EXHIBIT 3.8
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
INERGY PARTNERS, LLC
(JULY 31, 2001)
Table of Contents
Page
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ARTICLE I DEFINITIONS.................................................... 2
1.1 Definitions Generally............................................. 2
1.2 Terms Defined Herein.............................................. 2
1.3 Other Definitional Provisions..................................... 6
ARTICLE II BUSINESS PURPOSES AND OFFICES................................. 6
2.1 Name; Business Purpose............................................ 6
2.2 Powers............................................................ 7
2.3 Principal Office.................................................. 7
2.4 Registered Office and Registered Agent............................ 7
2.5 Amendment of the Certificate...................................... 7
2.6 Liability of Members.............................................. 7
2.7 Authority; Investment Intent; Restriction Against Transfer........ 7
ARTICLE III CAPITAL CONTRIBUTIONS AND LOANS.............................. 8
3.1 Capital Accounts and Percentage Interests......................... 8
3.2 Additional Capital Calls.......................................... 8
3.3 Percentage Interest Adjustments................................... 8
3.4 Capital Account Adjustments and Revaluation....................... 9
3.5 Capital Accounts.................................................. 10
3.6 Capital Withdrawal Rights, Interest and Priority.................. 11
3.7 Loans............................................................. 11
ARTICLE IV ALLOCATIONS AND DISTRIBUTIONS................................. 11
4.1 Distributions to Pay Taxes........................................ 11
4.2 [Not Used]........................................................ 11
4.3 Additional Cash Distributions..................................... 11
4.4 Liquidation Distributions......................................... 11
4.5 Profits, Losses and Distributive Shares of Tax Items.............. 12
4.6 Allocation of Operating Income, Income, Loss and Credits.......... 12
4.7 Special Rules Regarding Allocations............................... 13
4.8 Withholding of Distributions...................................... 15
4.9 No Priority....................................................... 16
4.10 Tax Withholding.................................................. 16
4.11 Reserves......................................................... 16
ARTICLE V MANAGEMENT..................................................... 16
5.1 Management........................................................ 16
5.2 Voting............................................................ 16
5.3 Officers.......................................................... 16
5.4 Meetings of the Voting Members.................................... 16
5.5 Notice of Meeting................................................. 17
5.6 Waiver of Notice.................................................. 17
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Table of Contents
(continued)
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5.7 Action Without a Meeting.......................................... 17
5.8 Non-Voting Members................................................ 17
5.9 Definitions....................................................... 17
5.10 Limitation of Liability.......................................... 18
5.11 Right to Indemnification......................................... 18
5.12 Enforcement of Indemnification................................... 19
5.13 Advancement of Expenses.......................................... 19
5.14 Non-Exclusivity.................................................. 19
5.15 Insurance........................................................ 20
5.16 Amendment and Vesting of Rights.................................. 20
5.17 Severability..................................................... 20
5.18 Contracts with Members or their Affiliates....................... 20
5.19 Other Business Ventures.......................................... 20
ARTICLE VI ACCOUNTING AND BANK ACCOUNTS.................................. 21
6.1 Fiscal Year....................................................... 21
6.2 Books and Records................................................. 21
6.3 Tax Information................................................... 21
6.4 Tax Returns and Elections; Tax Matters Partner.................... 21
6.5 Section 754 Election.............................................. 22
6.6 Bank Accounts..................................................... 22
ARTICLE VII TRANSFERS OF INTERESTS....................................... 22
7.1 General Transfer Restrictions..................................... 22
7.2 First Offer Right................................................. 22
7.3 Exempt Transfers.................................................. 24
7.4 Third Party Offer to Purchase..................................... 24
7.5 Third Party Offer to Acquire the Entire Company................... 24
7.6 [Not Used]........................................................ 24
7.7 Substitute Members................................................ 25
7.8 Effect of Admission as a Substitute Member........................ 25
7.9 Additional Members................................................ 25
7.10 Applicability.................................................... 25
7.11 Termination of Employment........................................ 26
7.12 Valuation of Interests........................................... 26
7.13 Buy-Back Provisions.............................................. 26
7.14 Payment upon Buy-Back............................................ 26
7.15 Resignation...................................................... 26
7.16 Miscellaneous Provisions Regarding Article VII................... 26
ARTICLE VIII DISSOLUTION AND TERMINATION................................. 28
8.1 Events Causing Dissolution........................................ 28
8.2 Effect of Dissolution............................................. 28
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Table of Contents
(continued)
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8.3 Application of Proceeds........................................... 29
8.4 Continuing Obligations............................................ 29
ARTICLE IX MISCELLANEOUS................................................. 29
9.1 Title to Assets................................................... 29
9.2 Nature of Interest in the Company................................. 29
9.3 Notices........................................................... 29
9.4 Waiver of Default................................................. 29
9.5 No Third Party Rights............................................. 30
9.6 Entire Agreement.................................................. 30
9.7 Amendments to this Agreement...................................... 30
9.8 Severability...................................................... 30
9.9 Binding Agreement................................................. 30
9.10 Headings......................................................... 30
9.11 Counterparts..................................................... 30
9.12 Governing Law.................................................... 31
9.13 Remedies......................................................... 31
EXHIBIT A Members Capital Accounts and Percentage Interests
SCHEDULE A Not Used
SCHEDULE B Valuation Formula
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
INERGY PARTNERS, LLC
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") is entered into as of July 31, 2001, among the present members of
Inergy Partners, LLC, a Delaware limited liability company (the "Company").
RECITALS
A. The Company was originally organized as a limited liability company
under the Delaware Limited Liability Company Act on November 8, 1996, and its
original name was "Mid-Atlantic Energy, LLC."
B. The Limited Liability Company Agreement for the Company was amended and
restated on September 30, 1998 and 10 amendments thereto have since been entered
into, with Amendment No. 10 being entered into on May 2, 2001.
C. As a result of such amendments, a number of members were admitted to the
Company as holders of common and preferred interests.
D. On the date hereof, a limited partnership organized by the Company has
effected a public offering of limited partnership interests and certain other
transactions have occurred pursuant to a Contribution, Conveyance and Assignment
Agreement among various parties, including the Company, of even date herewith.
E. In addition, the Company, Inergy Holdings, LLC and certain holders of
Class A Preferred Interest of the Company have entered into separate agreements
pursuant to which, among other things, such holders of Class A Preferred
Interests have either (1) exchanged such interests for interests in the
aforementioned public limited partnership and therefore are no longer Members of
the Company or (2) exchanged their Class A Preferred Interests for common
interests in the Company.
F. As a result of the aforementioned agreements and actions, the Company no
longer has outstanding any Class A Preferred Interests and all Members of the
Company hold common interests in the Company and such Members have agreed to
this Second Amended and Restated Limited Liability Company Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
contained herein, the parties hereto agree to amend and restate the Initial LLC
Agreement in its entirety as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions Generally. Unless defined specifically herein, terms
relating to a limited liability company shall have the meanings given to them in
the Delaware Limited Liability Company Act.
1.2 Terms Defined Herein. As used herein, the following terms shall have
the following meanings, unless the context otherwise specifies:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
"Additional Capital Call" has the meaning set forth in Section 3.2 hereof.
"Additional Distributions" has the meaning set forth in Section 4.3 hereof.
"Adjusted Capital Account Deficit" means, with respect to each Member, the
deficit balance, if any, in such Member's Capital Account as of the end of the
relevant fiscal year, after giving effect to the following adjustments: (i)
increased for any amounts such Member is unconditionally obligated to restore
and the amount of such Member's share of Company Minimum Gain and Member Minimum
Gain after taking into account any changes during such year; and (ii) reduced by
the items described in Treasury Regulations (S)1.704-1(b)(2)(ii)(d)(4), (5) and
(6).
"Affiliate" means any other Person directly or indirectly controlling or
controlled by or under direct or indirect common control with such Person. For
the purposes of this definition, "control," when used with respect to any Person
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Agreement" means this Second Amended and Restated Limited Liability
Company Agreement of Inergy Partners, LLC, as amended from time to time.
"Bankruptcy", with respect to any Person, means the entry of an order for
relief against such Person under the Federal Bankruptcy Code or the insolvency
of such Person under any state insolvency act.
"▇▇▇▇▇▇▇ Members" are those members designated as such on Exhibit A hereto
and their successors and permitted assigns.
"Business Day" shall mean any day other than a Saturday or Sunday or a day
on which banking institutions in Kansas City, Missouri are authorized or
obligated to close.
"Capital Account" means the separate account established and maintained by
the Company for each Member pursuant to Section 3.5 hereof.
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"Certificate" means the Certificate of Formation of the Company filed with
the Secretary of State of Delaware, as amended from time to time.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or the corresponding provisions of future laws.
"Company" means Inergy Partners, LLC, a Delaware limited liability company.
"Company Minimum Gain" shall have the same meaning as the term "partnership
minimum gain" set forth in Treasury Regulation (S)1.704-2(d)(1). Company Minimum
Gain shall be determined, first, by computing for each Nonrecourse Debt any gain
that the Company would realize if the Company disposed of the property subject
to that liability for no consideration other than full satisfaction of such
liability and, then, aggregating the separately computed gains. For purposes of
computing gain, the Company shall use the basis of such property that is used
for purposes of determining the amount of the Capital Accounts under Section 3.5
hereof. In any taxable year in which a Revaluation occurs, the net increase or
decrease in Company Minimum Gain for such taxable year shall be determined by:
(1) calculating the net decrease or increase in Company Minimum Gain using the
current year's book value and the prior year's amount of Company Minimum Gain,
and (2) adding back any decrease in Company Minimum Gain arising solely from the
Revaluation.
"Contributing Member" has the meaning set forth in Section 3.3 hereof.
"Credits" means all tax credits allowed by the Code with respect to
activities of the Company or the Property.
"Distributions" means any distributions by the Company to the Members of
Liquidation Proceeds, Tax Distributions or Additional Distributions.
"EBITDA" means the net income of the Operating Company before provision for
income taxes determined in accordance with GAAP plus the amount included in such
net income for interest, depreciation and amortization of intangible items.
"Employee Member " means an individual or entity designated as such on
Exhibit A hereto, and their successors and permitted assigns.
"Exempt Transfer" has the meaning set forth in Section 7.3 hereof.
