Exhibit 4
EXECUTION VERSION
-----------------
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
NEW AFFIRMATIVE LLC
dated as of
June 30, 2005
THE MEMBERSHIP UNITS CREATED BY THIS LIMITED LIABILITY COMPANY AGREEMENT HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS, AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND SUCH OTHER
APPLICABLE SECURITIES LAWS PURSUANT TO EFFECTIVE REGISTRATION OR AN EXEMPTION
THEREFROM. IN ADDITION, SUCH MEMBERSHIP UNITS MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED, IN WHOLE OR IN PART, EXCEPT AS PROVIDED IN ARTICLE
VIII OF THIS AGREEMENT. ACCORDINGLY, THE HOLDERS OF SUCH MEMBERSHIP UNITS
SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE RISKS OF THEIR
RESPECTIVE INVESTMENTS IN SUCH MEMBERSHIP UNITS FOR AN INDEFINITE PERIOD OF
TIME.
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.......................................................2
ARTICLE II FORMATION OF THE LIMITED LIABILITY COMPANY.......................8
Section 2.1 Formation; Filings........................................8
Section 2.2 Name and Office...........................................8
Section 2.3 Company Purpose; Powers...................................9
Section 2.4 Term......................................................9
Section 2.5 Fiscal Year...............................................9
ARTICLE III RIGHTS AND DUTIES OF THE MEMBERS AND CONDUCT OF THE
BUSINESS OF THE COMPANY.......................................9
Section 3.1 Members...................................................9
Section 3.2 Board of Managers........................................10
Section 3.3 Officers.................................................12
Section 3.4 Evidence of Company Action...............................13
Section 3.5 Cooperation; Exculpation and Indemnification.............13
Section 3.6 Freedom of Action; Confidentiality; Business
Opportunities..........................................14
Section 3.7 Consents and Approvals...................................16
ARTICLE IV FINANCING.......................................................17
Section 4.1 Initial Financing........................................17
Section 4.2 Additional Capital.......................................17
Section 4.3 No Other Capital Contributions...........................17
Section 4.4 No Interest on Capital Contributions.....................17
Section 4.5 No Loans to Company......................................18
Section 4.6 Membership Units.........................................18
ARTICLE V CAPITAL ACCOUNTS; DIVISION OF PROFITS AND LOSSES;
DISTRIBUTIONS..................................................18
Section 5.1 Capital Accounts.........................................18
Section 5.2 Allocations of Net Income and Net Loss...................18
Section 5.3 Distributions............................................20
Section 5.4 No Right of Withdrawal...................................20
Section 5.5 Amounts Held in Reserve..................................20
Section 5.6 Account Balances.........................................21
ARTICLE VI BANKING, ACCOUNTING, BOOKS AND RECORDS..........................21
Section 6.1 Banking..................................................21
Section 6.2 Maintenance of Accounts and Accounting Method;
Member Preparation.....................................21
Section 6.3 Company Tax Returns......................................21
Section 6.4 Designation of Tax Matters Partner.......................22
Section 6.5 Withholding..............................................23
ARTICLE VII INFORMATION....................................................23
Section 7.1 Reports of Affirmative...................................23
Section 7.2 Inspection of Records....................................23
Section 7.3 Tax Information..........................................23
ARTICLE VIII ADMISSION OF NEW MEMBERS; TRANSFER OF MEMBERSHIP
UNITS; WITHDRAWAL OF A MEMBER...............................24
Section 8.1 Admission of New Members.................................24
Section 8.2 Transfer of Membership Units by Members..................24
Section 8.3 Company Sale.............................................25
Section 8.4 Drag-Along Sale..........................................27
Section 8.5 Withdrawal of a Member...................................29
ARTICLE IX DISSOLUTION AND TERMINATION OF COMPANY..........................30
Section 9.1 Dissolution..............................................30
Section 9.2 Distribution Upon Dissolution............................30
Section 9.3 Distributions in Cash or in Kind.........................31
Section 9.4 Final Accounting.........................................31
Section 9.5 Time for Liquidation.....................................31
Section 9.6 Termination..............................................31
Section 9.7 Members Not Personally Liable for Return of
Capital Contributions..................................32
ARTICLE X MISCELLANEOUS PROVISIONS.........................................32
Section 10.1 Amendments...............................................32
Section 10.2 Termination of Agreement.................................32
Section 10.3 Notices..................................................32
Section 10.4 Counterparts.............................................35
Section 10.5 Table of Contents and Headings...........................35
Section 10.6 Successors and Assigns...................................35
Section 10.7 Severability.............................................35
Section 10.8 Non-Waiver...............................................35
Section 10.9 Applicable Law...........................................35
Section 10.10 Entirety of Agreement....................................35
Section 10.11 Recapitalization, etc....................................35
Section 10.12 Interpretation...........................................36
Schedules
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Schedule I Percentage Interests
Schedule 3.2(a) Managers
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
NEW AFFIRMATIVE LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF NEW
AFFIRMATIVE LLC (the "Company"), dated as of the 30th day of June, 2005, by
and among DSC AFFM, LLC (the "DSC Member") and Affirmative Investment LLC (the
"AIL Member" and together with the DSC Member, the "Initial Members"), as the
members; and such other Persons (as hereinafter defined) who may be admitted
from time to time as members hereunder.
WHEREAS, the DSC Member and ▇.▇. ▇▇▇▇▇▇▇ I LP ("Flowers") caused to
be formed the Company as a limited liability company under the Act (as
hereinafter defined) pursuant to this Agreement (as hereinafter defined).
WHEREAS, on June 13, 2005, the Company, the DSC Member and Flowers
entered into the Subscription Agreement (the "Subscription Agreement"),
pursuant to which each of the DSC Member and Flowers agreed to make certain
investments in the Company.
WHEREAS, on June 13, 2005, the DSC Member and Flowers entered into
the Limited Liability Company Agreement (the "Original LLC Agreement") with
respect to the management and operation of the Company.
WHEREAS, on June 14, 2005, the Initial Members, the Company, Vesta
Insurance Group, Inc. ("VIG") and Vesta Fire Insurance Corporation ("VFIC")
have entered into a Stock Purchase Agreement (the "Stock Purchase Agreement"),
pursuant to which, among other things, the Company has agreed to purchase
5,218,228 shares of common stock of Affirmative Insurance Holdings, Inc.
("Affirmative") owned, collectively, by VIG and VFIC.
WHEREAS, the Company has been formed for the sole purpose of
acquiring and holding the shares of common stock of Affirmative purchased
pursuant to the Stock Purchase Agreement as well as additional shares of
common stock of Affirmative, if any, held directly by the Members as of the
closing of the transactions contemplated by the Stock Purchase Agreement.
WHEREAS, as of the date hereof, pursuant to Section 8.2(b) of the
Original LLC Agreement, Flowers transferred and assigned its rights and
obligations under the Subscription Agreement to the AIL Member and the AIL
Member became a party to the Original LLC Agreement and was substituted for
Flowers for all purposes therein and determined to amend and restate the
Original LLC Agreement as set forth herein.
NOW, THEREFORE, it is mutually agreed that:
ARTICLE I
DEFINITIONS
As used herein the following terms have the meaning set forth below:
"Act" shall mean the Delaware Limited Liability Company Act as in
effect on June 13, 2005 (currently Chapter 18 of Title 6, Sections 18-101
through 18-1109 of the Delaware Code) and as it may be amended hereafter from
time to time.
"Adjusted Capital Account" shall mean, at any time, the then balance
in the Capital Account of a Member, after giving effect to the following
adjustments: (i) credit to such Capital Account any amounts that such Member
is deemed obligated to restore as described in the penultimate sentences of
Treasury Regulations Section 1.704-2(g)(1) and Treasury Regulations Section
1.704-2(i)(5) and (ii) debit to such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The
foregoing definition of "Adjusted Capital Account" is intended to comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted consistently therewith.
"Affiliate" shall mean, in respect of any specified Person, a Person
that directly or indirectly, through one or more intermediaries, Controls, is
controlled by, or is under common Control with, the Person specified. For
purposes of this Agreement, neither the Company nor any of its Affiliates
shall be deemed to be an Affiliate of the DSC Member or any of its Affiliates
or of the AIL Member or any of its Affiliates.
"Affirmative" shall have the meaning set forth in the recitals to
this Agreement.
"Affirmative Equity Securities" shall have the meaning set forth in
Section 3.6(b) hereof.
"Agreement" shall mean this Amended and Restated Limited Liability
Company Agreement of New Affirmative LLC, as the same may be amended or
restated from time to time.
"AIL Member" shall have the meaning set forth in the first paragraph
of this Agreement.
"Appraiser" shall have the meaning set forth in Section 8.5(b)
hereof.
"Beneficial Ownership" means the ownership interest in any securities
which such Person or any of its Affiliates is deemed to "beneficially own"
within the meaning of Rule 13d-3 under the Exchange Act.
"Board" shall have the meaning set forth in Section 3.1(b) hereof.
"Board Determination" shall have the meaning set forth in Section
3.2(c) hereof.
"Business" shall have the meaning set forth in Section 2.3 hereof.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in New York, New York are authorized or required by
law to be closed for regular banking business.
"Capital Account" shall have the meaning set forth in Section 5.1
hereof.
"Capital Contribution" shall mean, with respect to a particular
Member, the amount of capital contributed (or assumption of indebtedness of
the Company by a Member) or deemed to have been contributed by such Member to
the Company pursuant to Articles IV or VIII hereof.
"Cash Flow" means, for any period, the sum (without duplication),
determined in accordance with GAAP, of (i) the Company's cash flow from
operating activities, plus (ii) the Company's cash flow from investing
activities, in each case from the applicable statement of cash flows.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the Treasury Regulations promulgated thereunder.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Sale" shall have the meaning set forth in Section 8.3(a)
hereof.
"Company Sale Notice" shall have the meaning set forth in Section
8.3(a) hereof.
"Confidential Information" shall mean confidential, proprietary or
other non-public information and documents, processes or trade secrets
relating to the Company or its Subsidiaries or their respective assets,
business or operations, including the terms and provisions of this Agreement,
subject to the exceptions set forth in Section 3.6(c) of this Agreement.
"Control" shall mean, with respect to a particular Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of management or policies (whether through ownership of Voting
Securities or partnership or membership interests, by contract or otherwise)
of such Person.
"Consent Transferee" shall have the meaning set forth in Section
8.2(c) hereof.
"Cure Period" shall have the meaning set forth in Section 8.5(a)
hereof.
"Damages" shall have the meaning set forth in Section 3.5(b) hereof.
"Defaulting Member" shall have the meaning set forth in Section 4.1
hereof.
"Department" shall mean the Illinois Department of Financial and
Professional Regulation - Division of Insurance.
