanding any other provision of this Agreement, the
Dissolution Shareholder shall have the right to serve as one (or, if
there are at any time more than ten Directors on the Board of
Directors, two) of the Company's Directors, through such
representatives as are appointed by the Dissolution Shareholder (such
designated persons to be referred to as the "Specially Appointed
Director(s)") at all times and from time to time, and shall have the
sole right to remove such representative(s) as Directors; all as
provided in Section 7.2(b) of this Agreement.
6.2 Voting Rights of Shareholders; Authority of Board of Directors.
(a) The Board of Directors shall make all decisions made for and
on behalf of the Company, such decisions shall be binding upon the
Company, and the Shareholders shall have no voting rights; except,
however, as expressly set forth herein. The Board of Directors, in its
sole discretion, has full, complete and exclusive right, power and
authority in the management and control of the Company business to do
any and all things necessary to effectuate the purpose of the Company;
except, however, as expressly set forth herein. The members of the
Board of Directors shall devote such time as is necessary to the
affairs of the Company, and shall receive such compensation from the
Company and such reimbursement for expenses as is permitted by the
Company's By-laws as then in effect. No Person dealing with the Board
of Directors shall be required to determine its authority to make any
undertaking on behalf of the Company or to determine any facts or
circumstances bearing upon the existence of such authority.
(b) Notwithstanding Section 6.2(a) above, but subject to Sections
10.1(a)(i) and 10.1(a)(ii), Article 12 and Article 13 hereof, in the
event of a proposed sale or other disposition of all or substantially
all of the assets of the Company at any one time, merger or
consolidation of the Company (where the Company is not the surviving
Entity), dissolution of the Company, or issuance of any restricted
Share or deferred Share awards under a Company incentive share plan,
any such proposed occurrence, in order to be approved must, (i) with
respect to the merger or consolidation of the Company (where the
Company is not the surviving Entity), first receive the approval of
the Board of Directors, (ii) with respect to a sale or other
disposition of all or substantially all of the assets of the Company
at any one time, or dissolution of the Company, any such proposed
action must first receive the approval of the Board of Directors, and
(iii) receive the vote, at a duly held meeting, of more than 50% in
interest of the total then issued and outstanding Shares (or, in the
case of a written Consent without a meeting, more than 50% in interest
of the total then issued and outstanding Shares), voting as one class
(and not as separate classes, notwithstanding the fact that there may
be members of more than one class voting) or such greater percentage
as is then required under the Act.
(c) Notwithstanding Section 6.2(a) above, but subject to Sections
6.1(d), 7.2(a) and 7.2(b) and Articles 12 and 13 hereof, the vote, at
a duly held meeting, of more than 50% in interest of the total then
issued and outstanding Shares (or, in the case of a written Consent
without a meeting, more than 50% in interest of the total then issued
and outstanding Shares), voting as one class (and not as separate
classes, notwithstanding the fact that there may be members of more
than one class voting), shall be able to remove any Director (other
than a Specially Appointed Director) and elect a replacement therefor.
If the Shareholders vote to remove a Director pursuant to this Section
6.2(c), they shall provide the removed Director with notice thereof,
which notice shall set forth the date upon which such removal is to
become effective.
(d) Except as otherwise provided in this Agreement or in any
share plan or share incentive plan adopted by the Company, the holders
of Common Shares have sole Shareholder authority;
(i) to vote on such matters as may be brought before the
Shareholders from time to time (on issues other than those as to
which this Agreement specifically provides for voting rights of
Shareholders in addition to or instead of holders of Common
Shares);
(ii) to elect Directors, and shall do so on an annual basis;
and in all such votes on which the holders of Common Shares have sole
Shareholder voting authority, in order for the holders of Common
Shares to act to approve a matter on which they are voting, such
matter must receive the vote of more than 50% in interest of the
Common Shares which are voted at a meeting at which a quorum of Common
Shares is present (or, in the case of a written Consent without a
meeting, must receive the written Consent of more than 50% in interest
of the aggregate Common Shares), voting as one class (and not as
separate classes, notwithstanding the fact that there may be members
of more than one class voting) (or such greater percentage as is then
required under the Act or under the express terms of this Agreement).
For purposes of the foregoing sentence, the term "quorum" means more
than 50% of the then issued and outstanding Common Shares, except as
provided in any share plan or share incentive plan adopted by the
Company.
The annual meeting of the holders of Common Shares of the Company
for the election of Directors and for the transaction of such other
business as properly may come before such meeting shall be held in
accordance with the By-laws. Subject to the provisions of Article 13
relating to meetings of Shareholders and related subjects, the By-laws
shall govern matters relating to, among other things, annual and
special meetings, notice, waiver of notice, adjournment, proxies,
written consents, procedures, and telephonic meetings, to the extent
not inconsistent with this Agreement.
(e) Notwithstanding any other provision of this Agreement,
Shareholders have voting rights with respect to a particular matter
(to the extent provided herein with regard to categories of
Shareholders permitted to vote on particular matters, and otherwise)
only after such matter has first been approved by the Board of
Directors, except with regard to (i) the removal of a Director (and
the election of a replacement therefor in connection therewith) as
provided in this Agreement, (ii) the amendment of this Agreement,
(iii) the sale or other disposition of all or substantially all of the
assets of the Company at any one time, (iv) the dissolution of the
Company, and (v) any matter as to which any share plan or share
incentive plan adopted by the Company provides otherwise.
(f) For purposes of this Agreement, in order for a meeting of
Shareholders to be considered duly held with regard to a particular
question, a quorum of more than 50% in interest of the Shares which
are entitled to vote at such meeting on the particular question must
be present (in person or by proxy).
6.3 Transfers of Special Shareholder Interests. The restrictions,
limitations and other provisions of this Section 6.3 shall in no manner
limit or restrict the right of a Special Shareholder to resign its status
as a Special Shareholder to the extent permitted under Section 6.1(b) of
this Agreement; and, once such Special Shareholder properly resigns
pursuant thereto, the transfer restrictions set forth in this Section 6.3
as they relate to such Special Shareholder shall automatically and
immediately terminate. Subject to the foregoing sentence, it is agreed
that:
(a) No Special Shareholder (a "Special Transferor") may make any
Transfer of any of its Shares to a Transferee (a "Special Transferee")
unless each of the following requirements is met:
(i) At all times during the existence of the Company,
including upon consummation of such Transfer, one or more Special
Shareholders must have, in the aggregate, at least a number of
Shares which will result in the allocation to the Special
Shareholder(s), in the aggregate, of the minimum percentage
interest in the Company which will permit the Company to retain
its tax status as an association taxable as a partnership rather
than as a corporation, in the opinion of counsel to the Company;
and
(ii) Before any such Transfer can be made, the Company must
be furnished with an opinion of counsel (which may or may not be
the same counsel as is referenced in subparagraph (i) above) to
the effect that the Transfer in question will not adversely
affect the Company's tax status as an association taxable as a
partnership rather than as a corporation.
