<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1997
REGISTRATION STATEMENT NO. 333-34679
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 7
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AFFILIATED MANAGERS GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 6719 04-32-18510
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
TWO INTERNATIONAL PLACE, 23RD FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 747-3300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
------------------------
WILLIAM J. NUTT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AFFILIATED MANAGERS GROUP, INC.
TWO INTERNATIONAL PLACE, 23RD FLOOR
BOSTON, MASSACHUSETTS 02110
(617) 747-3300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MARTIN CARMICHAEL III, P.C. DAVID B. HARMS, ESQ.
GOODWIN, PROCTER & HOAR LLP SULLIVAN & CROMWELL
Exchange Place 125 Broad Street
Boston, Massachusetts 02109 New York, New York 10004
(617) 570-1000 (212) 558-4000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
EXPLANATORY NOTE
This Amendment No. 7 to the Affiliated Managers Group, Inc. Registration
Statement on Form S-1 is being filed for the purpose of filing an Exhibit.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION (1)
The following table sets forth the estimated expenses payable by the
Company in connection with this offering (excluding underwriting discounts and
commissions):
<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
----------------------------------------------------------------------- ----------
<S> <C>
SEC Registration Fee................................................... $ 56,107
NYSE Filing Fee........................................................ 95,100
NASD Filing Fee........................................................ 19,015
Accounting Fees and Expenses........................................... 800,000
Legal Fees and Expenses................................................ 400,000
Printing Expenses...................................................... 300,000
Blue Sky Qualifications Fees and Expenses.............................. 25,000
Transfer Agent's Fee................................................... 2,000
Miscellaneous.......................................................... 20,278
----------
TOTAL............................................................. $1,717,500
</TABLE>
- ---------------
(1) The amounts set forth above, except for the SEC, NYSE and NASD fees, are in
each case estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with Section 145 of the General Corporation Law of the State
of Delaware, Article VII of the Company's Third Amended and Restated Certificate
of Incorporation provides that no director of the Company shall be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases, or (iv) for any transaction from which the
director derived an improper personal benefit. In addition, the Certificate
provides that if the Delaware General Corporation Law is amended to authorize
the further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Article V of the Company's Amended and Restated By-laws provides for
indemnification by the Company of its directors, officers and certain
non-officer employees under certain circumstances against expenses (including
attorneys fees, judgments, fines and amounts paid in settlement) reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was an officer or employee of the Company if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company, and, with respect to
criminal actions or proceedings, if such person had no reasonable cause to
believe his or her conduct was unlawful.
Under Section 8(b) of each of the Underwriting Agreements filed as Exhibit
1.1 and Exhibit 1.2 hereto, the U.S. Underwriters and the International
Underwriters have agreed to indemnify, under certain conditions, the Company,
its directors, certain officers and persons who control the Company within the
meaning of the Securities Act of 1933 against certain liabilities.
II-1
<PAGE> 4
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Company has issued unregistered securities
to a limited number of persons, as described below. No underwriters or
underwriting discounts or commissions were involved. There was no public
offering in any such transaction, and the Company believes that each transaction
was exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"), by reason of Section 4(2) thereof, based on the
private nature of the transactions and the financial sophistication of the
purchasers, all of whom had access to complete information concerning the
Company and acquired the securities for investment and not with a view to the
distribution thereof. In addition, the Company believes that the transactions
described in paragraphs (4), (5) and (7) below were exempt from the registration
requirements of the Securities Act, by reason of Rule 701 thereunder.
(1) On May 11, 1995, the Company issued an aggregate of 40,000 shares
of the Company's Class A Convertible Preferred Stock (convertible into
2,000,000 shares of Common Stock) for an aggregate purchase price of
2,000,000 shares of the Company's Common Stock and $10 million to Advent
VII L.P., Advent Atlantic and Pacific II L.P., Chestnut III Limited
Partnership, Chestnut Capital International III Limited Partnership, Advent
New York L.P., Advent Industrial II L.P. and TA Venture Investors Limited
Partnership, William J. Nutt, Sean M. Healey and Richard E. Floor.
(2) On November 7, 1995, the Company issued an aggregate of 10,448
shares of the Company's Series B-1 Voting Convertible Preferred Stock
(convertible into 522,400 shares of Common Stock) for an aggregate purchase
price of $7 million to Hartford Accident and Indemnity Company, Advent VII
L.P., Advent Atlantic and Pacific II L.P., Chestnut III Limited
Partnership, Chestnut Capital International III Limited Partnership, Advent
New York L.P., Advent Industrial II L.P. and TA Venture Investors Limited
Partnership, William J. Nutt, Sean M. Healey and Richard E. Floor.
(3) On November 7, 1995, the Company issued an aggregate of 19,403
shares of the Company's Series B-2 Non-Voting Convertible Preferred Stock
(convertible into 970,150 shares of Common Stock) for an aggregate purchase
price of $13 million to NationsBanc Investment Corporation.
(4) On June 27, 1996, the Company issued an aggregate of 3,703 shares
of the Company's Series B-1 Voting Convertible Preferred Stock (convertible
into 185,150 shares of Common Stock) for an aggregate purchase price of
approximately $2.48 million to certain employees and advisers of the
Company and its majority-owned subsidiaries, pursuant to the Company's 1995
Stock Purchase Plans.
(5) In April 1995, the Company sold 200,000 shares of Restricted
Common Stock to Mr. Healey for aggregate consideration of $400, and 25,000
shares of Restricted Common Stock to Mr. Michael A. Wilson for an aggregate
consideration of $50, in each case, being the fair market value of such
number of shares of Restricted Common Stock, as approved by the Board of
Directors of the Company at that time. In August 1995, the Company sold
50,000 shares of Restricted Common Stock under the 1995 Plan to Mr.
Chertavian for aggregate consideration of $100, being the fair market value
of such number of shares of Restricted Common Stock as approved by the
Board of Directors of the Company at that time. In March 1996, the Company
sold 112,500 shares of Restricted Common Stock under the 1995 Plan,
including sales of 25,000, 35,000, 25,000, 17,500 and 10,000 shares to
Messrs. Nutt, Healey, Chertavian, Brennan and Murphy, respectively, for
aggregate consideration of $500, $700, $500, $350 and $200, respectively,
being the fair market value of such numbers of shares of Restricted Common
Stock as approved by the Board of Directors of the Company at that time. In
May 1996, the Company sold 50,000 shares of Restricted Common Stock under
the 1995 Plan to Mr. Dalton for aggregate consideration of $1,000, being
the fair market value of such number of shares of Restricted Common Stock
as approved by the Board of Directors of the
II-2
<PAGE> 5
Company at that time. In February 1997, the Company sold 50,000 shares of
Restricted Common Stock under the 1995 Plan to Mr. Girvan for aggregate
consideration of $10,000, being the fair market value of such number of
shares of Common Stock as approved by the Board of Directors of the Company
at that time.
(6) On January 2, 1997, the Company issued an aggregate 1,715 shares
of Series B-1 Voting Convertible Preferred Stock (convertible into 85,750
shares of Common Stock) with a value of approximately $1.5 million as
consideration for shares of capital stock of The Burridge Group Inc. in
connection with the Company's investment in Burridge.
(7) In May 1997, the Company granted options to purchase an aggregate
of 1,850 shares of Class A Convertible Preferred Stock (convertible into an
aggregate of 92,500 shares of Common Stock) having an exercise price of
$455 per share (or $9.10 per underlying share of Common Stock), including
options to purchase 500, 500, 200, 300, 250 and 100 shares of Class A
Convertible Preferred Stock to Messrs. Nutt, Healey, Chertavian, Dalton,
Brennan and Murphy, respectively.
(8) On September 30, 1997, the Company issued an aggregate of 10,667
shares of Class D Convertible Preferred Stock (convertible into 533,331
shares of Common Stock) with a value of approximately $9.6 million in
connection with the Company's investment in GeoCapital.
(9) On October 9, 1997, the Company issued an aggregate of 5,333
shares of Series C-2 Non-Voting Convertible Preferred Stock and warrants to
purchase 28,000 shares of Series C-2 Non-Voting Convertible Preferred Stock
(convertible into 266,650 and 1,400,000 shares of Common Stock,
respectively) for an aggregate purchase price of $30 million.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement.
<TABLE>
<C> <S>
**1.1 Form of Underwriting Agreement
**1.2 Form of International Underwriting Agreement
+2.1 Purchase Agreement dated August 15, 1997 by and among the Registrant, Tweedy,
Browne Company L.P. and the partners of Tweedy, Browne Company L.P. (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
**+2.2 Agreement and Plan of Reorganization dated August 15, 1997 by and among the
Registrant, AMG Merger Sub, Inc., GeoCapital Corporation, GeoCapital, LLC and
the stockholders of GeoCapital Corporation (excluding schedules and exhibits,
which the Registrant agrees to furnish supplementally to the Commission upon
request)
**+2.3 Stock Purchase Agreement dated as of January 17, 1996 by and among the
Registrant, First Quadrant Holdings, Inc., Talegen Holdings, Inc., certain
employees of First Quadrant Corp. and the other parties identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
**2.4 Amendment to Stock Purchase Agreement by and among the Registrant, First
Quadrant Holdings, Inc., Talegen Holdings, Inc., certain managers of First
Quadrant Corp. and the Management Corporations identified therein, effective as
of March 28, 1996
**+2.5 Partnership Interest Purchase Agreement dated as of June 6, 1995 by and among
the Registrant, Mesirow Asset Management, Inc., Mesirow Financial Holdings,
Inc., Skyline Asset Management, L.P., certain managers of Mesirow Asset
Management, Inc. and the Management Corporations identified therein (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
</TABLE>
II-3
<PAGE> 6
<TABLE>
<C> <S>
**2.6 Amendment, made by and among Mesirow Financial Holdings, Inc. and the
Registrant, to Partnership Interest Purchase Agreement by and among the
Registrant, Mesirow Asset Management, Inc., Mesirow Financial Holdings, Inc.,
Skyline Asset Management, L.P., certain managers of Mesirow Asset Management,
Inc. and the Management Corporations identified therein, effective as of August
30, 1995
**3.1 Form of Amended and Restated Certificate of Incorporation
**3.2 Form of Amended and Restated By-laws
**4.1 Specimen certificate for shares of Common Stock of the registrant
**4.2 Credit Agreement dated as of September 30, 1997 by and among Chase Manhattan
Bank and the other lenders identified therein and the Registrant (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
**4.3 Stock Purchase Agreement dated November 7, 1995 by and among the Registrant, TA
Associates, NationsBank, The Hartford, and the additional parties listed on the
signature pages thereto (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
**4.4 Preferred Stock and Warrant Purchase Agreement dated August 15, 1997 between the
Registrant and Chase Equity Associates (excluding schedules and exhibits, which
the Registrant agrees to furnish supplementally to the Commission upon request)
**4.5 Amendment No. 1 to Preferred Stock and Warrant Purchase Agreement dated as of
October 9, 1997 between the Registrant and Chase Equity Associates
**4.6 Securities Purchase Agreement dated August 15, 1997 between the Registrant and
Chase Equity Associates (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
**4.7 Securities Purchase Agreement Amendment No. 1 dated as of October 9, 1997
between the Registrant and Chase Equity Associates
**5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the securities
being offered
**10.1 Amended and Restated Stockholders' Agreement dated October 9, 1997 by and among
the Registrant and TA Associates, NationsBank, The Hartford, Chase Equity
Associates and the additional parties listed on the signature pages thereto
10.2 Tweedy, Browne Company LLC Limited Liability Company Agreement dated October 9,
1997 by and among the Registrant and the other members identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
**10.3 GeoCapital, LLC Amended and Restated Limited Liability Company Agreement dated
September 30, 1997 by and among the Registrant and the members identified
therein (excluding schedules and exhibits, which the Registrant agrees to
furnish supplementally to the Commission upon request)
**+10.4 First Quadrant, L.P. Amended and Restated Limited Partnership Agreement dated
March 28, 1996 by and among the Registrant and the partners identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
**10.5 Amendment to First Quadrant, L.P. Amended and Restated Limited Partnership
Agreement by and among the Registrant and the partners identified therein,
effective as of October 1, 1996
**10.6 Second Amendment to First Quadrant, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of December 31, 1996
**10.7 First Quadrant U.K., L.P. Limited Partnership Agreement dated March 28, 1996 by
and among the Registrant and the partners identified therein (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
</TABLE>
II-4
<PAGE> 7
<TABLE>
<C> <S>
**10.8 Skyline Asset Management, L.P. Amended and Restated Limited Partnership
Agreement dated August 31, 1995 by and among the Registrant and the partners
identified therein (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
**10.9 Amendment to Skyline Asset Management, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of August 1, 1996
**10.10 Second Amendment to Skyline Asset Management, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of December 31, 1996
**10.11 Affiliated Managers Group, Inc. 1997 Stock Option and Incentive Plan
**10.13 Affiliated Managers Group, Inc. 1995 Incentive Stock Plan
**10.14 Form of Tweedy, Browne Employment Agreement
**11.1 Statement regarding computation of per share earnings
**21.1 Schedule of Subsidiaries
**23.1 Consent of Counsel (included in Exhibit 5.1 hereto)
**23.2 Consent of Coopers & Lybrand L.L.P. (Boston)
**23.3 Consent of Coopers & Lybrand L.L.P. (Chicago)
**23.4 Consent of Coopers & Lybrand L.L.P. (New York)
**23.5 Consent of KPMG Peat Marwick LLP
**24.1 Powers of Attorney
**27.1 Financial Data Schedule
</TABLE>
- ---------------
** Previously filed.
+ Certain portions of this Exhibit have been omitted pursuant to a confidential
treatment request filed with the Commission. The omitted portions have been
filed separately with the Commission.
(b) Financial Statement Schedules filed as part of this Registration
Statement are as follows:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Accountants on Schedule.......................... S-1
Report of Independent Certified Accountants on Schedule.......................... S-2
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-5
<PAGE> 8
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of the Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 7 to this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Boston, Commonwealth of Massachusetts, on November 20, 1997.
AFFILIATED MANAGERS GROUP, INC.
By: /s/ WILLIAM J. NUTT
----------------------------------
WILLIAM J. NUTT
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHAIRMAN OF THE BOARD OF
DIRECTORS
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 7 to this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
----------------------------------- ---------------------------------- -----------------
<C> <S> <C>
/s/ WILLIAM J. NUTT President, Chief Executive Officer November 20, 1997
----------------------------------- and Chairman of the Board of
WILLIAM J. NUTT Directors (Principal Executive
Officer)
* Senior Vice President (Principal November 20, 1997
----------------------------------- Financial Officer and Principal
BRIAN J. GIRVAN Accounting Officer)
* Director November 20, 1997
-----------------------------------
RICHARD E. FLOOR
* Director November 20, 1997
-----------------------------------
ROGER B. KAFKER
* Director November 20, 1997
-----------------------------------
P. ANDREWS MCLANE
* Director November 20, 1997
-----------------------------------
W.W. WALKER, JR.
Director November 20, 1997
-----------------------------------
JOHN M.B. O'CONNOR
</TABLE>
*By: /s/ NATHANIEL DALTON
--------------------------------------------
NATHANIEL DALTON, ATTORNEY-IN-FACT
II-7
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<C> <S>
**1.1 Form of Underwriting Agreement
**1.2 Form of International Underwriting Agreement
**+2.1 Purchase Agreement dated August 15, 1997 by and among the Registrant, Tweedy,
Browne Company L.P. and the partners of Tweedy, Browne Company L.P. (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
**+2.2 Agreement and Plan of Reorganization dated August 15, 1997 by and among the
Registrant, AMG Merger Sub, Inc., GeoCapital Corporation, GeoCapital, LLC and
the stockholders of GeoCapital Corporation (excluding schedules and exhibits,
which the Registrant agrees to furnish supplementally to the Commission upon
request)
**+2.3 Stock Purchase Agreement dated as of January 17, 1996 by and among the
Registrant, First Quadrant Holdings, Inc., Talegen Holdings, Inc., certain
employees of First Quadrant Corp. and the other parties identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
**2.4 Amendment to Stock Purchase Agreement by and among the Registrant, First
Quadrant Holdings, Inc., Talegen Holdings, Inc., certain managers of First
Quadrant Corp. and the Management Corporations identified therein, effective as
of March 28, 1996
**+2.5 Partnership Interest Purchase Agreement dated as of June 6, 1995 by and among
the Registrant, Mesirow Asset Management, Inc., Mesirow Financial Holdings,
Inc., Skyline Asset Management, L.P., certain managers of Mesirow Asset
Management, Inc. and the Management Corporations identified therein (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
**2.6 Amendment, made by and among Mesirow Financial Holdings, Inc. and the
Registrant, to Partnership Interest Purchase Agreement by and among the
Registrant, Mesirow Asset Management, Inc., Mesirow Financial Holdings, Inc.,
Skyline Asset Management, L.P., certain managers of Mesirow Asset Management,
Inc. and the Management Corporations identified therein, effective as of August
30, 1995
**3.1 Form of Amended and Restated Certificate of Incorporation
**3.2 Form of Amended and Restated By-laws
**4.1 Specimen certificate for shares of Common Stock of the registrant
**4.2 Credit Agreement dated as of September 30, 1997 by and among Chase Manhattan
Bank and the other lenders identified therein and the Registrant (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
**4.3 Stock Purchase Agreement dated November 7, 1995 by and among the Registrant, TA
Associates, NationsBank, The Hartford, and the additional parties listed on the
signature pages thereto (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
**4.4 Preferred Stock and Warrant Purchase Agreement dated August 15, 1997 between the
Registrant and Chase Equity Associates (excluding schedules and exhibits, which
the Registrant agrees to furnish supplementally to the Commission upon request)
**4.5 Amendment No. 1 to Preferred Stock and Warrant Purchase Agreement dated as of
October 9, 1997 between the Registrant and Chase Equity Associates
**4.6 Securities Purchase Agreement dated August 15, 1997 between the registrant and
Chase Equity Associates (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
**4.7 Securities Purchase Agreement Amendment No. 1 dated as of October 9, 1997
between the Registrant and Chase Equity Associates
**5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the securities
being offered
</TABLE>
<PAGE> 11
<TABLE>
<C> <S>
**10.1 Amended and Restated Stockholders' Agreement dated October 9, 1997 by and among
the Registrant and TA Associates, NationsBank, The Hartford, Chase Capital and
the additional parties listed on the signature pages thereto
10.2 Tweedy, Browne Company LLC Limited Liability Company Agreement dated October 9,
1997 by and among the Registrant and the other members identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
**10.3 GeoCapital, LLC Amended and Restated Limited Liability Company Agreement dated
September 30, 1997 by and among the Registrant and the members identified
therein (excluding schedules and exhibits, which the Registrant agrees to
furnish supplementally to the Commission upon request)
**+10.4 First Quadrant, L.P. Amended and Restated Limited Partnership Agreement dated
March 28, 1996 by and among the Registrant and the partners identified therein
(excluding schedules and exhibits, which the Registrant agrees to furnish
supplementally to the Commission upon request)
**10.5 Amendment to First Quadrant, L.P. Amended and Restated Limited Partnership
Agreement by and among the Registrant and the partners identified therein,
effective as of October 1, 1996
**10.6 Second Amendment to First Quadrant, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of December 31, 1996
**10.7 First Quadrant U.K., L.P. Limited Partnership Agreement dated March 28, 1996 by
and among the Registrant and the partners identified therein (excluding
schedules and exhibits, which the Registrant agrees to furnish supplementally to
the Commission upon request)
**10.8 Skyline Asset Management, L.P. Amended and Restated Limited Partnership
Agreement dated August 31, 1995 by and among the Registrant and the partners
identified therein (excluding schedules and exhibits, which the Registrant
agrees to furnish supplementally to the Commission upon request)
**10.9 Amendment to Skyline Asset Management, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of August 1, 1996
**10.10 Second Amendment to Skyline Asset Management, L.P. Amended and Restated Limited
Partnership Agreement by and among the Registrant and the partners identified
therein, effective as of December 31, 1996
**10.11 Affiliated Managers Group, Inc. 1997 Stock Option and Incentive Plan
**10.13 Affiliated Managers Group. Inc. 1995 Incentive Stock Plan
**10.14 Form of Tweedy, Browne Employment Agreement
**11.1 Statement regarding computation of per share earnings
**21.1 Schedule of Subsidiaries
**23.1 Consent of Counsel (included in Exhibit 5.1 hereto)
**23.2 Consent of Coopers & Lybrand L.L.P. (Boston)
**23.3 Consent of Coopers & Lybrand L.L.P. (Chicago)
**23.4 Consent of Coopers & Lybrand L.L.P. (New York)
**23.5 Consent of KPMG Peat Marwick LLP
**24.1 Powers of Attorney
**27.1 Financial Data Schedule
</TABLE>
- ---------------
** Previously filed.
+ Certain portions of this Exhibit have been omitted pursuant to a confidential
treatment request filed with the Commission. The omitted portions have been
filed separately with the Commission.
<PAGE> 1
EXHIBIT 10.2
TWEEDY, BROWNE COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
October 9, 1997
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TWEEDY, BROWNE COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS ......................................................1
Section 1.1 Definitions................................................1
ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS ............................15
Section 2.1 Conversion; Continuation..................................15
Section 2.2 Name......................................................16
Section 2.3 Term......................................................16
Section 2.4 Registered Agent and Registered Office....................16
Section 2.5 Principal Place of Business...............................16
Section 2.6 Qualification in Other Jurisdictions......................16
Section 2.7 Purposes and Powers.......................................17
Section 2.8 Title to Property.........................................18
ARTICLE III - MANAGEMENT OF THE LLC .........................................18
Section 3.1 Manager Member............................................18
Section 3.2 Management Board; Non-Manager Members.....................23
Section 3.3 Officers..................................................25
Section 3.4 Employees of the LLC......................................25
Section 3.5 Operation of the Business of the LLC......................26
Section 3.6 Compensation and Expenses of the Members..................27
Section 3.7 Non-Manager Members and Non-Solicitation Agreements.......28
Section 3.8 Non-Solicitation and Non-Disclosure by
Non-Manager Members.......................................28
Section 3.9 Remedies Upon Breach......................................31
Section 3.10 No Employment Obligation..................................31
Section 3.11 Funding Obligation........................................31
Section 3.12 Miscellaneous.............................................32
Section 3.13 Members...................................................33
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS ...................33
Section 4.1 Capital Accounts..........................................33
Section 4.2 Allocations...............................................34
Section 4.3 Capital Contribution for Offshore Shortfalls..............37
Section 4.4 Distributions.............................................38
Section 4.5 Distributions Upon Dissolution; Establishment of a
Reserve Upon Dissolution..................................41
Section 4.6 Proceeds from Capital Contributions and the Sale of
Securities; Insurance Proceeds; Certain Special Allocations
and Distributions........................................42
Section 4.7 Federal Tax Allocations...................................44
(i)
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Page
ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER MEMBERS;
RESIGNATION, REDEMPTION AND WITHDRAWAL BY NON-MANAGER
MEMBERS; ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS..................44
Section 5.1 Assignability of LLC Interests............................44
Section 5.2 Substitute Non-Manager Members............................45
Section 5.3 Allocation of Distributions Between Transferor and
Transferee; Successor to Capital Accounts................46
Section 5.4 Resignation, Redemptions and Withdrawals..................47
Section 5.5 Issuance of Additional LLC Interests......................47
Section 5.6 Additional Requirements...................................48
Section 5.7 Transition Planning with Respect to Certain Clients.......48
Section 5.8 Representation of Members.................................49
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE MANAGER MEMBER;
REDEMPTION, REMOVAL AND WITHDRAWAL....................................50
Section 6.1 Assignability of Interest.................................50
Section 6.2 Resignation, Redemption, and Withdrawal...................51
ARTICLE VII - PUTS AND CALLS OF LLC INTERESTS..............................52
Section 7.1 Puts......................................................52
Section 7.2 Calls.....................................................54
Section 7.3 Repurchase Upon Termination of Employment or Transfer
by Operation of Law.......................................55
Section 7.4 Election Rights of Manager Member to Pay in
Shares of AMG Stock.......................................58
Section 7.5 Class B Puts; Increase in Free Cash Flow Percentage.......59
ARTICLE VIII - DISSOLUTION AND TERMINATION..................................62
Section 8.1 No Dissolution............................................62
Section 8.2 Events of Dissolution.....................................62
Section 8.3 Notice of Dissolution.....................................62
Section 8.4 Liquidation...............................................62
Section 8.5 Termination...............................................63
Section 8.6 Claims of the Members.....................................63
ARTICLE IX - RECORDS AND REPORTS............................................63
Section 9.1 Books and Records.........................................63
Section 9.2 Accounting................................................63
Section 9.3 Financial and Compliance Reports..........................63
Section 9.4 Meetings..................................................65
Section 9.5 Tax Matters...............................................65
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION......................66
Section 10.1 Liability................................................66
(ii)
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Page
Section 10.2 Exculpation...............................................66
Section 10.3 Fiduciary Duty............................................66
Section 10.4 Indemnification...........................................67
Section 10.5 Notice; Opportunity to Defend and Expenses................67
Section 10.6 Miscellaneous.............................................68
ARTICLE XI - MISCELLANEOUS...................................................69
Section 11.1 Notices...................................................69
Section 11.2 Successors and Assigns....................................69
Section 11.3 Amendments................................................69
Section 11.4 No Partition..............................................70
Section 11.5 No Waiver; Cumulative Remedies............................70
Section 11.6 Dispute Resolution........................................70
Section 11.7 Prior Agreements Superseded; Certain Agreements
Incorporated Herein.......................................70
Section 11.8 Captions..................................................71
Section 11.9 Counterparts..............................................71
Section 11.10 Applicable Law; Jurisdiction.............................71
Section 11.11 Interpretation...........................................71
Section 11.12 Severability.............................................71
Section 11.13 Creditors................................................71
EXHIBITS
Exhibit A - Incentive Program of Tweedy, Browne Company LLC
Exhibit B - Form of Non-Solicitation/Non-Disclosure Agreement for
Non-Manager Members
Exhibit C - Form of Promissory Note for Repurchases
SCHEDULES
Schedule A - LLC Interests and Capital Accounts
Schedule B - Initial Management Board Members
Schedule C - Model Repurchase Calculation
(iii)
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TWEEDY, BROWNE COMPANY LLC
LIMITED LIABILITY COMPANY AGREEMENT
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This Limited Liability Company Agreement of Tweedy, Browne Company LLC
(the "LLC") is made and entered into as of October 9, 1997 (the "Effective
Date"), by and among the Persons identified as the Manager Member and the
Non-Manager Members on Schedule A attached hereto as Members of the LLC, and the
Persons who become Members of the LLC in accordance with the provisions hereof.