"Fair Value" of an asset means its fair market value.
"GAAP" means generally accepted accounting principles.
"Holdings" means Inergy Holdings, LLC, a Delaware limited liability
company.
"Illiquid Assets" has the meaning set forth in Section 3.4 hereof.
"Income" and "Loss" mean, respectively, for each fiscal year or other
period, an amount equal to the Company's taxable income or loss for such year or
period, determined in accordance
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with Code Section 703(a), except that for this purpose (i) all items of income,
gain, deduction or loss required to be separately stated by Code Section
703(a)(1) shall be included in taxable income or loss; (ii) tax exempt income
shall be added to taxable income or loss; (iii) any expenditures described in
Code Section 705(a)(2)(B) (or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulation (S)1.704-1(b)(2)(iv)(i)) and not otherwise
taken into account in computing taxable income or loss shall be subtracted; and
(iv) taxable income or loss shall be adjusted to reflect any item of income or
loss specially allocated in Article IV hereof and the Company's taxable income
shall be reduced or its loss increased by the amount of Operating Income
allocated pursuant to Section 4.6(a)(ii)(A) hereof.
"Inergy Propane" means Inergy Propane, LLC, a Delaware limited liability
company.
"Initial Contributions" means either the initial or the restated value of
the capital contributed by the Members for their Interests.
"Interest" means all of a Member's rights and interests in the Company in
such Member's capacity as a Member, all as provided in the Act, the Certificate
and this Agreement, including, without limitation, the Member's interest in the
capital, income, gain, deductions, basis, and credits of the Company. All
Interest in the Company is common interest.
"Liquidation Proceeds" means all Property at the time of liquidation of the
Company and all proceeds thereof.
"Member" means each Person executing this Agreement, including a Substitute
Member, if any.
"Member Minimum Gain" shall have the same meaning as the term "partner
nonrecourse debt minimum gain" as set forth in Treasury Regulation
(S)1.704-2(i)(3). With respect to each Member Nonrecourse Debt, Member Minimum
Gain shall be determined by computing for each Member Nonrecourse Debt any gain
that the Company would realize if the Company disposed of the property subject
to that liability for no consideration other than full satisfaction of such
liability. For purposes of computing gain, the Company shall use the basis of
such property that is used for purposes of determining the amount of the Capital
Accounts under Section 3.5 hereof. In any taxable year in which a Revaluation
occurs, the net increase or decrease in Member Minimum Gain for such taxable
year shall be determined by: (1) calculating the net decrease or increase in
Member Minimum Gain using the current year's book value and the prior year's
amount of Member Minimum Gain, and (2) adding back any decrease in Member
Minimum Gain arising solely from the Revaluation.
"Member Nonrecourse Debt" shall have the same meaning as the term "partner
nonrecourse debt" set forth in Treasury Regulation (S)1.704-2(b)(4).
"Member Nonrecourse Deductions" shall have the same meaning as the term
"partner nonrecourse deductions" set forth in Treasury Regulation
(S)1.704-2(i)(2). Generally, the amount of Member Nonrecourse Deductions with
respect to a Member Nonrecourse Debt for a fiscal year equals the net increase
during the year in the amount of the Member Minimum Gain (determined in
accordance with Treasury Regulation (S)1.704-2(i)) reduced (but not below zero)
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by the aggregate distributions made during the year of proceeds of Member
Nonrecourse Debt and allocable to the increase in Member Minimum Gain determined
according to the provisions of Treasury Regulation (S)1.704-2(i).
"Non-Contributing Member" has the meaning set forth in Section 3.3 hereof.
"Non-Exempt Transfer" means any Transfer that is not an exempt transfer
under Section 7.3 hereof.
"Nonrecourse Debt" means a Company liability with respect to which no
Member bears the economic risk of loss as determined under Treasury Regulations
(S)(S)1.752-1(a)(2) and 1.752-2.
"Nonrecourse Deductions" shall have the same meaning as the term
"nonrecourse deductions" set forth in Treasury Regulation (S)1.704-2(c).
Generally, the amount of Nonrecourse Deductions for a fiscal year equals the net
increase in the amount of Company Minimum Gain (determined in accordance with
Treasury Regulation (S)1.704-2(d)) during such year reduced (but not below zero)
by the aggregate distributions made during the year of proceeds of a Nonrecourse
Debt that are allocable to the increase in Company Minimum Gain, determined
according to the provisions of Treasury Regulation (S)1.704-2(c) and (h).
"Non-Voting Member" is a Member who is not entitled to vote in any matter
requiring a vote under the terms of this Agreement.
"Operating Companies" means Inergy Propane and such other entities in which
the Company may from time to time acquire and own, directly or indirectly,
voting control.
"Operating Income" means Income, unless otherwise designated by a Voting
Member Majority.
"Percentage Interest" means a Member's percentage as set forth on Schedule
A attached hereto, as adjusted from time to time pursuant to this Agreement.
"Person" means any individual, partnership, limited liability company,
corporation, association, cooperative, estate, trust, custodian, nominee or any
other individual or entity in its own or any representative capacity.
"Property" means all properties and assets, including intellectual
property, contract rights and other intangible assets, that the Company may own
or otherwise have an interest in from time to time.
"Representative" has the meaning set forth in Section 5.1 hereof.
"Reserves" means amounts set aside from time to time by the Members
pursuant to Section 4.10 hereof.
"Revaluation" shall mean the occurrence of any event described in clause
(x), (y) or (z) of Section 3.5(b) hereof in which the book basis of Property is
adjusted to its Fair Value.
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"Substitute Member" has the meaning set forth in Section 7.7 hereof.
"Tax Distribution" has the meaning set forth in Section 4.1 hereof.
"Tax Matters Partner" means the Member designated pursuant to Section 6.4
hereof to represent the Company in matters before the Internal Revenue Service.
"Transfer" means (i) when used as a verb, to give, sell, exchange, assign,
transfer, lease, pledge, hypothecate, bequeath, devise or otherwise dispose of
or encumber, and (ii) when used as a noun, the nouns corresponding to such
verbs, in either case voluntarily or involuntarily, by operation of law or
otherwise.
"Transferee" has the meaning set forth in Section 7.1 hereof.
"Transferor" has the meaning set forth in Section 7.2 hereof.
"Treasury Regulations" means the regulations promulgated by the Treasury
Department with respect to the Code, as such regulations are amended from time
to time, or the corresponding provisions of future regulations.
"Voting Member" is a Member who is entitled to vote in all matters
requiring a vote under the terms of this Agreement.
"Voting Member Majority" means those Voting Members holding a majority of
the Percentage Interests held by all Voting Members.
1.3 Other Definitional Provisions.
(a) As used in this Agreement, accounting terms not defined in this
Agreement, and accounting terms partly defined to the extent not defined,
shall have the respective meanings given to them under GAAP.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
(c) Words of the masculine gender shall be deemed to include the
feminine or neuter genders, and vice versa, where applicable. Words of the
singular number shall be deemed to include the plural number, and vice
versa, where applicable.
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ARTICLE II
BUSINESS PURPOSES AND OFFICES
2.1 Name; Business Purpose.
(a) The name of the Company shall be as stated in the Certificate. The
name of the Company may be changed from time to time by the Voting Member
Majority.
(b) The purpose of the Company is to:
(i) invest in and act as the Non-Managing General Partner of
Inergy, L.P., a Delaware limited partnership;
(ii) invest in and be the sole owner of common units of New
Inergy Propane, LLC, a Delaware limited liability company;
(iii) invest, directly or indirectly through other entities in
Inergy Propane, to do any and all things necessary or incidental
thereto; and
(iv) to engage in such other business as the Voting Member
Majority deems in the best interests of the Company.
2.2 Powers. The Company may carry on any lawful business, purpose or
activity permitted by the Act and shall possess and may exercise all the powers
granted by the Act, any other law, or this Agreement, together with any powers
incidental thereto, as far as such powers and privileges are necessary or
convenient to the conduct, promotion or attainment of the business, purposes or
activities of the Company.
2.3 Principal Office. The principal office of the Company shall be located
at ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or at such other
place(s) as the Voting Member Majority may determine from time to time.
2.4 Registered Office and Registered Agent. The location of the registered
office and the name of the registered agent of the Company in the State of
Delaware shall be as stated in the Certificate. The registered office and
registered agent of the Company in the State of Delaware may be changed, from
time to time, by the Voting Member Majority.
2.5 Amendment of the Certificate. The Company shall amend the Certificate
at such time or times and in such manner as may be approved by the Voting Member
Majority or as required by the Act or this Agreement.
2.6 Liability of Members. No Member, Representative or officer, solely by
reason of being a Member, Representative or officer, shall be liable, under a
judgment, decree or order of a court, or in any other manner, for any debt,
obligation or liability of the Company, whether arising in contract, tort or
otherwise, or for the acts or omissions of the other Members or any other
Representative or officer of the Company. The failure of the Company to observe
any formalities or requirements relating to the exercise of its powers or
management of its business
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or affairs under this Agreement or the Act shall not be grounds for imposing
liability on the Members, Representatives or officers for liabilities of the
Company.
2.7 Authority; Investment Intent; Restriction Against Transfer. Each Member
warrants to the Company and to the other Members that: (a) the Member is duly
organized, validly existing and in good standing under the laws of its state of
organization, if applicable, and that the Member has the requisite power and
authority to execute this Agreement and to perform its obligations hereunder;
(b) the Member is acquiring an Interest for such Member's own account as an
investment and without any intent to distribute such Interest or any portion
thereof or interest therein; and (c) the Member acknowledges that the Interests
have not been registered under the Securities Act of 1933 or any state
securities laws, and such Member's Interest may not be resold or transferred
except as provided in Article VII hereof and except pursuant to a registration
statement under or an exemption from the registration provisions of the federal
and applicable state securities laws.
ARTICLE III
CAPITAL CONTRIBUTIONS AND LOANS
3.1 Capital Accounts and Percentage Interests. The Capital Account and the
Percentage Interest, as the case may be, of each Member shall be as set forth
opposite such Member's name on Exhibit A attached hereto.