"Drag-Along Notice" shall have the meaning set forth in Section
8.4(a) hereof.
"Drag-Along Sale" shall have the meaning set forth in Section 8.4(a)
hereof.
"Drag Transferee" shall have the meaning set forth in Section 8.4(a)
hereof.
"DSC Member" shall have the meaning set forth in the first paragraph
of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder, as amended from time to time.
"Excluded Activities" shall have the meaning set forth in Section
3.5(b) hereof.
"Fair Market Value" shall mean the amount that an informed and
willing purchaser under no compulsion to buy would pay to acquire the relevant
interest in the Company in an arm's-length transaction and which an informed
and willing seller under no compulsion to sell would accept for such interest
in an arm's length transaction without taking into account any control premium
or the existence of any approval rights under this Agreement.
"Fiscal Year" shall mean the fiscal year of the Company, as
determined pursuant to Section 2.5 hereof.
"Form A" shall mean Form A, Statement Regarding the Acquisition of
Control of a Domestic Insurer.
"Form A Approval Date" shall mean the date of receipt of written
approval from the Department with respect to the Form A filed by the Company
with respect to the transactions contemplated by the Stock Purchase Agreement.
"Formation Date" shall have the meaning set forth in Section 2.4
hereof.
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to time.
"Governmental Entity" shall have the meaning set forth in Section
2.6(e) hereof.
"Indemnified Parties" shall have the meaning set forth in Section
3.5(b) hereof.
"Initial Members" shall have the meaning set forth in the first
paragraph of this Agreement.
"Majority of the Managers" shall mean a number of Managers
constituting more than 50% of the number of Managers of the entire Board, as
such latter number may be adjusted from time to time pursuant to Section
3.2(a) hereof, without taking into account any vacancies thereon.
"Managers" shall have the meaning set forth in Section 3.2(a) hereof.
"Member" shall mean: (i) the DSC Member; (ii) the AIL Member; (iii)
any Person admitted as a Member pursuant to Section 8.1, 8.2 or 10.6 hereof;
and (iv) any transferee of any of the foregoing admitted as a Member pursuant
to Section 8.2 hereof.
"Members Capital Contributions" shall have the meaning set forth in
Section 4.1 hereof.
"Membership Units" shall mean the equity interests of the Company
designated as "Membership Units" as more fully described in Section 4.6.
"Nasdaq" shall have the meaning set forth in Section 8.5(b) hereof.
"Net Income" and "Net Loss" mean, for each Fiscal Year or part
thereof, the taxable income or loss of the Company for such Fiscal Year or
part thereof determined in accordance with Code Section 703(a)(for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments (without duplication):
(i) any income of the Company exempt from federal income tax
shall be added to such taxable income or loss;
(ii) any expenditure of the Company described in Code
Section 705(a)(2)(B) or treated as such pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(i) shall be subtracted from
such taxable income or loss;
(iii) any depreciation, amortization and other cost recovery
deductions allowable for federal income tax purposes shall be
computed with reference to the book value of the assets (as adjusted
under Section 5.2(b)), as opposed to the adjusted tax bases of such
assets, in computing such taxable income or loss; and
(iv) gain or loss resulting from any disposition of Company
property with respect to which gain or loss is recognized for federal
income tax purposes shall be computed with reference to the book
value of the property (as adjusted under Section 5.2(b) hereof)
disposed of, rather than the adjusted tax basis of such property.
"Notice" shall have the meaning set forth in Section 10.3 hereof.
"Observer" shall have the meaning set forth in Section 3.2(b) hereof.
"Percentage Interest" shall mean, with respect to each Member, the
number of Membership Units owned by such Member divided by the aggregate
number of Membership Units of the Company which are outstanding as of the date
of measurement.
"Permitted Consideration" shall mean (i) cash, (ii) equity securities
of a class which is traded on a national securities exchange or on the Nasdaq;
provided, that the number of such equity securities payable to any Member
shall be no greater than the sum of the average trading volume of such equity
securities for each of the ten (10) trading days prior to and ending on the
date prior to the date of the acceptance of an offer in connection with a
Company Sale or Drag-Along Sale (or, if the DSC Member and the AIL Member
otherwise agree, such other date of determination) and (iii) common equity
securities of a class which is not traded on a national securities exchange or
on the Nasdaq, or any combination of any of the items referred to in clauses
(i), (ii) and (iii); provided, however, that if any portion of the
consideration offered in any Drag-Along Sale or Company Sale includes common
equity securities of the type described in clause (iii), then (A) not more
than five percent (5%) of the aggregate consideration offered shall consist of
such equity securities, and (B) such consideration shall also include
customary registration rights.
"Permitted Person" shall have the meaning set forth in Section 3.6
hereof.
"Permitted Transferees" shall mean with respect to each Member, any
Persons that are Affiliates of such Member; provided, that any transfer to a
"Permitted Transferee" shall not be permitted if a Board Determination is made
that such Transfer, together with all other Transfers of Membership Units
previously made, could result in a termination of the Company for federal or
state income tax purposes or could result in or create a significant risk that
the Company could be terminated for federal or state income tax purposes, or
if the Company reasonably determines that such Transfer will be materially
financially detrimental to the Company.
"Person" shall mean any natural person, entity, firm, corporation,
partnership, association, limited liability company, joint-stock company,
trust, or unincorporated organization.
"Proposed Seller" shall have the meaning set forth in Section 8.3(a)
hereof.
"Related Party" shall mean, with respect to any Person who is not an
individual, a stockholder, director, officer, employee, partner or member of
such Person, including, with respect to a Member, any individual who is
designated a Manager by such Member.
"Remaining Member" shall have the meaning set forth in Section 8.4(a)
hereof.
"Subscription Agreement" shall have the meaning set forth in Section
4.1 hereof.
"Subsidiaries" of any Person means any corporation, partnership,
joint venture, limited liability company, trust, estate or other Person of
which (or in which), directly or indirectly, more than 50% of (i) the issued
and outstanding capital stock having ordinary voting power to elect a majority
of the board of directors of such corporation (irrespective of whether at the
time capital stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency), (ii) the
interest in the capital or profits of such partnership, joint venture or
limited liability company or other Person or (iii) the Beneficial Ownership
interest in such trust or estate is at the time owned by such first Person, or
by such first Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries.
"Suspended Member" shall have the meaning set forth in Section 3.2(c)
hereof.
"Tax Matters Partner" shall have the meaning set forth in Section 6.4
hereof.
"Transfer" shall mean, with respect to any interest in the Company
(whether direct or indirect, of record, beneficial or other) to sell, assign,
transfer, convey, exchange, mortgage, pledge or grant a participation,
security interest or any other rights in, or otherwise encumber or dispose of,
including by merger, consolidation, dividend or distribution, such Company
interest, in each case, whether made directly or indirectly, voluntarily or
involuntarily, absolutely or conditionally, or by operation of law or
otherwise; provided, that for the purpose of Sections 8.2(a) through (c)
hereof, a "Transfer" shall not be deemed to have occurred by reason of any
indirect transfer of Membership Units by reason of an acquisition or transfer
of any non-Controlling, non-voting equity interest or income participation
right in any of the Members or their respective Affiliates; provided, further,
that a Member shall notify all other Members of each such transfer within five
(5) Business Days after the consummation thereof.
"Transferring Member" shall have the meaning set forth in Section
8.4(a) hereof.
"Voting Securities" shall mean, with respect to a Person, all classes
of capital stock, partnership interests, limited liability company interests
or other securities of such Person then outstanding and normally entitled to
vote in the election of directors or members of a similar governing body
(irrespective of whether or not at the time securities of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency).
"VIG" shall have the meaning set forth in the recitals to this
Agreement.
"VFIC" shall have the meaning set forth in the recitals to this
Agreement.
"Withdrawal" shall have the meaning set forth in Section 8.5(a)
hereof.
"Withdrawing Member" shall have the meaning set forth in Section
8.5(a) hereof.
ARTICLE II
FORMATION OF THE LIMITED LIABILITY COMPANY
Section 2.1 Formation; Filings. The Company has been formed as a
limited liability company pursuant to the provisions of the Act by the
execution and filing of a Certificate of formation by an authorized person as
required by the Act. The Members and the Company hereby adopt, approve,
confirm and ratify all actions previously taken by or on behalf of the Company
(including the actions of the authorized person) in connection with the filing
of the Certificate of Formation for the Company with the Office of the
Secretary of State of the State of Delaware and other initial formation and
operational matters. Each of the Members intends that the Company shall be
treated as a partnership for all relevant tax purposes and agree to take all
reasonable actions as may be reasonably required to qualify for and receive
such treatment and shall execute or cause to be executed from time to time all
other instruments, certificates, notices and documents, and shall do or cause
to be done, at the expense of the Company, all such filing, recording,
publishing and other acts, in each case, as may be necessary or appropriate
from time to time to comply with all applicable requirements for the operation
and, when appropriate, termination of a limited liability company in the State
of Delaware and all other jurisdictions where the Company shall desire to
conduct its business.
Section 2.2 Name and Office.
(a) The name of the Company shall be "New Affirmative LLC" and its
business shall be carried on in this name with such variations and changes the
Board in its sole judgment pursuant to a Board Determination deems necessary
or appropriate to comply with requirements of the jurisdictions in which the
Company's operations are conducted.
(b) The Company shall maintain an office or offices at such location
or locations as the Board may from time to time select pursuant to a Board
Determination.
(c) The registered office of the Company shall be located at ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (New Castle County), and the
registered agent for service of process on the Company at such address shall
be The Corporation Trust Company, unless and until changed by the Board
pursuant to a Board Determination.
Section 2.3 Company Purpose; Powers. The Company is formed for the
object and purpose of, and the nature of the business to be conducted and
promoted by the Company is, issuing its Membership Units, acquiring, holding,
owning, voting, pledging, selling, exchanging, transferring or otherwise
disposing of Affirmative Equity Securities (the "Business") and any other
lawful act or activity for which limited liability companies may be organized
under the Act. Subject to the provisions of this Agreement, the Company and
the Board (acting on the Company's behalf) shall have the power and authority
to take any and all actions necessary, appropriate, advisable, desirable or
incidental to or for the furtherance and accomplishment of the foregoing
purposes. Notwithstanding anything herein to the contrary, nothing set forth
herein shall be construed as authorizing the Company to possess any purpose or
power, or to do any act or thing, forbidden by law to a limited liability
company organized under the laws of the State of Delaware.
Section 2.4 Term. The term of the Company commenced on the date of
the filing of a Certificate of Formation in the office of the Secretary of
State of the State of Delaware (the "Formation Date"), and shall continue in
perpetuity, unless dissolved and liquidated in accordance with Article IX
hereof.
Section 2.5 Fiscal Year. Unless the Members shall at any time
otherwise determine, the Fiscal Year shall end on December 31. The initial
Fiscal Year commenced on the Formation Date and shall end on December 31,
2005.