WHEREAS, the Original Principals and Clark were the sole partners of
Tweedy, Browne Company L.P., a Delaware limited partnership (the "Predecessor"),
immediately prior to the Effective Date;
WHEREAS, the Original Principals and Clark have converted the Predecessor
into a Delaware limited liability company pursuant to Section 18-214 of the
Delaware Limited Liability Company Act, 6 Del. C. Section 18-101, et seq. (as it
may be amended from time to time and any successor to such act, the "Act") and,
in connection therewith, filed a Certificate of Conversion and a Certificate of
Formation of the LLC with the Office of the Secretary of State of the State of
Delaware as of the Effective Date;
WHEREAS, the Original Principals and Clark desire to sell a majority of
their interests in the LLC to AMG/TBC Holdings, Inc., a Delaware corporation
("Holdings"), and wholly-owned subsidiary of Affiliated Managers Group, Inc., a
Delaware corporation ("AMG"), and the Original Principals desire to sell a
portion of their remaining interests to Shrager and Wyckoff; and
WHEREAS, the Original Principals, Clark, Shrager, Wyckoff and Holdings
desire to continue the business of the Predecessor as a limited liability
company under the Act from and after the Effective Date, with Holdings
designated as the Manager Member and, in connection therewith, to enter into
this Agreement, which has heretofore been approved by the Predecessor, to set
forth their relative rights and obligations.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the mutual
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I - DEFINITIONS.
SECTION 1.1 DEFINITIONS. Unless the context otherwise requires, the terms
defined in this Article I shall, for the purposes of this Agreement, have the
meanings herein specified.
"1940 Act" shall mean the Investment Company Act of 1940, as it may be
amended from time to time, and any successor to such act.
"Act" shall have the meaning set forth in the preamble of this Agreement.
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"Additional Non-Manager Members" shall have the meaning specified in
Section 5.5 hereof.
"Advisers Act" shall mean the Investment Advisers Act of 1940, as it may
be amended from time to time, and any successor to such act.
"Affiliate" shall mean, with respect to any Person (herein the "first
party"), any other Person that directly or indirectly controls, or is controlled
by, or is under common control with, such first party. The term "control" as
used herein (including the terms "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power (a) to vote or
dispose of, or direct the voting or disposition of, fifty percent (50%) or more
of the outstanding voting securities of such Person or (b) otherwise to direct
the management or policies of such Person by contract or otherwise.
"Agreement" shall mean this Limited Liability Company Agreement, as it may
be amended, supplemented or restated from time to time.
"AMG" shall have the meaning set forth in the preamble of this Agreement.
"AMG Stock" shall have the meaning specified in Section 7.4(a) hereof.
"AMG's Average Stock Price" shall have the meaning specified in Section
7.4(c)(i) hereof.
"Asserted Liability" shall have the meaning specified in Section 10.5(a)
hereof.
"Board Vote" shall have the meaning specified in Section 3.2(c) hereof.
"Brokerage Services" shall mean any services that either involve the
negotiation of contracts for, and the execution of, the purchase and sale of
securities or otherwise relate to the securities brokerage business.
"Call" shall have the meaning specified in Section 7.2(a) hereof.
"Capital Account" shall mean the capital account maintained by the LLC for
each Member in accordance with the capital accounting rules described in Section
4.2 hereof.
"Capital Contribution" shall mean, as to each Member, the aggregate amount
of cash and the Fair Market Value of any property contributed to the capital of
the LLC by such Member (or any prior holders of the Capital Account of such
Member) pursuant to Section 2.1(c) or Section 4.3 hereof or in connection with
the issuance of additional LLC Interests or otherwise.
"Carry" shall mean, with respect to Manager Shares issued by an Offshore
Fund to an Offshore Related Partnership at any time, the rate applicable to the
Performance Increment under the organizational documents of such Offshore Fund.
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"Certificate" shall mean the Certificate of Formation of the LLC required
under the Act, as such Certificate may be amended and/or restated from time to
time.
"Claims Notice" shall have the meaning specified in Section 10.5(a)
hereof.
"Clark" shall mean James M. Clark, Jr.
"Class B Interest" shall mean, as of a measurement date, (i) an amount
equal to two-thirds (2/3) of the Class B Profit of the LLC in the fiscal year
ended on, or most recently prior to, the measurement date, if, in each of the
two (2) fiscal years of the LLC ended on, or most recently prior to the
measurement date, the LLC had Class B Profit, or (ii) zero (0) as of that
measurement date, if, in either of such two fiscal years, the LLC did not have
Class B Profit.
"Class B Notice" shall have the meaning specified in Section 7.5(c)
hereof.
"Class B Notice Deadline" shall have the meaning specified in Section
7.5(c) hereof.
"Class B Payment" shall have the meaning specified in Section 7.5(d)
hereof.
"Class B Points" shall mean the Class B Points (or fraction thereof)
authorized by the LLC pursuant hereto, entitling the holders thereof to the
relative rights, title and interests in the LLC at any particular time as are
set forth in this Agreement, and any and all other benefits to which a holder
thereof may be entitled as provided in this Agreement. The Class B Points do not
entitle the holders thereof to any right to vote on any matter concerning the
LLC whatsoever. With respect to a Member as of any date, "Class B Points" shall
mean the number of Class B Points held by such Member as of such date as set
forth on Schedule A hereto, as amended from time to time in accordance with the
terms hereof, and as in effect on such date.
"Class B Profit" shall mean, for any period, the amount, if any, by which
Revenues From Operations for such period exceed the sum of (a) the Free Cash
Flow for such period, (b) operating expenses of the LLC incurred during or
relating to such period consistent with the then past practices of the LLC, not
including salaries, bonuses or other compensation paid or payable other than out
of Free Cash Flow to the Non-Manager Members in respect of such period or other
distributions made or makeable to the Non-Manager Members other than out of Free
Cash Flow in respect of such period and (c) ten million dollars ($10,000,000).
"Class B Put" shall have the meaning specified in Section 7.5(a) hereof.
"Class B Put Date" shall have the meaning specified in Section 7.5(a)
hereof.
"Class B Value" shall have the meaning specified in Section 7.5(b) hereof.
"Client" shall mean all Past Clients, Present Clients and Potential
Clients, subject to the following general rule that with respect to each Client,
the term shall also include (i) any Persons
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which are known to a Non-Manager Member to be Affiliates of such Client, (ii)
Persons who are members of the Immediate Family of such Client or any of its
Affiliates or (iii) with respect to the LLC, investors in each of the Private
Funds and the Offshore Funds (sponsored or marketed by the LLC, by any
Controlled Affiliate of the LLC or (directly or indirectly) by any Non-Manager
Member).
"Code" or "Internal Revenue Code" shall mean the United States Internal
Revenue Code of 1986, as from time to time amended, and any successor code
thereto. A reference to a specific section of the Code refers not only to such
specific section but also to any corresponding provision of any federal tax
statute enacted after the Effective Date, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"Controlled Affiliate" shall mean, with respect to a Person, any Affiliate
of such Person under its "control," as the term "control" is defined in the
definition of Affiliate, but shall include, with respect to the LLC, any of the
Mutual Funds, the Offshore Funds and the Private Funds that are managed or
advised by the LLC as of the date of such determination.
"Covered Person" shall mean a Member, any Affiliate of a Member, any
officer, director, shareholder, partner, employee or member of a Member or any
of its Affiliates, or any Officer.
"Date of Default" shall have the meaning specified in Section 4.3(c)
hereof.
"Defaulting Member" shall have the meaning specified in Section 4.3(c)
hereof.
"Due Date" shall have the meaning specified in Section 4.3(a) hereof.
"Effective Date" shall have the meaning specified in the preamble of this
Agreement.
"Employment Agreement" shall have the meaning ascribed thereto in the
Purchase Agreement.
"Encumbrances" shall mean any restrictions, liens, claims, charges,
pledges or encumbrances of any kind or nature whatsoever.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Fair Market Value" shall mean the fair market value as agreed upon by the
Manager Member (or, for purposes of Section 4.5 hereof, if there shall be no
Manager Member, the Liquidating Trustee) and the Management Board or, in the
absence of such agreement, as determined by an appraiser selected by the Manager
Member (or, for purposes of Section 4.5 hereof, if there shall be no Manager
Member, the Liquidating Trustee) with the prior consent of the Management Board,
which consent will not be unreasonably withheld.
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"For Cause" shall mean, with respect to the termination of a Non-Manager
Member's employment with the LLC, any of the following:
(a) The Non-Manager Member has engaged in any criminal act
which is or involves a violation of federal or state securities laws or
regulations (or equivalent laws or regulations of any country or political
subdivision thereof), embezzlement, fraud, wrongful taking or
misappropriation of property, theft or any other crime involving
dishonesty or other serious felony offense and has been convicted (whether
or not subject to appeal) or pled nolo contendere (or any similar plea) to
any criminal offense in connection with or relating to such act;
(b) The Management Board and the Manager Member, acting in
good faith and in consultation with each other, have determined that the
Non-Manager Member has persistently and willfully neglected his duties and
such neglect has continued for a period of not less than thirty (30) days
following written notice from the Manager Member or the Management Board
specifying the nature of the Non-Manager Member's neglect; or
(c) The Non-Manager Member has (i) violated or breached any
material provision of his Employment Agreement or Non-Solicitation
Agreement or (ii) engaged in any of the activities prohibited by Section
3.8 hereof and, in each case, the Management Board or the Manager Member
has determined that harm that is not immaterial or insignificant has or is
likely to occur to the LLC, the Manager Member or AMG as a result of such
violation, breach or activity.
"Free Cash Flow" shall mean, for any period (a) the Free Cash Flow
Percentage multiplied by Revenues From Operations of the LLC for such period,
minus (b) the Free Cash Flow Expenditures for such period.
"Free Cash Flow Expenditure" shall have the meaning specified in Section
3.5(a) hereof.
"Free Cash Flow Percentage" shall initially mean the percentage determined
pursuant to Section 1.2(a) of the Purchase Agreement, as adjusted, if
applicable, pursuant to Sections 1.2(b) through 1.2(g) of the Purchase
Agreement, subject to increase as set forth in Section 7.5 hereof.
"GCT" shall have the meaning specified in Section 4.6(g) hereof.
"Global Intrinsic Value Fund" shall mean Global Intrinsic Value Fund
Limited, an open-end investment company incorporated in Bermuda as a mutual fund
with limited liability, and any successor entities thereto.
"Governmental Authority" shall mean any foreign, federal, state or local
court, governmental authority or regulatory body.
"Holdings" shall have the meaning set forth in the preamble of this
Agreement.
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"Immediate Family" shall mean, with respect to any individual, such
individual's spouse, former spouse, parents, grandparents, children,
grandchildren, siblings (and estates, trusts, partnerships and other entities
and legal relationships of which a substantial majority in interest of the
beneficiaries, owners, investors, members or participants at all times in
question are, directly or indirectly, one or more of the Persons described above
and/or such individual).
"Incentive Program" shall mean the Tweedy, Browne Company LLC Incentive
Program in the form attached hereto as Exhibit A.
"Income Tax Regulations" shall mean the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Indebtedness" shall mean, with respect to a Person, (a) all indebtedness
of such Person for borrowed money or for the deferred purchase price of property
or services (other than current trade liabilities incurred in the ordinary
course of business and payable in accordance with customary practices), (b) any
other indebtedness of such Person which is evidenced by a note, bond, debenture
or similar instrument, (c) all obligations of such Person under any financing
leases, (d) all obligations of such Person in respect of acceptances issued or
created for the account of such Person, (e) all obligations of such Person under
noncompetition agreements reflected as liabilities on a balance sheet of such
Person in accordance with generally accepted accounting principles, (f) all
liabilities secured by any Lien on any property owned by such Persons even
though such Person has not assumed or otherwise become liable for the payment
thereof, and (g) all net obligations of such Person under interest rate,
commodity, foreign currency and financial markets swaps, options, futures and
other hedging obligations.
"Independent Public Accountants" shall mean any independent certified
public accountant satisfactory to the Manager Member and retained by the LLC.
"Ineligible Manager" shall have the meaning specified in Section 6.2(b)
hereof.
"Intellectual Property" shall have the meaning specified in Section 3.8(d)
hereof.
"Investment Management Services" shall mean any services that involve (a)
the management of an investment account or fund (or portions thereof or a group
of investment accounts or funds), or (b) the giving of advice with respect to
the investment and/or reinvestment of assets or funds (or any group of assets or
funds), in each case, for compensation other than out-of-pocket expenses and
good faith director's or trustee's fees.
"IRS" shall mean the Internal Revenue Service of the United States
Department of the Treasury.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever
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(including, without limitation, any conditional sale or other title retention
agreement and any financing lease having substantially the same economic effect
as any of the foregoing).
"Liquidating Trustee" shall have the meaning specified in Section 8.4
hereof.
"LLC" shall have the meaning set forth in the preamble of this Agreement.
"LLC Interests" shall mean the units representing the outstanding limited
liability company interests (as defined in the Act) of the Members in the LLC,
including, without limitation, such Member's LLC Points, Reserved Points, Class
B Points, Capital Account, voting rights and any other rights, benefits and
obligations of such Member under this Agreement and the Act.
"LLC Points" shall mean the LLC Points authorized by the LLC pursuant
hereto, entitling the holders thereof to the relative rights, title and
interests in the profits, losses, deductions and credits of the LLC at any
particular time as are set forth in this Agreement, and any and all other
benefits to which a holder thereof may be entitled as provided in this Agreement
(including, without limitation, certain limited voting rights as set forth
herein), but specifically excluding the Class B Points and (for all purposes
other than the definition of Reserved Points) Reserved Points authorized
hereunder. With respect to a Member as of any date "LLC Points" shall mean the
aggregate number of LLC Points belonging to such Member as set forth on Schedule
A hereto under the column headed "LLC Points," as amended from time to time in
accordance with the terms hereof, and as in effect on such date.
"LLC Repurchase" shall have the meaning specified in Section 7.3(a)
hereof.
"Management Board" shall have the meaning specified in Section 3.2(a).
"Manager Member" shall mean Holdings, and any Person who becomes a
successor Manager Member as provided herein.
"Manager Member Excess Loss Allocations" shall mean, as of any measurement
date (including, without limitation, a Put/Call Measurement Date or a
termination of employment), any amount by which the cumulative amount of items
of LLC loss and deduction allocated to the Manager Member pursuant to Sections
4.2(b)(ii), 4.2(b)(iii) and 4.2(d), hereof exceed the cumulative amount of items
of LLC income and gain allocated to the Manager Member pursuant to Sections
4.2(a)(ii) and 4.2(c)(i) hereof, in each case, calculated through the date that
is one (1) year prior to the last day of the calendar quarter in which the
measurement date occurs.
"Manager Shares" shall mean the Manager's Shares (as defined in the
respective organizational documents) of each of the Offshore Funds held, as of
the date of this Agreement, by the Offshore Related Partnerships.
"Member" shall mean any Person admitted to the LLC as a "member" within
the meaning of the Act, which includes the Manager Member and the Non-Manager
Members (excluding, for this purpose, Transferees until admitted as Members
pursuant to the provisions hereof), unless otherwise indicated, and includes any
Person admitted as an Additional Non-Manager Member or
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a substitute Non-Manager Member pursuant to the provisions of this Agreement, in
such Person's capacity as a Member of the LLC, unless otherwise indicated. For
purposes of the Act, the Members shall constitute one (1) class or group of
members.
"Mutual Funds" shall mean Tweedy, Browne Global Value Fund and the Tweedy,
Browne American Value Fund, each a series of TBF, and any additional series of
TBF or any other investment company registered with the SEC as such established
after the Effective Date and any successor entities thereto.
"Non-Manager Member" shall mean any Person who is or becomes a Non-Manager
Member pursuant to the terms hereof (and, other than for purposes of Article III
hereof and any other provision hereof permitting or requiring any action,
consent or approval by a Non-Manager Member, it being understood that the rights
under such provisions shall always be exercised solely by such Non-Manager
Member and not by any Transferee), their respective Transferees, if any, under
Section 5.1(b) or Section 5.1(c) or, to the extent set forth in any consent of
the Manager Member pursuant to Section 5.1(a), their respective Transferees
under Section 5.1(a), unless otherwise indicated.
"Non-Solicitation Agreement" shall have the meaning set forth in Section
3.8 hereof.
"Notice Deadline" shall have the meaning specified in Section 7.1(d)
hereof.
"Notices" shall have the meaning specified in Section 11.1 hereof.
"Officers" shall have the meaning specified in Section 3.3 hereof.
"Offshore Adjustment" shall mean, with respect to each Offshore Fund and
for any period not greater than one fiscal year of such Offshore Fund, (a) the
sum of (i) the net assets in such Offshore Fund on each date as of which the net
assets are determined multiplied by (ii) the Offshore Fund Fee Rate in effect
for such Offshore Fund as of each such date during such period as of which the
net assets are determined, divided by (b) the number of times during such period
the net assets of such fund are determined, multiplied by (c) a fraction, the
numerator of which is the number of days in such period and the denominator of
which is 365 or 366, as the case may be.
"Offshore Deemed Revenues" shall mean for each Offshore Fund with respect
to each applicable period, the amount of any Performance Increment for such
period.
"Offshore Fund Fee Rate" shall initially mean, for each Offshore Fund
(including, without limitation, the Global Intrinsic Value Fund), one and
one-half percent (1.5%), in each case, subject to adjustment as follows:
(a) On each date on which the Relevant Percentage for such Offshore
Fund increases, the Offshore Fund Fee Rate for that Offshore Fund shall be
decreased by an amount equal to the product of (i) the original Offshore Fund
Fee Rate (as adjusted pursuant to clause (b)
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below) and (ii) the difference between the Relevant Percentage in effect
immediately after such increase and the Relevant Percentage in effect
immediately before such increase.
(b) On each date on which the Carry for such Offshore Fund increases
or decreases, in each case, pursuant to the organizational documents of such
Offshore Fund, (i) the Offshore Fund Fee Rate then in effect shall be
proportionately adjusted and (ii) the original Offshore Fund Fee Rate for that
Offshore Fund shall be proportionately adjusted, including for purposes of any
subsequent calculations required by paragraph (a) above.
(c) The Management Board may give the LLC and the Manager Member an
irrevocable written notice that the Non-Manager Members who are partners in the
Offshore Related Partnerships wish to terminate the Offshore Adjustment and
related calculations. Effective for all periods after the first calendar quarter
end that is at least twenty-four (24) months after the date of such notice (or
on such earlier or later date as is agreed to by the Management Board and the
Manager Member), and conditioned upon the Relevant Percentage being one hundred
percent (100%) on and after such effective date and upon the corresponding
increase in the Performance Fee to the LLC under the provisions of the
applicable related Offshore Management Agreement, the Offshore Fund Fee Rate for
each of the Offshore Funds shall be reduced to zero (0) (i.e. the LLC shall
receive the amount of the actual Performance Increment in lieu of the Offshore
Fund Fee Rate).
"Offshore Funds" shall mean (a) each Value Sub-Fund, (b) the Global
Intrinsic Value Fund and (c) any other investment fund organized outside the
U.S. which the Manager Member and the Management Board agree to treat as an
Offshore Fund, and any successor entities thereto, in each case so long as the
LLC or any Controlled Affiliate thereof is providing Investment Management
Services to such investment fund. Whenever a provision of this Agreement refers
to assets in an Offshore Fund, that reference shall not be deemed to include
assets in an Offshore Fund which are managed without any compensation therefor.
"Offshore Management Agreement" shall mean , with respect to the Value
Sub-Funds, the Investment Management Agreement, dated as of October 31, 1996,
between Tweedy, Browne Value Funds and the Predecessor, as amended and restated
(as contemplated by Section 5.7 hereof) by the Amended and Restated Investment
Management Agreement, dated as of October __, 1997, between Tweedy, Browne Value
Funds and the LLC, and with respect to the Global Intrinsic Value Fund, the
Amended and Restated Investment Management Agreement, dated as of April 1, 1994,
between Global Intrinsic Value Fund and the Predecessor, to be, as amended as
contemplated by Section 5.7 hereof, and in each case, any successor agreements
thereto.
"Offshore Related Partnerships" shall mean Alpine Partners, L.P.,
Belgravia Partners, L.P., Genpar Partners II, L.P., Tweeco Partners, L.P. and 52
Associates, L.P., each a Delaware limited partnership, and any successors
thereto or other entities which are entitled to receive Performance Increments
with respect to their Manger Shares in one or more Offshore Funds and in which
one or more of the Non-Manager Members or the Immediate Family of any of them
have an interest.
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"Offshore Shortfall" shall mean the amount, if any, by which (a) the sum
of the items of LLC loss and deduction for such quarter to be allocated under
Section 4.2(b) exceeds (b) the sum of the items of LLC income and gain for such
quarter to be allocated under Section 4.2(a)(v), together with items of LLC
income earned and collected in prior quarters that was reserved for use in
paying operating expenses of the LLC, and was so used in such quarter, up to an
aggregate maximum amount for any quarter of the sum of (x) the amount of LLC
income and gain allocated to the Manager Member under clause (B) of Section
4.2(a)(i) for such quarter and (y) the amount of LLC income and gain allocated
to the Non-Manager Members under clause (B) of Section 4.2(a)(iii) for such
quarter.
"Operating Cash Flow" shall mean, for any period, an amount equal to (a)
Revenues From Operations of the LLC for such period, minus (b) Free Cash Flow
for such period.
"Operating Shortfall" shall mean, as of any measurement date (including,
without limitation, a Put/Call Measurement Date or a termination of employment),
the amount, if any, by which the actual operating expenses of the LLC exceeded
the Operating Cash Flow of the LLC (including previously reserved Operating Cash
Flow) during the twelve (12) months ending on the last day of the calendar
quarter in which the measurement date occurs.
"Original Principals" shall mean each of Messrs. Christopher H. Browne,
William H. Browne and John D. Spears (and, other than for purposes of Article
III hereof and any other provision hereof permitting or requiring any action,
consent or approval by a Non-Manager Member, it being understood that the rights
under such provisions shall always be exercised solely by such Non-Manager
Member and not by any Transferee), their respective Transferees, if any, under
Section 5.1(b) or Section 5.1(c) or, to the extent set forth in any consent of
the Manager Member pursuant to Section 5.1(a), their respective Transferees
under Section 5.1(a)).
"Past Client" shall mean at any particular time, any Person who at any
point prior to such time had been an investment advisory client of, or recipient
of Investment Management Services or Brokerage Services from, the LLC
(including, without limitation, the Predecessor) or any of its Controlled
Affiliates but at such time is not an advisee or investment advisory client of,
or recipient of Investment Management Services or Brokerage Services from, the
LLC or any of its Controlled Affiliates.
"Performance Fee" shall mean, for each Offshore Fund with respect to each
applicable period, the "Performance Fee" as defined in, and payable to the LLC
as Investment Manager pursuant to, the respective Offshore Management Agreement.
"Performance Increment" shall mean, with respect to Manager Shares issued
by an Offshore Fund to an Offshore Related Partnership with respect to each
applicable period, the Performance Increment or similar performance fee or
profit allocation (as defined in the organizational documents of such Offshore
Fund) that has been definitively calculated and booked by such Offshore Fund
during such period (after giving effect to the reduction for the Selling
Commission (as defined in the organizational documents of such Offshore Fund) or
similar solicitation or brokerage fees and after giving effect to any reduction
for any Performance Fee).