3.2 Additional Capital Calls. The Members recognize that the Company may
require from time to time capital in order to accomplish the purpose and
business of the Company. Accordingly, additional cash capital contributions
("Additional Capital Calls") may be called for from time to time by the Voting
Member Majority. Within ten Business Days after the date such Additional Capital
Call is declared by the Voting Member Majority, each Member shall be entitled to
contribute, in cash, to the capital of the Company an amount (the "Additional
Contribution") equal to such Member's Percentage Interest at the time of the
Additional Capital Call multiplied by the aggregate additional capital
contributions. No Member shall be obligated to make any Additional Contributions
to the Company and, accordingly, no Member shall be liable for damage to the
Company or any other Member as a result of the failure of such Member to make
any such Additional Contributions. The remedies set forth in Section 3.3 below
shall be the sole remedies for any such failure.
3.3 Percentage Interest Adjustments.
(a) If the Capital Accounts of the Members are adjusted pursuant to
Section 3.5(b), then, after such adjustments are made, the Percentage
Interests of the Members will be correspondingly adjusted as follows:
(i) Effective as of ten Business Days after the last date a
capital contribution under Section 3.2 above may be made, the
Percentage Interests of the Members shall be automatically adjusted to
take account of such failure of such Member to make such capital
contribution. The Percentage Interest of each Member shall be the
respective percentage obtained by dividing the total balance
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in such Member's Capital Account as of such date by the total balance
in all Members' Capital Accounts as of such date. Any payment by a
Contributing Member of all or a portion of a Non-Contributing Member's
contribution pursuant to Section 3.3(a)(ii) below shall result in a
comparable adjustment in the Percentage Interests of the Members. The
sum of the Percentage Interests of the Members, as adjusted in
accordance with this Section 3.3(a)(i), shall equal 100%.
(ii) If any Member fails for any reason to make in a timely
manner any part or all of an Additional Contribution called for under
Section 3.2 (the "Unpaid Additional Contribution"), such Member shall
be deemed a "Non-Contributing Member" and the Company shall promptly
give written notice of the failure to contribute to all Members. Each
of the Members contributing their pro-rata share of an Additional
Contribution (the "Contributing Members") shall have the right, but
not the obligation, for a period of 10 days after notice of such
failure to contribute by a Non-Contributing Member is given, to
contribute to the Company an amount equal to (A) the amount of each
Non-Contributing Member's Unpaid Additional Contribution multiplied by
a fraction the numerator of which is the Contributing Member's
Percentage Interest at the time of the Additional Capital Call and the
denominator of which is the sum of the Percentage Interests of all
Contributing Members who desire to contribute to the Company such
Contributing Members' pro-rata share of the Non-Contributing Member's
Unpaid Additional Contribution or (B) such greater amount of the
Non-Contributing Member's Unpaid Additional Contribution as shall be
agreed upon by all of such Contributing Members. Upon the payment by
the Contributing Members of all or a portion of the Non-Contributing
Member's Unpaid Additional Contribution, the Percentage Interests of
the Members shall be adjusted as provided in Section 3.3(a)(i) above.
(b) The Company shall not dissolve as a result of any failure by a
Member to make a capital contribution under Section 3.2 above, unless the
Voting Member Majority following such a failure elects to dissolve the
Company.
3.4 Capital Account Adjustments and Revaluation. If a Member fails for any
reason to make a capital contribution under Section 3.2 above within ten
Business Days after the last date such capital contribution may be made (the
"Default Date"), then the Capital Accounts of the Members will be adjusted
pursuant to Section 3.5(b) hereof. For purposes of adjustments made pursuant to
this Section 3.4, the Fair Value of the Company's assets shall be determined as
follows:
(a) Cash, deposit accounts, United States securities with a maturity
of 90 days or less or other cash equivalents shall be valued at the
principal or par amounts with accrued interest thereon, if any, through the
Default Date.
(b) All securities and commodities which are traded on a generally
recognized exchange shall be valued at the closing price, or if applicable
the average of the bid and ask price, on the Default Date.
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(c) All assets of the Company which are not described in subparagraphs
(i) or (ii) above and which would be current assets of the Company under
the accrual method of accounting shall be valued in an amount equal to
their book value determined in accordance with generally accepted
accounting principles consistently applied as if the Company applied the
accrual method of accounting.
(d) Except as to the value of the Company's interests in the Operating
Companies, all assets not described in the preceding subparagraphs (i)
through (iii) (the "Illiquid Assets") shall be valued in an amount equal to
the Fair Value of such Illiquid Assets as determined by a Voting Member
Majority.
(e) The Company's interests in the Operating Companies shall be valued
using the methods described in (i) through (iv) above for the valuation of
assets held by the Operating Companies (based on the entire equity
interests of the Operating Companies) multiplied by the Company's
percentage interests in the equity of the Operating Companies at the time
of such valuation.
3.5 Capital Accounts.
(a) A separate Capital Account shall be maintained for each Member. Each
Member's Capital Account shall be (i) increased by (a) the amount of money
contributed by such Member, (b) the Fair Value of property contributed by such
Member (net of liabilities secured by such contributed property that the Company
is considered to assume or take subject to under Code Section 752), (c)
allocations to such Member, pursuant to Article IV hereof, of Company income and
gain (or items thereof), and (d) to the extent not already netted out under
clause (ii)(b) below, the amount of any Company liabilities assumed by the
Member or which are secured by any property distributed to such Member; and (ii)
decreased by (a) the amount of money distributed to such Member, (b) the Fair
Value of property distributed to such Member (net of liabilities secured by such
distributed property that such Member is considered to assume or take subject to
under Code Section 752), (c) allocations to such Member, pursuant to Article IV
hereof, of Company loss and deductions (or items thereof), and (d) to the extent
not already netted out under clause (i)(b) above, the amount of any liabilities
of the Member assumed by the Company or which are secured by any property
contributed by such Member to the Company.
In the event any Interest is transferred in accordance with the terms of
this Agreement, the Transferee shall succeed to the Capital Account of the
Transferor to the extent it relates to the transferred interest, and the Capital
Account of each Transferee shall be increased and decreased in the manner set
forth above.
(b) In the event of (x) an additional capital contribution by a Member that
results in a shift in Percentage Interests, (y) the distribution by the Company
to a Member of more than a de minimis amount of property (other than cash) or a
distribution of property as consideration for an Interest or (z) the liquidation
of the Company within the meaning of Treasury Regulation
(S)1.704-1(b)(2)(ii)(g), the book basis of the Property shall be adjusted to
Fair Value and the Capital Accounts of the Members shall be
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adjusted simultaneously to reflect the aggregate net adjustment to book basis as
if the Company recognized gain or loss equal to the amount of such aggregate net
adjustment.
(c) In the event that Property is subject to Code Section 704(c) or is
revalued on the books of the Company in accordance with paragraph (b) above
pursuant to Treasury Regulation (S)1.704-1(b)(2)(iv)(f), the Members' Capital
Accounts shall be adjusted in accordance with Treasury Regulation
(S)1.704-1(b)(2)(iv)(g) for allocations to the Members of depreciation,
amortization and gain or loss, as computed for book purposes (and not tax
purposes) with respect to such Property.
(d) The foregoing provisions of this Section 3.5 and the other provisions
of this Agreement relating to the maintenance of the Capital Accounts are
intended to comply with Treasury Regulations (S)(S)1.704-1(b) and 1.704-2, and
shall be interpreted and applied in a manner consistent with such Treasury
Regulations. In the event the Members determine that it is prudent or advisable
to modify the manner in which the Capital Accounts, or any increases or
decreases therein, are computed in order to comply with such Treasury
Regulations, the Members may cause such modification to be made, provided such
modification is not likely to have a material effect on the amounts
distributable to any Member upon the dissolution of the Company.
3.6 Capital Withdrawal Rights, Interest and Priority. Except as expressly
provided in this Agreement, no Member shall be entitled to withdraw or reduce
such Member's Capital Account or to receive any Distributions. No Member shall
be entitled to demand or receive any Distributions in any form other than in
cash. No Member shall be entitled to receive or be credited with any interest on
the balance in such Member's Capital Account at any time. Except as may be
otherwise expressly provided herein, no Member shall have any priority over any
other Member as to the return of the balance in such Member's Capital Account.
3.7 Loans. Any Member may advance funds as a loan to the Company in such
amounts, at such times and on such terms and conditions as may be approved by
the Voting Member Majority. Loans by a Member to the Company shall not be
considered as contributions to the capital of the Company.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 Distributions to Pay Taxes. With respect to any tax year in which the
Company shall report taxable income, the Company shall distribute to the
Members, based upon their respective Percentage Interests at the time of such
distribution, an aggregate amount equal to the Company's taxable income, plus or
minus other items of income, gain, loss or deduction passing through to the
Members, times the sum of the effective applicable Federal income tax rate and
the higher of North Carolina or Missouri state income tax rates and assuming
that each Member is an individual paying Federal and state income tax at the
highest marginal income tax rates with respect to the applicable type of income
(a "Tax Distribution"). All Tax Distributions shall be made at a time sufficient
to enable the Members to pay any required estimated tax payments.
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4.2 [Not Used]
4.3 Additional Cash Distributions. The Company shall make, from time to
time, such distributions as shall be determined by the Voting Member Majority
(an "Additional Distribution"). Such Additional Distributions shall be
distributed to the Members in accordance with their respective Percentage
Interests, as adjusted.
4.4 Liquidation Distributions. Liquidation Proceeds shall be distributed in
the following order of priority:
(a) First, to the payment of debts and liabilities of the Company
(including to Members to the extent otherwise permitted by law) and the
expenses of liquidation.
(b) Next, to the setting up of such reserves as the Person required or
authorized by law to wind up the Company's affairs may reasonably deem
necessary or appropriate for any disputed, contingent or unforeseen
liabilities or obligations of the Company, provided that any such reserves
shall be paid over by such Person to an independent escrow agent, to be
held by such agent or its successor for such period as such Person shall
deem advisable for the purpose of applying such reserves to the payment of
such liabilities or obligations and, at the expiration of such period, the
balance of such reserves, if any, shall be distributed as hereinafter
provided.
(c) Next, to the Members in proportion to and to the extent of their
respective positive Capital Account balances after taking into account the
allocation of all Operating Income, Income or Loss pursuant to this
Agreement for the fiscal year(s) in which the Company is liquidated.
(d) Next, to the Members in accordance with their respective
Percentage Interests, as adjusted.