ARTICLE III
RIGHTS AND DUTIES OF THE MEMBERS AND CONDUCT
OF THE BUSINESS OF THE COMPANY
Section 3.1 Members.
(a) The name, address, Members Capital Contribution, number of
Membership Units and Percentage Interest of each Member as of the date of this
Agreement (prior to any amendments or restatements) are set forth in the books
and records of the Company, which books and records shall be amended from time
to time to reflect any additional Capital Contribution or acquisition of
additional Membership Units by an existing Member or the Withdrawal of a
Member pursuant to the terms hereof.
(b) Subject to the provisions of this Agreement, the business,
property and affairs of the Company shall be managed, and all powers of the
Company shall be exercised, and all decisions to cause the Company to act
shall be made, by or under the direction of a Board of Managers (the "Board")
by a Board Determination (unless otherwise expressly provided in this
Agreement).
(c) Except as otherwise provided by the Act or herein, 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 Members shall not be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member of
the Company. No Member or any of its Affiliates shall have any liability for
the debts, obligations or liabilities of any other Member solely by reason of
being a Member of the Company. No member shall be obligated to cure any
deficit in any Capital Account.
(d) For so long as (i) the AIL Member is a Member, J. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ shall Control the AIL Member and (ii) the DSC Member is a Member,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ shall control the DSC Member; provided, that foregoing
provisions shall not apply to the AIL Member or the DSC Member, as the case
may be, in the event (A) of any involuntary dissolution of such Member or its
Controlling Affiliates or (B) that the limited partners (or the equivalent
thereof) of such Member or its Controlling Affiliates remove J. ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, respectively.
Section 3.2 Board of Managers.
(a) The Board shall consist of four (4) individuals (the "Managers");
provided, that the number of Managers may be changed from time to time by the
unanimous approval of the Managers. Except as set forth in this Section 3.2, a
Manager shall remain in office until removed by the Members designating such
Manager. The DSC Member shall designate two (2) Managers (the "DSC Managers")
and the AIL Member shall designate two (2) Managers (the "JCF Managers"), and,
unless otherwise agreed by the Members, in the event that the size of Board is
increased each of the DSC Member and the AIL Member shall be entitled to
designate a number of individuals to the Board such that the composition of
the Board is comprised of an equal number of DSC Managers and JCF Managers at
any one time. The Members shall take all actions necessary to maintain the
composition of the Board set forth in the preceding sentence. Each of the
Initial Members shall, in their respective sole discretion, be entitled to
remove or discharge (with or without cause and with or without prior notice)
any of the Managers designated by them at any time, and to designate
alternates (who shall be permitted to attend, and have full voting powers at,
any meeting at which any designated Manager is absent) or successors therefor.
Each Manager shall remain in office until his or her death, incapacity,
resignation or removal. In the event of death, incapacity, resignation or
removal of a Manager, the vacancy created thereby shall be filled in by the
Member who appointed such former Manager. To the extent applicable, any
required notice filings will be made with the Department prior to the
effectiveness of any such action by a Member. The current Managers are set
forth in Schedule 3.2(a) to this Agreement. Schedule 3.2(a) to this Agreement
shall be updated from time to time to reflect the addition or removal of
Managers.
(b) The Board shall have the right at any time to, pursuant to a
Board Determination, appoint one (1) or more non-voting observers to the Board
(the "Observers"). The Board reserves the right to remove and replace the
Observers at any time. Each of the Observers, if any, shall agree (i) to hold
in confidence and trust and not use or disclose to any third parties any
confidential information related to the Company's business, finances, plans,
investors and other material non-public information provided to or learned by
them in connection with their rights under this Article III and (ii) prior to
any such Observer being granted any of the rights hereunder, enter into a
letter agreement with the Company with respect to such Observer's obligations
set forth in clause (i).
(c) Unless otherwise stated herein, all Managers shall be eligible to
vote on all matters submitted to the Board. The Board at times as may be
necessary for the Company's business on at least two (2) Business Days prior
written notice of such meeting (unless otherwise determined by the Board
pursuant to a Board Determination) given by any one (1) Manager, which notice
shall contain the time and place of such meeting and the proposed items of
business. A number of Managers representing a Majority of the Managers then on
the Board shall constitute a quorum for the transaction of business by the
Board. Each Manager shall have one (1) vote on all matters before the Board.
Except as otherwise expressly set forth herein, all actions of the Board shall
require (A) a vote of a Majority of the Managers or (B) with respect to an
action taken without a meeting, the consent of all of the Managers in writing
(a "Board Determination"); provided, that following the effectiveness of any
order or ruling from the Department suspending, revoking, limiting or
restricting any Member or any of its representatives from participating in the
management of the business and affairs of the Company or any of its insurance
subsidiaries (a "Suspended Member") until the earlier of (x) the revocation of
such order or ruling or (y) Withdrawal of such Suspended Member pursuant to
Section 8.5 hereof, (i) the Managers appointed by such Suspended Member may be
restricted from voting (or acting by written consent) with respect to any
matter before the Board and actions of the Board with respect to such matters
shall require the unanimous vote of the Managers appointed by the other
Member; provided, that if the replacement by the affected Member of its
designated Manager(s) would address the concerns raised in the order or ruling
from the Department, nothing herein shall limit or restrict such Member from
so replacing such Manager and (ii) if applicable, the Suspended Member's right
to appoint Managers shall be suspended. The parties acknowledge and agree that
the remedies set forth in subclause (i) and (ii) of the preceding sentence
shall be narrowly tailored, to the extent practicable, to address the concerns
raised in the order or ruling from the Department.
(d) In the case of a tie in any vote of the Managers, the Company
shall continue to operate pursuant to the policies and authorizations with
respect to such matter then prevailing (i.e., the status quo shall be
maintained); provided, however, that any one (1) Manager may (i) cause the
Company to issue a notice of termination under the Stock Purchase Agreement
and cause the Company to terminate the Stock Purchase Agreement pursuant to
the terms of Sections 7.1(b), (c), (e) or (f) thereof or (ii) notify the
Sellers (as defined under the Stock Purchase Agreement) that a condition set
forth in Section 6.1 of the Stock Purchase Agreement (as it relates to the
Company) or Section 6.3 of the Stock Purchase Agreement has not been
satisfied..
(e) Notice of any Board meeting may be waived by any Manager before
or after such meeting. Any Manager may participate in any meeting of the Board
by conference telephone facilities or other media. In accordance with Section
18-404(d) of the Act, any action required or permitted to be taken at any
meeting of the Board may be taken without a meeting if all the members of the
Board consent thereto in writing. The writing or writings evidencing any such
consent shall be filed with the minutes of proceedings of the Board.
(f) Subject to Section 3.4 hereof, no Manager (acting in his or her
capacity as such) shall have any authority to bind the Company to any third
party with respect to any matter except pursuant to a resolution expressly
authorizing such action and which is duly adopted by the Board by the
affirmative vote required for such matter pursuant to the terms of this
Agreement.
(g) Any Manager may vote in accordance with the instructions of the
Member who has appointed him without any duty (fiduciary or otherwise) or
obligation or liability to the Company or any other Member to the fullest
extent allowed by Section 1101(c) of the Act.
(h) In performing their duties, the Managers shall be entitled to
rely on information, opinions, reports or statements, including financial
statements and other financial data, of any attorney, independent accountant
or other Person as to matters that the Managers believe to be within such
Person's professional or expert competence unless the Managers have actual
knowledge concerning the matter in question that would cause such reliance to
be unwarranted.
Section 3.3 Officers. Subject to Section 3.2 hereof, the Board may,
from time to time, pursuant to a Board Determination employ and retain such
other Persons as may be necessary or appropriate for the conduct of the
Company's business (subject to the supervision and control of the Board),
including employees, agents and other Persons (any of whom may be a Member or
Manager) who may be designated as officers of the Company, with titles
including but not limited to "chief executive officer," "president," vice
president," "treasurer," "secretary," "general manager," "director" and "chief
financial officer," as and to the extent authorized by the Board. Any number
of offices may be held by the same person. In its discretion, the Board may
choose not to fill any office for any period as it may deem advisable.
Officers need not be residents of the State of Delaware. Any officers so
designated shall have such authority and perform such duties as the Board may,
from time to time, expressly delegate to them pursuant to a Board
Determination, including to enter into and perform under any document on
behalf of the Company. Each officer shall hold office until his successor
shall be duly designated and shall qualify, or until his death or until he
shall resign or shall have been removed in the manner hereinafter provided.
The salaries or other compensation, if any, of the officers of the Company
shall be fixed from time to time by the Board pursuant to a Board
Determination.
Section 3.4 Evidence of Company Action. Any documents or instruments
to be executed in connection with any matter of the Company which has been
approved by the Board pursuant to a Board Determination shall be binding upon
the Company upon the execution of any such document or instrument by a
representative of each of the DSC Member and the AIL Member, which
representatives shall be appointed at such time by the DSC Managers and the
JCF Managers, respectively.
Section 3.5 Cooperation; Exculpation and Indemnification.
(a) For so long as such Person is a Member, each Member shall,
subject to any specific provisions set forth herein, cooperate in good faith
to ▇▇▇▇▇▇ the Business; provided, however, that the foregoing covenant shall
not require the investment of funds in the Company or the making of any loan
to, or any guarantee or accommodation on behalf of, the Company except to the
extent specifically provided herein.
(b) None of the Members, their respective Affiliates and Related
Parties, the Managers, officers or employees of the Company or any of the
agents or authorized representatives of any of the foregoing (collectively,
the "Indemnified Parties") shall have any obligation or liability (whether
direct or indirect, in contract or tort or otherwise) to any other Indemnified
Party or to the Company for any losses, claims, damages, liabilities, costs or
expenses (including fees and expenses of counsel) (collectively, "Damages")
asserted against or incurred by the Company or any Indemnified Party arising
out of or in connection with (i) any activities of any Indemnified Party
involving the formation of the Company and the offering and selling of
Membership Units, or (ii) the management or conduct of the business,
operations and affairs of the Company, or any Indemnified Party insofar as it
relates to the Company or any Member, including activities of an Indemnified
Party in the conduct of any other business engaged in by it which might
involve an actual or potential conflict of interest vis-a-vis the Company or
the Members (or any of them), or which are for the account of such Indemnified
Party, or in respect of which such Indemnified Party profits in any manner;
provided, however, that the foregoing shall not relieve any Indemnified Party
for Damages asserted against or incurred by the Company or another Indemnified
Party that result from any violation of law, gross negligence or willful
misconduct (including intentional misrepresentation) by such Indemnified Party
or any material breach by such Indemnified Party of the covenants or
agreements contained in this Agreement (collectively, "Excluded Activities").