(b) No Transfer to a Special Transferee shall be recognized by
the Company unless the Board of Directors of the Company receives
documentation satisfactory to it that the requirements of this Section
6.3 have been met.
(c) If the Special Transferor transfers all of its Shares in such
Transfer, in accordance with the restrictions and requirements of
Sections 6.3(a) and 6.3(b) of this Agreement, then such Special
Transferor shall thereafter no longer be a Special Shareholder. If the
Special Transferor transfers fewer than all of its Shares in such
Transfer, then:
(i) if such Special Transferor makes no provision for the
termination of its status as a Special Shareholder in accordance
with clause (ii) immediately below, such Special Transferor shall
continue to be a Special Shareholder; and
(ii) if the Special Transferee agrees in writing to be a
Special Shareholder and to be subject to the liabilities of a
Special Shareholder as provided in this Agreement, then, if all
of the requirements and limitations set forth in Section 6.3(a)
of this Agreement are complied with, the Special Transferor may
terminate its status as a Special Shareholder upon notice thereof
to the Company; provided, however, that no such resignation shall
be recognized by the Company unless the Board of Directors of the
Company receives documentation satisfactory to it that the
requirements of this Section 6.3(c) have been met.
6.4 Transfers of Dissolution Shareholder Interests.
(a) No Dissolution Shareholder (a "Dissolution Transferor") may
make any Transfer of any of its Shares to a Transferee (a "Dissolution
Transferee") unless each of the following requirements is met:
(i) At all times during the existence of the Company,
including upon consummation of such Transfer, one or more
Dissolution Shareholders must have, in the aggregate, at least a
number of Shares which will result in the allocation to the
Dissolution Shareholder, in the aggregate, of the minimum
percentage interest in the Company which will permit the Company
to retain its tax status as an association taxable as a
partnership rather than as a corporation, in the opinion of
counsel to the Company; and
(ii) Before any such Transfer can be made, the Company must
be furnished with an opinion of counsel (which may or may not be
the same counsel as is referenced in subparagraph (i) above) to
the effect that the Transfer in question will not adversely
affect the Company's tax status as an association taxable as a
partnership rather than as a corporation.
(b) No Transfer to a Dissolution Transferee shall be recognized
by the Company unless the Board of Directors of the Company receives
documentation satisfactory to it that Section 6.4(a)'s requirements
have been met.
(c) If the Dissolution Transferor transfers all of its Shares in
such Transfer, in accordance with the restrictions and requirements of
Sections 6.4(a) and 6.4(b) of this Agreement, then such Dissolution
Transferor shall thereafter no longer be a Dissolution Shareholder. If
the Dissolution Transferor transfers fewer than all of its Shares in
such Transfer, then:
(i) if such Dissolution Transferor makes no provision for
the termination of its status as a Dissolution Shareholder in
accordance with clause (ii) immediately below, such Dissolution
Transferor shall continue to be a Dissolution Shareholder; and
(ii) if the Dissolution Transferee agrees in writing to be a
Dissolution Shareholder, then, if all of the requirements and
limitations set forth in Section 6.4(a) of this Agreement are
complied with, the Dissolution Transferor may terminate its
status as a Dissolution Shareholder upon notice thereof to the
Company; provided, however, that no such resignation shall be
recognized by the Company unless the Board of Directors of the
Company receives documentation satisfactory to it that this
Section 6.4(c)'s requirements have been met.
ARTICLE 7
Directors and Officers
7.1 General Powers of Directors.
(a) Except as may otherwise be provided by the Act or by this
Agreement, the property, affairs and business of the Company shall be
managed by or under the direction of the Board of Directors, the Board
of Directors may exercise all the powers of the Company (including but
not limited to deciding whether to make various tax elections), and
the Shareholders shall have no right to act on behalf of or bind the
Company. The Directors shall act only as a Board, and the individual
Directors shall have no power as such. Subject to the provisions of
this Agreement and the By-laws with regard to Board of Directors
actions that can be taken without a quorum, the approval of a matter
by a majority of the Directors present at a meeting at which a quorum
is present shall constitute approval by the Board of Directors (or, in
the case of a written consent without a meeting, the approval of a
matter by all of the Directors shall constitute approval by the Board
of Directors).
(b) Unless expressly provided otherwise under this Agreement, the
Board of Directors shall have the exclusive authority to make all
determinations under this Agreement and under the By-laws.
(c) No contract or transaction among the Company and one or more
of its Affiliates, Directors or officers, or among the Company and any
other Entity in which one or more of the Company's Affiliates,
Directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely
because the Director or officer is present at or participates in the
meeting of the Board of Directors or of a committee thereof which
authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(i) The material facts as to such Affiliate's, Director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors
or the committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the affirmative
vote of a majority of the disinterested Directors, even though
the disinterested Directors be less than a quorum;
(ii) The material facts as to such Affiliate's, Director's
or officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the Shareholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by more than 50% in interest
of the Common Shares which are present and entitled to vote at a
meeting at which a quorum is present (or, in the case of a
written Consent without a meeting, more than 50% in interest of
the aggregate Common Shares), voting as one class (and not as
separate classes, notwithstanding the fact that there may be
members of more than one class voting), who are not Affiliates of
any of the interested Persons involved in such transaction; or
(iii) The contract or transaction is fair as to the Company.
Common or interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a
committee which authorizes the contract or transaction.
Notwithstanding the foregoing provisions of this Section 7.1(c), the
Company shall enter into or renew no agreement pursuant to which any
Affiliate of any Director would provide management services for any
Property, unless such agreement is approved by a majority of the
Directors who (a) are not officers of the Company, (b) are neither
related to any Company officer nor represent concentrated or family
holdings of the Company's Shares, and (c) are, in the view of the
Board of Directors, free of any relationship that would interfere with
the exercise of independent judgment; and, if such approval is
obtained in the case of a particular contract, such approval shall be
deemed to satisfy the requirements of this Section 7.1(c).
(d) Notwithstanding the above provisions of this Section 7.1, in
any transaction in which the Company wishes to issue Shares to SCATEF
or any Affiliate of SCATEF in exchange for such Person giving up fees
otherwise payable to it, such transaction, including but not limited
to the exchange ratio of Shares for such fees, shall not be approved
or undertaken by the Company unless and until approved, in lieu of the
requirements set forth in Section 7.1(c), by a majority of the
directors of the Company who are not Affiliates of SCATEF or of any
SCATEF Affiliate (even though the disinterested Directors may be less
than a quorum of the full Board of Directors), after the material
facts as to such transaction are disclosed or are known to such
unaffiliated Directors.