4.5 Profits, Losses and Distributive Shares of Tax Items. The Company's net
income or net loss, as the case may be, for each fiscal year of the Company or
part thereof, as determined in accordance with such method of accounting as may
be adopted for the Company pursuant to Article VI hereof, shall be allocated to
the Members for both financial accounting and income tax purposes as set forth
in this Article IV, except as otherwise provided for herein or unless decided
otherwise by the Voting Member Majority.
4.6 Allocation of Operating Income, Income, Loss and Credits.
(a) Operating Income, Income or Loss and Credits shall be allocated among
the Members as follows:
(i) Loss shall be allocated among the Members in the following order
of priority:
(A) First to the Members in proportion to and to the extent of
their respective positive Capital Account balances; then
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(B) To the Members in accordance with their respective Percentage
Interests, as adjusted.
(ii) Operating Income, Income and Credits shall be allocated among the
Members in the following order of priority:
(A) Income shall be allocated to the Members, on a pro rata basis
in accordance with the amounts previously allocated to such Members
under Section 4.6(a)(i)(B) hereof, until the cumulative amount of
Income allocated pursuant to this subparagraph (B) equals the
cumulative amount of Losses allocated to the Members pursuant to
Section 4.6(a)(i)(B) hereof; then
(B) Income shall be allocated to the Members, on a pro rata basis
in accordance with the amounts previously allocated to such Members
under Section 4.6(a)(i)(A) hereof, until the cumulative amount of
Income allocated pursuant to this subparagraph (D) equals the
cumulative amount of Losses allocated to the Members pursuant to
Section 4.6(a)(i)(A) hereof; then
(C) Income and Credits shall be allocated to the Members in
accordance with their respective Percentage Interests, as adjusted.
To the extent there is any adjustment in the respective Percentage
Interests of the Members, Operating Income, Income, Loss and Credits shall
be allocated among the pre-adjustment and post-adjustment periods as
provided in Section 4.7(k) below.
4.7 Special Rules Regarding Allocations. Notwithstanding the foregoing
provisions of this Article IV, the following special rules shall apply in
allocating the net income or net loss of the Company:
(a) Section 704(c) and Revaluation Allocations. In accordance with
Code Section 704(c) and the Treasury Regulations thereunder, income, gain,
loss and deduction with respect to any property contributed to the capital
of the Company shall, solely for tax purposes, be allocated between the
Members so as to take account of any variation between the adjusted basis
of such property to the Company for federal income tax purposes and its
Fair Value at the time of contribution. In the event of a Revaluation,
subsequent allocations of income, gain, loss and deduction with respect to
such property shall take account of any variation between the adjusted
basis of such property to the Company for federal income tax purposes and
its Fair Value immediately after the adjustment in the same manner as under
Code Section 704(c) and the Treasury Regulations thereunder. Any elections
or other decisions relating to such allocations shall be made by the
Members in a manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section 4.7(a) are solely for
income tax purposes and shall not affect, or in any way be taken into
account in computing, for book purposes, each Member's Capital Account, or
share of income or loss, pursuant to any provision of this Agreement.
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(b) Minimum Gain Chargeback. Notwithstanding any other provision of
this Article IV, if there is a net decrease in Company Minimum Gain during
a Company taxable year, each Member shall be allocated items of income and
gain for such year (and, if necessary, for subsequent years) in an amount
equal to that Member's share of the net decrease in Company Minimum Gain
during such year (hereinafter referred to as the "Minimum Gain Chargeback
Requirement"). A Member's share of the net decrease in Company Minimum Gain
is the amount of the total decrease multiplied by the Member's percentage
share of the Company Minimum Gain at the end of the immediately preceding
taxable year. A Member is not subject to the Minimum Gain Chargeback
Requirement to the extent: (1) the Member's share of the net decrease in
Company Minimum Gain is caused by a guarantee, refinancing or other change
in the debt instrument causing it to become partially or wholly recourse
debt or a Member Nonrecourse Debt, and the Member bears the economic risk
of loss for the newly guaranteed, refinanced or otherwise changed
liability; (2) the Member contributes capital to the Company that is used
to repay the Nonrecourse Debt and the Member's share of the net decrease in
Company Minimum Gain results from the repayment; or (3) the Minimum Gain
Chargeback Requirement would cause a distortion and the Commissioner of the
Internal Revenue Service waives such requirement.
A Member's share of Company Minimum Gain shall be computed in
accordance with Treasury Regulation (S)1.704-2(g) and as of the end of any
Company taxable year shall equal: (1) the sum of the Nonrecourse Deductions
allocated to that Member up to that time and the distributions made to that
Member up to that time of proceeds of a Nonrecourse Debt allocable to an
increase of Company Minimum Gain, minus (2) the sum of that Member's
aggregate share of net decrease in Company Minimum Gain plus that Member's
aggregate share of decreases resulting from revaluations of Property
subject to Nonrecourse Debts. In addition, a Member's share of Company
Minimum Gain shall be adjusted for the conversion of recourse and Member
Nonrecourse Debts into Nonrecourse Debts in accordance with Treasury
Regulation (S)1.704-2(g)(3). In computing the above, amounts allocated or
distributed to the Member's predecessor in interest shall be taken into
account.
(c) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article IV other than Section 4.7(b) above, if there is a
net decrease in Member Minimum Gain during a Company taxable year, each
Member who has a share of the Member Minimum Gain (determined under
Treasury Regulations (S)1.704-2(i)(5) as of the beginning of the year)
shall be allocated items of income and gain for such year (and, if
necessary, for subsequent years) equal to that Member's share of the net
decrease in Member Minimum Gain. In accordance with Treasury Regulations
(S)1.704-2(i)(4), a Member is not subject to this Member Minimum Gain
Chargeback requirement to the extent the net decrease in Member Minimum
Gain arises because the liability ceases to be Member Nonrecourse Debt due
to a conversion, refinancing or other change in the debt instrument that
causes it to be partially or wholly a Nonrecourse Debt. The amount that
would otherwise be subject to the Member Minimum Gain Chargeback
requirement is added to the Member's share of Company Minimum Gain.
14
(d) Qualified Income Offset. In the event a Member unexpectedly
receives an adjustment, allocation or distribution described in Treasury
Regulation (S)1.704.1(b)(2)(ii)(d)(4), (5) or (6), that causes or increases
such Member's Adjusted Capital Account Deficit, items of Company income and
gain shall be specially allocated to such Member in an amount and manner
sufficient to eliminate such Adjusted Capital Account Deficit as quickly as
possible, provided that an allocation under this Section 4.7(d) shall be
made if and only to the extent such Member would have an Adjusted Capital
Account Deficit after all other allocations under this Article IV have been
made.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year
or other period shall be allocated to the Members in proportion to their
Percentage Interests, as adjusted.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
shall be allocated to the Member that bears the risk of loss with respect
to the loan to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulation (S)1.704-2(i).
(g) Curative Allocations. Any special allocations of items of income,
gain, deduction or loss pursuant to Sections 4.7(b), (c), (d), (e) and (f)
hereof shall be taken into account in computing subsequent allocations of
income and gain pursuant to this Article IV, so that the net amount of any
items so allocated and all other items allocated to each Member pursuant to
this Article IV shall, to the extent possible, be equal to the net amount
that would have been allocated to each such Member pursuant to the
provisions of this Article IV if such adjustments, allocations or
distributions had not occurred. In addition, allocations pursuant to this
Section 4.7(g) with respect to Nonrecourse Deductions in Section 4.7(e)
above and Member Nonrecourse Deductions in Section 4.7(f) above shall be
deferred to the extent the Members reasonably determine that such
allocations are likely to be offset by subsequent allocations of Company
Minimum Gain or Member Minimum Gain, respectively.
(h) Loss Allocation Limitation. Notwithstanding the other provisions
of this Article IV, unless otherwise agreed to by the Voting Member
Majority, no Member shall be allocated Loss in any taxable year that would
cause or increase an Adjusted Capital Account Deficit as of the end of such
taxable year.
(i) Share of Nonrecourse Liabilities. Solely for purposes of
determining a Member's proportionate share of the "excess nonrecourse
liabilities" of the Company within the meaning of Treasury Regulation
(S)1.752-3(a)(3), each Member's interest in Company profits is equal to
such Member's respective Percentage Interest, as adjusted.
(j) Compliance with Treasury Regulations. The foregoing provisions of
this Section 4.7 are intended to comply with Treasury Regulation
(S)(S)1.704-1(b), 1.704-2 and 1.752-1 through 1.752-5, and shall be
interpreted and applied in a manner consistent with such Treasury
Regulations. In the event it is determined by the Voting Member Majority
that it is prudent or advisable to amend this Agreement in order to comply
with such
15
Treasury Regulations, the Voting Member Majority is empowered to so amend
or modify this Agreement, notwithstanding any other provision of this
Agreement.
(k) General Allocation Provisions. For purposes of determining the
Operating Income, Income, Loss or any other items for any period, Operating
Income, Income, Loss or any such other items shall be determined on a daily
basis, using any permissible method under Code Section 706 and the Treasury
Regulations thereunder.
4.8 Withholding of Distributions. Notwithstanding any other provision of
this Agreement, a Voting Member Majority (or any Person required or authorized
by law to wind up the Company's affairs) may suspend, reduce or otherwise
restrict Distributions of Liquidation Proceeds or Additional Distributions for
such time as a Voting Member Majority deems appropriate.
4.9 No Priority. Except as may be otherwise expressly provided herein, no
Member shall have priority over the other Members as to Company income, gain,
loss, credits and deductions or distributions.
4.10 Tax Withholding. Notwithstanding any other provision of this
Agreement, the Voting Member Majority is authorized to take any action that they
determine to be necessary or appropriate to cause the Company to comply with any
withholding requirements established under any federal, state or local tax law,
including, without limitation, withholding on any Distribution to any Member.
For the purposes of this Article IV, any amount withheld on any Distribution and
paid over to the appropriate governmental body shall be treated as if such
amount had in fact been distributed to the Member.
4.11 Reserves. The Voting Member Majority shall have the right to
establish, maintain and expend Reserves to provide for working capital, for
future maintenance, repair or replacement of the Property, for debt service, for
future investments and for such other purposes as the Voting Member Majority may
deem necessary or advisable.