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"Permanent Incapacity" shall mean, with respect to a Non-Manager Member,
that such Non-Manager Member has been permanently and totally unable, by reason
of injury, illness or other similar cause (determined pursuant to the process
set forth in the following sentence) to have performed his substantial and
material duties and responsibilities for a period of three hundred sixty-five
(365) consecutive days, which injury, illness or similar cause (as determined
pursuant to such process) would render such Non-Manager Member incapable of
operating in a similar capacity in the future. The foregoing determination shall
be made by a licensed physician selected by the Manager Member; provided,
however, that if the Manager Member or the LLC has purchased lump-sum key-man
disability insurance with respect to such Non-Manager Member, which policy is
then in effect, then such determination shall be made either (i) by an agreement
between such physician and a physician selected by the insurance company with
which the Manager Member, AMG or the LLC has entered into a lump-sum key-man
disability policy with respect to such Non-Manager Member, or, if the two
physicians cannot arrive at an agreement, a third physician will be chosen by
the first two physicians, and the majority decision of the three physicians will
then be binding), or (ii) if the Manager Member, AMG or the LLC has entered into
a lump-sum key-man disability policy with respect to such Non-Manager Member,
and a different procedure is then required under such policy, then by using such
other procedure as may then be required by such insurance policy.
"Person" shall mean any individual, partnership (limited or general),
corporation, limited liability company, limited liability partnership,
association, trust, joint venture, unincorporated organization or any similar
entity.
"Potential Client" shall mean, at any particular time, any Person to whom
the LLC (including, without limitation, the Predecessor) or any of its
Controlled Affiliates, through any of their officers, employees, agents or
consultants (or persons acting in any similar capacity), has, within two years
prior to such time, offered (by means of a personal meeting, telephone call, or
a letter or a written proposal specifically directed to the particular Person)
to provide Investment Management Services or Brokerage Services, but who is not
at such time an investment advisory client of, or recipient of Investment
Management Services or Brokerage Services from, the LLC or any of its Controlled
Affiliates. The preceding sentence is meant to exclude form letters, blanket
mailings, cold calls and initial marketing efforts that do not result in a
request by the recipient for further information or a presentation.
"Predecessor" shall have the meaning set forth in the preamble of this
Agreement.
"Present Client" shall mean, at any particular time, any Person who is at
such time an investment advisory client of, or recipient of Investment
Management Services or Brokerage Services from, the LLC or any of its Controlled
Affiliates.
"Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by Chase Manhattan Bank (or any successor thereto) as its
prime rate as in effect at its principal office.
"Private Funds" shall mean TBK Partners and Vanderbilt Partners, and any
other investment funds organized within or without the United States after the
Effective Date that the
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Manager Member and the Management Board agree to treat as a Private Fund, and
any successor entities thereto, in each case so long as the LLC or any
Controlled Affiliate thereof is providing Investment Management Services to such
investment fund. Whenever a provision of this Agreement refers to assets in a
Private Fund, that reference shall not be deemed to include assets in a Private
Fund which are managed without any compensation therefor.
"Public Offering" shall have the meaning specified in Section 7.4(a)
hereof.
"Purchase Agreement" shall mean that certain Purchase Agreement dated as
of August 15, 1997, by and among AMG, Tweedy, Browne Company L.P. and all the
partners of Tweedy, Browne Company L.P., as amended by that certain Amendment,
Waiver and Assignment Agreement dated as of the Effective Date by and among AMG,
Holdings, Tweedy, Browne Company L.P. and the partners of Tweedy, Browne Company
L.P., as the same has been and is hereafter further amended from time to time.
"Purchase Date" shall have the meaning specified in Section 7.1(b) hereof.
"Put" shall have the meaning specified in Section 7.1(a) hereof.
"Put LLC Points" shall have the meaning specified in Section 7.1(d)
hereof.
"Put/Call Measurement Date" shall have the meaning specified in Section
7.1(e) hereof.
"Put Notice" shall have the meaning specified in Section 7.1(d) hereof.
"Put Price" shall have the meaning specified in Section 7.1(e) hereof.
"Receipts Account" shall have the meaning specified in Section 4.4(d)
hereof.
"Relevant Percentage" shall mean, with respect to each Offshore Fund at
any time, the Relevant Percentage as defined in the respective Offshore
Management Agreement (i.e., the rate applicable to the Performance Fee payable
to the LLC under such Offshore Management Agreement).
"Repurchase" shall have the meaning specified in Section 7.3(a)(ii)
hereof.
"Repurchase Closing Date" shall have the meaning specified in Section
7.3(b) hereof.
"Repurchased Member" shall have the meaning specified in Section 7.3(a)
hereof.
"Repurchase Price" shall have the meaning specified in Section 7.3(c)
hereof.
"Required Capital Contributions" shall have the meaning specified in
Section 4.3(a) hereof.
"Reserved Points" shall mean the LLC Points (initially 8) reserved for
sale by the Original Principals and for transfer by Clark pursuant to the terms
of the Incentive Program. For all
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purposes of this Agreement (including without limitation for purposes of
allocations and distributions hereunder) unless otherwise specifically
indicated, Reserved Points shall not be treated as "LLC Points" until such time
as they are held by a Non-Manager Member other than an Original Principal or
Clark.
"Retirement" shall mean, with respect to a Non-Manager Member, the
termination by such Non-Manager Member of such Non-Manager Member's employment
with the LLC and its Affiliates: (a) after the date such Non-Manager Member
shall have been continuously employed by the LLC for a period of fifteen (15)
years commencing with the later of the Effective Date or the date such
Non-Manager Member becomes a Non-Manager Member of the LLC, as applicable, or
such other period as the Management Board and the Manager Member may determine
in a writing referring to a specific Non-Manager Member and (b) pursuant to a
written notice given to the LLC not less than one (1) year prior to the date of
such termination. Notwithstanding the foregoing, with respect to each of Messrs.
Christopher H. Browne, William H. Browne and John D. Spears, the term
"Retirement" shall mean the termination by him of his employment with the LLC
after the tenth (10th) anniversary of the Effective Date and pursuant to a
written notice given to the LLC not less than one (1) year prior to the date of
such termination.
"Revenues From Operations" shall mean, for any period, the gross revenues
of the LLC (except as set forth herein and except as otherwise agreed by the
Manager Member and the Management Board in a writing making reference to this
definition), determined on an accrual basis in accordance with generally
accepted accounting principles consistently applied; provided, however, that
Revenues From Operations shall not include (i) proceeds during such period from
the sale, exchange or other disposition of all, or a substantial portion of, the
assets of the LLC, (ii) revenues from the issuance by the LLC of additional LLC
Interests or (iii) payments received pursuant to any insurance policies other
than with respect to business interruption insurance; and, provided further,
that Revenues From Operations shall be determined net of any positive difference
between revenues from the provision of Brokerage Services and commission
expenses and clearing charges paid by the LLC during the relevant period ending
as of the end of the calendar quarter ending on or immediately prior to the
measurement date in connection with the provision of such Brokerage Services
(assuming for this purpose that the LLC continues to follow past practices with
respect to such revenues and charges).
"Run-Rate Free Cash Flow" shall mean, as of any measurement date, an
amount equal to the product of (i) the Run-Rate Revenues of the LLC as of such
date and (ii) the Free Cash Flow Percentage as of such date (without giving
effect to any transactions on such date).
"Run-Rate Revenues" shall mean, as of any measurement date, the sum of
(a) the aggregate revenues from all investment accounts (excluding
the Offshore Funds and other accounts all or a portion of the advisory fees for
which are based on performance) to which the LLC provides Investment Management
Services (and excluding for these purposes accounts of any Present Client of the
LLC who has not yet fully invested (except for cash balances in accordance with
customary practices of the LLC) the assets managed by the LLC as set forth in
such Client's contract with the LLC), determined by multiplying the net assets
of each such account under management by the LLC as of such date by the
applicable annualized asset-based
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advisory services fee rate in effect as of such date with respect to such Client
account (net of any fee reimbursements or waivers);
(b) with respect to each investment account to which the LLC
provides Investment Management Services (and excluding for these purposes
accounts of any Present Client of the LLC who has not yet fully invested (except
for cash balances in accordance with customary practices of the LLC) the assets
managed by the LLC as set forth in such Client's contract with the LLC), and
which has a performance fee component, either (i) the assets managed by the LLC
as set forth in such Client's contract with the LLC as of such date, multiplied
by the prevailing advisory fee rate in effect as of such date with respect to
separate account clients of the LLC, or (ii) if over the twenty-four (24) months
ending as of the end of the calendar quarter immediately prior to the
measurement date no performance fees have been earned by the LLC with respect to
such investment account, then the assets managed by the LLC as set forth in such
Client's contract with the LLC as of such date, multiplied by the advisory fee
rate applicable to the fixed fee component of such account, if any, net of any
expense offsets;
(c) the lesser of (i) the sum for all of the Offshore Funds, of the
product of (x) the net assets under management in each Offshore Fund as of such
date and (y) the Offshore Fund Fee Rate then in effect for each such Offshore
Fund or (ii) the sum for all of the Offshore Funds, of (A) fifty percent (50%)
of the base investment advisory fees received by the LLC from the Offshore Funds
for the twenty-four (24) months ending as of the end of the calendar quarter
immediately prior to the measurement date (in excess of any offset or netting
for expenses under each Offshore Management Agreement) and (B) fifty percent
(50%) of the Offshore Deemed Revenues for each Offshore Fund in each of the last
two (2) fiscal years immediately prior to the measurement date;
(d) with respect to each Present Client of the LLC whose commitment
for assets to be managed by the LLC as set forth in such Client's contract with
the LLC has not been fully invested (except for cash balances in accordance with
customary practices of the LLC), the aggregate revenues from all such accounts,
determined to be an amount that is the greater of (i) the product of fifty
percent (50%) of the net assets of such accounts committed to be managed by the
LLC as set forth in such Client's contract with the LLC and the applicable
advisory services fee rate in effect as of such date with respect to such
account and (ii) the product of the non-cash net assets and the applicable
advisory services fee rate in effect as of such date with respect to such
account (in each case, net of any fee reimbursements or waivers); and
(e) any positive difference between revenues from the provision of
Brokerage Services during the twelve (12) month period ending as of the end of
the calendar quarter ending immediately prior to the measurement date and
commission expenses and clearing charges paid by the LLC in connection with the
provision of such Brokerage Services.
"SEC" shall mean the Securities and Exchange Commission, and any successor
Governmental Authority thereto.
"Securities Act" shall mean the Securities Act of 1933, as it may be
amended from time to time, and any successor thereto.
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"Shrager" means Thomas Shrager.
"Stock Price" shall have the meaning specified in Section 7.4(c)(ii)
hereof.
"TBF" shall mean Tweedy, Browne Fund Inc., an open-end management
investment company registered under the 1940 Act.
"TBK Partners" shall mean TBK Partners, L.P., a Delaware limited
partnership, and any successor entity thereto.
"Transfer" shall mean any sale, assignment, transfer, exchange, charge,
pledge, gift, hypothecation, conveyance or encumbrance (such meaning to be
equally applicable to verb and noun forms of such term), or any offer to do any
of the foregoing.
"Tweedy, Browne Value Funds" shall mean the Tweedy, Browne Value Funds, an
investment company organized under the laws of the Grand Duchy of Luxemburg as a
Societe d'Investissement a Capital Variable (including the Value Sub-Funds), and
including any successor entities thereto.
"UBT" shall have the meaning specified in Section 4.6(g) hereof.
"Unsatisfactory Performance" shall mean a written determination by the
Management Board with the written consent of the Manager Member, that a
Non-Manager Member has failed to meet minimum requirements of satisfactory
performance of his job, after such Non-Manager Member has received written
notice that the Management Board was considering such a determination and the
Non-Manager Member has had a reasonable opportunity to respond in writing or in
person (at such Non-Manager Member's request) after his receipt of such notice.
"Value Sub-Funds" shall mean each sub-fund of the Tweedy, Browne Value
Funds, including Tweedy, Browne USA Value Fund, Tweedy, Browne International
Value Fund and Tweedy, Browne International Swiss Franc Value Fund and any
additional sub-funds thereof established after the Effective Date and any
successor entities thereto.
"Vanderbilt Partners" shall mean Vanderbilt Partners, L.P., a Delaware
limited partnership, and any successor entity thereto.
"Wyckoff" means Robert Q. Wyckoff, Jr.
In addition to the foregoing, other capitalized terms used in this
Agreement shall have the meaning ascribed thereto in the text of this Agreement.
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ARTICLE II - ORGANIZATION AND GENERAL PROVISIONS.
SECTION 2.1 CONVERSION; CONTINUATION.
(a) The Original Principals and Clark have agreed to continue the
business of the Predecessor as a limited liability company under and pursuant to
the provisions of the Act. The Members acknowledge that immediately prior to the
execution of this Agreement, Shrager and Wyckoff acquired certain interests from
the Original Principals and Clark and were admitted as Members of the LLC. The
Members hereby agree to further continue the business as a limited liability
company under and pursuant to the provisions of the Act, and agree that the
rights, duties and liabilities of the Members shall be as provided in the Act,
except as otherwise provided herein.
(b) Upon the execution of this Agreement or a counterpart of this
Agreement, the Non-Manager Members as of the Effective Date shall continue as
members of the LLC.
(c) The name, LLC Interests and Capital Contributions of each Member
(including the Fair Market Value of such Capital Contributions) shall be listed
on Schedule A attached hereto. The Manager Member shall update Schedule A from
time to time as it deems necessary to reflect accurately the information to be
contained therein. Any amendment or revision to Schedule A shall not be deemed
an amendment to this Agreement. Any reference in this Agreement to Schedule A
shall be deemed to be a reference to Schedule A as amended and in effect from
time to time and maintained with the records of the LLC.
(d) The Manager Member, as an authorized person within the meaning
of the Act, shall execute, deliver and file any certificates required or
permitted by the Act to be filed in the office of the Secretary of State of the
State of Delaware.
SECTION 2.2 NAME. Pursuant to the conversion of the Predecessor into the
LLC, the name of the Predecessor has been changed to Tweedy, Browne Company LLC.
At any time, the Management Board, with the written consent of the Manager
Member, may change the name of the LLC. The business of the LLC may be
conducted, upon compliance with all applicable laws, under any other name
designated by the Management Board with the written consent of the Manager
Member.
SECTION 2.3 TERM. As a result of the conversion of the Predecessor into
the LLC pursuant to Section 18-214 of the Act, the existence of the LLC is
deemed to have commenced as of December 24, 1986, the date the Predecessor
commenced its existence. The term of the LLC shall continue in perpetuity, until
the LLC is dissolved in accordance with the provisions of this Agreement.
SECTION 2.4 REGISTERED AGENT AND REGISTERED OFFICE. The LLC's registered
agent and registered office in Delaware shall be as set forth in the
Certificate. At any time, the Manager Member may designate another registered
agent and/or registered office.
SECTION 2.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the LLC shall be at 52 Vanderbilt Avenue, New York, New York. At any time,
the Management Board
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may change the location of the LLC's principal place of business; provided,
however, that if the principal place of business is to be located outside of New
York, New York, such action must be approved by the Manager Member.
SECTION 2.6 QUALIFICATION IN OTHER JURISDICTIONS. The Management Board
shall cause the LLC to be qualified or registered (under assumed or fictitious
name if necessary) in any jurisdiction in which such qualification, formation or
registration is required.
SECTION 2.7 PURPOSES AND POWERS. The principal business activity and
purposes of the LLC shall initially be to provide Investment Management Services
and Brokerage Services, and any businesses related thereto or useful in
connection therewith. In addition, the LLC shall have the authority to engage in
any other lawful business, purpose or activity permitted by the Act which is
agreed upon in writing by the Manager Member and the Management Board, and it
shall possess and may exercise all of the powers and privileges granted by the
Act or which may be exercised by any Person, together with any powers incidental
thereto, so far as such powers or privileges are necessary or convenient to the
conduct, promotion or attainment of the business purposes or activities of the
LLC, including without limitation the following powers:
(a) to conduct its business and operations and to have and exercise
the powers granted to a limited liability company by the Act in any state,
territory or possession of the United States or in any foreign country or
jurisdiction;
(b) to purchase, receive, take, lease or otherwise acquire, own,
hold, improve, maintain, use or otherwise deal in and with, sell, convey, lease,
exchange, transfer or otherwise dispose of, mortgage, pledge, encumber or create
a security interest in all or any of its real or personal property, or any
interest therein, wherever situated;
(c) to borrow or lend money or obtain or extend credit and other
financial accommodations, to invest and reinvest its funds in any type of
security or obligation of or interest in any public, private or governmental
entity, and to give and receive interests in real and personal property as
security for the payment of funds so borrowed, loaned or invested;
(d) to make contracts, including contracts of insurance, incur
liabilities and give guaranties, including without limitation, guaranties of
obligations of other Persons who are interested in the LLC or in whom the LLC
has an interest;
(e) to guarantee the signatures of customers or others whenever such
guarantees are convenient in the conduct of the LLC's business;
(f) to employ and terminate Officers, employees, agents and other
Persons, to organize committees and boards of the LLC, to delegate to such
Persons, committees and boards any or, except as otherwise specifically set
forth in this Agreement or provided in the Act, all its power and authority, to
fix the compensation and define the duties and obligations of such personnel, to
establish and carry out retirement, incentive and benefit plans for such
personnel, and to indemnify such personnel to the extent permitted by this
Agreement and the Act;
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(g) to make donations irrespective of benefit to the LLC for the
public welfare or for community, charitable, religious, educational, scientific,
civic or similar purposes;
(h) to institute, prosecute, and defend any legal action or
arbitration proceeding involving the LLC, and to pay, adjust, compromise,
settle, or refer to arbitration any claim by or against the LLC or any of its
assets;
(i) to indemnify any Person to the fullest extent permitted by law
and to obtain any and all types of insurance;
(j) to negotiate, enter into, renegotiate, extend, renew, terminate,
modify, amend, waive, execute, acknowledge or take any other action with respect
to any lease, contract or security agreement in respect of any assets of the
LLC;
(k) to form, sponsor, organize or enter into joint ventures, general
or limited partnerships, limited liability companies, trusts and any other
combinations or associations formed for investment purposes;
(l) to make, execute, acknowledge and file any and all documents or
instruments necessary, convenient or incidental to the accomplishment of the
purposes of the LLC; and
(m) to cease its activities and cancel its Certificate.
SECTION 2.8 TITLE TO PROPERTY. All property owned by the LLC, real or
personal, tangible or intangible, shall be deemed to be owned by the LLC as an
entity, and no Member, individually, shall have any ownership of such property.
ARTICLE III - MANAGEMENT OF THE LLC.
SECTION 3.1 MANAGER MEMBER.
(a) Subject to the other terms and conditions of this Agreement,
including the delegations of power and authority set forth herein, the
management and control of the business of the LLC shall be vested exclusively in
the Manager Member, and the Manager Member shall have exclusive power and
authority, in the name of and on behalf of the LLC, to perform all acts and do
all things which, in its sole discretion, it deems necessary or desirable to
conduct the business of the LLC, without the vote or consent of the Members in
their capacity as such. No Member other than the Manager Member shall have the
power to sign for or bind the LLC to any agreement or document in its capacity
as Member, but the Manager Member may delegate the power to sign for or bind the
LLC to one or more members of the Management Board or Officers of the LLC.
(b) The Manager Member shall, subject to all applicable provisions
of this Agreement, be authorized in the name of and on behalf of the LLC: (i) to
enter into, execute,
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amend, supplement, acknowledge and deliver any and all contracts, agreements,
leases or other instruments for the operation of the LLC's business; and (ii) in
general to do all things and execute all documents necessary or appropriate to
conduct the business of the LLC as set forth in Section 2.7 hereof, or to
protect and preserve the LLC's assets. The Manager Member may delegate any or
all of the foregoing powers.
(c) The Manager Member is required to be a Member, and shall hold
office until its resignation or removal in accordance with the provisions
hereof. The Manager Member is a "manager" (within the meaning of the Act) of the
LLC. The Manager Member shall devote such time to the business and affairs of
the LLC as it deems necessary, in its sole discretion, for the performance of
its duties, but in any event, shall not be required to devote full time to the
performance of such duties and may delegate its duties and responsibilities as
provided in this Agreement.
(d) Any action taken by the Manager Member, and the signature of the
Manager Member (or an authorized representative thereof) on any agreement,
contract, instrument or other document on behalf of the LLC, shall be sufficient
to bind the LLC and shall conclusively evidence the authority of the LLC with
respect thereto.
(e) Any Person dealing with the LLC, the Manager Member or any
Member may rely upon a certificate signed by the Manager Member as to (i) the
identity of the Manager Member or any Member; (ii) any factual matters relevant
to the affairs of the LLC; (iii) the Persons who are authorized to execute and
deliver any document on behalf of the LLC; or (iv) any action taken or omitted
by the LLC or the Manager Member.
(f) Notwithstanding the foregoing, the Manager Member shall have no
power or authority whatsoever to make recommendations with respect to or to
determine which transactions the LLC shall cause or recommend any client to
enter into, or the time at which, the party with which or the terms on which any
such transaction shall be entered into, or to exercise any right, power or
privilege with respect to the account of any Client or any of the securities or
other instruments in accounts of Clients.
(g) The LLC shall not do, and the Non-Manager Members (including
with respect to those Non-Manager Members who are members of the Management
Board or Officers, in their capacities as such) shall use all commercially
reasonable efforts to prevent the LLC from doing, any of the following without
the prior written consent of the Manager Member (which written consent makes
specific reference to this Section 3.1(g)):
(i) enter into, amend, modify or terminate any contract,
agreement or understanding (written or oral) if such action or the
resulting contract, agreement or understanding could reasonably be
expected to conflict with the provisions of this Agreement;
(ii) take any action or series of related actions or enter
into, amend, modify or terminate any contract, agreement or
understanding (written or oral) or series of related contracts,
agreements or understandings if such action or the
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resulting contract, agreement or understanding or series thereof
could reasonably be expected to: (A) reduce the percentage of
Operating Cash Flow available in the current or future periods for
non-fixed amount bonus and incentive payment to less than
one-quarter (1/4) of Operating Cash Flow reasonably anticipated for
the relevant period or periods or (B) effect a material reduction in
the availability of Free Cash Flow for distribution by the LLC in
the then current or future periods, or (C) have a material adverse
effect on the condition (financial or otherwise), properties,
assets, liabilities, business, operations or prospects of the LLC;
provided, however, that no consent of the Manager Member shall be
required for decisions by the Management Board in the exercise of
its reasonable good faith judgment relating to the commencement,
termination or modification of any agreement for the provision by
the LLC or any of its Controlled Affiliates of Investment Management
Services or Brokerage Services, including rates and other terms and
conditions with respect to Investment Management Services and
Brokerage Services, unless such decision directly or indirectly
benefits a Non-Manager Member or a member of the Immediate Family
of a Non-Manager Member to the detriment of the LLC or the Manager
Member;
(iii) create, incur, assume, or suffer to exist any
Indebtedness of the LLC (or its Controlled Affiliates, to the extent
such Indebtedness would be required to be included in the
consolidated balance sheet of the LLC in accordance with GAAP),
except Indebtedness of the LLC incurred to finance the acquisition
of fixed or capital assets (whether pursuant to a deferred purchase
arrangement with a vendor, a loan, a financing lease or otherwise)
in an amount outstanding at any time not to exceed one hundred fifty
thousand dollars ($150,000) (which shall be an obligation to be
repaid solely out of Operating Cash Flow);
(iv) take any action, enter into, amend, modify or terminate
any contract, agreement or understanding (written or oral) if such
action or the resulting contract, agreement or understanding (A) has
the effect of creating a Lien upon any of the assets of the LLC,
other than Liens securing permitted Indebtedness of the LLC incurred
to finance the acquisition of fixed or capital assets (whether
pursuant to a deferred purchase agreement with a vendor, a loan, a
financing lease or otherwise), provided that (1) such Liens shall be
created simultaneously with the acquisition of such fixed or capital
assets, (2) such Liens do not at any time encumber any property
other than the property financed by such Indebtedness, (3) the
amount of Indebtedness secured thereby is not increased, and (4) the
principal amount of Indebtedness secured by such Lien shall at no
time exceed the purchase price of such property; or (B) has the
effect of creating a Lien upon any of that portion of the revenues
of the LLC which is included in Free Cash Flow;
(v) either (A) take any action (or omit to take any action) if
such action (or omission) could reasonably be expected to result in
the termination of the employment (including, without limitation, a
so-called constructive termination under applicable law) either by
the LLC of any Non-Manager Member or by Shrager or Wyckoff as a
result of a material reduction in his compensation or
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responsibilities other than For Cause or Unsatisfactory Performance
or the performance of the business, or (B) enter into, amend, modify
or terminate any Employment Agreement or other employment commitment
or binding understanding with respect to employment matters with any
Non-Manager Member or member of the Immediate Family of a
Non-Manager Member or waive any rights of the LLC thereunder;
(vi) establish or modify any significant compensation
arrangement (other than salary and cash bonuses in the ordinary
course) or program (whether cash or non-cash benefits) applicable to
any employee, which (A) requires the Manager Member or any of its
Affiliates (other than the LLC) to take any action which the Manager
Member views as being contrary to the interest of the Manager Member
or the interest of any of its Affiliates and which it would not take
but for the action contemplated by the LLC or the Non-Manager
Members or Officers or (B) prevents the Manager Member or any of its
Affiliates (other than the LLC) from taking any action which the
Manager Member views as being in the interest of the Manager Member
or the interest of any of its Affiliates and which it would
otherwise have been able to take but for the action contemplated by
the LLC or the Non-Manager Members or Officers (and in addition,
each Non-Manger Member will use his commercially reasonable efforts
to cause the LLC to give the Manager Member not less than thirty
(30) days prior written notice before the LLC establishes,
terminates or modifies any significant compensation arrangement
(other than salary and cash bonuses in the ordinary course) or
program);
(vii) establish or modify any plan subject to ERISA;
(viii)enter into any line of business other than the provision
of Investment Management Services or Brokerage Services and
businesses related thereto or useful in connection therewith;
(ix) take any action, enter into, amend, modify or terminate
any contract or agreement with any of the Offshore Funds or the
Offshore Related Partnerships (including, without limitation, the
relevant Offshore Management Agreement and the organizational
documents of such Offshore Fund) either (A) that would have the
effect of benefitting one or more of the Non-Manager Members or
members of their Immediate Family to the detriment of the LLC, the
Manager Member or AMG, or (B) that would alter the arrangements
described in Section 5.7(a); or
(x) take any action which (A) may be taken only by the Manager
Member with or without the consent of the Non-Manager Members
pursuant to any provision of this Agreement, or (B) requires the
approval or consent of the Manager Member pursuant to any provision
of this Agreement.