7.2 Number and Term of Office of Directors.
(a) The number of seats constituting the entire Board of
Directors shall be at least five and no more than 15, with the exact
number of seats on the Board of Directors to be determined from time
to time by resolution of the Board of Directors. At least a majority
of the Directors in office at any point in time must be individuals
who are not employed by the Company or by any Affiliate of the
Company. Each Director (whenever elected) shall hold office until his
or her successor has been duly elected and qualified, or until his or
her earlier death, resignation, or removal. A Director shall not be
required to be a Shareholder or a resident of the State of Delaware.
(b) The Specially Appointed Director(s) shall have all of the
powers, rights, privileges, obligations and duties as all other
Directors, and shall for all purposes be Directors of the Company,
except that (i) the Specially Appointed Director(s) shall not be
counted when determining the total size of the Board of Directors for
the sole purpose of making the determination in Section 7.2(c) below
as to how many Directors are in each class, (ii) no Shareholders other
than the Dissolution Shareholder shall have any right to elect, remove
or replace the Specially Appointed Director(s), and, without limiting
the foregoing, the Specially Appointed Director(s) shall not stand for
election or reelection at any meeting of the holders of Common Shares.
Without limiting the foregoing, all other Shareholders, by becoming
Shareholders of the Company, agree that (I) the Dissolution
Shareholder has such rights to serve, through its appointed
representatives, as the Specially Appointed Director(s) and that the
necessary one seat or two seats on the Board of Directors shall be
reserved for such appointment(s) (and the size of the Company's Board
of Directors shall automatically be expanded at any time if such
expansion is necessary in order to permit the Dissolution Shareholder
to effect such appointment(s)) and (II) the Company's officers and
Directors may take any and all steps deemed appropriate by them, in
connection with Shareholder meetings or otherwise, to implement this
Section 7.2(b).
(c) Subject to Section 7.2(b) above, at all times the Board of
Directors shall be divided into three classes, as nearly equal in
numbers as the then total number of directors constituting the entire
Board of Directors permits, with the term of office of one class
expiring each year (with the first such class expiration to occur at
the first annual meeting of Shareholders); and the Board of Directors
shall have sole power to make such determinations. At the first annual
meeting of the holders of Common Shares, only the Directors of the
first class shall be elected by the holders of Common Shares (in
accordance with Section 6.2 hereof), and such persons shall hold
office thereafter for a term expiring at the third succeeding annual
meeting. At the second annual meeting of Shareholders, only the
Directors of the second class shall be elected by the holders of
Common Shares (in accordance with Section 6.2 hereof), and such
persons shall hold office thereafter for a term expiring at the third
succeeding annual meeting. At the third annual meeting of
Shareholders, only the Directors of the third class shall be elected
by the holders of Common Shares (in accordance with Section 6.2
hereof), and such persons shall hold office thereafter for a term
expiring at the third succeeding annual meeting. At each subsequent
annual meeting of Shareholders thereafter, the successors to any class
of directors whose term shall then expire shall be elected by the
holders of Common Shares (in accordance with Section 6.2 hereof) to
hold office for a term expiring at the third succeeding annual
meeting.
7.3 By-law Provisions. The By-laws shall govern matters relating to,
among other things, (a) with respect to directors, annual and special
meetings, notice, waiver of notice, quorum, voting, adjournment, written
consents, committees, procedures, telephonic meetings, resignations,
removals, vacancies, books and records, reports, and compensation and
reimbursement of expenses, to the extent not inconsistent with this
Agreement, (b) with respect to officers, all matters not governed by this
Agreement, and (c) employee benefit matters, which matters shall be subject
to and managed as provided by the discretion of the Board of Directors.
ARTICLE 8
Exculpation and Indemnification
8.1 Limitations on Liability, and Indemnification of, Directors and
Officers.
(a) No director or officer of the Company shall be liable,
responsible or accountable in damages or otherwise to the Company or
any of the Shareholders for any act or omission performed or omitted
by him or her, or for any decision, except in the case of fraudulent
or illegal conduct of such person. For purposes of this Section 8.1,
the fact that an action, omission to act or decision is taken on the
advice of counsel for the Company shall be evidence of good faith and
lack of fraudulent conduct.
(b) All Directors and officers of the Company shall be entitled
to indemnification from the Company for any loss, damage or claim
(including any reasonable attorney's fees incurred by such person in
connection therewith) due to any act or omission made by him or her,
except in the case of fraudulent or illegal conduct of such person;
provided, that any indemnity shall be paid out of, and to the extent
of, the assets of the Company only (or any insurance proceeds
available therefor), and no Shareholder shall have any personal
liability on account thereof.
(c) The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the Person acted fraudulently or illegally.
(d) The indemnification provided by this Section 8.1 shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any agreement, vote of Shareholders or Directors, or
otherwise, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(e) Any repeal or modification of this Section 8.1 shall not
adversely affect any right or protection of a Director or officer of
the Company existing at the time of such repeal or modification.
(f) The Company may, if the Board of Directors of the Company
deems it appropriate in its sole discretion, obtain insurance for the
benefit of the Company's Directors and officers, relating to the
liability of such persons.
ARTICLE 9
Transfers of Interests; Admission of New Shareholders
9.1 Transfers. Subject to Section 6.3 of this Agreement (relating to
Special Shareholders) and Section 6.4 of this Agreement (relating to
Dissolution Shareholders), the Shares shall be freely transferable; and any
Person who is a Transferee of Shares shall, by having such status, (a)
automatically become a Shareholder of the Company with no further action
being required on such Person's part, and (b) automatically be bound to the
terms and conditions of this Agreement (and be entitled to the rights of a
Shareholder hereunder), without the requirement for execution of this
Agreement by such Person. Certain mechanical aspects of the transfer of
Shares shall be set forth in the By-laws.
ARTICLE 10
Dissolution and Termination
10.1 Events of Dissolution.
(a) In accordance with Section 18-801 of the Act, and the
provisions therein permitting this Agreement to specify the events of
the Company's dissolution, the Company shall be dissolved and the
affairs of the Company wound up upon the occurrence of any of the
following events:
(i) a unanimous written decision of all of the Original
Shareholders who are then still Shareholders to dissolve the
Company;
(ii) the death, retirement, resignation, expulsion,
bankruptcy (as defined in Section 18-304 of the Act) or
dissolution of a Person who is then a Dissolution Shareholder, or
the occurrence of any other event that terminates the continued
membership in the Company of a Person who is then a Dissolution
Shareholder, unless more than 50% in interest of the
then-outstanding Shares votes, at a duly held meeting (or, in the
case of a written Consent without a meeting, more than 50% in
interest of the aggregate Shares acts), within 180 days of such
event to continue the Company; or
(iii) the vote of the Shareholders pursuant to Section
6.2(b) hereof.