For the avoidance of doubt, a Manager shall not have any obligation or
liability to an Indemnified Party by reason of taking any action or failing to
act in accordance with the instructions of the Member who appointed such
Manager.
(c) The Company shall indemnify and hold harmless each Indemnified
Party from and against any and all Damages asserted against or incurred by
such Indemnified Party arising out of or in connection with (i) the management
or conduct of the business, operations and affairs of the Company or (ii) any
activities of any Indemnified Party involving the formation of the Company and
the offering and selling of Membership Units; provided, however, that the
foregoing indemnification shall not apply with respect to Excluded Activities
committed by any such Indemnified Party. Expenses incurred by an Indemnified
Party in investigating or defending any claim shall be paid by the Company in
advance of the final disposition of such claim upon receipt by the Company of
a written agreement by or on behalf of such Indemnified Party to repay such
amount if it shall be ultimately determined that such Indemnified Party is not
entitled to be indemnified by the Company as authorized by this Section
3.5(c).
(d) The personal liability of the Managers of the Company is hereby
eliminated to the fullest extent permitted by the Act, as the same may be
amended and supplemented. A Manager of the Company shall not be personally
liable to the Company or its Members for monetary damages for breach of
fiduciary duty as a Manager, except as to liability to the extent such
exemption from liability or limitation thereof is not permitted under the Act,
as the same exists or may hereafter be amended. If the Act hereafter is
amended to further eliminate or limit the liability of a Manager, then a
Manager of the Company, in addition to the circumstances in which a Manager is
not personally liable as set forth in the preceding sentence, shall not be
liable to the fullest extent permitted by the Act. In furtherance of, and
without limiting the generality of the foregoing, no Manager shall be (a)
personally liable for the debts, obligations or liabilities of the Company,
including any such debts, obligations or liabilities arising under a judgment,
decree or order of a court; (b) obligated to cure any deficit in any Capital
Account; (c) required to return all or any portion of any Capital
Contribution; or (d) required to lend any funds to the Company. Any repeal or
modification of this Section 3.5 by the Members shall not adversely affect any
right or protection of a Manager existing at the time of such repeal or
modification with respect to acts or omissions occurring prior to such repeal
or modification.
(e) None of the provisions of this Section 3.5 shall be deemed to
create or grant any rights in favor of any third party, including, without
limitation, any right of subrogation in favor of any insurer or surety. The
rights of indemnification granted hereunder shall survive the dissolution,
winding up and termination of the Company.
Section 3.6 Freedom of Action; Confidentiality; Business
Opportunities. (a) Subject to the specific provisions of any other agreement
between the Company and a Member and Section 3.6(b) hereof, each Member and
its respective Affiliates and Related Parties (collectively, the "Permitted
Persons") may have other business and financial interests and investments and
may engage in any other business or trade, profession or employment
whatsoever, on its own account, or in partnership with, or as an employee,
officer, director, creditor, advisor or stockholder of any other Person, and
no Permitted Person shall be required to devote its or his entire time to the
business of the Company. Without limiting the generality of the foregoing,
each Permitted Person, except as set forth in Section 3.6(b) hereof, (i) may
engage in the same or similar activities or lines of business as the Company
or develop or market any products or services that compete, directly or
indirectly, with those of the Company, (ii) may invest or own any interest
publicly or privately in, or develop a business relationship with, any Person
engaged in the same or similar activities or lines of business as, or
otherwise in competition with, the Company and (iii) do business with any
client or customer of the Company. Neither the Company nor any other Member
nor any Affiliate thereof by virtue of this Agreement shall have any rights in
and to any such independent venture or the income or profits derived
therefrom, regardless of whether or not such venture was presented to a
Permitted Person as a direct or indirect result of its or his connection with
the Company. Except as set forth in Section 3.6(a) hereof, no Permitted Person
shall have any obligation to present any business opportunity to the Company,
even if the opportunity is one that the Company might have pursued or had the
ability or desire to pursue, in each case, if granted the opportunity to do so
and no Permitted Person shall be liable to the Company or any Member or any
Affiliate thereof for breach of any fiduciary or other duty, as a member or
otherwise, by reason of the fact that a Permitted Person pursues or acquires
such business opportunity, directs such business opportunity to another Person
or fails to present such business opportunity, or information regarding such
business opportunity, to the Company.
(b) Notwithstanding the foregoing, no Member or any of its Affiliates
may, directly or indirectly, acquire or Transfer (except as otherwise provided
in this Agreement) any shares of common stock of Affirmative, securities
convertible or exercisable into or exchangeable for the common stock of
Affirmative, options, warrants or other rights to purchase or subscribe for
the common stock of Affirmative, notes, debentures, rights and other forms of
investment of any kind in Affirmative (collectively, "Affirmative Equity
Securities") for its own account or for the account of any other Person (other
than through or by the Company).
(c) Each Member shall, and shall cause its Affiliates and Related
Parties and the respective agents and other representatives of the foregoing
to, hold strictly confidential, and not disclose to any Person, any
Confidential Information that is furnished to or obtained by such Member (or
the Manager designated by such Member), and (ii) if a Member shall cease to be
a Member, it shall either return all Confidential Information to the Company
or destroy such Confidential Information without retaining any record, copy or
image of such Confidential Information in any physical, electronic or other
form; provided that (1) the foregoing provisions shall not apply to any
disclosure, to the extent reasonably required, to those of such Member's
Related Parties and their respective agents and other representatives who
agree to be bound by the provisions of this Section 3.6(c), (2) the foregoing
provisions shall not apply where such Member or any of its Related Parties and
the respective agents and other representatives of the foregoing are compelled
to disclose such Confidential Information, by judicial or administrative
process or, in the reasonable opinion of counsel, by other requirements of
law; provided that prior written notice of such disclosure is given to the
Company and any such disclosure is limited to only that portion of the
Confidential Information that such Person is compelled to disclose, (3) the
term "Confidential Information" shall not include information (A) that is or
becomes generally available to the public other than as a result of disclosure
of such information by such Member or any of its Affiliates or Related Parties
or the respective agents and other representatives of the foregoing, (B) that
is or becomes available to the recipient of such information on a
non-confidential basis from a source that is not, to the recipient's
knowledge, bound by a confidentiality or other similar agreement, or by any
other legal, contractual or fiduciary obligation that prohibits or limits
disclosure of such information to the other Members and their respective
Related Parties and the respective agents and other representatives of the
foregoing or (C) that can be demonstrated to have been developed independently
by the representatives of such recipient which representatives have not had
any access to any information that would otherwise be deemed to be
"Confidential Information" pursuant to the provisions of this Section 3.6(c),
and (4) each of the Members acknowledges and agrees that any information they
may receive from the Company in its reports to Members is confidential,
proprietary and non-public in nature. Notwithstanding the foregoing (w) a
Member may disclose Confidential Information to a proposed transferee in
connection with any Transfer pursuant to Sections 8.2, 8.3 or 8.4 hereof (or
pursuant to a transfer of the type described in the proviso to the definition
of "Transfer") so long as such transferee enters into a confidentiality
agreement with respect thereto with terms which are no less restrictive that
the terms set forth in this Section 3.6(c); provided, that any such Member
acknowledges that any disclosure of Confidential Information in violation of
such confidentiality agreement by a proposed transferee shall constitute a
breach of this Section 3.6(c) by such Member and, in the case of disclosure
made by any such Member pursuant to this clause (w) in connection with any
Transfer pursuant to Section 8.2 hereof or any transfer described in the
proviso to the definition of "Transfer", such Member shall indemnify the
Company and the other Members for all Damages arising out of the disclosure of
such Confidential Information by a proposed transferee, (x) in the event that
any demand or request for disclosure of Confidential Information is made
pursuant to clause (2) above, the disclosing Member shall promptly notify the
Board and the other Members of the existence of such request or demand and
shall provide the other (and/or the Company) a reasonable opportunity to seek
an appropriate protective order or other remedy, which such Members will
cooperate in obtaining (each at its own expense), (y) each of the Members may,
to the extent applicable, file a copy of this Agreement as an exhibit to (I) a
Statement on Schedule 13D filed by the Members with the Securities and
Exchange Commission and any securities exchange on which Affirmative Equity
Securities are listed and (II) a Form A Filing with the Department and (z) the
Members and their respective Affiliates and Related Parties and the respective
agents and other representatives of the foregoing, are hereby expressly
authorized to disclose to any and all Persons, without limitation of any kind,
the tax treatment and any facts that may be relevant to the tax structure of
the transactions contemplated by this Agreement; provided, however, that such
parties may not disclose any other information that is not relevant to
understanding the tax treatment and tax structure of such transactions
(including the identity of any party and any information that could lead
another to determine the identity of any party), or any other information to
the extent that such disclosure could reasonably result in a violation of any
applicable securities law.
Section 3.7 Consents and Approvals. Each of the Members agrees, and
shall cause its respective Affiliates and Related Parties to agree, to assist,
to the extent it is reasonable to do so, the Company in obtaining as promptly
as practicable all consents, authorizations, approvals and waivers from any
Governmental Entity, including the Department, required to be obtained by the
Company (or such Member) in order to operate the Company's business in
accordance with any business plan then in effect, including assisting the
Company in making any required filings, submissions and notifications with any
Governmental Entity, including the Department. Each of the Members shall, and
shall cause their respective Affiliates and Related Parties to, to the extent
it is reasonable to do so, furnish to the Company such necessary information
and reasonable assistance as the Company may reasonably request in connection
with the foregoing. For the purposes of this Section 3.7, without limiting
this Section 3.7, it shall not be reasonable for any Person to be required to
take any action which such Person reasonably believes may cause such Person
undue harm.
ARTICLE IV
FINANCING
Section 4.1 Initial Financing. Concurrently with the closing under
the Stock Purchase Agreement and as specified in the Subscription Agreement,
dated as of June 13, 2005, by and among the Initial Members and the Company
(the "Subscription Agreement"), each Initial Member shall contribute the
"Members Capital Contribution" set forth opposite its name on Schedule I to
this Agreement (which shall be updated and filled in concurrently with the
delivery, pursuant to the terms of the Subscription Agreement, of Exhibit A to
the Subscription Agreement. If any Member fails to contribute its pro-rata
amount (a "Defaulting Member"), then the other Member may, if it has
contributed the amount requested to be contributed by such Member pursuant to
this Section 4.1, contribute an additional amount up to the full amount which
the Defaulting Member failed to contribute and this Agreement shall
automatically terminate and be of no further force or effect.
Section 4.2 Additional Capital.
(a) No Member shall be obligated to contribute any capital to the
Company other than its Members Capital Contribution. If it is determined by
the Board pursuant to a Board Determination that such additional Capital
Contributions are necessary or appropriate for the conduct of the Company's
business and affairs, including without limitation expansion or
diversification, the Members may be permitted from time to time to make
additional Capital Contributions on such terms and conditions as may be
determined by the Board pursuant to a Board Determination.