Whenever in this Agreement an action or determination requires the consent
of the Manager Member, such consent shall only be effective if it is given in a
writing which reasonably describes, or responds affirmatively to a written
request which reasonably describes, both the
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action which is proposed to be taken and the consent which is being requested or
given, and, unless otherwise specified in this Agreement, such consent of the
Manager Member may be given or withheld by the Manager Member acting in its
reasonable discretion.
(h) In addition to, and not in limitation of, the Manager Member's
powers and authority under this Agreement, the Manager Member shall also have
the power, in its reasonable discretion, after consultation with one or more
members of the Management Board (to the extent any prior consultation is
feasible), to take any or all of the following actions:
(i) such actions as it deems necessary or appropriate to cause
the LLC or, insofar as it is within the authority of the LLC, any
Controlled Affiliate of the LLC, or any officer, employee, member,
manager, partner, or agent thereof, to comply with laws, rules or
regulations applicable to the LLC or such Controlled Affiliate or
such Person in relation to the LLC or such Controlled Affiliate, or
any actions required by the Manager Member in accordance with its
duties hereunder;
(ii) any other action that the Manager Member is authorized to
take pursuant to the terms of this Agreement (subject to having
obtained any required Management Board approval) and any other
action necessary or appropriate to prevent actions that require the
Manager Member's consent pursuant to the terms of this Agreement if
such consent has not then been given;
(iii) establish and mandate that the LLC participate in
employee benefit plans which are subject to ERISA or require
qualification under Section 401 of the Internal Revenue Code in
order to make the expenses of such plans deductible and establish or
modify the terms of any such plan and take such actions as may be
necessary or desirable in connection therewith but only to the
extent that the Manager Member reasonably believes that such
participation is required by law and to the further extent the
Manager Member reasonably believes necessary to make the expense by
the LLC under such plans deductible or to comply with ERISA, as the
case may be;
(iv) such actions as it deems necessary or appropriate to
coordinate any initiative which involves the LLC (or a Controlled
Affiliate of the LLC) and the Manager Member and/or one or more of
its Affiliates, but only on such terms and conditions as the
participation of the LLC in such initiative has been approved by the
Management Board; and
(v) such actions as it deems necessary or appropriate to cause
the LLC to fulfill its obligations and exercise its rights under the
Purchase Agreement.
(i) The Manager Member and its Affiliates (including, without
limitation, AMG) may engage, independently or with others, in other business
ventures of every nature and description, including the acquisition, creation,
financing, trading in, and operation and disposition of interests in, investment
managers and brokers and other businesses that may be competitive with the LLC's
businesses. Neither the LLC nor any of the Non-Manager Members shall have any
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right in or to any other such ventures by virtue of this Agreement or the
limited liability company created or continued hereby, nor shall any such
activity by the Manager Member or such Affiliates be deemed wrongful or improper
or result in any liability to the Manager Member or such Affiliates. The Manager
Member shall not be obligated to present any opportunity to the LLC even if such
opportunity is of such a character which, if presented to the LLC, would be
suitable for the LLC.
SECTION 3.2 MANAGEMENT BOARD; NON-MANAGER MEMBERS.
(a) The LLC shall have a Management Board of the LLC (the
"Management Board"). Subject to the specific rights and powers expressly
reserved to the Manager Member in this Agreement (including, without limitation,
in Sections 3.1(g) and 3.1(h) hereof), to the agreement, consent or
determination of the Manager Member in those circumstances where such agreement,
consent or determination is expressly provided for in this Agreement and to the
provisions of Section 3.1 to the extent necessary or appropriate to effectuate
the foregoing, the Manager Member hereby irrevocably delegates, to the greatest
extent permitted by applicable law, to the Management Board all of its power and
authority, in the name of and on behalf of the LLC, to perform all acts and do
all things which the Management Board, in the reasonable exercise of its good
faith judgment, deems necessary or desirable to conduct the business of the LLC,
without the vote or consent of any Member in its capacity as such. In order to
effectuate the foregoing, the Management Board shall have the rights and powers
of the Manager Member set forth in Section 3.1(b) (subject to Sections 3.1(g)
and (h)), Section 3.1(d) and Section 3.1(e) hereof. Without in any way limiting
the scope of the foregoing delegation, the Management Board shall have the sole
and exclusive power and authority to make recommendations with respect to and to
determine which transactions then Present Clients of the LLC shall enter into,
and the time at which, the parties with which and the terms on which all such
transactions shall be entered into and to exercise any rights, powers and
privileges of the LLC with respect to the accounts of Clients or any of the
securities or other instrument in accounts of Clients and shall have the power
and authority to delegate any of the powers and authorities delegated to it to
Officers and employees of the LLC.
(b) The Management Board shall consist of Non-Manager Members
determined as follows:
(i) The Management Board shall initially have three (3)
members appointed by the Manager Member. The Manager Member hereby
appoints as the initial three (3) members of the Management Board
those Non-Manager Members listed on Schedule B hereto. The number of
members of the Management Board may be increased by the Management
Board. No Person who is not a Non-Manager Member may be, become or
remain a member of the Management Board.
(ii) Any vacancy in the Management Board however occurring
(including a vacancy resulting from the increase in size of the
Management Board) may be filled by any other Non-Manager Member
elected by the Management Board; provided, however, that if more
than one Non-Manager Member is
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available to fill such vacancy, the Manager Member shall have the
right to consent as to which Non-Manager Member shall fill such
vacancy. In lieu of filling any such vacancy, the Management Board
may determine to reduce the number of members of the Management
Board, but not, without the prior written consent of the Manager
Member, to a number less than three (3). If any vacancy on the
Management Board is not filled in accordance with the first sentence
of this clause (ii) and such failure to act results in the number of
members of the Management Board being less than three (3) members
for sixty (60) or more days after the date on which the Manager
Member gives the Management Board notice of its intent to fill any
such vacancy and one (1) or more Non-Manager Members are available
to fill such vacancy, then the Manager Member may appoint one or
more Non-Manager Members to the Management Board, until the number
of members of the Management Board equals three (3), which Person or
Persons shall immediately resign if subsequent thereto the remaining
member or members of the Management Board fill such vacancy or
vacancies in the manner contemplated by the first sentence of this
clause (ii).
(iii) Non-Manager Members who are members of the Management
Board shall remain members of the Management Board until their
resignation, removal or death. Any member of the Management Board
may resign by delivering his written resignation to any member of
the Management Board and the Manager Member. Any member of the
Management Board may be removed from such position with or without
cause by the Management Board acting by a Board Vote, with the prior
written consent of the Manager Member. Any Non-Manager Member shall
be deemed to have resigned from the Management Board and shall no
longer be a member of the Management Board immediately upon such
Non-Manager Member ceasing to be an employee of the LLC or otherwise
ceasing to be a Non-Manager Member, in each case, for whatever
reason. Any Non-Manager Member shall be deemed to have resigned
from the Management Board and shall no longer be a member of the
Management Board immediately upon such Non-Manager Member reaching
the age of seventy (70), unless the Management Board with the prior
written consent of the Manager Member waives or modifies the
requirements of this sentence with respect to a particular
Non-Manager Member.
(iv) Notwithstanding any other provision hereof to the
contrary, the Manager Member shall have full power and authority at
any time in its sole discretion (and without the consent or approval
of the Management Board or the Non-Manager Members) to remove, with
or without cause, one or more members of the Management Board or to
increase the number of members of the Management Board and to fill
the vacancies created by any such removal or increase with one or
more other Non-Manager Members, provided that such removal or
increase may only be effected by written notice from the Manager to
the LLC, which written notice must expressly reference this Section
of this Agreement.
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(c) At any meeting of the Management Board, presence in person or by
telephone (or other electronic means) of fifty percent (50%) or more of the
members of the Management Board shall constitute a quorum. At any meeting of the
Management Board at which a quorum is present, a majority of the members of the
Management Board present, which majority shall include at least fifty percent
(50%) of the Original Principals who are members of the Management Board for so
long as at least two (2) of the Original Principals are members of the
Management Board, may take any action on behalf of the Management Board (any
such action taken by such members of the Management Board is sometimes referred
to herein as a "Board Vote"). Any action required to be taken at any meeting of
the Management Board may be taken by the Management Board without a meeting of
the Management Board, if (i) a written consent thereto is signed by all the
members of the Management Board and (ii) the Manager Member has been given a
copy of such written consent not less than forty-eight (48) hours prior to such
action. Notice of the time, date and place of all meetings of the Management
Board shall be given to all members of the Management Board and, upon request,
to the Manager Member at least forty-eight (48) hours in advance of the meeting.
A representative of the Manager Member shall be entitled to attend each meeting
of the Management Board. Notice need not be given to any member of the
Management Board or the Manager Member if a waiver of notice is given (orally or
in writing) by such member of the Management Board or the Manager Member (as
applicable), before, at or after the meeting. Members of the Management Board
are not "managers" (within the meaning of the Act) of the LLC.
SECTION 3.3 OFFICERS. The Management Board may designate employees of the
LLC as officers of the LLC (the "Officers") as it deems necessary or desirable
to carry on the business of the LLC. Any two or more offices may be held by the
same Person. As of the Effective Date, the Management Board has designated the
Officers set forth as such in the Certificate, which shall be amended promptly
upon any change thereto. New offices may be created and filled by the Management
Board (and such offices shall be effective without any amendment to the
Certificate). Each Officer shall hold office until his successor is designated
by the Management Board or until his earlier death, resignation or removal. Any
Officer may resign at any time upon written notice to the LLC and the Manager
Member. Any Officer designated by the Management Board may be removed by the
Management Board (excluding the Person being considered) For Cause or not For
Cause at any time, subject to the terms of such Officer's Employment Agreement
with the LLC, if any. A vacancy in any office occurring because of death,
resignation, removal or otherwise may be filled by the Management Board. Any
designation of Officers, a description of any duties delegated to such Officers,
and any removal of such Officers shall be approved by the Management Board in
writing, which shall be delivered to the Manager Member. The Officers are not
"managers" (within the meaning of the Act) of the LLC. The Management Board may
delegate any or all of the power and authority delegated to it to one or more of
such Officers subject to the right of the Management Board to modify or withdraw
any or all of any such delegation and, unless otherwise set forth in a written
delegation of power and authority by the Management Board, to the right of any
member of the Management Board to withdraw any or all of any such delegation by
written notice to the Officer or Officers in question, which notice shall, upon
receipt, have the same effect as a Board Vote.
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SECTION 3.4 EMPLOYEES OF THE LLC.
(a) The terms of employment of any employee of the LLC who is not a
Non-Manager Member (including, without limitation, with respect to the hiring,
promoting, demoting and terminating of such employees), shall be determined by
the Management Board or such Person or Persons to whom the Management Board may
delegate such power and authority, subject, in all cases, to compliance with all
applicable laws, rules and regulations and, in the case of compensation, to the
provisions of 3.5 hereof. Notwithstanding the foregoing, the Manager Member may
terminate the employment by the LLC of any employee who has engaged in any
activity included in the definition of "For Cause;" (subject, in the case of
clause (b) of the definition of For Cause to the joint determination of the
Management Board and the Manager Member as set forth therein) provided, however,
that the Manager Member may not so terminate the employment of any such employee
without having first consulted with the Management Board and given written
notice to the Management Board specifying the reasons for such decision.
(b) The granting or Transferring of LLC Interests in connection with
any hiring or promotion of an employee shall be subject to the terms and
conditions set forth in Articles V and VI hereof.
(c) Any Person who is a Non-Manager Member may have his employment
with the LLC terminated by the LLC only: (i) in the case of a termination For
Cause, by either the Manager Member or the Management Board acting with the
prior written consent of the Manager Member, or (ii) in the case of any other
termination by the LLC, by the Management Board with the prior written consent
of the Manager Member.
(d) Subject to the other provisions of this Agreement (including,
without limitation, Section 3.5), the compensation and other terms of employment
of an employee who is a Non-Manager Member shall be set by the Management Board.
SECTION 3.5 OPERATION OF THE BUSINESS OF THE LLC.
(a) The Operating Cash Flow of the LLC for any period (reduced by
any portion thereof attributable to performance fees accrued in such period but
not paid in such period and increased by the portion of any performance fees
paid in such period that were accrued in a previous quarter) shall be used by
the LLC to provide for and pay its business expenses and expenditures as
determined by the Management Board; including, without limitation, compensation
and benefits to its employees, including the Officers. Without the prior written
consent of the Manager Member (which written consent makes specific reference to
this Section 3.5(a)), the LLC shall not incur (and the Non-Manager Members shall
use all commercially reasonable efforts to prevent the LLC from incurring) any
expenses or obligations that exceed its ability to pay or provide for them out
of its Operating Cash Flow (as adjusted in accordance with the parenthetical set
forth in the first sentence of this Section 3.5(a)) on a current or previously
reserved basis. Except to the extent otherwise required by applicable law, the
LLC shall only make payments of compensation to the Non-Manager Members who are
employees of the LLC out of the balance of its Operating Cash Flow (as adjusted
in accordance with the parenthetical set forth in the first sentence of this
Section 3.5(a)) remaining after the payment (or reservation for payment) of all
the
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other business expenses and expenditures for the applicable period. Any excess
Operating Cash Flow (as adjusted in accordance with the parenthetical set forth
in the first sentence of this Section 3.5(a)) remaining for any fiscal year
following the payment (or reservation for payment) of all business expenses and
expenditures may be used by the LLC in such fiscal year or any or all of such
excess Operating Cash Flow may be reserved for use in future fiscal years for
any permissible purpose. Revenues From Operations other than the portion which
constitutes Operating Cash Flow may be used to provide for and pay the business
expenses of the LLC only to the extent agreed to in writing by the Manager
Member and the Management Board (any such use being referred to herein as a
"Free Cash Flow Expenditure") and as provided in Section 9.5 with respect to the
payment of UBT.
(b) The LLC will maintain (and the Non-Manager Members shall use all
commercially reasonable efforts to cause the LLC to maintain), in full force and
effect, such insurance as is customarily maintained by companies of similar size
in the same or similar businesses (including, without limitation, errors and
omissions liability insurance but excluding key-man life insurance), the
premiums on which will be paid out of Operating Cash Flow. The LLC, the Manager
Member or AMG may maintain key-man life insurance and disability insurance
policies on each Non-Manager Member, from time to time, and the Non-Manager
Members will use all commercially reasonable efforts to cooperate with the
Manager Member, AMG and the LLC to effectuate the foregoing; provided, however,
that the LLC shall not maintain such insurance unless the Management Board and
the Manager Member so agree, in which case, they may also agree to treat the
premiums thereon as a Free Cash Flow Expenditure.
(c) Notwithstanding any of the provisions of this Agreement to the
contrary, all accounting, financial reporting and bookkeeping procedures of the
LLC shall be established in conjunction with policies and procedures determined
under the supervision of the Manager Member and AMG in connection with similar
matters for other Affiliates of the Manager Member and AMG. The LLC shall have a
continuing obligation to keep AMG's chief financial officer informed of material
financial developments with respect to the LLC. Notwithstanding any of the
provisions of this Agreement to the contrary, all legal, compliance and
regulatory matters of the LLC shall be coordinated with the Manager Member and
AMG, and the LLC shall have an ongoing obligation to keep the Manager Member and
AMG informed of all legal, compliance and related activities, in accordance with
procedures to be established by the Manager Member and the Management Board.
(d) Notwithstanding any of the provisions of this Agreement to the
contrary, the Non-Manager Members will cooperate with the Manager Member and AMG
and their Affiliates in implementing any initiative which involves the LLC (or a
Controlled Affiliate of the LLC) and the Manager Member, AMG and/or one or more
of their other Affiliates, but only on such terms and conditions as the
participation of the LLC in such initiative has been approved by the Management
Board.
SECTION 3.6 COMPENSATION AND EXPENSES OF THE MEMBERS. The Manager Member
may receive compensation for services provided to the LLC only to the extent
approved by the Management Board. The LLC shall, however, pay and/or reimburse
the Manager Member for all reasonable travel expenses incurred by the Manager
Member in accordance with Section 9.4
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as well as (i) any expenses incurred by the Manager Member in connection with
the operation of the LLC as approved or directed by the Management Board or any
duly authorized Officer, (ii) the applicable portion of any expenses incurred by
the Manager Member in connection with any initiative which involves the LLC
and/or one or more of the other Affiliates of the Manager Member or AMG, but
only on such terms and conditions as the participation of the LLC in such
initiative has been approved by the Management Board, and (iii) any expenses
incurred by the Manager Member in connection with its exercise of its powers
under Section 3.1(h)(i) of this Agreement. Without limiting the generality of
the foregoing, the Manager Member's general overhead items (including, without
limitation, salaries and rent) shall not be reimbursed by the LLC. Stockholders,
officers, directors, managers, members and agents of Members may serve as
employees of the LLC and be compensated therefor out of Operating Cash Flow as
determined by the Management Board.
SECTION 3.7 NON-MANAGER MEMBERS AND NON-SOLICITATION AGREEMENTS. Each of
the Original Principals has entered into an Employment Agreement with the LLC as
of the Effective Date in the form attached to the Purchase Agreement as Exhibit
8.9 thereto. Each of the Members hereby consents to each such Employment
Agreement. Each Non-Manager Member, other than such Original Principals and
Clark, has provided the LLC with a Non-Solicitation/Non-Disclosure Agreement in
form and substance substantially similar to Exhibit B hereto (the
"Non-Solicitation Agreement") (and, in the case of any substitute Non-Manager
Member (pursuant to Section 5.2 hereof) or Additional Non-Manager Member who is
not already bound by a Non-Solicitation Agreement, he shall, prior to and as a
condition precedent to becoming a Non-Manager Member, provide the LLC with such
an agreement (together with any changes or modifications thereto as the Manager
Member with the consent of the Management Board may deem necessary or desirable)
and such agreements shall, at all times, provide that each of the LLC, the
Manager Member and AMG shall be entitled to enforce the provisions of such
agreements on its own behalf and that the Manager Member and AMG shall be
entitled to enforce the provisions of such agreements on behalf of the LLC.
SECTION 3.8 NON-SOLICITATION AND NON-DISCLOSURE BY NON-MANAGER MEMBERS.
(a) Each Non-Manager Member (other than Clark) agrees, for the
benefit of the LLC and the other Members, that such Non-Manager Member shall
not, while employed by the LLC or any of its Affiliates, without the express
written consent of the Manager Member and the Management Board, directly or
indirectly, whether as owner, part-owner, shareholder, partner, member,
director, officer, manager, trustee, employee, agent or consultant, or in any
other capacity, on behalf of himself or any firm, corporation or other business
organization other than the LLC and its Controlled Affiliates, engage in any
activity described in Section 3.8(b), including, with respect to Section
3.8(b)(i), without regard to whether any such Person is a Client.
(b) In addition to, and not in limitation of, the provisions of
Section 3.8(a) hereto, each Non-Manager Member (other than Clark) agrees, for
the benefit of the LLC and the other Members, that such Non-Manager Member shall
not, during the period beginning on the date such Non-Manager Member becomes a
Non-Manager Member, and continuing until the date which is two (2) years after
the termination of such Non-Manager Member's employment with the LLC and its
Controlled Affiliates (unless a different period is agreed to by the Manager
Member
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and the Management Board in a writing making specific reference to this Section
3.8(b) and naming the Manager Member to whom such different period is to apply),
without the express written consent of the Manager Member and the Management
Board, directly or indirectly, whether as owner, part-owner, shareholder,
partner, member, director, officer, manager, trustee, employee, agent or
consultant, or in any other capacity, on behalf of himself or any firm,
corporation or other business organization other than the LLC and its Controlled
Affiliates:
(i) provide Investment Management Services or Brokerage
Services to any Person that is a Client of the LLC or any of its
Controlled Affiliates;
(ii) solicit or induce, whether directly or indirectly, any
Person for the purpose (which need not be the sole or primary purpose) of
(A) causing any funds with respect to which the LLC provides Investment
Management Services or Brokerage Services to be withdrawn from such
management, or (B) causing any Client of the LLC (including any Potential
Clients) not to engage the LLC or any of its Controlled Affiliates to
provide Investment Management Services or Brokerage Services for any
additional funds;
(iii) contact or communicate with, in either case in
connection with Investment Management Services or Brokerage Services,
whether directly or indirectly, any Client of the LLC; or
(iv) solicit or induce, or attempt to solicit or induce,
directly or indirectly, any employee or agent of, or consultant to, the
LLC or any of its Controlled Affiliates to terminate its, his relationship
therewith, hire any such employee, agent or consultant, or former
employee, agent or consultant, or work in any enterprise involving
Investment Management Services or Brokerage Services with any employee,
agent or consultant or former employee, agent or consultant, of the LLC or
its Controlled Affiliates who was employed by or acted as an agent or
consultant to the LLC or its Controlled Affiliates at any time preceding
the termination of such Non-Manager Member's employment (excluding for all
purposes of this sentence, secretaries and individuals holding other
similar positions).
(c) For purposes of Sections 3.8(a) and 3.8(b), in determining who
is included in the definition of "Client" of the LLC, (x) the term "Past Client"
shall be limited to those Past Clients who were advisees or investment advisory
clients of, or recipients of Investment Management Services or Brokerage
Services from, the LLC and its Controlled Affiliates (including the Predecessor)
at the date of termination of such Non-Manager Member's employment or at any
time during the twelve (12) months immediately preceding the date of such
termination, (y) the term "Potential Client" shall be limited to those Persons
to whom an offer was made within two (2) years prior to the date of termination
of such Non-Manager Member's employment, and (z) neither the term "Client" nor
the term "Person" shall include any Person who is included in the definition of
"Immediate Family" with respect to such Non-Manager Member.
Notwithstanding the provisions of Sections 3.8(a) and 3.8(b) hereof, any
Non-Manager Member may make passive investments in AMG or in a competitive
enterprise the shares or other equity interests of which are (A) publicly
traded, provided his holding therein, together with any
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holdings of his Affiliates and members of his Immediate Family, are less than
five percent (5%) of the outstanding shares of comparable interests in such
entity at the time such investments are made or (B) not publicly traded,
provided such holdings do not at any time exceed such percentage, and such
enterprise, either by itself or together with its Affiliates does not derive
more than 20% of its gross revenues from competitive activities.
(d) Each Non-Manager Member agrees that any and all presently
existing investment advisory businesses of the LLC and its Controlled Affiliates
(including the Predecessor), and all businesses developed by the LLC and its
Controlled Affiliates, including by such Non-Manager Member or any other
employee of the LLC (including the Predecessor), including without limitation,
all investment methodologies, all investment advisory contracts, fees and fee
schedules, commissions, records, data, client lists, agreements, trade secrets,
and any other incident of any business developed by the LLC (or the Predecessor)
or its Controlled Affiliates or earned or carried on by the Non-Manager Member
for the LLC or the Predecessor or their respective Controlled Affiliates other
than any such matters that are in the public record (unless they are so
available by virtue of a breach of the provisions of this Section 3.8), and all
trade names, service marks and logos under which the LLC or its Affiliates do
business, and any combinations or variations thereof and all related logos, are
and shall be the exclusive property of the LLC or such Controlled Affiliate, as
applicable, for its or their sole use, and (where applicable) shall be payable
directly to the LLC or such Controlled Affiliate. In addition, each Non-Manager
Member acknowledges and agrees that the investment performance of the accounts
managed by the LLC (and the Predecessor) was attributable to the efforts of the
team of professionals of the LLC (or the Predecessor, as applicable) and not to
the efforts of any single individual, and that therefore, the performance
records of the accounts managed by the LLC (and the Predecessor) are and shall
be the exclusive property of the LLC. Each Non-Manager Member acknowledges that,
in the course of performing services hereunder and otherwise (including, without
limitation, for the Predecessor), the Non-Manager Member has had, and will from
time to time have, access to information of a confidential or proprietary
nature, including without limitation, confidential or proprietary investment
methodologies, trade secrets, proprietary or confidential plans, client
identities and information, client lists, service providers, business operations
or techniques, records and data ("Intellectual Property") owned or used in the
course of business by the LLC or its Controlled Affiliates. Each Non-Manager
Member agrees always to keep secret and not ever publish, divulge, furnish, use
or make accessible to anyone (other than for the benefit of the LLC and its
Controlled Affiliates) any Intellectual Property of the LLC or any Controlled
Affiliate thereof that is not otherwise publicly available (other than
Intellectual Property that is publicly available by virtue of a breach of the
provisions of this Section 3.8). At the termination of the Non-Manager Member's
services to the LLC, all data, memoranda, client lists, notes, programs and
other papers, items and tangible media, and reproductions thereof relating to
the foregoing matters in the Non-Manager Member's possession or control, shall
be returned to the LLC and remain in the LLC's possession (except where the
return of such items shall be unreasonable or impractical in relation to the
importance or confidentiality of such items).