The death, retirement, resignation, expulsion, bankruptcy (as
defined in Section 18-304 of the Act) or dissolution of a Shareholder
or the occurrence of any other event that terminates the continued
membership of a Shareholder in the Company, shall not cause the
dissolution of the Company except to the extent specified above in
this Section 10.1(a).
(b) Dissolution of the Company shall be effective on the day on
which the event occurs giving rise to the dissolution, but the Company
shall not terminate until the assets of the Company shall have been
distributed as provided herein and a certificate of cancellation of
the Certificate has been filed with the Secretary of State of the
State of Delaware.
10.2 Application of Assets. In the event of dissolution, the Company
shall conduct only such activities as are necessary to wind up its affairs
(including the sale of the assets of the Company in an orderly manner), and
the assets of the Company shall be applied, first, as required by Section
18-804(a)(1) of the Act, and then in the manner, and in the order of
priority, set forth in Article 5.
10.3 Gain or Losses in Process of Liquidation. Any gain or loss or
disposition of Company property in the process of liquidation shall be
credited or charged to the Capital Accounts of Shareholders in accordance
with the provisions of Article 3. Any property distributed in kind in the
liquidation shall be valued and treated as though the property were sold at
its fair market value and the cash proceeds were distributed. The
difference between the fair market value of property distributed in kind
and its Book Value shall be treated as a gain or loss on the sale of such
property and shall be credited or charged to the Capital Account of
Shareholders in accordance with Article 3; provided, that no Shareholder
shall have the right to request or require the distribution of the assets
of the Company in kind.
10.4 Procedural and Other Matters.
(a) Upon dissolution of the Company and until the filing of a
certificate of cancellation as provided in Section 10.4(b), the
Persons winding up the affairs of the Company may, in the name of, and
for and on behalf of, the Company, prosecute and defend suits, whether
civil, criminal or administrative, gradually settle and close the
business of the Company, dispose of and convey the property of the
Company, discharge or make reasonable provision for the liabilities of
the Company, and distribute to the members any remaining assets of the
Company, in accordance with this Article 10 and all without affecting
the liability of Shareholders and Directors and without imposing
liability on a liquidating trustee.
(b) The Certificate may be canceled upon the dissolution and the
completion of winding up of the Company, by any Person authorized to
cause such cancellation in connection with such dissolution and
winding up.
ARTICLE 11
Appointment of Attorney-in-Fact
11.1 Appointment and Powers.
(a) Each Shareholder hereby irrevocably constitutes and appoints
the Company's chief executive officer, with full power of
substitution, as his, her or its true and lawful attorney-in-fact,
with full power and authority in his, her or its name, place and stead
to execute, acknowledge, deliver, swear to, file and record at the
appropriate public offices such documents, instruments and conveyances
as may be necessary or appropriate to carry out the provisions or
purposes of this Agreement, including, without limitation, the
following: (i) the Certificate; (ii) all other certificates and
instruments and amendments thereto that the Board of Directors deems
appropriate to qualify or continue the Company as a limited liability
company in the jurisdiction in which the Company may conduct business;
(iii) all instruments that the Board of Directors deems appropriate to
reflect a change or modification of the Company in accordance with the
terms of this Agreement; (iv) all conveyances and other instruments
that the Board of Directors deems appropriate to reflect the
dissolution and termination of the Company; (v) all fictitious or
assumed name certificates required or permitted to be filed on behalf
of the Company; (vi) any and all documents necessary to admit
Shareholders to the Company, or to reflect any change or transfer of a
Shareholder's Company Interest, or relating to the admission or
increased Capital Contribution of a Shareholder; (vii) any amendment
or other document to be filed as referenced in Section 3.1(d) or
3.1(f) of this Agreement; and (viii) all other instruments that may be
required or permitted by law to be filed on behalf of or relating to
the Company and that are not inconsistent with this Agreement.
(b) The authority granted by this Section 11.1 (i) is a special
power of attorney coupled with an interest, is irrevocable, and shall
not be affected by the subsequent incapacity or disability of the
Shareholder; (ii) may be exercised by a signature for each Shareholder
or by listing the names of all of the Shareholders executing this
Agreement with a single signature of any such Person acting as
attorney-in-fact for all of them; and (iii) shall survive the Transfer
by a Shareholder of the whole or any portion of his, her or its
Company Interest.
11.2 Presumption of Authority. Any Person dealing with the Company may
conclusively presume and rely upon the fact that any instrument referred to
above, executed by such Person acting as attorney-in-fact, is authorized,
regular and binding, without further inquiry.
ARTICLE 12
Certain Provisions Relating to
Changes in Control and Business Combinations
12.1 Definitions. For purposes of this Article 12, the following
definitions shall apply:
"Associate" when used to indicate a relationship with any Person,
means:
(a) Any Entity (other than the Company or a Subsidiary of the
Company) of which such Person is an officer, director or partner or
is, directly or indirectly, the beneficial owner of 10 percent or more
of any class of equity securities of such Entity;
(b) Any trust or other estate in which such Person has a
substantial beneficial interest or as to which such person serves as
trustee or in a similar fiduciary capacity; and
(c) Any Relative of such Person, or any Relative of a spouse of
such Person, who has the same home as such Person or who is a Director
or officer of the Company or a manager, director or officer of any of
its Affiliates.
"Beneficial Owner" when used with respect to Company Interests,
means a Person:
(a) That, individually or with any of its Affiliates or
Associates, beneficially owns Company Interests, directly or
indirectly; or
(b) That, individually or with any of its Affiliates or
Associates, has (i) the right to acquire Company Interests (whether
such right is exercisable immediately or only after the passage of
time), pursuant to any agreement, arrangement, or understanding or
upon the exercise of conversion rights, exchange rights, warrants or
options, or otherwise; or (ii) the right to vote Company Interests
pursuant to any agreement, arrangement or understanding; or
(c) That has any agreement, arrangement, or understanding for the
purpose of acquiring, holding, voting, or disposing of Company
Interests with any other Person that beneficially owns, or whose
Affiliates or Associates beneficially own, directly or indirectly,
such Company Interests.