ARTICLE V
MANAGEMENT
5.1 Management. The business and affairs of the Company shall be managed by
the Voting Member Majority. A Voting Member shall act through one or more
persons (a "Representative") as it shall designate by notice to the other Voting
Members.
5.2 Voting. All Members, other than Employee Members and the ▇▇▇▇▇▇▇
Members, shall be Voting Members to the extent of their Interests. All Employee
Members and the ▇▇▇▇▇▇▇ Members shall have no right to vote with respect to
their Interest. The Voting Members shall be entitled to vote on all matters
requiring a vote under the terms of this Agreement. Each Voting Member shall
vote according to their respective Percentage Interests in the Company. Upon the
Transfer of an Interest pursuant to the terms of this Agreement, each Interest
shall retain any and all voting rights associated therewith.
16
5.3 Officers. The Voting Members may delegate their powers and authority
under this Agreement in whole or in part to one or more officers of the Company
as the Voting Member Majority deems appropriate, which officer shall have such
power and authority as the Voting Member Majority deems appropriate.
5.4 Meetings of the Voting Members. Meetings of the Voting Members shall
not be required to be held at any regular frequency, but, instead, shall be held
upon the call of any Voting Member holding more than 20% in Percentage Interest,
acting through one or more of its Representatives. All meetings of the Voting
Members shall be held at the principal office of the Company or at such other
place, either within or without the State of Delaware, as shall be designated by
the person calling the meeting and stated in the notice of the meeting or in a
duly executed waiver of notice thereof. Representatives may participate in a
meeting of the Voting Members by means of conference telephone or video
equipment or similar communications equipment whereby all Representatives
participating in the meeting can hear each other, and participation in a meeting
in this manner shall constitute presence in person at the meeting.
5.5 Notice of Meeting. Notice of each meeting of the Voting Members,
stating the place, day and hour of the meeting, shall be given by the Voting
Member calling the meeting to the other Voting Members at least three Business
Days before the day on which the meeting is to be held. "Notice" and "call" with
respect to such meetings shall be deemed to be synonymous.
5.6 Waiver of Notice. Whenever any notice is required to be given to any
Voting Member under the provisions of this Agreement, a waiver thereof in
writing signed by such Member, acting through one or more of its
Representatives, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice. Attendance of a Representative
at any meeting of the Voting Members shall constitute a waiver of notice of such
meeting by the Voting Member he/she represents except where a Representative
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
5.7 Action Without a Meeting. Any action that is required to or may be
taken at a meeting of the Voting Members may be taken without a meeting if
consents in writing, setting forth the action so taken, are signed by one or
more of the Representatives of the Voting Member Majority. Such consents shall
have the same force and effect as a unanimous vote at a meeting duly held.
5.8 Non-Voting Members. Non-Voting Members shall have no right to notice of
or to attend any meeting of the Voting Members.
5.9 Definitions. For purposes of Sections 5.9 through 5.17 hereof,
inclusive, references to:
(a) The "Company" shall include, in addition to the resulting or
surviving limited liability company, any constituent limited liability
company (including any constituent of a constituent) absorbed in a
consolidation or merger so that any Person who is or was a manager or
officer of such constituent limited liability company, or is or was serving
at the request of such constituent limited liability company as a director,
17
officer or in any other comparable position of any Other Enterprise shall
stand in the same position under the provisions of this Article V with
respect to the resulting or surviving limited liability company as such
Person would if such Person had served the resulting or surviving limited
liability company in the same capacity;
(b) "Other Enterprises" or "Other Enterprise" shall include, without
limitation, any other limited liability company, corporation, partnership,
joint venture, trust or employee benefit plan, in which a Person is serving
at the request of the Company;
(c) "fines" shall include any excise taxes assessed against a person
with respect to an employee benefit plan;
(d) "defense" shall include investigations of any threatened, pending
or completed action, suit or proceeding as well as appeals thereof and
shall also include any defensive assertion of a cross-claim or
counterclaim;
(e) "serving at the request of the Company" shall include any service
as a director, officer, Representative or in any other comparable position
that imposes duties on, or involves services by, a Person with respect to
any Other Enterprise; and a Person who acted in good faith and in a manner
such Person reasonably believed to be in or not opposed to the interest of
any Other Enterprise shall be deemed to have acted "in the best interest of
the Company" as referred to in this Article V; and "Officer" shall include
any "Authorized Person" who is authorized to act on behalf of the Company
pursuant to the terms hereof, whether or not such person has been
designated an officer of the Company; and
(f) "officer" shall include an "authorized person" who is authorized
to act on behalf of the Company pursuant to the terms hereof, whether or
not such person has been designated an officer of the Company.
5.10 Limitation of Liability. No Person shall be liable to the Company or
its Members for any loss, damage, liability or expense suffered by the Company
or its Members on account of any action taken or omitted to be taken by such
Person as an officer of the Company or as a Representative or by such Person
while serving at the request of the Company as a director, officer or in any
other comparable position of any Other Enterprise, if such Person discharges
such Person's duties in good faith, and in a manner such Person reasonably
believes to be in or not opposed to the best interests of the Company. The
liability of an officer or Representative hereunder shall be limited only for
those actions taken or omitted to be taken by such Person in the discharge of
such Person's obligations in connection with the management of the business and
affairs of the Company or any Other Enterprise. The foregoing limitation of
liability shall apply to all officers and to all Persons who serve as a
Representative at any time.
5.11 Right to Indemnification. The Company shall indemnify each Person who
has been or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative, investigative or appellate (regardless of whether such action,
suit or proceeding is by or in the right of the Company or by third parties) by
reason of the fact that such Person is or was a Voting Member of the Company,
18
an officer of the Company, a Representative or is or was serving at the request
of the Company as a director, officer or in any other comparable position of any
Other Enterprise, against all liabilities and expenses, including, without
limitation, judgments, amounts paid in settlement, attorneys' fees, ERISA excise
taxes or penalties, fines and other expenses, actually and reasonably incurred
by such Person in connection with such action, suit or proceeding (including,
without limitation, the investigation, defense, settlement or appeal of such
action, suit or proceeding); provided, however, that the Company shall not be
required to indemnify or advance expenses to any Person on account of such
Person's conduct that was finally adjudged to have been knowingly fraudulent,
deliberately dishonest or willful misconduct; provided, further, that the
Company shall not be required to indemnify or advance expenses to any Person in
connection with an action, suit or proceeding initiated by such Person unless
the initiation of such action, suit or proceeding was authorized in advance by
the Voting Members; provided, however, that an officer or Representative shall
be indemnified hereunder only for those actions taken or omitted to be taken by
such Person in the discharge of such Person's obligations in connection with the
management of the business and affairs of the Company or any Other Enterprise.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or under a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that such Person's conduct was
finally adjudged to have been knowingly fraudulent, deliberately dishonest or
willful misconduct. The foregoing right to indemnification shall apply to all
Persons serving as officers and to all Persons who serve as a Representative at
any time or who serve at any time at the request of the Company as a director,
officer or in any other comparable position of any Other Enterprise. Nothing
herein prevents any Member from indemnifying its representatives or officers
under such Member's organizational documents or other agreements. If any Person
is entitled to indemnification both from the Company and from a Member, then
indemnification would come first from the Company and thereafter from the
Member.
5.12 Enforcement of Indemnification. In the event the Company refuses to
indemnify any Person who may be entitled to be indemnified or to have expenses
advanced under this Article V, such Person shall have the right to maintain an
action in any court of competent jurisdiction against the Company to determine
whether or not such Person is entitled to such indemnification or advancement of
expenses hereunder. If such court action is successful and the Person is
determined to be entitled to such indemnification or advancement of expenses,
such Person shall be reimbursed by the Company for all fees and expenses
(including attorneys' fees) actually and reasonably incurred in connection with
any such action (including, without limitation, the investigation, defense,
settlement or appeal of such action).
5.13 Advancement of Expenses. Expenses (including attorneys' fees)
reasonably incurred in defending an action, suit or proceeding, whether civil,
criminal, administrative, investigative or appellate, shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of the Person subject thereto to
repay such amount if it shall ultimately be determined that such Person is not
entitled to indemnification by the Company. In no event shall any advance be
made in instances where the Voting Members or legal counsel for the Company
reasonably determines that such Person would not be entitled to indemnification
hereunder.
19
5.14 Non-Exclusivity. The indemnification and advancement of expenses
provided by this Article V shall not be exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any statute, or any agreement, vote of Voting Members, policy of insurance or
otherwise, both as to action in their official capacity and as to action in
another capacity while holding their respective offices, and shall not limit in
any way any right that the Company may have to make additional indemnifications
with respect to the same or different Persons or classes of Persons. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article V shall continue as to a Person who has ceased to be an officer of
the Company, a Representative or a Person eligible for designation as a
Representative and as to a Person who has ceased serving at the request of the
Company as a director, officer or in any other comparable position of any Other
Enterprise and shall inure to the benefit of the heirs, executors and
administrators of such Person.
5.15 Insurance. The Voting Member Majority may cause the Company to
purchase and maintain insurance on behalf of any Person who is or was an
officer, agent or employee of the Company or a Representative or is or was
serving at the request of the Company as a director, officer or in any other
comparable position of any Other Enterprise, against any liability asserted
against such Person and incurred by such Person in any such capacity, or arising
out of such Person's status as such, whether or not the Company would have the
power, or the obligation, to indemnify such Person against such liability under
the provisions of this Article V.
5.16 Amendment and Vesting of Rights. The rights granted or created hereby
shall be vested in each Person entitled to indemnification hereunder as a
bargained-for, contractual condition of such Person's serving or having served
as an officer of the Company or a Representative or serving at the request of
the Company as a director, officer or in any other comparable position of any
Other Enterprise and, while this Article V may be amended or repealed, no such
amendment or repeal shall release, terminate or adversely affect the rights of
such Person under this Article V with respect to any (a) act taken or the
failure to take any act by such Person prior to such amendment or repeal, or (b)
any action, suit or proceeding concerning such act or failure to act filed after
such amendment or repeal.