(e) Each Non-Manager Member acknowledges that, in the course of
entering into this Agreement, the Non-Manager Member has had and, in the course
of the operation of the LLC, the Non-Manager Member will from time to time have,
access to Intellectual Property owned by or used in the course of business by
the Manager Member or AMG. Each
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Non-Manager Member agrees, for the benefit of the LLC and its Members, and for
the benefit of the Manager Member and AMG, always to keep secret and not ever
publish, divulge, furnish, use or make accessible to anyone (other than for the
benefit of the LLC and its Controlled Affiliates) with the Manager Member's
consent) any knowledge or information regarding Intellectual Property of the
Manager Member or of AMG that is not otherwise publicly available (other than
Intellectual Property that is publicly available by virtue of a breach of the
provisions of this Section 3.8). At the termination of the Non-Manager Member's
service to the LLC, all data, memoranda, documents, notes and other papers,
items and tangible media, and reproductions thereof relating to the foregoing
matters in the Non-Manager Member's possession or control shall be returned to
AMG and remain in its possession.
(f) The provisions of this Section 3.8 shall not be deemed to limit
any of the rights of the LLC, the Manager Member or AMG under any of the
Employment Agreements, Non-Solicitation Agreements or under applicable law, but
shall be in addition to the rights set forth in each of the Employment
Agreements and Non-Solicitation Agreements, and those which arise under
applicable law.
SECTION 3.9 REMEDIES UPON BREACH.
(a) In the event that, following the termination of his employment
with the LLC, a Non-Manager Member (i) breaches any of the provisions of Section
3.8 hereof, or (ii) breaches any of the provisions of the Employment Agreement
or Non-Solicitation Agreement to which he is a party (in each case, in a manner
that causes or could reasonably be expected to cause harm that is not immaterial
or insignificant to the LLC, the Manager Member or AMG), then (A) such
Non-Manager Member shall forfeit its right to receive any distributions under
Section 4.4 hereof not yet received, (B) such Non-Manager Member shall forfeit
its right to receive any payment for its LLC Interests under Sections 7.1, 7.2,
7.3 or 7.4 hereof if such payment has not yet been received, and (C) AMG (or its
assignees) shall have no further obligations under any promissory note
theretofore issued to such Non-Manager Member pursuant to Section 7.3(e) hereof,
and such promissory note shall be deemed to be canceled as of such breach.
(b) Each Non-Manager Member agrees that any breach of the provisions
of Section 3.8 of this Agreement or of the provisions of the Employment
Agreement or Non-Solicitation Agreement by such Non-Manager Member could cause
irreparable damage to the LLC, the other Non-Manager Members, the Manager Member
and AMG. The LLC, the Manager Member and AMG, shall have the right to an
injunction or other equitable relief (in addition to other legal remedies) to
prevent any violation of a Non-Manager Member's obligations hereunder or
thereunder.
SECTION 3.10 NO EMPLOYMENT OBLIGATION. Each Non-Manager Member
acknowledges that neither this Agreement nor the provisions of the
Non-Solicitation Agreement create an obligation on the part of the LLC to
continue the employment of such Non-Manager Member with the LLC, and that such
Non-Manager Member, unless he is a party to an Employment Agreement, is an
employee at will of the LLC.
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SECTION 3.11 FUNDING OBLIGATION. Each of the Original Principals
covenants and agrees to place under investment management of the LLC either
directly or in one or more of the Mutual Funds, Private Funds or Offshore Funds,
as such Original Principal may select, an additional (i.e., in addition to those
amounts which such Original Principals currently have, directly or indirectly,
under investment management of the LLC at the Effective Date) aggregate amount
equal to 37.037% of that portion of the LLC Interest Purchase Price (as defined
in the Purchase Agreement) paid by AMG to that Original Principal, and to
maintain such additional invested amount for a period of time not shorter than
that period commencing on the date such additional funds are placed under
investment management of the LLC and ending on the later of (i) the tenth (10th)
anniversary of the Effective Date or (ii) the termination of employment of such
Original Principal with the LLC for any reason or, if earlier, the date on which
(A) there shall have occurred a change in control of AMG as a result of an
unaffiliated third party acquiring in excess of forty percent (40%) of the
outstanding capital stock of AMG other than in the context of an acquisition by
AMG, (B) all of the Original Principals shall have ceased to be Members other
than as a result of their resignation or termination For Cause prior to the
stated terms of the Employment Agreements, or (C) such Original Principal shall
have died or become Permanently Incapacitated. The Original Principals, the LLC
and the other Members of the LLC hereby acknowledge and agree that none of the
Original Principals may withdraw any such additional invested amount until
expiration of the applicable period set forth in the preceding sentence, unless
such amount is simultaneously placed under management of the LLC by such
Original Principal either directly or in one or more of the Mutual Funds,
Private Funds or Offshore Funds as such Original Principal may select; provided,
however, that an Original Principal is permitted to withdraw from the management
of the LLC any amounts representing amounts which such Original Principal has,
directly or indirectly, under management of the LLC at the Effective Date, any
appreciation thereon, any appreciation over such Original Principal's additional
invested amount and any amounts necessary to pay taxes on any gains realized
with respect to investments made with such additional amount, provided, further,
however, that (i) such amounts shall not be withdrawn from the escrow
established pursuant to Section 8.15 of the Purchase Agreement except as set
forth in the Escrow Agreement (as defined in the Purchase Agreement) and (ii)
with respect to such amounts as may be withdrawn for purposes of paying taxes,
such amounts shall not be withdrawn except to the extent the realized
appreciation on the additional invested amount available for distribution is
insufficient to pay such taxes. Each Original Principal shall place the required
amount of funds under management of the LLC during the first twelve (12) months
after the Effective Date at a rate not less than twenty-five percent (25%) of
such amount per three-month period. All funds of Clark, each of the Original
Principals and each Person treated as a member of the Immediate Family of any of
the foregoing placed under direct or indirect management of the LLC may, in the
sole discretion of the Management Board, be managed by the LLC and its
Controlled Affiliates without the imposition of any investment advisory fees or
profit allocations or similar costs by the LLC with respect to any account of
any such Person or with respect to the interest of any such Person in any
Private Fund, Offshore Fund or, to the extent not inconsistent with the tax
status thereof and subject to the consent of the Manager Member (which consent
shall not be unreasonably withheld), Mutual Fund to which the LLC provides
Investment Management Services.
SECTION 3.12 MISCELLANEOUS. Each Non-Manager Member agrees that the
enforcement of the provisions of Sections 3.8 and 3.9 hereof, and the
enforcement of the provisions of the
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Employment Agreements and Non-Solicitation Agreements are necessary to ensure
the protection and continuity of the business, goodwill and confidential
business information of the LLC for the benefit of each of the Members. Each
Non-Manager Member agrees that, due to the proprietary nature of the LLC's
business, the restrictions set forth in Section 3.8 hereof and in the Employee
Agreements and Non-Solicitation Agreements are reasonable as to duration and
scope. If any provision contained in this Article III shall for any reason be
held invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Article III. It is the intention of the parties hereto that if any of the
restrictions or covenants contained herein is held to cover a geographic area or
to be for a length of time that is not permitted by applicable law, or is any
way construed to be too broad or to any extent invalid, such provision shall not
be construed to be null, void and of no effect, but to the extent such provision
would then be valid or enforceable under applicable law, such provision shall be
construed and interpreted or reformed to provide for a restriction or covenant
having the maximum enforceable geographic area, time period and other provisions
as shall be valid and enforceable under applicable law.
Each Non-Manager Member acknowledges that the obligations and rights under
Sections 3.8, 3.9 and 3.11 hereof and this Section 3.12 shall survive the
termination of the employment of such Non-Manager Member with the LLC and/or the
withdrawal or removal of such Non-Manager Member from the LLC, regardless of the
manner of such termination, withdrawal or removal in accordance with the
provisions hereof and of the relevant Employment Agreement or Non-Solicitation
Agreement. Except as agreed to by the Manager Member, in advance, in a writing
making specific reference to this Article III, no Non-Manager Member shall enter
into any agreement or arrangement which is inconsistent with the terms and
provisions of this Agreement.
SECTION 3.13 MEMBERS. Members, in their capacity as such, shall have
no right to amend or terminate this Agreement or to appoint, select, vote for or
remove the Manager Member, the Officers or their agents or to exercise voting
rights or call a meeting of the Members, except as specifically provided in this
Agreement.
ARTICLE IV - CAPITAL ACCOUNTS; ALLOCATIONS; DISTRIBUTIONS.
SECTION 4.1 CAPITAL ACCOUNTS.
(a) There shall be established for each Member a Capital Account
which shall initially be equal to the Capital Account of such Member as set
forth on Schedule A hereto. No Member shall have the right to withdraw any part
of his (including his predecessors in interest) Capital Account (including,
without limitation, such Member's Capital Contributions) until the dissolution
and winding up of the LLC, except as distributions pursuant to this Article IV
may represent returns of capital, in whole or in part. No Member shall be
entitled to receive any interest on any Capital Account balance (including,
without limitation, such Member's Capital Contributions). No Member shall have
any personal liability for the repayment of any Capital Contribution of any
other Member. Except as may be agreed to in connection with the issuance of
additional LLC Interests, as specifically set forth herein (including, without
limitation in Section 4.3 hereof), or as may be required under applicable law,
the Members shall not be required to
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make any further contributions to the LLC. No Member shall make any contribution
to the LLC without the prior consent of the Manager Member, except Required
Capital Contributions pursuant to Section 4.3 hereof, reservations of Operating
Cash Flow not utilized in a particular fiscal year or, at the option of any
Non-Manager Member, to fund any portion of any amounts by which regular
operating expenses exceed Operating Cash Flow.
(b) The Capital Account of each Member shall be adjusted in the
following manner. Each Capital Account shall be increased by such Member's
allocable share of income and gain, if any, of the LLC (as well as the Capital
Contributions made by a Member after the Effective Date) and shall be decreased
by such Member's allocable share of deductions and losses, if any, of the LLC,
and by the amount of all distributions made to such Member. The amount of any
distribution of assets other than cash shall be deemed to be the Fair Market
Value of such assets (net of any liabilities encumbering such property that the
distributee Member is considered to assume or take subject to). Capital Accounts
shall also be adjusted upon the issuance of additional LLC Interests as set
forth in Section 5.5(c) hereof. Capital Accounts may also be adjusted upon the
Transfer of LLC Interests as set forth in Section 5.2(b).
SECTION 4.2 ALLOCATIONS.
(a) Subject to Sections 4.2(c), 4.2(e) and 4.6 hereof, all items of
LLC income and gain shall be allocated among the Members' Capital Accounts at
the end of every quarter as follows:
(i) first, items of income and gain shall be allocated to the
Manager Member in an amount equal to (A) Free Cash Flow for such
quarter, multiplied by a fraction, the numerator of which is the
number of LLC Points held by the Manager Member on the first day of
such quarter, and the denominator of which is the sum of the number
of LLC Points outstanding and the number of Reserved Points on the
first day of such quarter plus (B) the product of (1) the aggregate
of any Offshore Adjustment for all Offshore Funds for such quarter,
(2) the Free Cash Flow Percentage, and (3) a fraction, the numerator
of which is the number of LLC Points held by the Manager Member on
the first day of such quarter, and the denominator of which is the
sum of the number of LLC Points outstanding and the number of
Reserved Points on the first day of such quarter;
(ii) second, items of income and gain, if any, shall be
allocated to the Manager Member until the Manager Member has been
allocated cumulative income and gain under Section 4.2(c)(i) and
this Section 4.2(a)(ii) equal to the cumulative amount of losses and
deductions allocated to the Manager Member under Sections
4.2(b)(ii), 4.2(b)(iii) and 4.2(d);
(iii) third, items of income and gain, if any, shall be
allocated among all Non-Manager Members who are not Original
Principals and not Clark in accordance with (and in proportion to)
each such Non-Manager Member's respective number of LLC Points on
the first day of such quarter, until the aggregate amount of such
items allocated to Non-Manager Members who are not
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Original Principals and not Clark equals (A) Free Cash Flow for such
quarter, multiplied by a fraction, the numerator of which is the
number of LLC Points held by all such Non-Manager Members who were
Members of the LLC on the first day of such quarter, and the
denominator of which is the sum of the number of LLC Points
outstanding and the number of Reserved Points on the first day of
such quarter plus (B) the product of (1) the aggregate of any
Offshore Deemed Revenues for such quarter in all Offshore Funds the
fiscal year of which ends during such quarter, (2) the Free Cash
Flow Percentage, and (3) a fraction, the numerator of which is the
time-weighted average number of LLC Points held by the Non-Manager
Members who are not Original Principals and not Clark on the first
day of such quarter (after giving effect, for the purposes of
time-weighting, to the balance of such quarter), and the denominator
of which is the sum of the number of LLC Points outstanding and the
number of Reserved Points on the first day of such quarter;
(iv) fourth, if and to the extent that any Original Principals
and Clark are Members of the LLC, items of income and gain, if any,
shall be allocated among all Original Principals and Clark in
accordance with (and in proportion to) each Original Principal's
respective number of LLC Points on the first day of such quarter,
until the aggregate amount of such items allocated to the Original
Principals equals the amount, if any, by which (A) Free Cash Flow of
the LLC for such quarter exceeds (B) the sum of the cumulative items
of income and gain allocated to the Manager Member and the
Non-Manager Members who are not Original Principals and not Clark
pursuant to the preceding paragraphs of this Section 4.2(a);
provided, however, that for purposes of this Section 4.2(a)(iv),
each Original Principal and Clark will be treated as if he holds, in
addition to his LLC Points, that number of LLC Points equal to the
number of Reserved Points set forth opposite his name on Schedule A
hereto as of the first day of such quarter; and
(v) finally, all remaining items of LLC income and gain, if
any, shall be allocated among the Non-Manager Members in accordance
with (and in proportion to) each Non-Manager Member's respective
number of LLC Points on the first day of such quarter; provided,
however, that for purposes of this Section 4.2(a)(v), each Original
Principal and Clark will be treated as if he holds, in addition to
his LLC Points, that number of LLC Points equal to the number of
Reserved Points set forth opposite his name on Schedule A hereto as
of the first day of such quarter.
(b) Subject to Sections 4.2(d), 4.2(e) and 4.6 hereof, all items of
LLC loss and deduction shall be allocated among the Members' Capital Accounts at
the end of every quarter as follows:
(i) first, all items of LLC loss and deduction for such
quarter shall be allocated among the Non-Manager Members in
accordance with (and in proportion to) each such Non-Manager
Member's respective number of LLC Points on the first day of such
quarter until, after giving effect to the allocation of the items of
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income and gain for such quarter under Section 4.2(a) as well as all
Required Capital Contributions for such quarter, all Capital
Accounts of Non-Manager Members have been reduced to zero (0),
provided that no additional losses shall be allocated to a Member
once its Capital Account has been reduced to zero (0) but thereafter
all items of LLC loss and deduction for such quarter shall be
allocated among the other Non-Manager Members which have positive
balances in their capital accounts pro-rata on the basis set forth
in this paragraph (i); provided, however, that for purposes of this
Section 4.2(b)(i), each Original Principal and Clark will be treated
as if he holds, in addition to his LLC Points, that number of LLC
Points equal to the number of Reserved Points set forth opposite his
name on Schedule A hereto as of the first day of such quarter;
(ii) second, all items of LLC loss and deduction for such
quarter not allocated to the Non-Manager Members under Section
4.2(b)(i) hereof shall be allocated to the Manager Member until its
Capital Account shall have been reduced to zero (0); and
(iii) finally, all items of LLC loss and deduction for such
quarter not allocated to the Members pursuant to the preceding
paragraphs of this Section 4.2 shall be allocated among all Members
in accordance with (and in proportion to) each Member's respective
number of LLC Points on the first day of such quarter; provided,
however, that for purposes of this Section 4.2(b)(iii), each
Original Principal and Clark will be treated as if he holds, in
addition to his LLC Points, that number of LLC Points equal to the
number of Reserved Points set forth opposite his name on Schedule A
hereto as of the first day of such quarter.
(c) If the LLC has a net gain from any sale, exchange or disposition
of all, or substantially all, of the assets of the LLC, then that net gain shall
be allocated among the Members as follows:
(i) first, items of gain, if any, shall be allocated to the
Manager Member until the Manager Member has been allocated
cumulative gain which, together with income and gain previously
allocated to the Manager Member under Section 4.2(a)(ii) hereof,
equals the cumulative amount of losses and deductions allocated to
the Manager Member under Sections 4.2(b)(ii), 4.2(b)(iii) and 4.2(d)
hereof;
(ii) thereafter, items of gain, if any, shall be allocated
among the Members in accordance with (and in proportion to) their
respective number of LLC Points as of the effective date of the
transaction; provided, however, that for purposes of this Section
4.2(c)(ii), each Original Principal and Clark will be treated as of
he holds, in addition to his LLC Points, that number of LLC Points
equal to the number of Reserved Points set forth opposite his name
on Schedule A hereto as of the effective date of the transaction.
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(d) If the LLC has a net loss from any sale, exchange or other
disposition of all, or substantially all, of the assets of the LLC, then that
net loss shall be allocated among the Members in accordance with (and in
proportion to) their respective number of LLC Points as of the effective date of
the transaction, provided that no additional losses shall be allocated to a
Member once its Capital Account has been reduced to zero (0), unless all
Members' Capital Accounts have then been reduced to zero (0) and, provided
further, that for purposes of this Section 4.2(d), each Original Principal and
Clark will be treated as if he holds, in addition to his LLC Points, that number
of LLC Points equal to the number of Reserved Points set forth opposite his name
on Schedule A hereto as of the effective date of the transaction.
(e) In the event that during any calendar quarter (or any fiscal
year) there is any change of Members or LLC Points (whether as a result of the
admission of an Additional Non-Manager Member, the redemption by the LLC of all
(or any portion of) any Non-Manager Member's LLC Points, a Transfer of any LLC
Points, Reserved Points or otherwise), the following shall apply: (i) such
change shall be deemed to have occurred as of the end of the last day of the
quarter in which such change actually occurred, (ii) the books of account of the
LLC shall be closed effective as of the close of business on the effective date
of any such change as set forth in clause (i) and such fiscal year shall
thereupon be divided into two or more portions, (iii) each item of income, gain,
loss and deduction shall be determined (on the closing of the books basis) for
the portion of such fiscal year ending with the date on which the books of
account of the LLC are so closed, and (iv) each such item for such portion of
such fiscal year shall be allocated (pursuant to the provisions of this Section
4.2) to those persons who were Members during such portion of such fiscal year
in accordance with their respective LLC Points during such period. For purposes
of this Agreement, unless it is the last day of a quarter, the Effective Date
shall be deemed to be the first day of a quarter; provided, however, that only
items of income, gain, loss or deduction accrued after the actual Effective Date
shall be treated as items of income, gain, loss or deduction of the LLC.
SECTION 4.3 CAPITAL CONTRIBUTION FOR OFFSHORE SHORTFALLS.
(a) By no later than the thirtieth (30th) day (the "Due Date")
following the end of each fiscal quarter of the LLC, each Original Principal and
Clark shall be required to make a Capital Contribution to the LLC in an amount
equal to his Offshore Shortfall for that quarter (the "Required Capital
Contributions"). Unless otherwise determined by a writing signed by each of the
Original Principals and Clark who is then a Member (and delivered to the LLC and
the Manager Member), the Offshore Shortfall for each Original Principal or Clark
shall equal the product of the aggregate Offshore Shortfall and a fraction the
numerator of which is the number of LLC Points held by such Original Principal
or Clark on the first day of such quarter and the denominator of which is the
number of LLC Points held by all Original Principals or Clark on the first day
of such quarter. For purposes hereof, each Original Principal and Clark will be
treated as if he holds, in addition to his LLC Points, that number of LLC Points
equal to the number of Reserved Points set forth opposite his name on Schedule A
hereto as of the effective date of the transaction.
(b) All Required Capital Contributions shall be paid to the LLC by
transfer (by wire or otherwise) of immediately available funds (or by such other
means as an Original Principal
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or Clark and the Manager Member may agree) on or before the Due Date for that
Required Capital Contribution.
(c) If an Original Principal or Clark fails to pay his Required
Capital Contribution under this Section 4.3 on the Due Date therefor, then the
LLC or the Manager Member shall notify such Original Principal or Clark of such
failure within two (2) days after such payment is due (which notice may be by
telephone followed by confirmation by telecopy (receipt confirmed), overnight
carrier or registered or certified mail), provided that the failure to give such
notice shall not affect the liability of such Original Principal or Clark to
make such Required Capital Contribution or subject the LLC or any Member
(including, without limitation, the Manager Member, but excluding such Original
Principal or Clark) to any liability hereunder or otherwise. An Original
Principal or Clark who fails to make Required Capital Contribution prior to the
expiration of seven (7) days after such notice (the "Date of Default") shall be
a "Defaulting Member." The obligation of a Defaulting Member to make a Required
Capital Contribution shall bear interest from and after the Date of Default at a
rate equal to the Prime Rate plus five percent (5%) per annum, which interest
shall compound quarterly. Any distributions or other payments by the LLC or the
Manager Member to which the Defaulting Member would otherwise be entitled
pursuant to this Agreement (including, without limitation, pursuant to Sections
4.4, 4.5 and 4.6 hereof) shall be applied by the LLC or the Manager Member to
the debt of the Defaulting Member hereunder until such debt shall be repaid and
any such distribution or other payment shall be deemed to have been distributed
or paid to the Defaulting Member. In addition, any discretionary bonus or other
discretionary payment (as opposed to regular salary) to which the Defaulting
Member would otherwise be entitled pursuant to the provisions of Section 3.5 or
otherwise, shall be applied by the LLC to the debt of the Defaulting Member
hereunder until such debt shall be repaid.
Any Defaulting Member shall also pay, on demand, all costs, including
court costs and reasonable attorneys' fees, paid or incurred by the LLC or the
Manager Member in collecting a Required Capital Contribution from a Defaulting
Member. If the Defaulting Member fails to make such payments immediately after
the demand for payment thereof, then provisions of the foregoing paragraph shall
apply to such amounts as if the demand were a notice of default (and the date
thereof were the Date of Default), with the seventh day preceding such notice
being the Due Date.
The provisions of this Section 4.3(c) are hereby expressly limited so that
in no contingency or event whatsoever shall the amount paid or agreed to be paid
to the LLC exceed the maximum amount of interest permitted by law, and in the
event any interest hereunder were to exceed the maximum amount of interest
permitted by law, such excess interest shall be deemed to be a mistake and shall
either be reduced immediately and automatically to the maximum amount permitted
by law or, if required to comply with applicable law, be canceled automatically
and, if theretofore paid, be credited on the principal amount of the obligation
of the Defaulting Member for his share of a Offshore Shortfall outstanding and,
to the extent such a credit is insufficient, be refunded.
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SECTION 4.4 DISTRIBUTIONS.
(a) Subject to Section 4.5 hereof, from and after the date hereof,
within thirty (30) days after the end of each calendar quarter, in each case if
and to the extent cash is available therefor (taking into account the use or
reservation of Operating Cash Flow (as adjusted in accordance with the
parenthetical set forth in the first sentence of Section 3.5(a)) from such
quarter), the Manager Member shall, based on the unaudited financial statements
for such calendar quarter prepared in accordance with Section 9.3 hereof (after
approval thereof by the Manager Member), cause the LLC to:
(i) First, distribute to the Manager Member, cash in the
amount of the sum of (A) the Free Cash Flow allocated to the Manager
Member pursuant to Section 4.2(a)(i)(A) for such quarter (and for
any previous quarter to the extent not previously distributed),
reduced by the Manager Member's pro-rata share of any reservations
from Free Cash Flow pursuant to Section 4.4(c), by the portion of
UBT allocated to the Manager Member pursuant to Section 4.6(g) for
such quarter and being paid from Free Cash Flow pursuant to Section
9.5 and by the portion of any accrued performance fees that were
allocated to the Manager Member in such quarter but not paid in such
quarter, and increased by the aggregate amount of any performance
fees paid in such quarter that were allocated to the Manager Member
in a previous quarter, plus (B) if such quarter end is the first
quarter end following the fiscal year end of any Offshore Fund(s),
the sum of any allocations to the Manager Member pursuant to Section
4.2(a)(i)(B) with respect to such Offshore Fund(s) for such quarter
(and for any previous quarter to the extent not previously
distributed); provided, that if cash is available to be distributed
to the Manager Member pursuant to this Section 4.1(a)(i) and the LLC
does not distribute such available amount to the Manager Member
(other than through the fault of the Manager Member) or to the
extent cash is not available because Operating Cash Flow and amounts
previously reserved from Operating Cash Flow were not sufficient to
meet actual expenses of the LLC, then the obligation of the LLC to
make such a distribution (or such portion) shall bear interest from
and after the thirtieth (30th) day after such quarter end at the
Prime Rate plus five percent (5%) per annum, compounded quarterly.