(b) Schedule I to this Agreement shall be amended from time to time
as appropriate to reflect any change in a Member's Percentage Interest and/or
number of Membership Units held by any Member resulting from a purchase and
sale of Membership Units.
Section 4.3 No Other Capital Contributions. Except as set forth in
this Agreement, no Member shall have any right, obligation or ability to make
any other Capital Contributions.
Section 4.4 No Interest on Capital Contributions. No Member shall be
entitled to receive interest on its Capital Contributions.
Section 4.5 No Loans to Company. No Member shall lend or advance
funds to the Company without the consent of the Board pursuant to a Board
Determination.
Section 4.6 Membership Units.
(a) Subject to the provisions of this Agreement, the Company is
authorized to issue equity interests designated as "Membership Units."
(b) Each Membership Unit will be identical in all respects and will
entitle the holders thereof to the same rights and privileges, except as
otherwise provided herein.
(c) For the purposes of determining the vote of the Members pursuant
to Section 9.1, each Member shall be entitled to one (1) vote per Membership
Unit.
ARTICLE V
CAPITAL ACCOUNTS; DIVISION OF
PROFITS AND LOSSES; DISTRIBUTIONS
Section 5.1 Capital Accounts. Each Member shall have a capital
account (a "Capital Account") which account shall be (a) increased by the
amount of cash and the fair market value of any property (net of liabilities
assumed by the Company and liabilities to which the property is subject)
contributed by such Member, plus all items of income and gain of the Company
allocated to such Member, plus (without duplication) any amount of
indebtedness of the Company assumed by such Member (b) decreased by the amount
of distributions to such Member of cash or other property (net of liabilities
assumed by the Member and liabilities to which the property is subject), plus
all items of loss and deduction of the Company allocated to such Member. The
provisions of this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Treasury Regulations Section 1.704-1(b) and shall
be interpreted and applied in a manner consistent with such Treasury
Regulations.
Section 5.2 Allocations of Net Income and Net Loss.
(a) Allocations to Capital Accounts: After giving effect to the
special allocations provided in Sections 5.2(b) and (d) hereof:
(i) Net Income shall be allocated to the Members in
accordance with their Percentage Interests.
(ii) Net Losses shall be allocated to the Members in
accordance with their Percentage Interests.
(b) Adjustments. Any allocation pursuant to Section 5.2(a) hereof
shall, however, be subject to any adjustment required to comply with Treasury
Regulations Sections 1.704-1 and 1.704-2, including any qualified income
offset within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and any nonrecourse deduction or minimum gain chargeback within the meaning of
Treasury Regulations Section 1.704-2. In the event that any Member has a
deficit Adjusted Capital Account balance as of the close of any Fiscal Year,
such Member shall be specially allocated items of Company income and gain in
the amount of such deficit as quickly as possible. The value of the Company
assets shall be adjusted on the Company's books to equal their respective fair
market values, in accordance with Treasury Regulations Section
1.704-1(b)(2)(iv)(f), upon the occurrence of the following events: (i) the
contribution of money or other property to the Company for an additional
interest in the Company by any new or existing Member in exchange for more
than a de minimis Capital Contribution; (ii) the distribution by the Company
to a Member of more than a de minimis amount of Company property in exchange
for an interest in the Company; and (iii) the liquidation of the Company
within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g). The
value of the Company's assets will be increased or decreased to reflect any
adjustment to the adjusted basis of such assets under Code Sections 734(b) or
743(b). In the event that the value of any Company asset is adjusted pursuant
to the two immediately preceding sentences, the amount of such adjustment
shall be taken into account as gain or loss from the disposition of such asset
which shall be allocated to the Members and their respective Capital Accounts
in accordance with Section 5.2(a) hereof. Any special allocations of items
pursuant to this Section 5.2(b) hereof shall be taken into account, to the
extent permitted by the Treasury Regulations, in computing subsequent
allocations of income, gain, loss or deductions pursuant to Section 5.2(a)
hereof so that the net amount of any items so allocated and all other items
allocated to each Member shall, to the extent possible, be equal to the amount
that would have been allocated to each Member pursuant to Section 5.2(a)
hereof had such special allocations under this Section 5.2(b) hereof not
occurred.
(c) Tax Allocations. Items of income, gain, loss, deduction and
credit realized by the Company shall, for each fiscal period, be allocated,
for federal, state and local tax purposes, among the Members in the same
manner as the items of income, gain, loss, deduction and credit were allocated
pursuant to Sections 5.2(a) and (b) hereof, except that, solely for federal,
state and local tax purposes, allocations with respect to any property
contributed to the capital of the Company shall be made using a reasonable
method of allocation, determined by the Board pursuant to a Board
Determination, in their sole discretion to take into account pre-contribution
gain or loss by any contributing Member with respect to any contributed
property, that is consistent with Code Section 704(c) and Treasury Regulations
promulgated thereunder. This Section 5.2(c) is intended to comply with the
requirements of Code Section 704(c) and the Treasury Regulations promulgated
thereunder.
(d) Redeterminations. If for any taxable period of the Company, the
Company is deemed to have a net increase (or decrease) in income for tax
purposes as a result of a redetermination by a tax authority resulting from
transactions between the Company and any Member or any Affiliate or Related
Party of any Member, the item or items of income or gain (or loss or
deduction) that resulted in such increase (or decrease) in income shall be
allocated to the Member that was (or the Affiliate or Related Party of which
was) a party to the transaction and the Capital Accounts of the Members shall
reflect such allocations but shall not result in any change in the respective
Percentage Interests of the Members.
(e) Federal Income Tax. It is the intent of this Company and its
Members that this Company shall be governed by the applicable provisions of
Subchapter K, Chapter 1, of the Code.
Section 5.3 Distributions.
(a) The Company shall not make any distributions to its Members other
than (i) pursuant to Section 5.3(d), (ii) pursuant to a Board Determination or
(iii) as set forth in Article IX.
(b) In the event of a distribution of property other than cash, the
value of such property shall be deemed to be equal to its fair market value
(net of any liabilities securing such distributed property that the recipient
Members are considered to assume or take subject to under Section 752 of the
Code). Any gain or loss associated with such property shall be allocated to
Members' Capital Accounts in accordance with Section 5.2 hereof, and
adjustments to Capital Accounts in respect of distributions of such property
shall reflect its fair market value.
(c) Any distributions, other than distributions made pursuant to
Section 5.3(d) or Article IX, shall be made to the Members as and if approved
by the Board as of a record date determined by the Board pursuant to a Board
Determination (which date shall not be less than 10 nor more than 45 days
before the date of the distribution), pro rata, in accordance with their
respective Percentage Interests.
(d) In the event of any dividend or distribution (other than
dividends or distributions of Affirmative Equity Securities) with respect to
the Affirmative Equity Securities or the receipt of any proceeds by the
Company with respect to the sale of Affirmative Equity Securities, unless a
Board Determination mandates otherwise, the Company shall as soon as
practicable upon receipt of such dividend or distribution, distribute to the
Members pro-rata, in accordance with their respective Percentage Interests,
the entire amount of such dividend or distribution.
Section 5.4 No Right of Withdrawal. No Member shall have the right to
withdraw any portion of such Member's Capital Contributions or Capital Account
in the Company, except as expressly provided herein.
Section 5.5 Amounts Held in Reserve. In regard to all distributions
made out of amounts in the Capital Accounts, the Board shall (pursuant to a
Board Determination) have the power, in its sole judgment, to withhold amounts
otherwise distributable in order to maintain the Company in a sound financial
and cash position and to make such provision as it in its sole judgment deems
necessary or advisable for any and all liabilities and obligations,
contingent, unforeseen or otherwise, of the Company.
Section 5.6 Account Balances. Notwithstanding the foregoing, at any
time any Member may have a positive, negative, or zero balance in its Capital
Account; provided, however, that no Member shall be required to pay to any
Member or to the Company the amount of any negative balance in any such
account. Notwithstanding the other provisions of this Article V, any amount
otherwise distributable to a Member may be withheld by the Board (pursuant to
a Board Determination), in its sole discretion, and distributed to the other
Members if the distribution of such amount to such Member would result in its
Adjusted Capital Account balance being reduced to an amount less than zero.
The immediately preceding sentence shall not apply to the extent that,
pursuant to the second sentence of Section 5.2(b) hereof, items of Company
income and gain are specially allocated to such Member in a manner that
increases such Member's Adjusted Capital Account balance to zero.
ARTICLE VI
BANKING, ACCOUNTING, BOOKS AND RECORDS
Section 6.1 Banking. All funds of the Company shall be deposited in
such bank or money market accounts as shall be established by the Board
pursuant to a Board Determination. Withdrawals from and checks drawn on any
such account shall be made upon the signature or signatures of the individuals
as may be designated by the Board pursuant to a Board Determination.
Section 6.2 Maintenance of Accounts and Accounting Method; Member
Preparation.
(a) The Tax Matters Partner shall keep or cause to be kept at the
office of the Company set forth in Section 2.2(b) hereof full and accurate
accounts of the transactions of the Company in proper books of account. Such
books and records shall be kept in accordance with GAAP consistently applied
and be available for inspection and copying at reasonable times during
business hours by the Members or their duly authorized agents or
representatives.
(b) The Tax Matter Partner and the Company shall provide any Member
and its representatives (including its accountants) reasonable access to the
books and records of the Company in order that any such Member may, on behalf
of itself, prepare unaudited quarterly and unaudited or audited annual
financial statements with respect to the Company. Any such Member preparing
such financial statements shall do so at its own cost, expense and liability
and shall indemnify the Company (and any other Member) from any cost, expense
or liability incurred in connection with the preparation and/or delivery
thereof. In addition to the foregoing, no Member shall be required to
participate in the preparation by any other Member of the financial statements
of the Company.
Section 6.3 Company Tax Returns. The Company shall cause to be
prepared and timely filed all tax returns required to be filed for the Company
in the jurisdictions in which the Company conducts business or derives income
for all applicable tax years, and shall furnish within 30 days after the
original due date, without extensions, of the Company's federal income tax
return (IRS Form 1065 or any successor form thereto), a statement of each
Member's distributive share of income, gains, losses, deductions and credits
for such tax year prepared by the Company's independent public accountants
(including IRS Form 1065 and Schedule K-1 and similar or successor forms and
schedules thereto) and a copy of the Company's federal tax return required to
be filed by the Company for such Fiscal Year. The Tax Matters Partner may
make, subject to the approval of the Board pursuant to a Board Determination,
any income or other tax elections for the Company; provided, however, upon the
Transfer of an Membership Unit in the Company, the Tax Matters Partner shall,
at the request of any Member, cause the Company to file an election under
Section 754 of the Code and the Treasury Regulations thereunder and a
corresponding election under the applicable section of state or local law. The
Members shall file their individual returns or corporate returns in a manner
consistent with the Company tax and information returns to the extent such
returns pertain to the business of the Company. Any filing by the Company of
any federal, state or local income tax returns of the Company, including IRS
Form 1065 and Schedule K-1 and similar or successor forms and schedules shall
be approved by a Board Determination.