"Business Combination" means:
(a) Unless the merger, consolidation or exchange of Company
Interests does not alter the contract rights of the Company Interests
as expressly set forth in this Agreement or change or convert in whole
or in part the outstanding Company Interests, any merger,
consolidation or exchange of Company Interests or any Subsidiary with
(i) any Interested Party or (ii) any other Entity (whether or not
itself an Interested Party) which is, or after the merger,
consolidation or exchange of interests would be, an Affiliate of an
Interested Party that was an Interested Party prior to the
transaction;
(b) Any sale, lease, transfer or other disposition, other than in
the ordinary course of business or pursuant to a distribution or any
other method affording substantially proportionate treatment to the
Shareholders, in one transaction or a series of transactions in any
12-month period, to any Interested Party or any Affiliate of any
Interested Party (other than the Company or any of its Subsidiaries)
of any assets of the Company or any Subsidiary having, measured at the
time the transaction or transactions are approved by the Board of
Directors of the Company, an aggregate book value as of the end of the
Company's most recently ended fiscal quarter of 10 percent or more of
the total market value of the outstanding Company Interests or of its
net worth as of the end of its most recently ended fiscal quarter;
(c) The issuance or transfer by the Company or any Subsidiary, in
one transaction or a series of transactions, of any Company Interests
or any equity securities of a Subsidiary which have an aggregate
market value of five percent or more of the total market value of the
outstanding Company Interests to any Interested Party or any Affiliate
of any Interested Party (other than the Company or any of its
Subsidiaries) except pursuant to the exercise of warrants or rights to
purchase securities pro-rata to all Shareholders or any other method
affording substantially proportionate treatment to those Shareholders;
(d) The adoption of any plan or proposal for the liquidation or
dissolution of the Company in which anything other than cash will be
received by an Interested Party or any Affiliate of any Interested
Party;
(e) Any reclassification of securities or recapitalization of the
Company, or any merger, consolidation or exchange of Company Interests
with any of its Subsidiaries which has the effect, directly or
indirectly, in one transaction or series of transactions, of
increasing by five percent or more the total number of outstanding
Company Interests, the proportionate amount of the outstanding Company
Interests or the outstanding number of any class of equity securities
of any Subsidiary which is directly or indirectly owned by any
Interested Party or any Affiliate of any Interested Party; or
(f) The receipt by any Interested Party or any Affiliate of any
Interested Party (other than the Company or any of its Subsidiaries)
of the benefit, directly or indirectly (except proportionately as a
holder of Company Interests), of any loan, advance, guarantee, pledge
or other financial assistance or any tax credit or other tax advantage
provided by the Company or any of its Subsidiaries.
"Interested Party" means any Person (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) the General Partners, the
Special Shareholder, the Original Shareholders, and the Dissolution
Shareholder, and (iv) any Affiliate or Associate of any Person
described in clause (iii) above) that:
(a) Is the beneficial owner, directly or indirectly, of 10
percent or more of the outstanding Company Interests;
(b) Is an Affiliate or Associate of the Company and at any time
within the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of 10 percent or
more of the then outstanding Company Interests; or
(c) Is an Affiliate or Associate of (a) or (b).
For purposes of determining whether a Person is an Interested Party,
the number of Company Interests deemed to be outstanding shall include
Company Interests deemed beneficially owned by the Person through the
definition of Beneficial Ownership set forth above but shall not
include any other Company Interests which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of
conversion rights, warrants or options, or otherwise.
"Market Value" means:
(a) In the case of Company Interests, the highest closing sale
price during the 30-day period immediately preceding the date in
question of a Company Interest of the same class or series on the
composite tape of the New York Stock Exchange-listed stocks, or, if
such Company Interest of the same class or series is not quoted on the
composite tape, on the New York Stock Exchange, or if such Company
Interest of the same class or series is not listed on such Exchange,
on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Company Interest of
the same class or series is listed, or, if the Company Interest of the
same class or series is not listed on any such exchange, the highest
closing bid quotation with respect to such a Company Interest of the
same class or series during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc.
automated quotations system or any system then in use, or, if no such
quotations are available, the fair market value on the date in
question of such a Company Interest of the same class or series as
determined by the Board of Directors in good faith; and
(b) In the case of property other than cash or stock, the fair
market value of such property on the date in question as determined by
the Board of Directors in good faith.
"Subsidiary" means any Person (other than an individual) in which
the Company, directly or indirectly, holds a majority of the voting
securities.
12.2 Business Combinations.
(a) Unless an exemption under Section 12.3(c) applies, the
Company may not engage in any Business Combination with any Interested
Party or any Affiliate of an Interested Party for a period of five
years following the most recent date on which such Interested Party
became an Interested Party (the "Five Year Tolling Period"), unless:
(i) in addition to any vote otherwise required by law or
this Agreement, the Board of Directors of the Company, prior to
the most recent date upon which the Interested Party became an
Interested Party, approved either the Business Combination or the
transaction which resulted in the Interested Party becoming an
Interested Party; or
(ii) on or subsequent to the date upon which the Interested
Party became an Interested Party, the Business Combination is (A)
approved by at least two-thirds of the persons who are then
members of the Board of Directors and (B) authorized at an annual
or special meeting of the Shareholders (and not by written
consent) by the affirmative vote of at least two-thirds in
interest of the Shareholders, excluding the Company Interests
held by an Interested Party who will (or whose Affiliate will be)
a party to the Business Combination or by an Affiliate or
Associate of that Interested Party, voting together as a single
class.
(b) Unless an exemption under Section 12.3 applies, in addition
to any vote otherwise required by law or this Agreement, a Business
Combination proposed by an Interested Party or an Affiliate of the
Interested Party after the Five Year Tolling Period shall be permitted
only if recommended by the Board of Directors who are present at a
duly-called meeting at which a quorum is present and approved by the
affirmative vote of at least:
(i) 80% in interest of all Shareholders, voting together as
a single voting group; and
(ii) Two-thirds in interest of the Shareholders, excluding
Company Interests held by an Interested Party who will (or whose
Affiliate will) be a party to the Business Combination or by an
Affiliate or Associate of the Interested Party, voting together
as a single voting group.
12.3 Exemptions.
(a) For purposes of this Section 12.3:
"Announcement Date" means the first general public announcement
of the proposal or intention to make a proposal of the Business
Combination or its first communication generally to the Shareholders,
whichever is earlier;
"Determination Date" means the most recent date on which the
Interested Party became an Interested Party; and
"Valuation Date" means:
(i) For a Business Combination voted upon by the
Shareholders, the latter of the day prior to the date of the vote
or the day 20 days prior to the consummation of the Business
Combination; and
(ii) For a Business Combination not voted upon by the
Shareholders, the date of the consummation of the Business
Combination.