Such interest shall be an expense paid from Operating Cash Flow and
shall not constitute a distribution under this Section 4.4(a).
(ii) Second, if such quarter end is the first quarter end
following the fiscal year end of any Offshore Fund(s), distribute to
each Non-Manager Member who is not an Original Principal or Clark,
cash in the amount of the sum of any allocations to such Non-Manager
Member pursuant to Section 4.2(a)(iii)(B) with respect to such
Offshore Fund(s) for such fiscal year (and for any previous such
fiscal year to the extent not previously distributed).
(iii) Third, distribute to each Non-Manager Member cash in an
amount equal to the allocations to such Non-Manager Member under
Section 4.2(a)(iii)(A) and Section 4.2(a)(iv) for such quarter (and
for any previous quarter to the extent
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not then distributed), reduced by (A) such Non-Manager Member's
pro-rata portion (as among all Members) of any reservations from
Free Cash Flow pursuant to Section 4.4(c) and by the portion of UBT
allocated to such Non-Manager Member pursuant to Section 4.6(g) for
such quarter and being paid from Free Cash Flow pursuant to Section
9.5, (B) the portion of any accrued performance fees that were
allocated to such Non-Manager Member in such quarter but not paid in
such quarter and (C) such Non-Manager Member's pro-rata portion (as
among all Non- Manager Members) of any amount by which cumulative
amounts of deduction and loss allocated to all Members under Section
4.2(b) exceed the cumulative amount of income and gain allocated to
all Non-Manager Members under Section 4.2(a)(v), and increased by
(D) if such quarter end is the first quarter end following the
fiscal year end of any Offshore Fund(s), the sum of any allocations
to such Non-Manager Member pursuant to Section 4.2(a)(iii)(B) with
respect to such Offshore Fund(s) for such quarter (and for any
previous quarter to the extent not previously distributed) and (E)
the aggregate amount of any performance fees paid in such quarter
that were allocated to such Non-Manager Member in a previous
quarter.
In addition, the Management Board may, in its sole discretion, use any
available cash of the LLC to make any or all of the foregoing distributions.
Notwithstanding anything else set forth herein to the contrary, no distribution
shall be made to a Member if and to the extent that after giving effect to such
distribution such Member would have a negative Capital Account after giving
effect to the allocations of income, gain, deduction and loss for the quarter
ended prior to the date of such distribution.
(b) Subject to reservations pursuant to Section 4.4(c) and UBT being
paid from Free Cash Flow pursuant to Section 9.5 and subject to any timing
differences in Section 4.4(a)(i)(A) and (B) and Section 4.4(a)(iii) relating to
performance fees and the Offshore Funds, after the end of each fiscal year of
the LLC, the Manager Member shall, based on the audited financial statements
prepared in accordance with Section 9.3 hereof, cause the LLC to make a special
distribution of any and all Free Cash Flow for the preceding fiscal year that
was allocated but not previously distributed, at such time and to the extent
cash is available therefor.
(c) The Manager Member may, from time to time, with the consent of
the Management Board, reserve and not distribute portions of Free Cash Flow for
any purpose that is in the interest of the LLC, including, without limitation,
to increase the net worth of the LLC, and to make capital expenditures. Any such
reservation would be made from all Members pro-rata in accordance with LLC
Points (treating each Non-Manager Member as if he held the number of Reserved
Points set forth opposite his name on Schedule A) as of the first day of the
quarter in which such reservation is made. Such funds shall be maintained in the
Receipts Account (as defined below) pending the expenditure thereof.
(d) To give effect to the foregoing, the LLC shall have two (2) bank
accounts. The first account (the "Receipts Account") shall have as its
authorized signatories such representatives of the Manager Member as the Manager
Member shall deem appropriate or desirable. All the LLC's receipts shall be paid
into the Receipts Account; provided, however, that the Manager Member shall
forward no less often than once per week the revenues of the LLC with
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respect to the accruals for a given month from the Receipts Account to the
second account (described below) until the revenues so forwarded equal the
Operating Cash Flow of the LLC for such month (and previous months to the extent
not so forwarded or used to pay expenses of the LLC other than Free Cash Flow
Expenditures) and, thereafter, revenues with respect to that month shall be
retained in the Receipts Account pending distribution or such other use thereof
as may be permitted under this Agreement. The Manager Member shall use the
Receipts Account to make all distributions of Free Cash Flow pursuant to this
Section 4.4 and to fund all Free Cash Flow Expenditures. The Manager Member
shall retain in the Receipts Account the amount which gives rise to the right to
make distributions pursuant to Section 4.4(e) hereof (including, without
limitation, the proceeds of sales of assets, insurance proceeds and the proceeds
of issuance of additional LLC Interests). The second account shall have as its
authorized signatories such Officers as may be designated by the Management
Board and one (1) designee of the Manager Member. This second account shall be
used by the Officers and Management Board to make all operating expense payments
(including payments of salaries and bonuses) out of Operating Cash Flow. All
funds of the LLC in any account subject to control of the Manager Member or the
Management Board shall be invested solely in the interests of the LLC in income
generating accounts or assets to the maximum extent practicable in light of the
cash needs of the LLC as determined in the good faith discretion of the Manager
Member or the Management Board, as applicable.
Within thirty (30) days after the end of each calendar quarter, based on
the unaudited financial statements for such calendar quarter prepared in
accordance with Section 9.3 hereof, and within ninety-five (95) days after the
end of each fiscal year of the LLC, based on the audited financial statements
prepared in accordance with Section 9.3 hereof, the Manager Member shall cause
such transfers between the accounts to be made as may be necessary to reconcile
the accounts with the amounts of revenue designated as Operating Cash Flow and
Free Cash Flow.
(e) Except as otherwise set forth herein, all other amounts or
proceeds available for distribution, if any, shall be distributed to the Members
at such time as may be determined by the Manager Member; provided that any such
distribution shall be made among the Members (i) in accordance with the positive
balances (if any) in their respective Capital Accounts (as determined
immediately prior to such distribution) until all such positive Capital Account
balances have been reduced to zero (0), and (ii) thereafter, among all Members
in accordance with their respective numbers of LLC Points at the time of such
distribution (provided, however, that if a Member makes a Capital Contribution
after the Effective Date, the Manager Member may cause the LLC to make a
priority return of such Capital Contribution).
(f) Notwithstanding any other provision of this Agreement, neither
the LLC, nor the Manager Member on behalf of the LLC, shall make a distribution
to any Member on account of its LLC Interests if such distribution would violate
the Act or other applicable law.
SECTION 4.5 DISTRIBUTIONS UPON DISSOLUTION; ESTABLISHMENT OF A RESERVE
UPON DISSOLUTION. Upon the dissolution of the LLC, after payment (or the making
of reasonable provision for the payment) of all liabilities of the LLC owing to
creditors, the Manager Member, or if there is none, the Liquidating Trustee
appointed as set forth in Section 8.4 hereof, shall set up such reserves as it
deems reasonably necessary for any contingent, conditional or unmatured
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liabilities or other obligations of the LLC. Such reserves may be paid over by
the Manager Member or Liquidating Trustee to a bank (or other third party), to
be held in escrow for the purpose of paying any such contingent, conditional or
unmatured liabilities or other obligations. At the expiration of such period(s)
as the Manager Member or Liquidating Trustee may deem advisable, such reserves,
if any (and any other assets available for distribution), or a portion thereof,
shall be distributed to the Members (i) in accordance with the positive balance
(if any) in their respective Capital Accounts (as determined immediately prior
to each such distribution) until all such positive Capital Account balances have
been reduced to zero (0), and (ii) thereafter, among the Members as of the date
of dissolution in accordance with their respective numbers of LLC Points
(including Reserved Points) as of the date of dissolution. Solely for purposes
of the foregoing sentence, Clark shall, for as long as he is a Member, be deemed
to have a Capital Account equal to the sum of the Capital Accounts of the
Original Principals multiplied by a fraction, the numerator of which is the
number of LLC Points held by him at the time of such transaction or transactions
and the denominator of which is the total number of LLC Points then held by
Original Principals and each other Original Principal shall be deemed to have a
Capital Account equal to his Capital Account multiplied by a fraction which is
one (1) minus the fraction determined above with respect to Clark. If any assets
of the LLC are to be distributed in kind in connection with such liquidation,
such assets shall be distributed on the basis of their Fair Market Value net of
any liabilities encumbering such assets and, to the greatest extent possible,
shall be distributed pro-rata in accordance with the total amounts to be
distributed to each Member. Immediately prior to the effectiveness of any such
distribution-in-kind, each item of gain and loss that would have been recognized
by the LLC had the property being distributed been sold at Fair Market Value
shall be determined and allocated to those persons who were Members immediately
prior to the effectiveness of such distribution in accordance with Sections
4.3(c) and 4.3(d) hereof.
SECTION 4.6 PROCEEDS FROM CAPITAL CONTRIBUTIONS AND THE SALE OF
SECURITIES; INSURANCE PROCEEDS; CERTAIN SPECIAL ALLOCATIONS AND DISTRIBUTIONS.
(a) Capital Contributions made by any Member after the Effective
Date other than Required Capital Contributions from Original Principals, and
other proceeds from the issuance of securities by the LLC may, in the sole
discretion of the Manager Member, be used for the benefit of the LLC (including,
without limitation, the repurchase or redemption of LLC Interests), or, may be
distributed by the LLC, in which case, any such proceeds shall be allocated and
distributed among the Members in accordance with their respective LLC Points
immediately prior to the date of such contribution or issuance of securities; it
being understood that in the case the proceeds are a note receivable, any such
distribution shall only occur, if at all, upon receipt by the LLC of any cash in
respect thereof.
(b) In the event of the death or Permanent Incapacity of a
Non-Manager Member covered by key-man life or disability insurance, as
applicable, the premiums on which have been paid by the LLC, the proceeds of any
such policy shall first be used by the LLC to fund (to the extent thereof) the
Repurchase of LLC Interests from the Non-Manager Member in accordance with
Section 7.3 hereof and, if the proceeds exceed the amounts so required to effect
such Repurchase, then the amount of such excess proceeds may, in the sole
discretion of the Manager Member, be used for the benefit of the LLC, or, may be
distributed by the LLC, in which case, any such proceeds shall be allocated and
distributed among the Members in
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accordance with their respective LLC Points immediately following the Repurchase
of the LLC Interests from such Non-Manager Member.
(c) Items of depreciation or amortization (as calculated for book
purposes in accordance with generally accepted accounting principles,
consistently applied, except that the gross book value of the property of the
LLC on the Effective Date shall be marked to the fair market value of such
property based upon the purchase price paid by the Manager Member for its LLC
Interest as reflected on Schedule A) on account of the property of the LLC on
the Effective Date, shall be specially allocated among the Members in accordance
with Capital Accounts on the Effective Date. All items of depreciation or
amortization (as calculated for book purposes in accordance with generally
accepted accounting principles, consistently applied) on account of property
purchased out of Operating Cash Flow (other than Free Cash Flow Expenditures)
shall be allocated as set forth in Section 4.2(b) hereof, and all items of
depreciation or amortization (as calculated for book purposes in accordance with
generally accepted accounting principles, consistently applied) on account of
property purchased out of Free Cash Flow Expenditures shall be allocated among
the Members other than Clark in the same proportion as such Members' allocated
portions of Free Cash Flow were reduced in order to reserve funds for the
purchase of such property.
(d) All items of LLC loss and deduction on account of Free Cash Flow
Expenditures (other than those covered by Section 4.6(c)) shall be allocated
among the Members in amounts equal to the amounts that Free Cash Flow to be
distributed under Section 4.4(c) was reduced for the purpose of making such Free
Cash Flow Expenditure.
(e) All items of LLC deduction arising in connection with any
Offshore Shortfall shall be specially allocated in their entirety solely to the
Original Principals and Clark who are then Members of the LLC in proportion to
their respective contributions making up such Offshore Shortfall.
(f) The amount, if any, of income and gain allocated to the LLC on
account of the performance of Investment Management Services by the LLC on
behalf of the Offshore Funds (other than any such income or gain equal to the
amounts actually accrued and payable under the terms of the Offshore Management
Agreements), shall be (i) allocated to the Original Principals and Clark in
proportion to their LLC Points and Reserved Points and (ii) shall be deemed to
have been distributed to such Original Principals and Clark, reducing the
Capital Accounts of such Original Principals and Clark in accordance with
Section 4.1(b) hereof.
(g) All items of LLC loss and deduction on account of New York City
unincorporated business tax payable by the LLC on account of operations after
the Effective Date ("UBT") shall be specially allocated on a quarterly basis to
each Member in an amount equal to the amount of such UBT multiplied by a
fraction the numerator of which is total net income of the LLC allocated (after
taking into account any losses, deductions or expenses allocated under Article
IV), and guaranteed payments and bonus payments made by the LLC, to such Member,
and the denominator of which is total net income of the LLC allocated (after
taking into account any losses, deductions or expenses allocated under Article
IV), and guaranteed payments and bonus payments made by the LLC, to all Members
for such period; provided, however, that if the
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provisions of New York City Administrative Code Section 11-604(18) or any
successor or analog provision thereof providing for the right of corporate
partners (or corporate members of limited liability companies) to claim their
allocable portion of such UBT as a credit for purposes of New York City general
corporation tax ("GCT") are changed so as to reduce or eliminate the right of
corporations organized in the state in which the Manager Member is organized and
doing business in the states in which the Manager Member does business and that
have sufficient GCT liability against which to apply such credit for purposes of
the GCT, then the portion of such UBT no longer so claimable as a credit because
of such change in law shall be allocated pursuant to Section 4.2(b) rather than
pursuant to this Section 4.6(g). In the event that the UBT otherwise payable by
the LLC is reduced by reason of the step-up in the tax basis of the property of
the LLC that is triggered under Section 754 of the Code upon the purchase by the
Manager Member of its LLC Interest, the Manager Member's share of the UBT of the
LLC otherwise determined under this Section 4.6(g) shall be reduced by the same
amount.
SECTION 4.7 FEDERAL TAX ALLOCATIONS. The Manager Member shall, in its
reasonable discretion, allocate the ordinary income and losses and capital gains
and losses of the LLC as determined for U.S. Federal income tax purposes (and
each item of income, gain, loss, deduction or credit entering into the
computation thereof), as the case may be, among the Members for tax purposes in
a manner that, to the greatest extent possible: (a) reflects the economic
arrangement of the Members under this Agreement (determined after taking into
account the allocation provisions of Sections 4.2, 4.5 and 4.6 hereof, and the
distribution provisions of Sections 4.4, 4.5 and 4.6 hereof) and (b) is
consistent with the principles of Sections 704(b) and 704(c) of the Code. The
Members understand and agree that, with respect to any item of property (other
than cash) contributed (or deemed to be contributed for U.S. federal income tax
purposes) by a Member to the capital of the LLC, the initial tax basis of such
property in the hands of the LLC will be the same as the tax basis of such
property in the hands of such Member at the time so contributed. The Members
further understand and agree that the taxable income and taxable loss of the LLC
is to be computed for Federal income tax purposes by reference to the initial
tax basis to the LLC of any assets and properties contributed by the Members
(and not by reference to the Fair Market Value of such assets and properties at
the time contributed). The Members also understand that, pursuant to Section
704(c) of the Code, all taxable items of income, gain, loss and deduction with
respect to such assets and properties shall be allocated among the Members for
Federal income tax purposes so as to take account of any difference between the
initial tax basis of such assets and properties to the LLC and their Fair Market
Values at the time contributed, using any method authorized by the Income Tax
Regulations under Section 704(c) and selected by the Manager Member, in its
reasonable discretion. For purposes of maintaining the Capital Accounts of the
Members, items of income, gain, loss and deduction relating to any asset or
property contributed to the LLC that are required to be allocated for tax
purposes pursuant to Section 704(c) of the Code shall not be reflected in the
Capital Accounts of the Members.
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ARTICLE V - TRANSFER OF LLC INTERESTS BY NON-MANAGER
MEMBERS; RESIGNATION, REDEMPTION AND WITHDRAWAL BY
NON-MANAGER MEMBERS;
ADMISSION OF ADDITIONAL NON-MANAGER MEMBERS.
SECTION 5.1 ASSIGNABILITY OF LLC INTERESTS. No LLC Interests held by any
Non-Manager Member may be Transferred and no Transfer by a Non-Manager Member
shall be binding upon the LLC or any Member, unless, in each case, it is
expressly permitted by this Article V and the Manager Member receives an
executed copy of the documents effecting such Transfer, which shall be in form
and substance reasonably satisfactory to the Manager Member. A Transferee of LLC
Interests may become a substitute Non-Manager Member only upon the terms and
conditions set forth in Section 5.2 hereof. If a Transferee of LLC Interests of
a Non-Manager Member in the LLC does not become (and until any such Transferee
becomes) a substitute Non-Manager Member in accordance with the provisions of
Section 5.2 hereof, such Person shall not be entitled to exercise or receive any
of the rights, powers or benefits of a Non-Manager Member other than the right,
if any, to receive allocations of profits and losses and distributions which
have been Transferred to such Person. No Non-Manager Member's LLC Interests may
be Transferred except:
(a) with the prior written consent of the Manager Member, which
consent may be granted or withheld by the Manager Member in its reasonable
discretion (provided, that the Manager Member may not withhold its consent in
the case of a proposed Transfer to a bona-fide charitable organization in an
amount that will be required to be Put on account of a Put Notice, for such
twelve-month period previously given by the Transferring Non-Manager Member);
(b) upon the death of such Non-Manager Member, his LLC Interests may
be Transferred by will or the laws of descent and distribution without the
consent of the Manager Member, but subject to the provisions of Section 7.3
hereof; and
(c) a Non-Manager Member may Transfer LLC Interests to members of
his Immediate Family (excluding for this purpose former spouses) without the
consent of the Manager Member;
provided, that in each case, (i) the Transferee enters into an agreement with
the LLC agreeing to be bound by the provisions hereof (and if such Transferee
is, or in connection with such Transfer is becoming, an employee of the LLC and
is not already a party to a Non-Solicitation Agreement, the Transferee enters
into a Non-Solicitation Agreement) and (ii) whether or not the Transferee enters
into such an agreement, the Transferred LLC Interests shall thereafter remain
subject to this Agreement (and, if applicable, the relevant Non-Solicitation
Agreement) to the same extent they would be if held by such Non-Manager Member;
provided, however, that the provisions of Sections 3.7, 3.8 and 3.9 will not,
solely by virtue of such Transfer, apply to any Transferee unless such
Transferee is an employee of the LLC (or any of its Controlled Affiliates) or
such Transferee is a Controlled Affiliate of such an employee or the LLC
(although if such provisions were otherwise applicable to such Transferee, they
will continue to apply to such Person).
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For all purposes of this LLC Agreement, any Transfers of LLC Interests
shall be deemed to occur as of the end of the last day of the calendar quarter
in which any such Transfer would otherwise have occurred. Upon any Transfer of
LLC Interests, the Manager Member shall make the appropriate revisions to
Schedule A hereto.
No LLC Interests of a Non-Manager Member in the LLC may be pledged,
hypothecated, optioned or encumbered, nor may any offer to do any of the
foregoing be made without the prior consent of the Management Board and the
Manager Member; provided that the consent of the Manager Member will not be
unreasonably withheld if the purpose of any such pledge or encumbrance is to
secure financing to enable the Transferee to purchase LLC Interests.
SECTION 5.2 SUBSTITUTE NON-MANAGER MEMBERS.
(a) No Transferee of LLC Interests of a Non-Manager Member shall
become a Member except in accordance with this Section 5.2. The Manager Member
may admit, in its sole discretion as a substitute Non-Manager Member (with
respect to all or a portion of the LLC Interests held by a Person), any Person
that acquires LLC Interests by Transfer from another Non-Manager Member pursuant
to Section 5.1 hereof, or that acquires LLC Interests from the Manager Member
pursuant to Section 6.1 hereof. The admission of a Transferee as a substitute
Non-Manager Member shall, in all events, be conditioned upon the execution of an
instrument satisfactory to the Manager Member whereby such Transferee becomes a
party to this Agreement as a Non-Manager Member as well as compliance by such
Transferee with the provisions of Section 3.7 hereof. Upon the admission of a
Transferee as a substitute Non-Manager Member, the Manager Member shall make the
appropriate revisions to Schedule A hereto, and such Person shall cease to be a
"Transferee" for purposes of this Agreement.
(b) Immediately prior to the effectiveness of (x) the admission of a
Transferee of LLC Interests of a Non-Manager Member as a substitute Non-Manager
Member with respect to such LLC Interests pursuant to the provisions of this
Section 5.2, or (y) the admission of a Transferee of LLC Interests from the
Manager Member as an additional Non-Manager Member with respect to such LLC
Interests, the Manager Member may, in its sole discretion, elect to revalue the
Capital Accounts of all the Members effective immediately prior to such
admission. If the Manager Member elects, in its sole discretion, to revalue the
Capital Accounts of all the Members, then the Capital Accounts of all the
Members shall be adjusted as follows:
(i) the Manager Member shall determine the proceeds which
would be realized if the LLC sold all its assets immediately prior
to the effectiveness of such admission, for a price equal to the
Fair Market Value of such assets determined as provided for herein,
and
(ii) The Manager Member shall allocate amounts equal to the
net gain or net loss which would have been realized upon such a sale
to the Capital Accounts of all the Members immediately prior to the
effectiveness of such admission, in accordance with the provisions
of Section 4.2(c) or Section 4.2(d) hereof, as applicable.
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SECTION 5.3 ALLOCATION OF DISTRIBUTIONS BETWEEN TRANSFEROR AND TRANSFEREE;
SUCCESSOR TO CAPITAL ACCOUNTS.
(a) Upon the Transfer of LLC Interests pursuant to this Article V,
distributions pursuant to Article IV after the date of such Transfer shall be
made to the Transferee at the date of distribution, unless the Transferor and
Transferee otherwise agree and so direct the LLC and the Manager Member in a
written statement signed by both the Transferor and Transferee. In connection
with a Transfer by a Member of LLC Points or Reserved Points, the Transferee
shall succeed to a pro-rata (based on the percentage of such Member's LLC Points
or Reserved Points Transferred) portion of the Transferor's Capital Account,
unless the Transferor and Transferee otherwise agree and so direct the LLC and
the Manager Member in a written statement signed by both the Transferor and
Transferee and, unless such agreement makes no change other than to reserve to
the Transferor all or a portion of distributions pursuant to Article IV or sales
price pursuant to Article VII, consented to by the Manager Member.
(b) Upon a Transfer of LLC Interests but prior to the Transferee
being admitted as a substitute Member with respect to such LLC Interests, the
Transferee shall receive allocations and distributions pursuant to the
provisions of Sections 4.2, 4.4, 4.5, 4.6 and 4.7 hereof as if such Transferee
were a Manager Member, Non-Manager Member who is an Original Principal or Clark
or Non-Manager Member who is not an Original Principal or Clark to the same
extent and proportionately with the Transferor of such LLC Interests. For all
other purposes of this Agreement (including, without limitation, the provisions
of Section 4.3, Article VII (except to the extent the LLC and the Manager Member
or AMG have been directed in writing to make payments of the proceeds of a Put,
a Call or a Repurchase to the Transferee of such LLC Interests)), upon a
Transfer of LLC Interests but prior to the Transferee being admitted as a
substitute Member with respect to such LLC Interests, the Transferor shall be
treated as holding the LLC Interests so Transferred.
SECTION 5.4 RESIGNATION, REDEMPTIONS AND WITHDRAWALS. No Non-Manager
Member shall have the right to resign, to cause the redemption of its LLC
Interests, in whole or in part, or to withdraw from the LLC, except (a) with the
consent of the Manager Member, or (b) as is expressly provided for in Article
VII hereof. Upon any resignation, redemption or withdrawal, the Non-Manager
Member shall only be entitled to the consideration, if any, provided for by
Article VII hereof. Upon the resignation, redemption or withdrawal, in whole or
in part, by a Non-Manager Member, the Manager Member shall make the appropriate
revisions to Schedule A hereto. Notwithstanding the foregoing, without any
action on his part or on the part of the LLC, the Management Board or any
Member, effective March 31, 1999, Clark shall automatically cease to be a Member
of the LLC and his interest in the LLC shall be reallocated among the Original
Principals who are Members at such time, in proportion to their respective LLC
Points and Reserved Points, and the Manager Member shall make appropriate
revisions to Schedule A hereto.