Section 6.4 Designation of Tax Matters Partner. The AIL Member is
hereby designated as the "Tax Matters Partner", under Section 6231(a)(7) of
the Code, with respect to the Company. The Tax Matters Partner is specifically
directed and authorized to take whatever steps the Tax Matters Partner, in its
sole discretion, deems necessary or desirable to perfect such designation,
including, subject to Section 6.3 hereof, filing any forms or documents with
the Internal Revenue Service and taking such other action as may from time to
time be required under regulations of the United States Department of the
Treasury. The Tax Matters Partner shall at all times assure that each Member
is a "notice partner" as defined in Section 6231(a)(8) of the Code with
respect to the Company. The Tax Matters Partner shall promptly deliver to each
of the other Members a copy of all notices, communications, reports and
writings received from the Internal Revenue Service or other tax authority
relating to or potentially resulting in an adjustment of Company items and
keep each of the Members advised of all material developments with respect to
any proposed adjustments which come to its attention. Any Member has the right
to participate in administrative or judicial proceedings relating to the
determination of Company items at the Company level. Expenses of such
administrative or judicial proceedings undertaken by the Tax Matters Partner
shall, upon submission of an adequate accounting, be deemed expenses of the
Company. Each Member, other than the Tax Matters Partner, who elects to
participate in such proceedings shall be responsible for any expenses incurred
by such Member in connection with such participation. Further, the cost of any
adjustments to a Member and the cost of any resulting audits or adjustments of
such Member's tax return, shall be borne solely by the affected Member.
Notwithstanding the foregoing, the Tax Matters Partner may not settle any
administrative or judicial proceeding or enter into any agreement (including
extending the period of limitations) with the Internal Revenue Service or
other tax authority, in each case, without a Board Determination. This Section
6.4 is not intended to authorize the Tax Matters Partner to exercise or limit
any right that is exercisable by any other Member under Sections 6222 through
6232 of the Code.
Section 6.5 Withholding. Notwithstanding any other provision of this
Agreement, the Company is authorized to take any action that it reasonably
determines to be necessary or appropriate to cause the Company to comply with
any foreign or United States federal, state or local withholding requirement
with respect to any allocation, payment or distribution by the Company to any
Member or other Person. All amounts so withheld, and, in the manner determined
by the Company, amounts withheld with respect to any allocation, payment or
distribution by any Person to the Company, shall be treated as distributions
to the applicable Members under the applicable provisions of this Agreement,
as the case may be. Notwithstanding any other provision of this Agreement, if
any such withholding requirement with respect to any Member exceeds the amount
distributable to such Member under applicable provisions of this Agreement or
if any such withholding requirement was not satisfied with respect to any
amount previously allocated, paid or distributed to such Member, such Member
and any successor or assignee with respect to such Member's Membership Units
hereby indemnifies and agrees to hold harmless the other Members and the
Company for such excess amount or such withholding requirement, as the case
may be. Any amount so withheld by the Company shall be promptly paid by the
Company to the appropriate federal, state or local taxing authority.
ARTICLE VII
INFORMATION
Section 7.1 Reports of Affirmative. To the extent the Board receives
financial reports or other information from Affirmative, the Board shall
furnish any Member with such information at the Member's request.
Section 7.2 Inspection of Records. A Member and its duly authorized
representatives may, for any reason reasonably related to its interest as a
Member of the Company, examine the Company's books of account and make copies
and extracts therefrom at its own expense. The Managers shall maintain the
records of the Company for three years following the termination of the
Company. The Managers shall be permitted to keep information confidential from
the Members pursuant to 18-305(c) of the Act.
Section 7.3 Tax Information. The Company shall send or cause to be
sent to each Member within 30 days after filing of the Company's federal
income tax (IRS Form 1065 or any successor form thereto), state income tax,
local or any other tax or information returns, including any amendments and
supplements thereto, such information as is reasonably necessary for each
Member to complete its applicable foreign, federal, state, local and any other
tax or information returns, including a copy of the Company's foreign,
federal, state, local and any other tax or information returns for such Fiscal
Year, including any amendments and supplements thereto.
ARTICLE VIII
ADMISSION OF NEW MEMBERS;
TRANSFER OF MEMBERSHIP UNITS;
WITHDRAWAL OF A MEMBER
Section 8.1 Admission of New Members. Subject to Section 3.2 hereof,
additional Members may be admitted to the Company from time to time on such
terms and conditions as shall be determined in accordance with such Section,
including upon execution and delivery of a counterpart of this Agreement.
Schedule I to this Agreement shall be amended from time to time as appropriate
to reflect (x) the number of Membership Units held by such additional Member,
(x) the Percentage Interest of any additional Member admitted to the Company
in accordance this Section 8.1 hereof and (y) any change in the number of
Membership Units held by any Member and/or an existing Member's Percentage
Interest resulting from an admission of an additional Member in accordance
with this Section 8.1 hereof.
Section 8.2 Transfer of Membership Units by Members.
(a) Except as otherwise provided in Section 8.2 or Section 8.4
hereof, a Member may not (without the approval of the other Members) otherwise
withdraw or resign from the Company or take any action to dissolve, terminate
or liquidate the Company or Transfer (other than to a Permitted Transferee of
such Member) any or all of the Membership Units held by such Member except as
permitted pursuant to this Section 8.2 or Sections 8.3 or 8.4 hereof.
(b) A Member may Transfer any or all of its Membership Units to a
Permitted Transferee of such Member at any time; provided, that a Member shall
notify all other Members of each Transfer to a Permitted Transferee within
five (5) Business Days after the consummation thereof; provided, further, that
the Permitted Transferee shall be required to execute a joinder to this
Agreement in which the Permitted Transferee agrees to be bound by the terms
and conditions of this Agreement to the same extent and in the same manner as
the Member transferring such Membership Units and all references to the
transferring Member in this Agreement (e.g., "DSC Member", " AIL Member")
shall thereafter be deemed to be references to such Permitted Transferee;
provided, further, that the Transfer to any Permitted Transferee shall be in
compliance with all applicable federal, state and foreign securities laws.
Schedule I to this Agreement shall be amended from time to time as appropriate
to reflect the addition of any Permitted Transferee.
(c) At any time after the Form A Approval Date, any Member may
Transfer any or all of its Membership Units to a third party (a "Consent
Transferee"), subject to the written consent of the other Member, which
consent shall not be unreasonably withheld; provided, it being understood that
that it is not unreasonable to withhold consent in the event that any Consent
Transferee (or the transferring Member) requests any material changes to the
terms and provisions of this Agreement or requests any changes to the
provisions relating to the governance of the Company; provided, further, that
the Consent Transferee shall be required to execute a joinder to this
Agreement in which the Consent Transferee agrees to be bound by the terms and
conditions of this Agreement to the same extent and in the same manner as the
Member transferring such Membership Units and all references to the
transferring Member in this Agreement and if any Initial Member transfers all
but not less than all of its Membership Units then all references to the
transferring (e.g., "DSC Member", "AIL Member") shall thereafter be deemed to
be references to such Consent Transferee. Subject to any notice or filing with
the Department, a Member transferring Membership Units may agree, in its sole
discretion, to grant to any Consent Transferee the right to appoint (or assign
the voting rights with respect to) the Managers appointed by such Member;
provided, that (x) a Consent Transferee may not receive the right to appoint
more than one (1) Manager unless such Consent Transferee purchases a Member's
entire fifty percent (50%) aggregate Percentage Interest in the Company
(unless each of the Managers on the Board otherwise consents) and (y) a Member
may in no event appoint (or assign the voting rights with respect to a Manager
to) more than one (1) Consent Transferee at any time (except to a transferee
of such Member's entire fifty percent (50%) aggregate Percentage Interest in
the Company). Schedule I to this Agreement shall be amended from time to time
as appropriate to reflect the addition of any Consent Transferee.
(d) Any purported Transfer of a Member's Membership Units in
violation of this Section 8.2 or Section 8.3 or 8.4 hereof shall be void and
of no effect.
(e) In the event of any Transfer of Membership Units by a Member of
any or all of its Membership Units during any year, the Company and its
Members agree that the allocations made pursuant to Article V of this
Agreement will be made to such Member and transferee of such Member as
determined by a closing of the books of the Company as of the date of such
Transfer.
Section 8.3 Company Sale.
(a) Following the fifth (5th) anniversary of the closing under the
Stock Purchase Agreement, either Initial Member (or any transferee of an
Initial Member's entire fifty percent (50%) Percentage Interest in the
Company) (such Person, the "Proposed Seller"), shall have the right to elect
to cause the auction and sale of all, but not less than all, of the Company or
its assets or outstanding Membership Units, and, if applicable, all other
outstanding equity securities, options, warrants or other rights to exercise,
purchase or otherwise acquire the Beneficial Ownership of, any Membership
Units, of the Company in an arm's-length third party transaction for
consideration consisting solely of Permitted Consideration (a "Company Sale")
in accordance with the terms and conditions set forth in this Section 8.3. The
Proposed Seller shall have the right to exercise its right to effectuate a
Company Sale hereunder by providing written notice of such Proposed Seller's
intention to effectuate such Company Sale (the "Company Sale Notice") to the
Company and each other Member.
(b) The Proposed Seller shall be free for a period of one hundred
eighty (180) days from the date of delivery of the Company Sale Notice to
enter into a definitive purchase agreement with respect to a proposed Company
Sale. The Company Sale shall be conducted pursuant to an auction process by an
independent nationally recognized investment banking firm selected by the
Proposed Seller (and approved by the DSC Member or AIL Member, as the case may
be, which approval shall not be unreasonably withheld) in such manner and on
such terms as the Proposed Seller determines, provided that all Members are
entitled to receive the same price per Membership Unit, and participate in the
transaction on the same terms. No Member shall have the right to participate
as a bidder in the auction. The Company and all other Members shall cooperate
with the investment banking firm in any Company Sale. The Board shall be kept
fully informed and be given the opportunity to participate in the negotiations
and discussion concerning the Company Sale process. All Members agree, and
will cause their representatives on the Board, to vote in favor of any Company
Sale in accordance with this Section 8.3. At the election of the Proposed
Seller, the Proposed Seller shall have the right to terminate or not go
forward with any Company Sale if it is dissatisfied with the result thereof,
and the Proposed Seller shall retain the right to provide additional Company
Sale Notices pursuant to this Section 8.3 for so long as it is a Member,
provided, however, that if the Proposed Seller does not enter into a
definitive purchase agreement with respect to the proposed Company Sale prior
to the end of the one hundred eighty (180) day period, then no such Company
Sale shall be consummated. If the Proposed Seller of such Company Sale
requests within the next twelve (12) month period that another Company Sale
process be conducted, then such Proposed Seller shall pay all fees and
expenses incurred in connection with such additional Company Sale process if
such further Company Sale process is unsuccessful.