5.17 Severability. If any provision of this Article V or the application of
any such provision to any Person or circumstance is held invalid, illegal or
unenforceable for any reason whatsoever, the remaining provisions of this
Article V and the application of such provision to other Persons or
circumstances shall not be affected thereby and, to the fullest extent possible,
the court finding such provision invalid, illegal or unenforceable shall modify
and construe the provision so as to render it valid and enforceable as against
all Persons and to give the maximum possible protection to Persons subject to
indemnification hereby within the bounds of validity, legality and
enforceability. Without limiting the generality of the foregoing, if any officer
of the Company, any Representative or any Person who is or was serving at the
request of the Company as a director, officer or in any other comparable
position of any Other Enterprise is entitled under any provision of this Article
V to indemnification by the Company for some or a portion of the judgments,
amounts paid in settlement, attorneys' fees, ERISA excise taxes or penalties,
fines or other expenses actually and reasonably incurred by any such Person in
connection with any threatened, pending or completed action, suit or proceeding
(including, without limitation, the investigation, defense, settlement or appeal
of such action, suit or proceeding), whether civil, criminal, administrative,
investigative or appellate, but not, however,
20
for all of the total amount thereof, the Company shall nevertheless indemnify
such Person for the portion thereof to which such Person is entitled.
5.18 Contracts with Members or their Affiliates. All contracts or
transactions between the Company and one of its Members or officers or between
the Company and another limited liability company, corporation, partnership,
association or other organization in which a Member has a financial interest or
with which such Member is affiliated are permissible if such contract or
transaction, and such Member's or officer's interest therein, are fully
disclosed to the Voting Members and approved by the Voting Member Majority.
5.19 Other Business Ventures. Any Member may engage in, or possess an
interest in, other business ventures of every nature and description,
independently or with others, whether or not similar or identical to the
business of the Company, and neither the Company nor any other Member shall have
any right by virtue of this Agreement in or to such other business ventures or
to the income or profits derived therefrom. The Members and Representatives
shall not be required to devote all of their time or business efforts to the
affairs of the Company, but shall devote so much of their time and attention to
the Company as is reasonably necessary and advisable to manage the affairs of
the Company to the best advantage of the Company. The foregoing shall not
supersede any employment, confidentiality, noncompete or other specific
agreement that may exist between the Company (or an Affiliate of the Company)
and any Member (or an Affiliate of any Member).
ARTICLE VI
ACCOUNTING AND BANK ACCOUNTS
6.1 Fiscal Year. The fiscal year and taxable year of the Company shall end
on such date as is adopted by the Voting Member Majority.
6.2 Books and Records. At all times during the existence of the Company,
the Company shall cause to be maintained full and accurate books of account,
which shall reflect all Company transactions and be appropriate and adequate for
the Company's business. The books and records of the Company shall be maintained
at the principal office of the Company. Each Member or its representatives shall
have the right during ordinary business hours and upon reasonable notice to
inspect and copy (at such Member's own expense) all books and records of the
Company. The Voting Member Majority may cause the Company to retain a firm of
certified public accountants of recognized standing to audit the financial
statements of the Company.
6.3 Tax Information. As soon as practicable after the end of each fiscal
year, there shall be prepared and delivered to each Member all information with
respect to the Company necessary for the preparation of the Members' federal and
state income tax returns.
6.4 Tax Returns and Elections; Tax Matters Partner. The Company shall cause
to be prepared and timely filed all federal, state and local income tax returns
and other returns or statements required of the Company by applicable law. The
Company shall claim all deductions and make such elections for federal or state
income tax purposes that the Members reasonably
21
believe will produce the most favorable tax results for the Members. Holdings is
hereby designated as the Company's "Tax Matters Partner," as defined in the
Code, and in such capacity is hereby authorized and empowered to act for and
represent the Company and each of the Members before the Internal Revenue
Service in any audit or examination of any Company tax return and before any
court selected by the Members for judicial review of any adjustment assessed by
the Internal Revenue Service. Holdings does hereby accept such designation.
Holdings shall provide the other Members with written notice of any federal
income tax audit and shall keep the other Members informed of all material
developments involved in such proceedings. The Members specifically acknowledge,
without limiting the general applicability of this Section 6.4, that Holdings
shall not be liable, responsible or accountable in damages or otherwise to the
Company or any Member with respect to any action taken by it in its capacity as
the Tax Matters Partner, provided that Holdings acted in a manner it believed to
be in the best interests of the Company and its Members. All reasonable
out-of-pocket expenses incurred by Holdings in its capacity as the Tax Matters
Partner shall be considered expenses of the Company for which Holdings shall be
entitled to full reimbursement. Nothing in this Section 6.4 shall limit the
ability of the Members to take any action in their individual capacity relating
to tax audit matters that is left to the determination of an individual partner
under Code Section 6222 through Code Section 6232.
6.5 Section 754 Election. In the event a distribution of Company assets
occurs that satisfies the provisions of Section 734 of the Code, upon the
determination of the Voting Member Majority, the Company shall elect, pursuant
to Section 754 of the Code, to adjust the basis of the Property to the extent
allowed by Section 734 and shall cause such adjustments to be made and
maintained. Any additional accounting expenses incurred by the Company in
connection with making or maintaining any such basis adjustment shall be
reimbursed to the Company from time to time by the distributee who benefits from
the making and maintenance of such basis adjustment.
6.6 Bank Accounts. All funds of the Company shall be deposited in a
separate bank, money market or similar account(s) approved by the Voting Member
Majority and in the Company's name. Withdrawals therefrom shall be made only by
such persons as are authorized by the Voting Member Majority.
ARTICLE VII
TRANSFERS OF INTERESTS
7.1 General Transfer Restrictions. No Member may Transfer all or any part
of such Member's Interest, except (i) pursuant to the provisions of Section 7.2,
(ii) pursuant to an Exempt Transfer or (iii) with the written consent of all the
Voting Members; provided, however, that, notwithstanding, the described clauses
(i), (ii) and (iii) above, no Transfer shall be permitted if it would result in
the "termination" of the Company pursuant to (S)708 of the Code. Any purported
Transfer of an Interest in violation of the terms of this Agreement shall be
null and void and of no effect. Any permitted Transfer shall be effected by a
written instrument and shall be effective as of the date specified in such
instrument. Any person receiving an Interest from a Member in a permitted
Transfer shall not become a Substitute Member except in accordance with Section
7.7. Any assignee of an Interest as allowed by this Section 7.1 who does not
become a Substitute
22
Member as provided in Section 7.7 (a "Transferee") shall not be a Member and
shall not have any right to vote as a Member or to participate in the management
of the business and affairs of the Company, such right to vote such Interest and
to participate in the management of the business and affairs of the Company
continuing with the Transferor. The Transferee shall, however, be entitled to
distributions and allocations of the Company, as provided in Article IV of this
Agreement, attributable to the Interest that is the subject of the Transfer to
such Transferee. Any Transferee desiring to make a further Transfer shall become
subject to all of the provisions of this Article VII to the same extent and in
the same manner as any Member desiring to make any Transfer.
7.2 First Offer Right.
(a) If any Member (the "Transferor") wishes to make a Non-Exempt Transfer
of Interests, then, at least 25 Business Days before making any such Non-Exempt
Transfer (the "First Offer Election Period"), the Transferor will deliver a
written notice (the "First Offer Notice") to the Company and to all Voting
Members (the "Offerees").
(b) The First Offer Notice will specify the proposed percentage and type of
Interests to be the subject of such Transfer (the "Offered Interests") and
disclose in reasonable detail the proposed terms and conditions of the Transfer.
The purchase price for any such Transfer shall be payable at the closing of the
transaction in cash or, at the option of the Offerees, with a promissory note
payable in regular installments over a period of no more than five years bearing
interest at a rate equal to the Company's cost of funds.
(c) The Offerees may, in the aggregate, give notice to elect to purchase
all (but not less than all) of the Offered Interests, at the price and on the
terms specified in the First Offer Notice by delivering written notice of such
election (the "First Offer Election Notice") to the Transferor within 15
Business Days after delivery of the First Offer Notice. If more than one Offeree
(other than the Company) gives notice of election to purchase the Offered
Interests, they shall be entitled to purchase such Offered Interests in
proportion to their existing Percentage Interests, as adjusted, of the Company,
unless they agree otherwise. If the Offerees (other than the Company) do not
elect to purchase all of the Offered Interests, the Company may give notice to
elect to purchase all (but not less than all) of the Offered Interests by
delivering written notice to the Transferor within 7 Business Days after the
expiration of the period referred to in the first sentence of this clause (c).
(d) If any Offerees have elected to purchase any Offered Interests, the
transfer of such shares will be consummated as soon as practical (but in any
event within 10 Business Days) after the expiration of the First Offer Election
Period. If the Offerees have not elected to purchase all of the Offered
Interests, the Transferor may, within 90 days after the expiration of the First
Offer Election Period, transfer all (but not less than all) of such Offered
Interests to one or more Third Parties at a price and on terms no more favorable
to the Third Parties than offered to the Offerees in the First Offer Notice;
provided, however, that prior to such Transfer, such Third Parties shall have
agreed in writing to be bound by the provisions of this Agreement and shall have
delivered to the
23
Company an executed counterpart of this Agreement. Any Offered Interests not
transferred within such 90-day period will be subject to the provisions of this
Section 7.2 upon any subsequent transfer.
(e) Notwithstanding the foregoing, unless the Transferor shall have
consented to the purchase of less than all of the Offered Interests, no Offeree
may purchase any Offered Interests unless all of the Offered Interests are to be
purchased by the Offerees.
(f) Any and all rights associated with any Interest shall be retained by
each Offered Interest sold or otherwise transferred pursuant to this Section
7.2.
7.3 Exempt Transfers. The restrictions contained in this Article VII will
not apply with respect to:
(a) any Transfer to the spouse of a Member;
(b) any Transfer to a lineal descendant, natural or adopted, of a
Member or to the spouse of any such lineal descendant;
(c) any Transfer to the trustee of a trust for the substantial benefit
of a Member and/or one or more persons described in (i) or (ii) above;
(d) any Transfer to ▇▇▇▇ ▇▇▇▇▇▇▇ or any entity of which the vote is
controlled by ▇▇▇▇ ▇▇▇▇▇▇▇; or
(e) any Transfer to the Company;
provided, however, that the restrictions contained in this Article VII and, in
the case of an Interest held at any time by an Employee Member, Sections 7.10
through 7.14 hereof will continue to be applicable to the Interests after any
such Transfer, other than a Transfer to the Company (but with the buy-back
provisions of Section 7.13 being based upon the employment status of the
original Employee Member), and before any such Transfer is effected the
transferees of such Interests, other than the Company, shall agree in writing to
be bound by all the provisions of this Agreement and shall execute and deliver
to the Company a counterpart of this Agreement.