SECTION 5.5 ISSUANCE OF ADDITIONAL LLC INTERESTS.
(a) Additional Non-Manager Members (the "Additional Non-Manager
Members" and each an "Additional Non-Manager Member") may be admitted to the LLC
and
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such Additional Non-Manager Members may be issued LLC Interests, only upon
approval of the Management Board and the consent of the Manager Member and upon
such terms and conditions as may be established by the Manager Member with the
consent of the Management Board (including, without limitation, upon such
Additional Non-Manager Member's execution of an instrument satisfactory to the
Manager Member whereby such Person becomes a party to this Agreement as a
Non-Manager Member as well as, in the case of employees of the LLC (or its
Controlled Affiliates) or any Controlled Affiliate of any such employee, such
Person's compliance with the provisions of Section 3.7 hereof); provided, that,
the Management Board and the Manager Member shall take all commercially
reasonable steps to ensure that there are at least three (3) Non- Manager
Members at all times.
(b) Except as provided by Section 5.4, existing Non-Manager Members
may be issued additional LLC Interests by the LLC only with the consent of, and
upon such terms and conditions as may be established by the Management Board
with the consent of the Manager Member. The Manager Member may only be issued
additional LLC Interests by the LLC upon approval by the Management Board.
(c) Each time other than as provided by Section 5.4 additional LLC
Interests are issued, the Capital Accounts of all the Members (other than Clark)
shall be adjusted as follows: (i) the Manager Member shall determine the
proceeds which would be realized if the LLC sold all its assets at such time for
a price equal to the Fair Market Value of such assets determined as provided
herein, and (ii) the Manager Member shall allocate amounts equal to the net gain
or net loss which would have been realized upon such a sale to the Capital
Accounts of all the Members immediately prior to the effectiveness of such
issuance in accordance with the provisions of Section 4.2(c) or Section 4.2(d)
hereof, as applicable (provided, that LLC Points and Reserved Points of Clark
shall be deemed to have been allocated in accordance with the last sentence of
Section 5.4 at the time provided therein).
(d) Upon the issuance of additional LLC Interests, the Manager
Member shall make the appropriate revisions to Schedule A hereto.
SECTION 5.6 ADDITIONAL REQUIREMENTS. As additional conditions to the
validity of (x) any Transfer of a Non-Manager Member's LLC Interests (pursuant
to Section 5.1 above), or (y) the issuance of additional LLC Interests (pursuant
to Section 5.5 above), such Transfer or issuance shall not: (i) violate the
registration provisions of the Securities Act or the securities laws of any
applicable jurisdiction, (ii) cause the LLC or any class of its securities to
become subject to registration under the Exchange Act, (iii) cause the LLC to
become subject to regulation as an "investment company" under the 1940 Act and
the rules and regulations of the SEC thereunder, (iv) result in the termination
of any contract to which the LLC is a party and which individually or in the
aggregate are material (it being understood and agreed that any contract
pursuant to which the LLC provides Investment Management Services or Brokerage
Services is material), (v) result in the treatment of the LLC as an association
taxable as a corporation or as a "publicly traded partnership" for Federal or
state income tax purposes or (vi) violate any laws of any jurisdiction of
organization of any Offshore Fund.
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The Manager Member may require reasonable evidence as to the foregoing,
including, without limitation, a favorable opinion of counsel, which expense
shall be borne by the parties to such transaction (and to the extent the LLC is
such a party, shall be paid from Operating Cash Flow).
To the fullest extent permitted by law, any Transfer that violates the
conditions of this Section 5.6 shall be null and void.
SECTION 5.7 TRANSITION PLANNING WITH RESPECT TO CERTAIN CLIENTS.
(a) It shall be a condition precedent to the exercise by any
Original Principal of a Put of any of his or its LLC Interests or a Repurchase
upon termination of employment from an Original Principal, that each Offshore
Management Agreement shall provide that, effective upon completion of a sale of
LLC Points by such Original Principal or Transferee thereof pursuant to Article
VII, the formulas for determination of the Performance Fee payable to the LLC
pursuant to such agreements shall be increased by an amount correlative to the
proportion of the amount allocable to Manager Shares or other profit allocation
or performance fee structure represented by a fraction, the numerator of which
is the number of LLC Points being sold at that time by such Original Principal
or Transferee, and the denominator of which is the number of LLC Points of the
Original Principals and their Transferees at the time of the first such sale by
any of the Original Principals or their Transferees. The LLC and each of the
Non-Manager Members shall use all commercially reasonable efforts to cause the
LLC and each of the Offshore Funds to comply with this Section 5.7.
Notwithstanding any other provision of this Agreement to the contrary, this
covenant shall survive the withdrawal or removal of a Non-Manager Member from
the LLC. No Non-Manager Member shall enter into any agreement or arrangement or
take any action which is inconsistent with the terms of this Section 5.7, and
the Non-Manager Members shall use all commercially reasonable efforts to prevent
the LLC or any of the Offshore Funds from entering into any agreement or
arrangement or taking any action which is inconsistent with the terms of this
Section 5.7.
(b) Each of the Original Principals hereby covenants and agrees
that, without the prior written consent of the Manager Member, such Original
Principal shall not permit any Offshore Related Partnership to cause or
otherwise permit the Offshore Fund in which any such Offshore Related
Partnership holds interests to (A) terminate the LLC as Investment Advisor to
such Offshore Fund (B) or otherwise modify the LLC's relationship with such
Offshore Fund (including, without limitation, any amendment to the relevant
Offshore Management Agreement or organizational documents of such Offshore Fund)
either (I) in a manner that would have the effect of benefitting one or more of
the Original Principals, Non-Manager Members or members of their Immediate
Family to the detriment of the LLC or the Manager Member or AMG or (II) under
any circumstances, to effect any change in the arrangements described in Section
5.7(a).
SECTION 5.8 REPRESENTATION OF MEMBERS. The Manager Member and each
Non-Manager Member (including each Additional Non-Manager Member) hereby
represents and warrants to the LLC and each other Member, and acknowledges, that
(a) it has such knowledge and experience in financial and business matters that
it is capable of evaluating the merits and risks of an investment in the LLC and
making an informed investment decision with respect thereto, (b) it is
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able to bear the economic and financial risk of an investment in the LLC for an
indefinite period of time, (c) it is acquiring an interest in the LLC for
investment only and not with a view to, or for resale in connection with, any
distribution to the public or public offering thereof, (d) the LLC Interests
have not been registered under the securities laws of any jurisdiction and
cannot be disposed of unless they are subsequently registered and/or qualified
under applicable securities laws and the provisions of this Agreement have been
complied with, and (e) the execution, delivery and performance of this Agreement
by such Member do not require it to obtain any consent or approval that has not
been obtained and do not contravene or result in a default under any provision
of any existing law or regulation applicable to it, or any agreement or
instrument to which it is a party or by which it is bound.
ARTICLE VI - TRANSFER OF LLC INTERESTS BY THE
MANAGER MEMBER; REDEMPTION, REMOVAL
AND WITHDRAWAL
SECTION 6.1 ASSIGNABILITY OF INTEREST.
(a) Except as set forth in this Section 6.1, without the approval of
the Management Board, none of the LLC Interests of AMG or its Affiliates may be
Transferred; provided, however, (i) it is understood and agreed that, in
connection with the operation of the businesses of AMG and the Manager Member
(including, without limitation, the financing of its LLC Interests and direct or
indirect interests in additional investment management companies), the LLC
Interests of AMG and its Affiliates will be pledged and encumbered, and holders
of liens on such LLC Interests shall have, and be able to exercise, the rights
of secured creditors with respect to such LLC Interests, (ii) AMG and its
Affiliates may sell some (but not a majority) of their LLC Interests to a Person
who is not a Member but who is an Officer or employee of the LLC or who becomes
an Officer or employee of the LLC in connection with such issuance, or a Person
wholly owned by any such Person, (iii) AMG and its Affiliates may sell some (but
not a majority) of their LLC Interests to existing Non-Manager Members, and (iv)
AMG and its Affiliates may sell all or any portion of their LLC Interests to AMG
or any Controlled Affiliate of AMG, which shall thereafter be subject to the
provisions contained herein with respect to the Manager Member or AMG; provided,
however, that without the approval of the Management Board there shall be only
one Manager Member. Notwithstanding anything else set forth herein, the Manager
Member may, with the approval of the Management Board, sell all its LLC
Interests in a single transaction or a series of related transactions, and, in
any such case, each of the Non-Manager Members shall be required to sell, in the
same transaction or transactions, all their LLC Interests; provided, that the
price to be received by all the Members shall be allocated among the Members as
follows: (a) an amount equal to the sum of the positive balances, if any, of the
Capital Accounts shall be allocated among the Members having such Capital
Accounts in proportion to such positive balances, and (b) the excess, if any,
shall be allocated among all Members in accordance with their respective number
of LLC Points at the time of such sale. Upon any of the foregoing transactions,
the Manager Member shall make the appropriate revisions to Schedule A hereto.
Solely for purposes of the foregoing sentence, Clark shall, for as long as he is
a Member, be deemed to have a Capital Account equal to the sum of the Capital
Accounts of the Original Principals multiplied by a fraction, the numerator of
which is the number of LLC
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Points held by him at the time of such transaction or transactions and the
denominator of which is the total number of LLC Points then held by Original
Principals and each other Original Principal shall be deemed to have a Capital
Account, equal to his Capital Account multiplied by a fraction which is one (1)
minus the fraction determined above with respect to Clark.
(b) In the case of any Transfer upon foreclosure pursuant to Section
6.1(a)(i) above, each Transferee shall sign a counterpart signature page to this
Agreement agreeing thereby to become either a Non-Manager Member or a Manager
Member (provided, however, that once one such other Transferee elects to become
a Manager Member, no Transferee (other than a subsequent Transferee of such new
Manager Member) may elect to be a Manager Member hereunder). If the Transferees
pursuant to Section 6.1(a)(i) above receive all the Manager Member's LLC
Interests, and none of such Transferees elects to become a Manager Member, then
that shall be deemed to be an event of withdrawal by the Manager Member. If,
however, one of the Transferees elects to become a Manager Member, and executes
a counterpart signature page to this Agreement agreeing thereby to become a
Manager Member, then notwithstanding any other provision hereof to the contrary,
the old Manager Member shall thereupon be permitted to withdraw from the LLC as
Manager Member.
(c) In the case of a Transfer pursuant to the penultimate sentence
of Section 6.1(a) above, the Manager Member shall be deemed to have withdrawn,
and its Transferee shall be deemed to have become the Manager Member.
SECTION 6.2 RESIGNATION, REDEMPTION, AND WITHDRAWAL.
(a) To the fullest extent permitted by law, except as set forth in
Section 6.1 hereof, without approval by the Management Board, the Manager Member
shall not have the right to resign or withdraw from the LLC as Manager Member.
With approval by the Management Board, the Manager Member may resign or withdraw
as Manager Member upon prior written notice to the LLC. Without approval by the
Management Board, the Manager Member shall have no right to have all or any
portion of its LLC Interests redeemed. Any resigned or withdrawn Manager Member
shall retain its interest in the capital of the LLC and its other economic
rights under this Agreement as a Non-Manager Member having the number of LLC
Points held by the Manager Member prior to its resignation or withdrawal. If a
Manager Member who has resigned or withdrawn no longer has any economic interest
in the LLC, then upon such resignation or withdrawal, such Person shall cease to
be a Member of the LLC. The Manager Member may not be removed by the Members of
the LLC for any reason.
(b) If the Manager Member is subject to the prohibitions set forth
in Section 9(a) of the 1940 Act (an "Ineligible Manager") and none of the Mutual
Funds, the LLC or the Manager Member has been able either to obtain an order
from the SEC permitting the LLC to continue acting as investment adviser to the
Mutual Funds, or otherwise to obtain appropriate comfort as set forth in a
written opinion of counsel reasonably acceptable to the Management Board that
the LLC may continue acting as investment adviser to the Mutual Funds, then the
Ineligible Manager shall withdraw as Manager Member, notwithstanding any other
provision of this Agreement to the contrary. Immediately prior to any such
withdrawal, the Ineligible Manager shall designate another Person, in its
reasonable discretion, who is not subject to the prohibitions set forth in
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Section 9(a) of the 1940 Act to be Manager Member and, notwithstanding any other
provision of this Agreement to the contrary, the Ineligible Manager may Transfer
all or any portion of its LLC Interests to such Person and upon such terms and
conditions as may be set by the Ineligible Manager in its sole discretion
(including, without limitation, the condition that such Person return to the
Ineligible Manager all or any portion of its LLC Interests at such time or times
as may be set by the Ineligible Manager in its sole discretion and to the terms
and conditions required by Section 5.6). In addition, notwithstanding anything
else set forth herein to the contrary, the Person so designated to become the
Manager Member may be required to withdraw as Manager Member whereupon the
Ineligible Manager shall again become the Manager Member conditioned upon either
(i) the Ineligible Manager no longer being subject to the prohibitions set forth
in Section 9(a) of the 1940 Act, (ii) the Mutual Funds, the LLC or the
Ineligible Manager obtaining an order from the SEC permitting the LLC to act as
investment adviser to the Mutual Fund with the Ineligible Manager as Manager
Member, or (iii) the Mutual Funds, the LLC or the Ineligible Manager otherwise
obtaining an opinion of counsel reasonably satisfactory to the Management Board
that the LLC may act as investment adviser to the Mutual Funds with the
Ineligible Manager as Manager Member.
ARTICLE VII - PUTS AND CALLS OF LLC INTERESTS
SECTION 7.1 PUTS.
(a) Each Non-Manager Member may, subject to the terms and conditions
set forth in this Section 7.1, cause AMG to purchase portions of the LLC
Interests held by such Non-Manager Member in the LLC (each a "Put").
(b) Each Original Principal may, subject to the terms and conditions
set forth in this Agreement, cause AMG to purchase from such Original Principal
on the last business day in February (or, if later in any year starting in the
year 2003, the month end after which the Manager Member has had the information
necessary to determine the Put Price for a period of not less than fifteen (15)
days) starting with such date in the year 2003 (each a "Purchase Date"), all or
a portion of the LLC Interests held by such Original Principal as of the
Effective Date. It is a condition precedent to the exercise by any Original
Principal of a Put that such Original Principal, the LLC, the Offshore Related
Partnerships and the Offshore Funds shall have complied with the provisions of
Section 5.7 hereof.
(c) Each Non-Manager Member who is not entitled to any rights under
Section 7.1(b) may, subject to the terms and conditions set forth in this
Agreement, cause AMG to purchase from such Non-Manager Member any number of LLC
Points that is less than or equal to ten percent (10%) of the LLC Points issued
or Transferred to such Non-Manager Member at any time (including, without
limitation, pursuant to the Incentive Program or upon the exercise of any
options granted under the Incentive Program) as of any five (5) separate
Purchase Dates (but only up to an aggregate of a number of LLC Points as is
equal to fifty percent (50%) of the LLC Points issued or Transferred to such
Non-Manager Member), starting on the first Purchase Date which is at least five
(5) years following the date of a particular issuance or Transfer (with LLC
Interests acquired upon exercise of an option being deemed to have been acquired
on the date
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of grant of such option and with Clark's interests that are reallocated to the
Original Principals being deemed to have been acquired by them on the Effective
Date).
(d) If a Non-Manager Member desires to exercise his rights under
Section 7.1(b) or 7.1(c) above, he shall give AMG, each other Non-Manager Member
and the LLC irrevocable written notice (a "Put Notice") on or prior to the
preceding December 31 (the "Notice Deadline"), stating that he is electing to
exercise such rights and the number of LLC Points (the "Put LLC Points") to be
sold in the Put. Puts in any given calendar year for which Put Notices are
received before the Notice Deadline for that calendar year shall be completed as
follows: AMG shall purchase from each Non-Manager Member that number of Put LLC
Points designated in the Put Notice; provided, however, that, prior to the tenth
(10th) anniversary of the Effective Date, in no event shall the aggregate number
of LLC Points AMG is required to purchase on any Purchase Date under Section
7.1(b) and Section 7.1(c), together with all LLC Points purchased by the Manager
Member pursuant to Puts under Section 7.1(b) and Section 7.1(c) within twelve
(12) months prior to such Purchase Date, exceed two and one-half (2.5) LLC
Points; and, provided further, that in the case of a Put under Section 7.1(c)
above, in no event shall AMG be required to purchase LLC Points in excess of
either (A) the maximum number permitted by Section 7.1(c) above with respect to
that Non-Manager Member, that portion of his LLC Points and that year, or (B)
the aggregate number of LLC Points that may be Put by that Non-Manager Member
with respect to that portion of the LLC Points issued or transferred to him. If
the number of LLC Points for which Put Notices are received under Section 7.1(b)
and Section 7.1(c) before the Notice Deadline for any such twelve (12) month
period prior to the tenth (10th) anniversary of the Effective Date exceeds two
and one-half (2.5) LLC Points, then AMG shall purchase an aggregate of two and
one-half (2.5) LLC Points from among all Non-Manager Members who have provided
timely Put Notices in such proportion as shall result in each such Non-Manager
Member (together with his Transferees) having sold under Section 7.1(b) and
Section 7.1(c) an aggregate percentage of the highest number of LLC Points held
by such Member and his Transferees at any time after the Effective Date that is
as nearly the same as practicable.
(e) The purchase price for a Put (the "Put Price") shall be an
amount (which is intended to be a proxy for fair market value) equal to (A)
eight and one-half (8.5) multiplied by the amount, if any, equal to (i) the
Run-Rate Free Cash Flow of the LLC as of the end of the calendar quarter ending
prior to the applicable Purchase Date (i.e., the calendar quarter ending on
December 31) (the "Put/Call Measurement Date"), minus (ii) the Operating
Shortfall as of such Put/Call Measurement Date, minus (iii) the excess, if any,
of the Manager Member Excess Loss Allocations as of such Put/Call Measurement
Date over the allocations under Section 4.2(b)(ii) to the Manager Member that
were made during the twelve (12) months ending on the last day of the calendar
quarter in which such Put/Call Measurement Date occurs, multiplied by (B) a
fraction, the numerator of which is the number of outstanding LLC Points to be
purchased from such Non-Manager Member on the Purchase Date and the denominator
of which is the total number of LLC Points outstanding on the Purchase Date
before giving effect to any Puts or Calls or any issuances or redemptions of
LLC Points on such Purchase Date, but including as outstanding LLC Points all
Reserved Points.
(f) In the case of any Put pursuant to the provisions of Section
7.1(b) or Section 7.1(c) hereof, the Put Price shall be paid by AMG (or, if AMG
shall have assigned its obligation
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pursuant to paragraph (g) below, the assignee(s) thereof) on the relevant
Purchase Date by wire transfer or certified check issued to such Non-Manager
Member or Transferee, in each case, against delivery of such documents or
instruments of Transfer as may reasonably be requested by AMG or the assignee or
assignees thereof, as applicable, and in each case including representations
that at the effective time of such transaction the Non-Manager Member or
Transferee thereof making such Transfer is the record and beneficial owner of
the LLC Interests being Put, free and clear of any Encumbrances other than those
imposed by this Agreement.
(g) AMG may, with consent of the Management Board, assign any or all
of its rights and obligations to purchase LLC Interests under this Section 7.1,
in one or more instances, to the LLC or, if AMG shall have made a pro-rata offer
to the Non-Manager Members, to such Non-Manager Members as accept such offer. In
addition, AMG may, without the consent of the Management Board assign any or all
of its rights and obligations to purchase LLC Interests under this Section 7.1,
in one or more instances, to the Manager Member or any other wholly-owned direct
or indirect subsidiary of AMG provided that AMG is not released from its
obligations under this Section 7.1 and remains liable therefor, provided further
that in the event such assignee is a wholly-owned direct or indirect subsidiary
of AMG and thereafter ceases to be so owned (for any reason other than after
foreclosure on a pledge of securities), such assignee shall reassign to AMG or
the Manager Member all LLC Interests so acquired.
(h) As of any Purchase Date, the Non-Manager Member or Transferee
thereof making such Transfer shall cease to hold the LLC Interests purchased on
the Purchase Date, and shall cease to hold a pro-rata portion of such
Non-Manager Member's Capital Account and shall no longer have any rights with
respect to such portion of his LLC Interests. Each Transferee of a Non-Manager
Member shall be required to Put such number of LLC Points at such times as may
be directed by the Transferor Non-Manager Member (subject to the restrictions
set forth in Sections 7.1(b), 7.1(c) and 7.1(d) which shall continue to apply as
if the LLC Points were held by the Transferor Non-Manager Member.
SECTION 7.2 CALLS.
(a) The Manager Member may, subject to the terms and conditions set
forth in this Section 7.2, cause each Non-Manager Member to sell portions of the
LLC Interests held by each such Non-Manager Member in the LLC (each a "Call").
(b) The Manager Member may cause each Non-Manager Member (and any
Transferee thereof) to sell up to twenty percent (20%) of the highest total
number of LLC Points (excluding any Reserved Points) held by such Non-Manager
Member at any time, to the Manager Member on any Purchase Date starting with the
first Purchase Date which is after the 65th birthday of such Non-Manager Member.
(c) If the Manager Member desires to exercise its rights under
Section 7.2(b), it shall give each Non-Manager Member and the LLC irrevocable
written notice (a "Call Notice") on or prior to the immediately preceding Notice
Deadline, stating that it is electing to exercise such rights, the Non-Manager
Member with respect to whom the Call is being exercised and the number of LLC
Points to be purchased in the Call.
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(d) The purchase price for a Call (the "Call Price") shall be an
amount (which is intended to be a proxy for fair market value) equal to (A)
eight and one-half (8.5) multiplied by the amount, if any, equal to (i) the
Run-Rate Free Cash Flow of the LLC as of the applicable Put/Call Measurement
Date, minus (ii) the Operating Shortfall as of such Put/Call Measurement Date,
minus (iii) the excess, if any, of the Manager Member Excess Loss Allocations
as of such Put/Call Measurement Date over the allocations under Section
4.2(b)(ii) to the Manager Member that were made during the twelve (12) months
ending on the last day of the calendar quarter in which such Put/Call
Measurement Date occurs, multiplied by (B) a fraction, the numerator of which
is the number of outstanding LLC Points to be purchased from such Non-Manager
Member on the Purchase Date and the denominator of which is the total number of
Reserved Points and LLC Points outstanding on the Purchase Date before giving
effect to any Puts or Calls or any issuances or redemptions of LLC Interests on
such Purchase Date.
(e) As of any Purchase Date, the Non-Manager Member (and its
Transferees to the extent applicable) selling LLC Points under this Section 7.2
shall cease to hold the LLC Interests purchased on the Purchase Date, and shall
cease to hold a pro-rata portion of such Non-Manager Member's Capital Account
and shall no longer have any rights with respect to such portion of its LLC
Interests.
SECTION 7.3 REPURCHASE UPON TERMINATION OF EMPLOYMENT OR TRANSFER BY
OPERATION OF LAW.
(a) In the event that the employment by the LLC of any Non-Manager
Member other than Clark terminates for any reason, then:
(i) if the termination of the Non-Manager Member occurred
because of the death or Permanent Incapacity of such Non-Manager
Member and the LLC has purchased key-man life or lump-sum disability
insurance on such Non-Manager Member, the LLC shall purchase and the
Non-Manager Member (and any Transferees thereof who have not been
admitted as Non-Manager Members) (together a "Repurchased Member")
shall sell to the LLC for cash, that number of LLC Points then held
by such Repurchased Member (before taking into account any
Repurchase hereunder) the Repurchase Price of which is equal to the
cash proceeds of any key-man life insurance policies or lump-sum
disability insurance policies, as applicable, maintained by the LLC
on the life or health of such Non-Manager Member (an "LLC
Repurchase"), and
(ii) in each other such case (and, in the case of the death or
Permanent Incapacity of a Non-Manager Member, to the extent the
Repurchase Price exceeds the proceeds described in clause (i) of
this Section 7.3(a) (determined after all such proceeds have been
collected)), AMG shall purchase and the Repurchased Member shall
sell (each a "Manager Member Repurchase") all (or, in the case of
the death or Permanent Incapacity of a Non-Manager Member, such
remaining portion as is not required to be purchased by the LLC
under clause (i) of this Section 7.3(a)) of the LLC Points held by
the Repurchased Member, in each case, pursuant to the terms of this
Section 7.3. For purposes hereof, each LLC Repurchase and each
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Manager Member Repurchase together with the related LLC Repurchase,
if any, is referred to as a "Repurchase."
(b) The closing of the Repurchase will take place on a date set by
AMG (the "Repurchase Closing Date"), which shall be within sixty (60) days after
the last day of the calendar quarter in which the Non-Manager Member's
employment with the LLC is terminated or, if longer, fifteen (15) days after AMG
receives the information necessary to calculate the Repurchase Price; provided,
however, that if the employment by the LLC of such Non-Manager Member is
terminated because of the death or Permanent Incapacity of such Non-Manager
Member and the LLC or AMG has purchased key-man life or lump-sum disability
insurance on such Non-Manager Member, then the Repurchase Closing Date shall be
a date set by AMG which is as soon as reasonably practicable after the LLC or
AMG has received all proceeds of all key-man life insurance policies or
disability insurance policies, as applicable, maintained by the LLC on the life
or health of such Non-Manager Member; and, provided, further, that it shall be a
condition precedent to any Repurchase of LLC Interests from an Original
Principal that such Non-Manager Member (or his heirs and assigns), the LLC and
the Offshore Funds shall have complied with the provisions of Section 5.7
hereof.