(c) In the event that the Company Sale is effectuated, each of the
Members shall (i) prior to closing of any such proposed Company Sale, execute
any purchase agreement or other certificates, instruments and other agreement
required to consummate the proposed Company Sale; provided, however, that any
such purchase agreement or other certificates, instruments and other
agreements shall be on terms no less favorable to the other Members than those
executed by either of the Proposed Seller in connection with such Company
Sale, including without limitation, the purchase price (and form of
consideration) per Membership Unit therefor, the provision of, and reasonable
representation and warranty as to, information requested by the proposed
purchaser from the Proposed Seller and the provision of requisite
indemnifications from the Proposed Seller; provided, further, that (x) if at
the commencement of such Company Sale process more than thirty-five (35%) of
the outstanding publicly traded equity securities are held by Persons other
than the Company (a "Public Company Sale"), then in the event that any Member
is required as part of such Public Company Sale to make unreasonable
representations or warranties or provide unreasonable indemnities, such Member
which refuses to make any such unreasonable representation or warranty shall
have the right to trigger a Withdrawal as a Withdrawing Member pursuant to
Section 8.5 hereof (it being understood that the terms of Section 8.5(d) shall
be inapplicable) and (y) for any Company Sale other than a Public Company
Sale, the Members will use reasonable best efforts to pursue reasonable
representations and warranties and reasonable indemnities in connection with
such Company Sale; provided, further, that any indemnification provided to the
proposed purchaser by the Proposed Seller and by the other Members shall be
made pro-rata in proportion to the respective Membership Units or other equity
securities of the Company beneficially owned by each of them (except in the
case of indemnifications arising as a result of a breach of a representation
or warranty relating specifically to a particular seller which shall be borne
solely by such seller), and (ii) use their commercially reasonable efforts to
obtain all necessary consents from third parties and take such other actions
as may be necessary to effectuate the intent of the foregoing. At the closing
of any such proposed Company Sale, such other Members shall deliver to the
proposed purchaser (i) such instruments of transfer as shall be requested by
the proposed purchaser with respect to the Membership Units or other equity
securities of the Company to be Transferred, against receipt of the purchase
price therefor in such Company Sale and (ii) such Members' Shares or other
Equity Securities, free and clear of any liens. At such closing the transferee
shall deliver payment (in full in immediately available funds in the case of
all cash payments) for the Membership Units and other equity securities
purchased by such transferee.
(d) In the event that the Company Sale is effectuated through a
business combination (whether by way of merger, recapitalization or
otherwise), the Members shall use their commercially reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things necessary or advisable to consummate and make effective the business
combination.
(e) Notwithstanding anything else in this Agreement, a Member that
has Transferred all of its Membership Units shall remain bound by the terms of
sections 3.6(c) and 6.3 hereof and Article X hereof.
Section 8.4 Drag-Along Sale.
(a) In the event that the sale process set forth in Section 8.3
hereof does not result in a Company Sale, then at any time within sixty (60)
days of the end of such process, if either Initial Member (or any transferee
of an Initial Member's entire fifty percent (50%) Percentage Interest in the
Company) (any such Person, the "Transferring Member") has received a bona-fide
offer consisting of Permitted Consideration from a third party (which is not
an Affiliate of the Transferring Member) regarding the Transfer of all of the
Membership Units owned by the Transferring Member to such third party (the
"Drag Transferee"), then the Transferring Member may, at its option and
without the approval of any of any of the other Members (the "Remaining
Members"), require each of the Remaining Members to include in any such
Transfer to a Drag Transferee all, but not less than all, of the Membership
Units (and, if applicable, any other securities of the Company) owned by each
Remaining Member, as determined in accordance with this Section 8.4. In such
event, the Transferring Member shall send written notice (the "Drag-Along
Notice") of the exercise of its rights pursuant to this Section 8.4 to each
Remaining Member, setting forth the sales price consideration per Membership
Unit to be paid by the Drag Transferee and the other material terms and
conditions of such transaction (such transaction, a "Drag-Along Sale"). The
Drag-Along Notice shall state that the Remaining Members shall be required to
participate in the Drag-Along Sale according to the terms and conditions of
this Section 8.4. Within sixty (60) days following the receipt of the
Drag-Along Notice, the Remaining Members shall deliver to a representative of
the Transferring Member designated in the Drag-Along Notice all documents
required to be executed in connection with the Drag-Along Sale and, upon
consummation of the Transfer of Membership Units by the Transferring Member
and the Drag-Along Sale, shall cause the transfer all of such Remaining
Member's Membership Units to be recorded in the books of the Company in the
name of the Drag Transferee. In the event that any Remaining Holder should
fail to deliver any such documents or cause the Company to record the transfer
of the Remaining Member's Membership Units, then the Transferring Member shall
be authorized to unilaterally cause the books and records of the Company to
show that such Membership Units are bound by the provisions of this Section
8.4 and may be Transferred only to the Drag Transferee.
(b) The obligations of the Remaining Members pursuant to Section
8.4(b) are subject to the satisfaction of the following conditions:
(i) in an arm's-length third party transaction for
consideration consisting solely of Permitted Consideration in
accordance with the terms and conditions set forth in this Section
8.4;
(ii) the Drag-Along Sale shall be effectuated at or above
the price set forth in the Drag-Along Notice, consist of Permitted
Consideration, and upon any other terms and conditions (including
contractual terms) which are equal to or more favorable, considered
as a whole, than as set forth in the Drag-Along Notice; and
(iii) each of the Remaining Members shall prior to the
closing of any such proposed Drag-Along Sale, execute any purchase
agreement or other certificates, instruments and other agreement
required to consummate the proposed Drag-Along Sale; provided,
however, that any such purchase agreement or other certificates,
instruments and other agreements shall be on terms no less favorable
to the other Remaining Members than those executed by the
Transferring Member in connection with such Drag-Along Sale,
including without limitation, the purchase price (and form of
consideration) per Membership Unit therefor, the provision of,
reasonable representation and warranty as to, information requested
by the proposed purchaser from the Proposed Seller and the provision
of requisite indemnifications from the Proposed Seller; ; provided,
further, that (x) if at the commencement of such Drag-Along Sale is a
Public Company Sale, then in the event that any Member is required as
part of such Public Company Sale to make unreasonable representations
or warranties or provide unreasonable indemnities, such Member which
refuses to make any such unreasonable representation or warranty
shall have the right to trigger a Withdrawal as a Withdrawing Member
pursuant to Section 8.5 hereof (it being understood that the terms of
Section 8.5(d) shall be inapplicable) and (y) for any Drag-Along Sale
other than a Public Company Sale, the Members will use reasonable
best efforts to pursue reasonable representations and warranties and
reasonable indemnities in connection with such Company Sale;
provided, further, that any indemnification provided to the Drag
Transferee by the Transferring Member and by the other Members shall
be made pro-rata in proportion to the respective Membership Units or
other equity securities of the Company beneficially owned by each of
them (except in the case of indemnifications arising as a result of a
breach of a representation or warranty relating specifically to a
particular seller which shall be borne solely by such seller).
Section 8.5 Withdrawal of a Member.
(a) In the event of (i) the death, incapacity, permanent disability,
bankruptcy or involuntary dissolution of any Member or (ii) that any such
Member becomes a Suspended Member; provided, that a Suspended Member shall
have a ninety (90) day period (the "Cure Period") during which to cure and
cause to be lifted such order or ruling which caused the Member to become a
Suspended Member (each such event, a "Withdrawal"), the Company shall dissolve
and be wound up as provided in Article IX hereof unless all the Members,
excluding, if applicable, the Member who is the Withdrawing Member (as
hereinafter defined) consent to continue the Company. The Member that is the
subject of the Withdrawal (the "Withdrawing Member") shall deliver prompt
written notice to the Company and the other Members of the occurrence of a
Withdrawal. If the Members decide to continue the Company pursuant to the
first sentence of this paragraph, the Company shall inform the Withdrawing
Member of such decision by written notice delivered within ninety (90) days of
the occurrence of the Withdrawal.
(b) If the Members elect to continue the Company following a
Withdrawal in accordance with Section 8.5(a) hereof, the Company shall make
payment in cash and Affirmative Equity Securities (as set forth below) in
liquidation of the Withdrawing Member's Membership Units. Any such payment(s)
shall be equal to the Fair Market Value of the Membership Units owned by the
Withdrawing Member, as determined pursuant to the following sentence. Fair
Market Value shall be determined by an independent nationally recognized
investment banking firm selected by the Company (the "Appraiser"), and the fee
of such Appraiser shall be paid by the Company and the Members agree that such
fee amount shall be deducted from the amount payable to the Withdrawing
Member. Absent manifest error, the determination of the Appraiser of the Fair
Market Value of the Membership Units owned by the Withdrawing Member shall be
final and binding on the Company, the Withdrawing Member and the other
Members. The Fair Market Value of the Withdrawing Member's Membership Units
shall be satisfied and paid to the Withdrawing Member by the Company in the
form of (i) up to that number of Affirmative Equity Securities which were
contributed to the Company upon the closing of the Subscription Agreement by
such Member (with an aggregate value less than or equal to the Fair Market
Value of the Withdrawing Member's Membership Units) and (ii) second, to the
extent that the value of the Affirmative Equity Securities set forth in clause
(i) is less than the Fair Market Value of the Membership Units owned by the
Withdrawing Member, an amount of cash equal to such deficit; provided, that
for the purposes of this Section 8.5, the value of any Affirmative Equity
Securities on the date of such payment shall be (x) if there should be a
public market for the Affirmative Equity Securities on such date, the
arithmetic mean of the high and low prices of the Affirmative Equity
Securities as reported on such date on the composite tape of the principal
national securities exchange on which the Affirmative Equity Securities are
listed or admitted to trading, or, if the Affirmative Equity Securities are
not listed or admitted on any national securities exchange, the arithmetic
mean of the per-share closing bid price and per-share closing asked price on
such date as quoted on the National Association of Securities Dealers
Automated Quotation System (or such market in which such prices are regularly
quoted) (the "Nasdaq"), or, if no sale of Affirmative Equity Securities shall
have been reported on the composite tape of any national securities exchange
or quoted on the Nasdaq on such date, the arithmetic mean of the per-share
closing bid price and per-share closing asked price on the immediately
preceding date on which sales of the Affirmative Equity Securities have been
so reported or quoted, and (ii) if there is not a public market for the
Affirmative Equity Securities on such date, the value established by the
Appraiser.