7.4 Third Party Offer to Purchase. If a third party (a "Proposed
Purchaser") makes an offer (the "Third Party Offer") to purchase the Interest of
a Member or Members, and such purchase would enable the Proposed Purchaser to
acquire one or more Members' Interests, which Members' Interests include in the
aggregate more than 50% in Percentage Interest, then within ten Business Days
after the issuance of the Third Party Offer to a Member or Members, the Proposed
Purchaser shall issue to the other Members an offer (the "Tag-Along Offer")
whereby such Members, individually, may elect, within 30 days after receipt of
the Tag-Along Offer, one of the following alternatives:
(a) To sell any or all of its Interest to the Proposed Purchaser under
the same terms and conditions as the Third Party Offer; or
24
(b) To take no action and continue to hold its Interest in the
Company.
7.5 Third Party Offer to Acquire the Entire Company. If a third party makes
an offer (the "Purchase Offer") to purchase all of the Interests in the Company
for an identical price per Percentage Interest, and the holders of more than 50%
in Percentage Interest desire to accept the Purchase Offer, then the other
Members hereby agree to participate in such sale on the same terms and
conditions as the Purchase Offer.
7.6 [Not Used].
7.7 Substitute Members. No assignee of all or part of a Member's Interest
shall become a Member in place of the Member assigning the Interest (a
"Substitute Member") unless and until:
(a) The transferring Member has stated such intention in the
instrument of assignment;
(b) The Transferee has executed an instrument accepting and adopting
the terms and provisions of this Agreement;
(c) The Transferee delivers an opinion of Counsel acceptable to the
Company that the Transfer will not result in a termination of the Company
pursuant to Section 708 of the Code and such Transfer is exempt from
registration under all applicable securities laws;
(d) The transferring Member or Transferee has paid all reasonable
expenses of the Company in connection with the admission of the Transferee
as a Substitute Member; and
(e) All non-transferring Voting Members in their sole and absolute
discretion have consented in writing to such Transferee becoming a
Substitute Member.
Upon satisfaction of all of the foregoing conditions with respect to a
particular Transferee, the Voting Members shall cause this Agreement to be duly
amended to reflect the admission of the Transferee as a Substitute Member.
7.8 Effect of Admission as a Substitute Member. Unless and until admitted
as a Substitute Member pursuant to Section 7.7 hereof, a Transferee shall not be
entitled to exercise any rights of a Member in the Company, including the right
to vote, grant approvals or give consents with respect to such Interest, the
right to require any information or accounting with respect to the Company's
business or the right to inspect the Company's books and records, but such
Transferee shall only be entitled to receive, to the extent of the Interest
transferred to it, the Distributions to which the transferring Member would be
entitled. A Transferee that has become a Substitute Member has, to the extent of
the Interest transferred to it, all the rights and powers of the Person for whom
it is substituted and is subject to the restrictions and liabilities of a Member
under this Agreement and the Act. Upon admission of a Transferee as a Substitute
Member, the transferring Member shall cease to be a Member of the Company to the
extent of such Interest.
25
A Person shall not cease to be a Member upon assignment of all of such Member's
Interest unless and until the Transferee becomes a Substitute Member.
7.9 Additional Members. Additional Members (whether Voting Members or
Non-Voting Members) may be admitted to the Company and additional Interests may
be issued only by the consent of a Voting Member Majority, and the Percentage
Interests shall be adjusted as approved by such Voting Member Majority.
7.10 Applicability. The provisions of Sections 7.10, 7.11, 7.12, 7.13 and
7.14 hereof shall apply only to the Interests held by Employee Members.
7.11 Termination of Employment. Upon the termination of an Employee
Member's employment with Inergy Partners, for any reason or no reason, the
Employee Member shall sell and the Company shall buy such Employee Member's
Interest or Interests in the Company, at a purchase price determined by a
predetermined valuation formula, as set forth in Section 7.12 below, and subject
to the terms and conditions set forth in Sections 7.13 and 7.14 below.
7.12 Valuation of Interests. The Interests held by the Employee Members
shall be valued by the Company as of September 30th of each year using the
valuation formula set forth in Schedule B attached hereto. The valuation
determined each year by the valuation formula set forth in Schedule B is
hereinafter referred to as the "EBITDA Valuation." The EBITDA Valuation
determined as of September 30th of each year shall be used for the ensuing
twelve-month period to determine the price at which an Employee Member's
Interest is repurchased by the Company pursuant to Section 7.11 hereof.
7.13 Buy-Back Provisions. Upon the termination of an Employee Member's
employment with Inergy Partners, for any reason or no reason, the Employee
Member shall sell and the Company shall buy such Employee Member's Interest in
the Company subject to the following terms and conditions:
If an Employee Member leaves the employment of Inergy Partners by reason of
resigning, being terminated with or without cause or due to such Employee
Member's normal retirement, death or disability at any time, then the
Employee Member shall sell and the Company shall buy such Employee Member's
Interest in the Company at a purchase price equal to the EBITDA Valuation
on the date such Employee Member's employment with Inergy Partners
terminate.
7.14 Payment upon Buy-Back. Upon the termination of an Employee Member's
employment with Inergy Partners such that the Company will buy such Employee
Member's Interest pursuant to the buy-back provisions set forth in Section 7.13
above, the Company shall pay the purchase price for the Interest as determined
pursuant to Section 7.13 above, in cash, or at the Company's option, pay all or
any part of the purchase price in equal quarterly installment payments over a
period of 5 years, bearing interest at the applicable federal rate under Section
1274 of the Internal Revenue Code of 1986, as amended.
26
7.15 Resignation. No Member may resign or withdraw from the Company. Except
as provided in Section 8.1(c) of this Agreement, upon the occurrence of any
event that terminates the continued membership of a Member in the Company, the
Company shall not be dissolved.
7.16 Miscellaneous Provisions Regarding Article VII.
(a) Without limiting any of the foregoing, the Members shall not, and shall
cause each of their respective affiliates not to, (i) take any action the effect
of which would prevent or frustrate the carrying out of the procedures
contemplated by this Article VII or (ii) at any time (whether before or after
any termination of this Agreement) make any assertion, claim or defense that
this Article VII or any of the provisions hereof violate or are inconsistent
with the terms of this Agreement or any laws or public policies.
(b) At the closing of any purchase and sale of a Interest under this
Article VII, the purchaser and the selling Member shall deliver such
certificates and such assignment documents in customary form as may be
reasonably requested in order to consummate the transaction, and, unless
otherwise specified herein, the purchaser shall deliver the purchase price in
immediately available funds to such bank account as shall have been specified by
the selling Member at least three Business Days prior to the closing (or, if no
such notice has been given, by delivery of a certified or bank check). At such
closing, the selling Member shall sell and transfer its Interest to the
purchaser free and clear of Liens other than Liens arising out of Company
financing and shall so warrant to the purchaser. The selling Member shall also
represent and warrant to the purchaser that the selling Member has good and
marketable title to the Interest being sold and transferred. In addition, each
of the selling Member and the purchaser shall make customary representations and
warranties to the other including representations and warranties with respect to
organization, valid existence, authorization, and non-contravention. With
respect to obligations arising out of Company financing, the purchaser shall, in
addition to paying the purchase price, either (i) satisfy or otherwise obtain
release from all liability on the part of the selling Member and its Affiliates
with respect to all obligations of the Company, including debt and lease
obligations, which such selling Member and/or its Affiliates shall have
guaranteed, or (ii) indemnify and hold harmless the selling Member and its
Affiliates against such liability and secure such indemnification with a letter
of credit or payment bond reasonably satisfactory to such selling Member. As
used herein, "Lien" shall mean, as to any Interest, liens, encumbrances,
security interests and other rights, interest or claims of others therein
(including, without limitation, warrants, options, rights of first refusal,
rights of first offer, co-sale and similar rights).
(c) If, with respect to any purchase and sale of a Interest under this
Article VII, the selling Member is not present at the time and place designated
for a closing, or, if present, fails to produce the certificates or assignment
documents reasonably requested to consummate the transaction or fails to satisfy
any other obligation to be satisfied at the closing, as aforesaid, for any
reason whatsoever or no reason, then the purchase price and any other document
or instrument required by the Company at the closing ("Closing Documentation")
shall be deposited with the President of the Company. The foregoing shall
constitute valid payment even though the selling Member shall voluntarily
encumber and dispose of said Interests contrary to the
27
provisions hereof and irrespective of the fact that any pledgee, transferee or
other person may thereby have acquired said Interests or the fact that
certificates or assignment documents for any of said Interests may have been
delivered to any pledgee, transferee or other person.
If the Closing Documentation is deposited with the President of the Company
as provided herein, then from and after the date of such deposit and even if the
certificates evidencing said Interests or the assignment documents have not been
delivered to the Company, the purchase of said Interests shall be deemed to have
been fully effected and all title and interest in and to the Interests so
purchased shall be deemed to have been vested in the Company, and all rights of
the selling Member or of any transferee, assignee or any other person having an
interest therein, as a Member of the Company or otherwise, shall terminate
except for the right to receive the Closing Documentation, but without interest;
and the President of the Company, as attorney-in-fact for and in the name of the
selling Member, shall cause the Interests so purchased to be transferred on the
books and records of the Company to the Company, and shall issue a new
certificate or certificates therefor to the purchaser(s) thereof. The selling
Member does hereby irrevocably appoint and designate the President of the
Company and his successors in office as his attorney-in-fact, for and on his
behalf, to receive, receipt for, hold and collect the said Closing
Documentation, to effect the transfer of said Interests on the books and records
of the Company, and to issue said certificate or certificates in the manner
above provided. The selling Member shall be entitled to receive the Closing
Documentation upon delivery to the Company of the certificates evidencing the
Interests so purchased, and assignment documents duly indorsed for transfer, as
aforesaid, together with any document or instrument required of such Member.