(b) The vote required by Section 12.2(b) does not apply to a
Business Combination if (1) the Business Combination or the
transaction which resulted in the Interested Party becoming an
Interested Party shall have been approved by the Board of Directors
prior to the Determination Date or (2) each of the conditions in items
(i) through (iii) below is met:
(i) The aggregate amount of the cash and the market value as
of the Valuation Date of consideration other than cash to be
received for each Company Interest in such Business Combination
(whether or not the Interested Party has previously acquired the
particular class or series of Company Interest in question) is at
least equal to the highest of the following:
(A) The highest per Company Interest price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Party for any Company
Interests of the same class or series acquired by it within
the five-year period immediately prior to the Announcement
Date of the proposal of the Business Combination, plus an
amount equal to interest compounded annually from the
earliest date on which the highest per Company Interest
acquisition price was paid (for the same class or series)
through the Valuation Date at the rate for one-year United
States Treasury obligations from time to time in effect,
less the aggregate amount of any cash distributions paid and
the market value of any distributions paid in other than
cash, per Company Interest (for the same class or series)
from the earliest date through the Valuation Date, up to the
amount of the interest; or
(B) The highest per Company Interest price (including
any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Party for any Company
Interest of the same class or series acquired by it on, or
within the five-year period immediately before, the
Determination Date, plus an amount equal to interest
compounded annually from the earliest date on which the
highest per Company Interest acquisition price was paid for
the same class or series through the valuation Date at the
rate for one-year United States Treasury obligations from
time to time in effect, less the aggregate amount of any
cash distributions paid and the market value of any
distributions paid in other than cash, per Company Interest
of the same class or series from the earliest date through
the Valuation Date, up to the amount of the interest; or
(C) The highest preferential amount per Company
Interest to which the holders of Company Interests of such
class or series are entitled in the event of any voluntary
or involuntary liquidation, dissolution or winding up of the
Company; or
(D) The Market Value per Company Interest of the same
class or series on the Announcement Date, plus an amount
equal to interest compounded annually from that date through
the Valuation Date at the rate for one-year United States
Treasury obligations from time to time in effect, less the
aggregate amount of any cash distributions paid and the
market value of any distributions paid in other than cash,
per Company Interest of the same class or series from that
date through the Valuation Date, up to the amount of
interest; or
(E) The Market Value per Company Interest of the same
class or series on the Determination Date, plus an amount
equal to interest compounded annually from that date through
the Valuation Date at the rate for one-year United States
Treasury obligations from time to time in effect, less the
aggregate amount of any cash distributions paid and the
Market Value of any distributions paid in other than cash,
per Company Interest of the same class or series from that
date through the Valuation Date, up to the amount of the
interest; or
(F) The price per Company Interest equal to the Market
Value per Company Interest of the same class or series on
the Announcement Date or on the Determination Date,
whichever is higher, multiplied by the fraction of:
(1) The highest per Company Interest price
(including any brokerage commissions, transfer taxes
and soliciting dealers' fees) paid by the Interested
Party for any Company Interests of the same class or
series acquired by it within the five-year period im-
mediately prior to the Announcement Date, over
(2) The Market Value per Company Interest of the
same class or series on the first day in such five-
year period on which the Interested Party acquired
the Company Interests.
(ii) The consideration to be received by the holders of any
Company Interests is to be in cash or in the same form as the
Interested Party has previously paid for Company Interests,
except to the extent that the Shareholders otherwise elect in
connection with their approval of the proposed transaction under
Section 6.2 of this Agreement. If the Interested Party has paid
for Company Interests with varying forms of consideration, the
form of consideration for such Company Interests of the same
class or series shall be either cash or the form used to acquire
the largest number of Company Interests of the same class or
series previously acquired by it, except to the extent that the
Shareholders otherwise elect.
(iii) After the Determination Date and prior to the
consummation of such Business Combination:
(A) There shall have been no failure to declare and pay
at the regular date therefor (if applicable) any full
periodic distributions (whether or not cumulative) on any
outstanding Company Interests or other securities of the
Company;
(B) There shall have been:
(1) No reduction in the annual rate of distribu-
tions made with respect to any class or series
of Company Interests (except as necessary to reflect
any subdivision of Company Interests); and
(2) An increase in such annual rate of distribu-
tions as necessary to reflect any reclassification,
recapitalization, reorganization or any similar
transaction which has the effect of reducing the
number of outstanding Company Interests; and
(C) The Interested Party did not become the Beneficial
Owner of any additional Company Interests except as part of
the transaction which resulted in such Interested Party
becoming an Interested Party or by virtue of proportionate
Company Interest splits or distributions.
The provisions of items (A) and (B) of this subsection (b)(iii) do not
apply if no Interested Party or an Affiliate or Associate of the Interested
Party voted as a member of the Board of Directors of the Company in a
manner inconsistent with such items (A) and (B) and the Interested Party,
within 10 days after any act or failure to act inconsistent with such
items, notifies the Board of Directors of the Company in writing that the
Interested Party disapproves thereof and requests in good faith that the
Board of Directors rectify such act or failure to act.
(c) The provisions of Section 12.2 do not apply to any Business
Combination of the Company with an Interested Party that became an
Interested Party inadvertently, if the Interested Party:
(i) As soon as practicable (but not more than 10 days after
the Interested Party knew or should have known it had become an
Interested Party) divests itself of a sufficient amount of
Company Interests so that it no longer is the beneficial owner,
directly or indirectly, of 10 percent or more of the outstanding
Company Interests; and
(ii) Would not at any time with the five-year period
preceding the Announcement Date with respect to the Business
Combination have been an Interested Party except by inadvertence.
12.4 Amendment. Notwithstanding any other provisions of this
Agreement, this Article 12 may be amended or repealed only by a vote of 80%
in interest of all Shareholders, voting together as a single class,
excluding Company Interests held by any Interested Party or any Affiliate
of an Interested Party.
12.5 Certain Determinations with Respect to this Article 12. The Board
of Directors shall have the power to determine for the purposes of this
Article 12, on the basis of information known to the Directors: (i) the
number of Company Interests of which any Person is the Beneficial Owner,
(ii) whether a Person is an Affiliate or Associate of another, (iii)
whether a Person has an agreement, arrangement or understanding with
another as to the matters referred to in the definition of "Beneficial
Owner" as hereinabove defined, (iv) whether two or more transactions
constitute a "series of transactions," and (v) such other matters with
respect to which a determination is required under this Article 12.
ARTICLE 13
Voting Rights of Certain Control Company Interests
13.1 Definitions. For purposes of this Article 13, the following
definitions shall apply:
"Acquiring Person" means a person who makes or proposes to make a
Control Company Interests Acquisition, or such Person's Affiliate or
Associate.
"Associate" when used to indicate a relationship with any Person
means:
(a) An "Associate" as defined in Section 12.1; or
(b) A Person that:
(i) Directly or indirectly controls, or is controlled by, or
is under common control with, the Person specified; or
(ii) Is acting or intends to act jointly or in concert with
the Person specified.