(c) Subject to the penultimate sentence of Section 8.5(b) hereof,
redemption of a Membership Interest in accordance with Section 8.5(b) hereof
shall take place no later than five (5) Business Days after the determination
of Fair Market Value of the Membership Units (or such later date as may be the
soonest practicable date).
(d) In the event of any Withdrawal, the Initial Members (or a 50%
transferee thereof) may jointly and severally (unless one of the Initial
Members is the Withdrawing Member in its sole election) elect to require that
the Company, in lieu of making the liquidating payment(s) to the Withdrawing
Member pursuant to Section 8.5(b) hereof, initiate a Company Sale pursuant to
Section 8.3 hereof (disregarding for the purposes of this Section 8.5 only,
the five (5) year period referred to therein). In the event that the sale
process set forth in Section 8.3 hereof does not result in a Company Sale,
then the Company shall make all required liquidating payment(s) to the
Withdrawing Member pursuant to Section 8.5(b) hereof.
(e) Schedule I to this Agreement shall be amended from time to time
as appropriate to reflect any change in a Member's Percentage Interest or the
number of Membership Units owned by such Member resulting from a purchase and
sale or liquidation of Membership Units pursuant to this Section 8.5.
ARTICLE IX
DISSOLUTION AND TERMINATION OF COMPANY
Section 9.1 Dissolution. The Company shall be dissolved upon the
earliest to occur of any of the following:
(a) the termination of the Stock Purchase Agreement;
(b) a Board Determination to dissolve the Company; or
(c) the entry of a decree of judicial dissolution under the Act.
Section 9.2 Distribution Upon Dissolution. Upon the dissolution of
the Company as a result of any of the events set forth in Section 9.1 hereof,
the Members (or, if dissolution should occur by reason of Section 8.4(d)
hereof, the last remaining Member), acting together shall proceed, subject to
the provisions herein, to liquidate the Company and apply the proceeds in such
liquidation, or in their sole discretion to distribute Company assets, in the
following order of priority:
(a) First, to the payment of debts and liabilities of the Company, in
order of their priority (including loans or advances that may have been made
by any of the Members to the Company), and the expenses of liquidation;
(b) Second, to the establishment of any reserve which a Board
Determination deems reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company. Such reserve may be paid over to
any attorney at law, or other acceptable party, as escrow agent to be held for
disbursement in payment of any of the aforementioned liabilities and, at the
expiration of such period as shall be deemed advisable by a Board
Determination in the manner provided in this Section 9.2;
(c) Third, to all Members with positive Capital Account balances
(after giving effect to Section 9.3 hereof) in proportion to such Capital
Account balances, until such balances are reduced to zero; and
(d) Finally, any remaining proceeds shall be distributed to the
Members in accordance with their respective Percentage Interests as set forth
on Schedule I to this Agreement.
Section 9.3 Distributions in Cash or in Kind. Upon dissolution, the
Members, their successors or other representatives may in their sole
discretion (a) liquidate all or a portion of the Company assets and apply the
proceeds of such liquidation as set forth in Section 9.2 hereof or (b)
determine the value of any Company assets not sold or otherwise disposed of
(including, if they so determine, hiring an appraiser, in which event the cost
of such appraisal shall be considered a debt of the Company), allocate any
unrealized gain or loss based on such value to the Members' accounts as though
the properties in question had been sold on the date of distribution and,
after giving effect to any such adjustment, distribute said assets in a manner
consistent with Article V hereof; provided that the Members shall in good
faith attempt to liquidate sufficient Company assets to satisfy in cash the
debts and liabilities (foreseen, contingent or otherwise) set forth in
Sections 9.2(a) and 9.2(b) hereof.
Section 9.4 Final Accounting. In the event of the dissolution of the
Company, prior to any liquidation, a proper accounting shall be made to the
Members from the date of the last previous accounting to the date of
dissolution.
Section 9.5 Time for Liquidation. A reasonable time period shall be
allowed for the orderly liquidation of the assets of the Company and the
discharge of liabilities to creditors so as to enable the Members to minimize
the losses attendant upon such liquidation.
Section 9.6 Termination.
Upon compliance with the foregoing distribution plan, the Company
shall cease to be such and the Members shall execute and cause to be filed a
certificate of cancellation of the Company in accordance with Section 18-203
of the Act.
Section 9.7 Members Not Personally Liable for Return of Capital
Contributions. None of the Members or any of their respective Affiliates and
Related Parties shall be personally liable for the return of the Capital
Contributions of any Member and such return shall be made solely from
available Company assets, if any, and each Member hereby waives any and all
claims it may have against the other Members and their respective Affiliates
and Related Parties in this regard.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Amendments. The terms and provisions of this Agreement
may not be modified or amended at any time without the written consent of each
of the Members.
Section 10.2 Termination of Agreement. Notwithstanding anything to
the contrary in this Agreement, this Agreement shall terminate and be of no
further force or effect:
(a) in the event that either the closing of the transactions
contemplated by the Stock Purchase Agreement or the Subscription Agreement
fail to occur or if the Company does not receive the written approval of the
Department in connection with the Company's filing of the Form A with respect
to Affirmative; or
(b) pursuant to Section 4.1 hereof.
Section 10.3 Notices. Any notice, request, consent or communication
(collectively a "Notice") under this Agreement shall be effective only if it
is in writing and (i) personally delivered, (ii) sent by certified or
registered mail, return receipt requested, postage prepaid (iii) sent by a
nationally recognized overnight delivery service, with delivery confirmed, or
(iv) telexed or telecopied, with receipt confirmed, addressed as follows:
If to DSC, to:
DSC AFFM, LLC
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Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
with a copy to:
DSC AFFM, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
and a copy to:
Jenner & Block LLP
▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇, Esq.
If to JCF, to:
Affirmative Investment LLC
c/o ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
c/o The Enstar Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
Attention:
If to the Company, to:
New Affirmative LLC
c/o Affirmative Investment LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
c/o The Enstar Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone:
Facsimile:
Attention:
and
c/o DSC AFFM, LLC
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
with a copy to:
DSC AFFM, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
(a) if to any other Member, to such address as set forth in a writing
delivered to the Company at the time of its admission;
or such other Persons or addresses as shall be furnished in writing by any
Member to the other Members. A Notice shall be deemed to have been given as of
the date when (i) personally delivered, (ii) three (3) days after when so
deposited with the United States mail properly addressed, (iii) the next day
when delivered during business hours to said overnight delivery service
properly addressed, or (iv) when receipt of the telex or telecopy is
confirmed, as the case may be, unless the sending party has actual knowledge
that a Notice was not received by the intended recipient. All Notices shall
specifically state: (i) the provision (or provisions) of this Agreement with
respect to which such Notice is given; and (ii) the relevant time period, if
any, in which the Member given such Notice must respond. If a party notifies
the other parties that it is willing to receive electronic notices (by
internet, e-mail or otherwise), Notice may (but is not required to be) given
to such party by such electronic methods.
Section 10.4 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be considered an original.
Section 10.5 Table of Contents and Headings. The table of contents
and the headings of the sections of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof.
Section 10.6 Successors and Assigns. Except as otherwise permitted
herein, no Member may assign its rights hereunder, whether by operation of law
or otherwise, without the prior written consent of the other Members given in
accordance with Section 8.2(a) hereof. Notwithstanding the foregoing, a Member
may assign its rights hereunder to an Affiliate of such Member by Notice to
the other parties to this Agreement. This Agreement shall inure to the benefit
of and be binding upon the parties and their respective heirs, executors,
administrators, successors and permitted assigns.
Section 10.7 Severability. Every provision of this Agreement is
intended to be severable. If any term or provision hereof is held to be
illegal or invalid for any reason whatsoever such term or provision shall be
enforced to the maximum extent permitted by law and, in any event, such
illegality or invalidity shall not affect the validity of the remainder of
this Agreement.
Section 10.8 Non-Waiver. No provision of this Agreement shall be
deemed to have been waived except if the giving of such waiver is contained in
a written notice given to the party claiming such waiver and no such waiver
shall be deemed to be a waiver of any other or further obligation or liability
of the party or parties in whose favor the waiver was given.
Section 10.9 Applicable Law. This Agreement and the rights and
obligations of the parties hereto shall be interpreted and enforced in
accordance with and governed by the laws of the State of Delaware applicable
to agreements made and to be performed wholly within that jurisdiction.
Section 10.10 Entirety of Agreement. This Agreement, including the
schedules and exhibits hereto, constitute the entire agreement among the
parties hereto with respect to the subject matter hereof.
Section 10.11 Recapitalization, etc. Except as otherwise provided in
this Agreement, the provisions of this Agreement shall apply to any and all
Membership Units or any successor or assign of the Company (whether by merger,
consolidation, transfer or sale of assets, conversion or otherwise) which may
be issued in respect of, in exchange for, or in substitution of, any
Membership Units by reason of any reorganization, any recapitalization,
reclassification, merger, consolidation, partial or complete liquidation, sale
of assets, stock dividend, split, distribution to Members or combination of
the Membership Units or any other change in the Company's capital structure,
in order to preserve fairly and equitably as far as practicable, the original
rights and obligations of the parties hereto under this Agreement.
Section 10.12 Interpretation. Unless otherwise expressly provided,
for purposes of this Agreement, (a) any reference in this Agreement to gender
shall include both genders, and words imparting the singular number only shall
include the plural and vice versa, unless, in each case, the context otherwise
requires, (b) the provision of a Table of Contents, the division of this
Agreement into Articles, Sections and other subdivisions and the insertion of
headings are for convenience of reference only and shall not affect or be
utilized in construing or interpreting this Agreement, (c) all references in
this Agreement to any "Section," "Article," "Schedule" or "Exhibit" are to the
corresponding Section, Article, Schedule or Exhibit of this Agreement unless
otherwise specified, (d) 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
and (e) the word "including" or any variation thereof means "including,
without limitation" and shall not be construed to limit any general statement
that it follows to the specific or similar items or matters immediately
following it.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned have duly executed this Limited
Liability Company Agreement of New Affirmative LLC, as of the day and year
first above written.
DSC AFFM, LLC
BY: DSC AFFM Manager LLC,
its Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
---------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Authorized Person
AFFIRMATIVE INVESTMENT LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Authorized Person
Schedule I
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Percentage Interests
--------------------
(as of June 30, 2005)
Member Percentage Interest Membership Units Capital Contribution
DSC Member
AIL Member
Schedule 3.2(a)
Managers
Designated by DSC Member (the DSC Managers):
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Designated by AIL Member (the JCF Managers):
--------------------------------------------
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▇▇▇▇▇ ▇▇▇▇▇▇▇