ARTICLE VIII
DISSOLUTION AND TERMINATION
8.1 Events Causing Dissolution. The Company shall be dissolved only upon
the first to occur of the following events:
(a) December 31, 2026.
(b) The election to dissolve being made by a Voting Member Majority.
(c) At any time there are no Members, provided that the Company shall
not be dissolved if within 90 days after the occurrence of the event that
terminated the continued membership of the last remaining Member, the
personal representative of the last remaining Member agrees in writing to
continue the Company and to the admission of the personal representative of
such Member or its nominee or designee to the Company as a Member,
effective as of the occurrence of the event that terminated the continued
membership of the last remaining Member.
(d) Upon the entry of a decree of dissolution with respect to the
Company under Section 18-802 of the Act.
28
(e) When the Company is not the surviving entity in a merger or
consolidation under the Act.
8.2 Effect of Dissolution. Except with respect to an event referred to in
Section 8.1(e) of this Agreement, and except as otherwise provided in this
Agreement, upon the dissolution of the Company, the Voting Members or surviving
Voting Member, as the case may be, shall take such actions as may be required
pursuant to the Act and shall proceed to wind up, liquidate and terminate the
business and affairs of the Company. In connection with such winding up, the
Voting Members or surviving Voting Member shall have the authority to liquidate
and reduce to cash (to the extent necessary or appropriate) the assets of the
Company as promptly as is consistent with obtaining Fair Value therefor, to
apply and distribute the proceeds of such liquidation and any remaining assets
in accordance with the provisions of Section 8.3 hereof, and to do any and all
acts and things authorized by, and in accordance with, the Act and other
applicable laws for the purpose of winding up and liquidation.
8.3 Application of Proceeds. Upon dissolution and liquidation of the
Company, the assets of the Company shall be applied and distributed in the order
of priority set forth in Section 4.4 hereof.
8.4 Continuing Obligations. In the event any Member is required to assume
or pay any debt, expense, obligation or liability of the Company following
dissolution or termination, first, the Members shall pay and indemnify such
Member for their respective Percentage Interest of such debt, expense,
obligation or liability required to be paid by such Member to the extent of
assets distributed to such Members.
ARTICLE IX
MISCELLANEOUS
9.1 Title to Assets. Title to the Property and all other assets acquired by
the Company shall be held in the name of the Company. No Member shall
individually have any ownership interest or rights in the Property or any other
assets of the Company, except indirectly by virtue of such Member's ownership of
an Interest. No Member shall have any right to seek or obtain a partition of the
Property or other assets of the Company, nor shall a Member have the right to
any specific assets of the Company upon the liquidation of or any distribution
from the Company.
9.2 Nature of Interest in the Company. An Interest shall be personal
property for all purposes.
9.3 Notices. Any notice, demand, request or other communication required or
permitted to be given pursuant to this Agreement or the Act to the Company, a
Member, or any other Person (a "Notice") shall be sufficient if in writing and
if hand-delivered, mailed or sent by commercial overnight delivery service, to
the Company at its principal office or to a Member at the address of the Member
as it appears on the records of the Company or if sent by facsimile transmission
to the telephone number, if any, of the recipient's facsimile machine as such
telephone number appears on the records of the Company. All Notices that are
mailed shall be
29
deemed to be given when deposited in the United States mail, postage prepaid.
All Notices that are hand-delivered shall be deemed to be given upon delivery.
All notices that are given by commercial overnight delivery shall be deemed to
be given upon delivery by the delivery service. All Notices that are given by
facsimile transmission shall be deemed to be given upon receipt.
9.4 Waiver of Default. No consent or waiver, express or implied, by the
Company or a Member with respect to any breach or default by the other Members
hereunder shall be deemed or construed to be a consent or waiver with respect to
any other breach or default by such Member of the same provision or any other
provision of this Agreement. Failure on the part of the Company or a Member to
complain of any act or failure to act of the other Members or to declare such
other Member in default shall not be deemed to constitute a waiver by the
Company or the Members of any rights hereunder.
9.5 No Third Party Rights. None of the provisions contained in this
Agreement shall be for the benefit of or enforceable by any third parties,
including, but not limited to, creditors of the Company; provided, however, the
Company may enforce any right granted to the Company under the Act, the
Certificate or this Agreement.
9.6 Entire Agreement. This Agreement, together with the Certificate,
constitutes the entire agreement between the Members, in such capacity, relative
to the formation, operation and continuation of the Company.
9.7 Amendments to this Agreement.
(a) Except as otherwise provided herein, this Agreement shall not be
modified or amended in any manner other than by the written agreement of the
Voting Member Majority at the time of such modification or amendment; provided,
however, any amendment affecting the allocation of Income and Loss to a Member
shall be approved by that Member.
(b) This Agreement may be amended by the Voting Member Majority, without
any execution of such amendment by all Members, in order to reflect the
occurrence of any of the following events provided that all of the conditions,
if any, contained in the relevant sections of this Agreement with respect to
such event have been satisfied:
(i) an adjustment of the Percentage Interests upon a Member's failure
to make a capital contribution as required hereunder; and
(ii) the modification of this Agreement to comply with the relevant
tax laws pursuant to Sections 3.6 or 4.7(j) hereof.
9.8 Severability. In the event any provision of this Agreement is held to
be illegal, invalid or unenforceable to any extent, the legality, validity and
enforceability of the remainder of this Agreement shall not be affected thereby
and shall remain in full force and effect and shall be enforced to the greatest
extent permitted by law.
30
9.9 Binding Agreement. Subject to the restrictions on the disposition of
Interests herein contained, the provisions of this Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
heirs, personal representatives, successors and permitted assigns.
9.10 Headings. The headings of Sections of this Agreement are for
convenience of reference only and shall not be considered in construing or
interpreting any of the terms or provisions hereof.
9.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one agreement.
9.12 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware.
9.13 Remedies. In the event of a default by a Member in the performance of
any obligation undertaken in this Agreement, in addition to any other remedy
available to the non-defaulting Members, the defaulting Member shall pay to the
non-defaulting Members all costs, damages, and expenses, including reasonable
attorneys' fees, incurred by the non-defaulting Member as a result of such
default. In the event that any dispute arises with respect to the enforcement,
interpretation, or application of this Agreement and court proceedings are
instituted to resolve such dispute, the prevailing party in such court
proceedings shall be entitled to recover from the non-prevailing party all costs
and expenses, including, but not limited to, reasonable attorneys' fees,
incurred by the prevailing party in such court proceedings.
31
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INERGY HOLDINGS, LLC*
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
* Inergy Holdings, LLC is signing on behalf of itself as a Member of Inergy
Partners and, pursuant to agreement (as evidenced by a signed letter
agreement from each of such persons), on behalf of the following Members:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
H. ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Zero Butane Gas, Inc.
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
Inergy Holdings, LLC
EXHIBIT A
MEMBER CAPITAL ACCOUNTS AND PERCENTAGE INTERESTS
Employee Members Capital Accounts Percentage
---------------- ---------------- ----------
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 16,190 0.0365%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 16,190 0.0365%
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 8,093 0.0182%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 8,093 0.0182%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 9,744 0.0220%
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 32,337 0.0729%
H. ▇▇▇▇ ▇▇▇▇ 8,093 0.0182%
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 32,337 0.0729%
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,117,095 2.5177%
▇▇▇▇▇▇▇ Members Capital Accounts Percentage
--------------- ---------------- ----------
Zero Butane Gas, Inc. 2,346,546 5.2887%
▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ 177,107 0.3992%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 49,288 0.1111%
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 12,381 0.0279%
Other Members Capital Accounts Percentage
------------- ---------------- ----------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,564,520 3.5262%
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ 745,784 1.6809%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. 204,000 0.4598%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 96,000 0.2164%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. 100,000 0.2254%
Inergy Holdings, LLC 37,825,231 85.2514%
SCHEDULE A
[Not Used]
SCHEDULE B
INERGY PARTNERS, LLC
VALUATION FORMULA
The following formula sets forth the method that will be used to value the
Company at September 30th of each year. The value determined by the valuation
formula set forth below will then be used as a basis for determining the price
at which an Employee Member's Interest in the Company will be repurchased by the
Company upon the termination of such an Employee Member's employment with Inergy
Propane. The following formula will be determined from the consolidated
financial statements of the Company.
EBITDA for the fiscal year ended September 30th
PLUS OR MINUS
the Weather Adjustment Factor
EQUALS
Adjusted EBITDA
MULTIPLY BY
the Valuation Multiple
EQUALS
the value of the Company before adjustments
PLUS
Fixed Asset Purchases after April 1
PLUS OR MINUS
Net Working Capital
MINUS
Long-Term Debt
EQUALS
the EBITDA Valuation
The EBITDA Valuation determined pursuant to the valuation formula set forth
above will be calculated with reference to the following assumptions and
definitions:
1. "EBITDA" means earnings before interest, taxes, depreciation and
amortization.
2. The "Weather Adjustment Factor" will be determined pursuant to the
following formula:
Actual Degree Days for period from April through March
Less: Normal Degree Days of 3,750
Equals: Degree Day deviation from normal
Times: Actual propane and distillate gallons per Degree Day for
period from October through March
Equals: Estimated impact on gallons sold
Times: 90% of actual propane and distillate unit gross profit for
period from October through March
Equals: Weather Adjustment Factor
"Degree Days" represent the difference between sixty-five degrees
Fahrenheit and the mean temperature on a given day, provided that the
mean temperature on such day is less than sixty-five degrees
Fahrenheit.
3. The "Valuation Multiple" will be equal to 6; provided, however, the Company
and each Employee Members shall have the option of engaging, at their own
expense, a third party mutually agreeable to the Company and such Employee
Member to determine the Valuation Multiple to be used to determine the
EBITDA Valuation for any year. Such third party shall determine the
Valuation Multiple by valuing the Company as a going concern facing a
change of control transaction. No minority discount shall be applied by
such third party in determining the Valuation Multiple.
4. The EBITDA in a given year will receive minimal benefit for Fixed Assets
acquired after the middle of the year. Therefore, only the amount of Fixed
Assets purchased after April 1 of a given year will be added into the
valuation formula.
5. The current portion of long-term debt is included in Long-Term Debt rather
than Net Working Capital.