"Control Company Interests" means those Company Interests that,
except for this Article 13, would, if aggregated with all other
Company Interests (including Company Interests the acquisition of
which is excluded from the definition "Control Company Interests
Acquisition" below) owned by a Person or in respect of which that
Person is entitled to exercise or direct the exercise of voting power,
except solely by virtue of a revocable proxy, entitle that Person,
directly or indirectly, to exercise or direct the exercise of the
voting power of any class or series of Company Interests within any of
the following ranges of voting power:
(a) One-fifth or more, but less than one-third of all voting
power;
(b) One-third or more, but less than a majority of all voting
power; or
(c) A majority or more of all voting power.
"Control Company Interests" includes Company Interests only to the extent
that the Acquiring Person, following the acquisition of the Company
Interests, is entitled, directly or indirectly, to exercise or direct the
exercise of voting power within any level of voting power set forth in this
section for which approval has not been obtained previously under Section
13.2.
"Control Company Interests Acquisition" means the acquisition,
directly or indirectly, by any Person (other than (i) the Company,
(ii) any subsidiary of the Company, (iii) the General Partners, the
Special Shareholder, the Original Shareholders, and the Dissolution
Shareholder, and (iv) any Affiliate or Associate of any Person
described in clause (iii) above), of ownership of, or the power to
direct the exercise of voting power with respect to, issued and
outstanding Control Company Interests. Control Company Interests
Acquisition does not include the acquisition of Control Company
Interests:
(a) Under the laws of descent and distribution;
(b) Under the satisfaction of a pledge or other security interest
created in good faith and not for the purpose of circumventing this
Article 13; or
(c) Under a merger, consolidation or exchange of interests if the
Company is a party to the merger, consolidation or exchange of
interests.
Unless the acquisition entitles any Person, directly or indirectly, to
exercise or direct the exercise of voting power of Company Interests in
excess of the range of voting power previously authorized or attained under
an acquisition that is exempt under items (a), (b) or (c) of this
definition, "Control Company Interests Acquisition" does not include the
acquisition of Company Interests in good faith and not for the purpose of
circumventing this Article 13, by or from any Person whose voting rights
have previously been authorized by the Shareholders in compliance with this
Article 13 or any Person whose previous acquisition of Company Interests
would have constituted a Control Company Interests Acquisition but for the
exclusions in items (a) through (c) of this definition.
"Interested Company Interests" means Company Interests in respect
of which an Acquiring Person is entitled to exercise or direct the
exercise of the voting power of Company Interests in the election of
Directors or otherwise.
13.2 Voting Rights.
(a) Control Company Interests acquired in a Control Company
Interests Acquisition have no voting rights except to the extent
approved by the Shareholders at a meeting held under Section 13.4 by
the affirmative vote of two-thirds in interest of all Shareholders,
excluding any votes cast with respect to Interested Company Interests.
(b) For purposes of this Section 13.2:
(i) Company Interests acquired within 180 days or Company
Interests acquired under a plan to make a Control Company
Interests Acquisition are considered to have been acquired in the
same acquisition; and
(ii) A Person may not be deemed to be entitled to exercise
or direct the exercise of voting power with respect to Company
Interests held for the benefit of others if the Person:
(A) Is acting in the ordinary course of business, in
good faith and not for the purpose of circumventing the
provisions of this Section of the Agreement; and
(B) Is not entitled to exercise or to direct the
exercise of the voting power of the Company Interests unless
the Person first seeks to obtain the instruction of another
person.
13.3 Acquiring Person Statement. Any Person who proposes to make or
who has made a Control Company Interests Acquisition may deliver an
Acquiring Person statement to the Company at the Company's principal
office. The Acquiring Person statement shall set forth all of the
following:
(a) The identity of the Acquiring Person and each other member of
any group of which the Person is a part for purposes of determining
Control Company Interests;
(b) A statement that the Acquiring Person statement is given
under this Article 13;
(c) The number of Company Interests owned (directly or
indirectly) by the Acquiring Person and each other member of any
group;
(d) The applicable range of voting power as set forth in the
definition of "Control Company Interests"; and
(e) If the Control Company Interests Acquisition has not
occurred:
(i) A description in reasonable detail of the terms of the
proposed Control Company Interests Acquisition; and
(ii) Representations of the Acquiring Person, together with
a statement in reasonable detail of the facts on which they are
based, that:
(A) The proposed Control Company Interests Acquisition,
if consummated, will not be contrary to law; and
(B) The Acquiring Person has the financial capacity,
through financing to be provided by the Acquiring Person,
and any additional specified sources of financing required
under Section 13.5, to make the proposed Control Company
Interests Acquisition.
13.4 Special Meeting.
(a) Except as provided in Section 13.5, if the Acquiring Person
requests, at the time of delivery of an Acquiring Person statement,
and gives a written undertaking to pay the Company's expenses of a
special meeting, except the expenses of opposing approval of the
voting rights, within ten days after the day on which the Company
receives both the request and undertaking, the Board of Directors of
the Company shall call a special meeting of the Shareholders, to be
held within 50 days after receipt of the Acquiring Person statement
and undertaking, for the purpose of considering the voting rights to
be accorded the Company Interests acquired or to be acquired in the
Control Company Interests Acquisition.
(b) The Board of Directors may require the Acquiring Person to
give bond, with sufficient surety, to reasonably assure the Company
that this undertaking will be satisfied.
(c) Unless the Acquiring Person agrees in writing to another
date, the special meeting of Shareholders shall be held within 50 days
after the day on which the Company has received both the request and
the undertaking.
(d) If the Acquiring Person makes a request in writing at the
time of delivery of the Acquiring Person statement, the special
meeting may not be held sooner than 30 days after the day on which the
Company receives the Acquiring Person statement.
(e) If no request is made under subsection (a) of this Section
13.4, the issue of the voting rights to be accorded the Company
Interests acquired in the Control Company Interests Acquisition may,
at the option of the Company, be presented for consideration at any
meeting of the Shareholders. If no request is made under subsection
(a) of this Section 13.4 and the Company proposes to present the issue
of the voting rights to be accorded the Company Interests acquired in
a Control Company Interests Acquisition for consideration at any
meeting of the Shareholders, the Company shall provide the Acquiring
Person with written notice of the proposal not less than 20 days
before the date on which notice of the meeting is given.
13.5 Calls.
(a) A call of a special meeting of Shareholders is not required
to be made under Section 13.4 unless, at the time of delivery of an
Acquiring Person statement under Section 13.3, the Acquiring Person
has:
(i) Entered into a definitive financing agreement or
agreements with one or more responsible financial institutions or
other entities that have the necessary financial capacity,
providing for any amount of financing of the Control Company
Interests Acquisition not to be provided by the Acquiring Person;
and
(ii) Delivered a copy of the agreements to the Company.
13.6 Notice of Meeting.
(a) If a special meeting of the Shareholders is requested, notice
of the special meeting shall be given as promptly as reasonably
practicable by the Company to all Shareholders of record as of the
record date set for the meeting, whether or not the Shareholder is
entitled to vote at the meeting.
(b) Notice of the special or annual meeting at which the voting
rights are to be considered shall include or be accompanied by the
following:
(i) A copy of the Acquiring Person statement delivered to
the Company under Section 13.3; and
(ii) A statement by the Board of Directors setting forth its
position or recommendation, or stating that it is taking no
position or making no recommendation, with respect to the issue
of voting rights to be accorded the Control Company Interests.
13.7 Redemption Rights.
(a) If an Acquiring Person statement has been delivered on or
before the 10th day after the Control Company Interests Acquisition,
the Company may, at its option, redeem any or all Control Company
Interests, except Control Company Interests for which voting rights
have been previously approved under Section 13.2, at any time during a
60-day period commencing on the day of a meeting at which voting
rights are considered under Section 13.4 and are not approved.
(b) In addition to the redemption rights authorized under
subsection (a) of this Section 13.7, if an Acquiring Person statement
has not been delivered on or before the 10th day after the Control
Company Interests Acquisition, the Company may, at its option, redeem
any or all Control Company Interests, except Control Company Interests
for which voting rights have been previously approved under Section
13.2, at any time during a period commencing on the 11th day after the
Control Company Interests Acquisition and ending 60 days after the
acquiring person statement has been delivered.
(c) Any redemption of Control Company Interests under this
Section shall be at the fair value of the Company Interests. For
purposes of this section, "fair value" shall be determined:
(i) As of the date of the last acquisition of Control
Company Interests by the Acquiring Person in a Control Company
Interests Acquisition or, if a meeting is held under Section
13.4, as of the date of the meeting; and
(ii) Without regard to the absence of voting rights for the
Control Company Interests.
13.8 Amendment. Notwithstanding any other provisions of this
Agreement, this Article 13 may only be amended or repealed by a vote of 80%
in interest of all Shareholders, voting together as a single class,
excluding any votes cast with respect to Interested Company Interests.
ARTICLE 14
Miscellaneous Provisions
14.1 Notices.
(a) Except as otherwise provided in this Agreement or in the
By-laws, any and all notices, consents, offers, elections and other
communications required or permitted under this Agreement shall be
deemed adequately given only if in writing and the same shall be
delivered either in hand, by telecopy, or by mail or Federal Express
or similar expedited commercial carrier, addressed to the recipient of
the notice, postage prepaid and registered or certified with return
receipt requested (if by mail), or with all freight charges prepaid
(if by Federal Express or similar carrier).
(b) All notices, demands, and requests to be sent hereunder shall
be deemed to have been given for all purposes of this Agreement upon
the date of receipt or refusal.
(c) All such notices, demands and requests shall be addressed as
follows: (i) if to the Company, to its principal place of business, as
set forth in Article 2 hereof and (ii) if to a Shareholder, to the
address of such Shareholder listed on the Company's Shareholder
register.
(d) By giving to the other parties written notice thereof, the
parties hereto and their respective successors and assigns shall have
the right from time to time and at any time during the term of this
Agreement to change their respective addresses effective upon receipt
by the other parties of such notice and each shall have the right to
specify as its address any other address.
14.2 Word Meanings. The words such as "herein", "hereinafter",
"hereof" and "hereunder" refer to this Agreement as a whole and not merely
to a subdivision in which such words appear unless the context otherwise
requires. The singular shall include the plural and the masculine gender
shall include the feminine and neuter, and vice versa, unless the context
otherwise requires.
14.3 Binding Provisions. The covenants and agreements contained herein
shall be binding upon, and inure to the benefit of, the heirs, legal
representatives, successors and assignees of the respective parties hereto.
14.4 Amendment and Modification. Unless otherwise specifically
provided in this Agreement, this Agreement may be amended, modified or
supplemented only by the vote, at a duly held meeting, of more than 50% in
interest of the then-outstanding Common Shares (or, in the case of a
written Consent without a meeting, more than 50% in interest of the
aggregate then-outstanding Common Shares), voting or acting as one class
(and not as separate classes, notwithstanding the fact that there may be
members of more than one class voting); provided, however, that Section 8.1
shall not be amended, modified or supplemented, unless such amendment,
modification or supplement receives the Consent of at least 80% in interest
of the holders of then-outstanding Common Shares.
14.5 Waiver. The waiver by any party hereto of a breach of any
provisions contained herein shall be in writing, signed by the waiving
party, and shall in no way be construed as a waiver of any succeeding
breach of such provision or the waiver of the provision itself.
14.6 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to such
state's laws concerning conflicts of laws. In the event of a conflict
between any provision of this Agreement and any nonmandatory provision of
the Act, the provision of this Agreement shall control and take precedence.
14.7 Separability of Provisions. Each provision of this Agreement
shall be deemed severable, and if any part of any provision is held to be
illegal, void, voidable, invalid, nonbinding or unenforceable in its
entirety or partially or as to any party, for any reason, such provision
may be changed, consistent with the intent of the parties hereto, to the
extent reasonably necessary to make the provision, as so changed, legal,
valid, binding and enforceable. If any provision of this Agreement is held
to be illegal, void, voidable, invalid, nonbinding or unenforceable in its
entirety or partially or as to any party, for any reason, and if such
provision cannot be changed consistent with the intent of the parties
hereto to make it fully legal, valid, binding and enforceable, then such
provision shall be stricken from this Agreement, and the remaining
provisions of this Agreement shall not in any way be affected or impaired,
but shall remain in full force and effect.
14.8 Headings. The headings contained in this Agreement (including but
not limited to the titles of the Schedules and Exhibits hereto) have been
inserted for the convenience of reference only, and neither such headings
nor the placement of any term hereof under any particular heading shall in
any way restrict or modify any of the terms or provisions hereof.
14.9 Further Assurances. The Shareholders shall execute and deliver
such further instruments and do such further acts and things as may be
required to carry out the intent and purposes of this Agreement.
14.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
14.11 Entire Agreement. This Agreement, and all Schedules and Exhibits
hereto, constitutes the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and supersedes all prior
understandings or agreements, oral or written, between the parties.
IN WITNESS WHEREOF, the undersigned, being the Chairman and Chief Executive
Officer and the President of the Company, respectively, have executed and
delivered this Amended and Restated Certificate of Formation and Operating
Agreement on behalf of the Shareholders who have duly approved this Agreement as
required by Section 14.4 as of the day and year first-above written.
By: /s/ Mark K. Joseph
-------------------------------------------------
Name: Mark K. Joseph
Title: Chairman and Chief Executive Officer
By: /s/ Michael L. Falcone
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Name: Michael L. Falcone
Title: President