(c) The purchase price for the Repurchase (the "Repurchase Price")
shall be determined as follows: the Repurchase Price shall be calculated as of
the last day of the calendar quarter in which the termination of such
Non-Manager Member's employment occurs and shall equal (which is intended to be
a proxy for fair market value) (A) eight and one-half (8.5) multiplied by the
amount, if any, equal to (x) the Run Rate Free Cash Flow as of such date, minus
(y) the Operating Shortfall as of such date, minus (z) the excess, if any, of
the Manager Member Excess Loss Allocations as of such date over the allocations
under Section 4.2(b)(ii) to the Manager Member that were made during the twelve
(12) months ending on the last day of the calendar quarter in which such date
occurs, multiplied by (B) a fraction, the numerator of which is the number of
LLC Points being purchased from such Non-Manager Member in the Repurchase, and
the denominator of which is the sum of the Reserved Points and the number of
LLC Points outstanding on the Repurchase Closing Date (before giving effect to
any issuances or redemptions of LLC Interests on such date); provided, however,
that if the termination or cessation giving rise to such Repurchase is other
than death or Permanent Incapacity (or, in the case of Shrager or Wyckoff, in
the event of a unilateral termination of employment by the LLC other than For
Cause or Unsatisfactory Performance) and occurs prior to the earliest date on
which such Person could have commenced Retirement, then the multiple set forth
in clause (A) above shall be three (3) rather than eight and one-half (8.5);
and provided further, that if a Repurchase described in the immediately
preceding proviso occurs prior to the fifth (5th) anniversary of the Effective
Date, the Repurchase Price determined therefor shall be reduced by an amount
equal to the product of (x) the excess of the Capital Account of the Manager
Member immediately after the Effective Date over reductions therein due to
amortization of the purchase price of the LLC Interests acquired by the Manager
Member on the Effective Date multiplied by (y) a fraction the numerator of
which is the number of LLC Points subject to this adjustment and the
denominator of which is 100; and provided, further, however, that the
Repurchase Price with respect to Shrager or Wyckoff shall in no event be less
than the lesser of (i) the amount originally paid by such Non-Manager Member
for his LLC Interest and (ii) three and three quarters (3.75) multiplied by the
Run Rate Free Cash Flow as of the Repurchase Closing
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Date multiplied by a fraction, the numerator of which is the number of LLC
Points being purchased from such Non-Manager Member in the Repurchase, and the
denominator of which is the sum of the Reserved Points and the number of LLC
Points outstanding on the Repurchase Closing Date (before giving effect to any
issuances or redemptions of LLC Interests on such date).
(d) The rights of AMG, the LLC and their assignees hereunder are in
addition to and shall not affect any other rights which the Manager Member, the
LLC or their assigns may otherwise have to repurchase LLC Interests (including,
without limitation, pursuant to any agreement entered into by an Additional
Non-Manager Member which provides for the vesting of LLC Points).
(e) On the Repurchase Closing Date, AMG and/or the LLC (as
applicable) shall pay to the Repurchased Member the Repurchase Price for the LLC
Interests repurchased in the manner set forth in this Section 7.3, and upon such
payment the Repurchased Member shall cease to hold any LLC Interests, and such
Repurchased Member shall be deemed to have withdrawn from the LLC and shall
cease to be a Member of the LLC and shall no longer have any rights hereunder;
provided, however, that the provisions of Article III and Sections 10.4, 10.5
and 10.6 shall continue as set forth therein. On the Repurchase Closing Date,
the Repurchased Member and the LLC (and if AMG is purchasing LLC Interests from
the Repurchased Member, AMG) (or their assignees) shall execute an agreement
reasonably acceptable to AMG in which the Repurchased Member represents and
warrants to AMG and/or the LLC, as applicable (or their assignees), that it has
sole record and beneficial title to the Repurchased Interest, free and clear of
any Encumbrances at the date of the transaction other than those imposed by this
Agreement. Payment of the Repurchase Price shall be made on the Repurchase
Closing Date as follows: (i) in the case of termination of employment of an
Original Principal or, in the case of any other Non-Manager Member, because of
death or Permanent Incapacity of such Non-Manager Member (to the extent of the
collected proceeds of any insurance policies under which the LLC or the Manager
Member is the beneficiary upon the death or Permanent Incapacity of such
Non-Manager Member), by wire transfer of immediately available funds to an
account designated by the Repurchased Member in writing at least three (3)
business days prior to the Repurchase Closing Date, and (ii) in the case of any
other termination of employment of a Non-Manager Member who is not an Original
Principal other than a Retirement (but including a termination of employment
because of Permanent Incapacity to the extent the obligation exceeds the
proceeds of any key-man disability insurance policies described above), with a
promissory note in the form attached hereto as Exhibit C, the principal of which
promissory note would be paid in four (4) equal installments, the first
installment would be paid on the Repurchase Date, and the second, third and
fourth installments would be paid fourteen (14) months, twenty-six (26) months
and thirty-eight (38) months, respectively, after the first installment.
(f) AMG may, with the consent of the Management Board, assign any or
all of its rights and obligations under this Section 7.3, in one or more
instances, to the LLC; provided, that the foregoing shall have no effect on the
LLC's obligation set forth in Section 7.3(a)(i) regarding the use of the
proceeds of a key-man life or disability insurance policy. In addition, AMG may,
without the consent of the Management Board assign any or all of its rights and
obligations to purchase LLC Interests under this Section 7.3, in one or more
instances, to the Manager Member or any other wholly-owned subsidiary of AMG
provided that AMG is not
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released from its obligations under this Section 7.3 and remains liable
therefor, and provided further that in the event such assignee is a wholly-owned
direct or indirect subsidiary of AMG and thereafter ceases to be so owned (for
any reason other than after foreclosure on a pledge of securities), such
assignee shall reassign to AMG or the Manager Member all LLC Interests so
acquired.
(g) In the event that a Non-Manager Member or a Transferee thereof
is required to sell its LLC Interests pursuant to the provisions of this Section
7.3, and in the further event that such Non-Manager Member or any Transferee
thereof refuses to, is unable to, or for any reason fails to, execute and
deliver the documents required by this Section 7.3, the LLC or AMG, as
applicable (or their respective assign(s)) may deposit the purchase price, if
any, therefor (including cash and/or promissory notes) with any bank doing
business within fifty (50) miles of the LLC's principal place of business, or
with the LLC's accounting firm, as agent or trustee, or in escrow, for such
Non-Manager Member or Transferee, to be held by such bank or accounting firm for
the benefit of and for delivery to such Non-Manager Member or Transferee. Upon
such deposit by the LLC or AMG (or their respective assign(s)) and upon notice
thereof given to such Non-Manager Member or Transferee, such Non-Manager
Member's LLC Interests shall be deemed to have been Transferred to the LLC or
AMG (or their assign(s)), as applicable, the Non-Manager Member and/or any such
Transferee shall have no further rights with respect thereto (other than the
right to withdraw any payment therefor held in escrow), and AMG shall record
such Transfer or repurchase on Schedule A hereto.
SECTION 7.4 ELECTION RIGHTS OF MANAGER MEMBER TO PAY IN SHARES OF AMG
STOCK.
(a) If AMG has, at the time of a Put or a Repurchase completed a
registration of shares of its common stock for sale under the Securities Act
(other than a registration on Form S-8 or its then equivalent form) or a
registration effected solely to implement an employee benefit plan, a
transaction under Rule 145 or to which any other similar rule of the SEC under
the Securities Act is applicable or registration on a form not available for
registering securities for sale to the public (a "Public Offering"), then AMG
may elect to pay all or a portion of the Put Price for the relevant Put, or
Repurchase Price for the Repurchase in shares of AMG's Common Stock (the "AMG
Stock") in accordance with the provisions of this Section 7.4. If AMG elects to
pay a portion of the Put Price or Repurchase Price in shares of AMG Stock in
accordance with the provisions of this Section 7.4, the portion of the
consideration which is paid in AMG Stock shall reduce the cash portion of the
Put Price or Repurchase Price.
(b) An election under this Section 7.4 must be made by AMG at least
sixty (60) days prior to the relevant Purchase Date, by giving written notice to
the LLC and the Non-Manager Member who has exercised a Put or Repurchased
Member, as applicable, of such election, which election, once made, shall only
be revocable within thirty (30) days after being made.
(c) The number of shares of AMG Stock to be issued upon exercise of
the Put, or upon the Repurchase shall equal the quotient obtained by dividing
the portion of the Put Price or Repurchase Price (as applicable) payable in AMG
Stock by AMG's Average Stock Price, where:
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(i) "AMG's Average Stock Price" is defined to mean the average
(arithmetic mean) Stock Price of AMG Stock during the forty (40)
trading days prior to the date of the closing of the Put or Call or
Repurchase; and
(ii) "Stock Price" is defined to mean, for any day, the
closing price for the AMG Stock, which shall be the last sale price
or, in the case no such sale takes place on such day, the average of
the closing bid and asked prices, in either case as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange or
other market on which the AMG Stock is listed or admitted to
trading; or, if not listed or admitted to trading on any national
securities exchange, the last quoted price (or, if not so quoted,
the average of the last quoted high bid and low asked prices) in the
over-the-counter market, as reported by NASDAQ or such other system
then in use; or, if on any such date no bids are quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in such
security reasonably selected by the Board of Directors of AMG;
provided, however, that if at the time AMG makes such election, the
product of AMG's Average Stock Price multiplied by the number of
shares of AMG Stock owned beneficially by persons who are not
executive officers or directors of AMG or entities which are
currently beneficial owners of more than ten percent (10%) of AMG
Stock within the meaning of Rule 16a-1 of the Exchange Act does not
exceed five hundred million dollars ($500,000,000), then the Stock
Price shall be reduced by an illiquidity factor, if any, determined
by an investment banking firm reasonably acceptable to the Manager
Member and the Management Board.
In the event that there is any stock split (or reverse stock split), stock
dividend or other similar event, equitable and appropriate adjustments shall be
made in the application of the foregoing calculation of AMG's Average Stock
Price to take account of such event.
(d) The maximum portion of the Put Price or Repurchase Price payable
in AMG Stock without the consent of the Non-Manager Member (or his estate or
representative) shall be 100% minus the maximum combined federal, state and
local marginal tax rate applicable to sales of capital assets held by such
Non-Manager Member for the period he held such interests; provided, however,
that such portion shall be 0% if a stockholder of the Manager Member on the
Effective Date beneficially has purchased more than 40% of the outstanding AMG
Stock other than in connection with an investment (by merger or otherwise) by
AMG or if the Non-Manager Member has died and the AMG Stock to be received by
his estate, heirs, beneficiaries or Transferees is not immediately salable
without registration or any other restriction.
SECTION 7.5 CLASS B PUTS; INCREASE IN FREE CASH FLOW PERCENTAGE.
(a) Each Non-Manager Member holding Class B Points may cause AMG to
purchase all (and not less than all) of such Class B Points for the Class B
Payment on any one Purchase Date on or after the tenth (10th) anniversary of the
Effective Date (a "Class B Put
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Date"), subject to and in accordance with the terms and conditions set forth in
this Section 7.5 (each, a "Class B Put"). Upon the closing of any such Class B
Put as of the Class B Put Date, the Class B Points purchased by AMG shall be
automatically converted into that number of new LLC Points as is specified
below, and the Free Cash Flow Percentage shall thereafter be increased as
provided herein.
(b) Each Non-Manager Member who has been issued Class B Points
pursuant to this Agreement, as set forth on Schedule A hereto (and as amended
from time to time), is entitled, upon exercise of the Class B Put, to the
corresponding Class B Value. For purposes of this Section 7.5, the "Class B
Value" shall mean, as of any Class B Put Date, (i) the Class B Interest as of
the end of the fiscal year ending on or most recently prior to the applicable
Class B Put Date, if any, multiplied by (ii) a fraction, the numerator of which
is the total number of Class B Points held by such Non-Manager Member, and the
denominator of which is the aggregate number of Class B Points outstanding as of
such Class B Put Date immediately prior to exercise of such Class B Put.
(c) If a Non-Manager Member desires to exercise its Class B Put, it
shall give AMG each other Non-Manager Member and the LLC irrevocable written
notice (a "Class B Notice") (together, in the case of an Original Principal,
with his notice of Retirement) on or prior to the preceding December 31 (the
"Class B Notice Deadline") stating that he is electing to exercise such Class B
Put.
(d) Upon the first Class B Put Date immediately following delivery
of a Class B Notice, AMG shall pay the Non-Manager Member exercising his Class B
Put an amount (the "Class B Payment") equal to such Non-Manager Member's Class B
Value as of such Class B Put Date multiplied by eight and one-half (8.5). Upon
payment of the Class B Payment as of such Class B Put Date, the Non-Manager
Member who has exercised his Class B Put shall cease to hold any Class B Points
and shall no longer have any rights hereunder with respect to such Class B
Points.
(e) Immediately upon payment of the Class B Put Payment to the
Non-Manager Member exercising his Class B Put,
(i) the Class B Points purchased by AMG shall automatically
convert into that number of new LLC Points equal to the product of
(x) the aggregate number of LLC Points (excluding Reserved Points,
if any) outstanding immediately prior to the applicable Class B Put
Date and (y) a fraction, the numerator of which is such Non-Manager
Member's Class B Value as of such Class B Put Date, and the
denominator of which is the Free Cash Flow for the preceding fiscal
year; and
(ii) the Free Cash Flow Percentage shall be increased to an
amount equal to the sum of (x) the Free Cash Flow Percentage
immediately prior to the applicable Class B Put Date and (y) a
fraction, the numerator of which is such Non-Manager Member's Class
B Value as of such Class B Put Date, and the denominator of which is
the Revenues From Operations for the preceding fiscal year.
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(f) The Class B Payment shall be paid by AMG (or its assigns) on the
relevant Class B Put Date either (i) by wire transfer or certified check issued
to such Non-Manager Member, or (ii) subject to the limitations set forth in
Section 7.4 with respect to Puts, at the election of AMG if AMG has, at that
time, completed a Public Offering, by the delivery to such Non-Manager Member of
that number of shares of AMG Stock as it would be required to deliver under
Section 7.4(c) if the Class B Payment were the Put Price and the Class B Put
Date were the Purchase Date, in each case, immediately following AMG's receipt
of any documentation it may deem necessary to evidence the conversion of the
Class B Point into additional LLC Points and the increase in the Free Cash Flow
Percentage, including, without limitation, an acknowledgment of the foregoing
executed by each of the Members of the LLC.
(g) In the event that the employment by the LLC of any Non-Manager
Member terminates for any reason at any time on or after the tenth (10th)
anniversary of the Effective Date, then such Non-Manager Member (or his or her
estate, heirs or legal representatives, as the case may be) may cause AMG to
purchase all (and not less than all) of the Class B Points held by such
Non-Manager Member as of the date of such termination (with respect to which no
Class B Notice had previously been given to AMG) for the Class B Payment on the
Class B Put Date immediately following the date of such termination, subject to
and in accordance with the terms and conditions set forth herein. For purposes
of applying this clause (g) only, each reference to "Non-Manager Member" in the
other clauses of this Section 7.5 (other than clause (h) of this Section 7.5)
shall be deemed to include the estate, heirs and legal representatives of any
such Non-Manager Member, and, except for purposes of Section 7.5(h) hereof, any
purchase of Class B Points pursuant to this clause (g) shall be included within
the definition of "Class B Put." In the event that the employment by the LLC of
any Non-Manager Member terminates for any reason at any time prior to the tenth
(10th) anniversary of the Effective Date, then any Class B Points held by such
Non-Manager Member as of the date of such termination shall be automatically
canceled and shall be null and void, and such Non-Manager Member (and his or her
estate, heirs or legal representatives, as applicable) shall no longer have any
rights hereunder with respect to such Class B Points.
(h) If a Non-Manager Member who has previously exercised his Class B
Put thereafter (i) exercises a Put under Section 7.1 hereof, (ii) is subject to
a Call under Section 7.2 hereof, or (iii) is subject to a Repurchase under
Section 7.3 hereof, then, the following shall occur:
(i) AMG shall determine whether, as of the effective date of
such Put, Call or Repurchase after giving pro-forma effect to such
Put, Call or Repurchase, the Class B Interest in the aggregate (the
"Pro-Forma Class B Interest") is greater than zero (0);
(ii) If the Pro-Forma Class B Interest is greater than zero
(0), then on the first Class B Put Date following the closing of
such Put, Call or Repurchase, AMG shall pay to such Non-Manager
Member an amount equal to (x) eight and one-half (8.5), multiplied
by (y) such Pro-Forma Class B Interest minus the actual Class B
Interest as of the effective date of such Put, Call or Repurchase,
multiplied by (z) a fraction, the numerator of which is the number
of Class B Points held by such Non-Manager Member immediately prior
to his
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Class B Put, and the denominator of which is the sum of the number
of Class B Points outstanding as of the effective date of such Put,
Call or Repurchase together with the number of Class B Points held
by such Non-Manager Member immediately prior to his Class B Put;
(iii) Upon such payment, a number of new LLC Points shall be
issued to AMG as is equal to (x) the product of the aggregate number
of LLC Points (and Reserved Points, if any) outstanding and (y) a
fraction, the numerator of which is the product of subclauses (y)
and (z) under clause (ii) above, and the denominator of which is
such product, plus the Free Cash Flow for the fiscal year preceding
the date of the payment under clause (ii) above;
(iv) The Free Cash Flow Percentage shall then also be
increased to an amount equal to the sum of (x) the Free Cash Flow
Percentage immediately prior to the payment under clause (ii) above
and (y) a fraction (expressed as a percentage), the numerator of
which is the product of subclauses (y) and (z) under clause (ii)
above, and the denominator of which is Revenues From Operations for
the preceding fiscal year; and
(v) AMG may, without the consent of the Management Board or
any Member, assign any or all of its rights and obligations under this
Section 7.5, in one or more instances, to the Manager Member or any other
wholly-owned subsidiary of AMG, provided that AMG is not released from its
obligations under this Section 7.5 and remains liable therefor.
ARTICLE VIII - DISSOLUTION AND TERMINATION.
SECTION 8.1 NO DISSOLUTION. The LLC shall not be dissolved by the
admission of Additional Non-Manager Members, substitute Non-Manager Members or
substitute Manager Members or by the death, retirement, resignation, expulsion,
bankruptcy or dissolution of any Member of the LLC.
SECTION 8.2 EVENTS OF DISSOLUTION. The LLC shall be dissolved and its
affairs wound up upon the occurrence of any of the following events:
(a) a date designated in writing by the Manager Member with the
consent of the Management Board; or
(b) upon the entry of a decree of judicial dissolution under
Section 18-802 of the Act.
SECTION 8.3 NOTICE OF DISSOLUTION. The Manager Member shall promptly
notify the Members of any dissolution of the LLC pursuant to Section 8.2 hereof
or otherwise pursuant to the Act.
SECTION 8.4 LIQUIDATION. Upon the dissolution of the LLC, the Manager
Member, or if there is none, the Person or Persons approved by the holders of
more than fifty percent (50%)
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of the LLC Points then outstanding (including the Person that was the Manager
Member) shall carry out the winding up of the LLC (in such capacity, the
"Liquidating Trustee") and shall immediately commence to wind up the LLC's
affairs; provided, however, that a reasonable time shall be allowed for the
orderly liquidation of the assets of the LLC and the satisfaction of liabilities
to creditors so as to enable the Members to minimize the normal losses attendant
upon a liquidation. The Members shall continue to share in allocations and
distributions during liquidation in the same proportions, as specified in
Article IV hereof, as before liquidation. The proceeds of liquidation shall be
distributed as set forth in Section 4.5 hereof.
SECTION 8.5 TERMINATION. The LLC shall terminate when all of the assets of
the LLC, after payment of or due provision for all debts, liabilities and
obligations of the LLC, shall have been distributed to the Members in the manner
provided for in Section 4.5 hereof and the Certificate shall have been canceled
in the manner required by the Act.
SECTION 8.6 CLAIMS OF THE MEMBERS. All Members and former Members shall
look solely to the LLC's assets for any return of their Capital Contributions
and if the assets of the LLC remaining after payment of or due provision for all
debts, liabilities and obligations of the LLC are insufficient to return such
Capital Contributions, the Members and former Members shall have no recourse
against the LLC or any other Member.
ARTICLE IX - RECORDS AND REPORTS.
SECTION 9.1 BOOKS AND RECORDS. The LLC shall, and the Non-Manager Members
who are members of the Management Board shall use all commercially reasonable
efforts to cause the LLC to, keep complete and accurate books of account with
respect to the operations of the LLC, prepared in accordance with generally
accepted accounting principles, using the accrual method of accounting,
consistently applied. Such books shall reflect that the LLC Interests have not
been registered under the Securities Act, and that the LLC Interests may not be
Transferred without registration under the Securities Act or exemption therefrom
and without compliance with Article V or Article VI of this Agreement, as
applicable. Such books shall be maintained at the principal office of the LLC in
New York, New York or at such other principal place of business as determined
pursuant to Section 2.5 hereof.
SECTION 9.2 ACCOUNTING. The LLC's books of account shall be kept on the
accrual method of accounting, or on such other method of accounting as the
Manager Member may from time to time determine, with the advice of the
Independent Public Accountants, and shall be closed and balanced at the end of
each LLC fiscal year. The taxable year of the LLC shall be the twelve (12)
months ended December 31 or such other taxable year as the Manager Member may
designate, with the written advice of the Independent Public Accountants.
SECTION 9.3 FINANCIAL AND COMPLIANCE REPORTS. The LLC shall, and each
Non-Manager Member who is a member of the Management Board shall use all
commercially reasonable efforts to cause the LLC to, furnish to the Manager
Member each of the following:
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(a) within ten (10) days after the end of each month and each fiscal
quarter, an unaudited financial report of the Revenues From Operations of the
LLC and the net assets of each Offshore Fund on each date as of which the net
assets thereof were determined during such period, which report shall be
prepared in accordance with generally accepted accounting principles using the
accrual method of accounting, consistently applied (except that the financial
report may (i) be based on estimates to the extent actual data is not available
and be subject to adjustments of such estimates within seventeen (17) days after
the end of each month and each fiscal quarter, (ii) be subject to normal
year-end audit adjustments which are neither individually nor in the aggregate
material and (iii) not contain all notes thereto which may be required in
accordance with generally accepted accounting principles) and shall be certified
by the most senior financial Officer of the LLC to have been so prepared;
(b) as soon as practicable and in any event within seventeen (17)
days after the end of each month and each fiscal quarter, a report prepared in a
similar manner and certified by the most senior financial Officer of the LLC to
have been so prepared, which shall include:
(i) statements of operations, changes in Members' Capital
Accounts and cash flows for such month or quarter, together with a
cumulative income statement from the first day of the then-current fiscal
year to the last day of such month or quarter;
(ii) a balance sheet as of the last day of such month or
quarter; and
(iii) with respect to the quarterly financial report, a
detailed computation of Free Cash Flow for such quarter;
(c) within fifteen (15) days after the end of each fiscal year of
the LLC, a financial report of Revenues From Operations of the LLC for such year
and the net assets of each Offshore Fund on each date as of which the net assets
thereof were determined during such year, in each case, as to which the audit
procedures applicable to such item shall have been performed by Independent
Public Accountants satisfactory to the Manager Member;
(d) within seventeen (17) days after the end of each fiscal year of
the LLC or within such other time as the Manager Member and the Management Board
agree, audited financial statements of the LLC, which shall include statements
of operations, changes in Members' Capital Accounts and cash flows for such year
and a balance sheet as of the last day thereof, each prepared in accordance with
generally accepted accounting principles, using the accrual method of
accounting, consistently applied, certified by Independent Public Accountants
satisfactory to the Manager Member;
(e) if requested by the Manager Member, within twenty-five (25) days
after the end of each calendar quarter, the LLC's operating budget for each of
the next four (4) fiscal quarters, in such form and containing such estimates as
may be requested by the Manager Member from time to time;
(f) copies of all financial statements, reports, notices, press
releases and other documents released to the public;
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(g) as promptly as is reasonably possible following request by the
Manager Member from time to time, such operations and/or performance data as may
be requested; and
(h) any other financial or other information available to the
Officers as the Manager Member shall have reasonably requested on a timely
basis.
SECTION 9.4 MEETINGS.
(a) The LLC and its Officers shall hold such regular meetings at the
LLC's principal place of business with representatives of the Manager Member not
more frequently than quarterly (except in special circumstances) as may be
reasonably requested by the Manager Member from time to time. These meetings
shall be attended (either in person or by telephone) by such of the Officers and
other employees of the LLC as may be reasonably requested by the Manager Member
or any of the Officers. The LLC will reimburse the reasonable travel expenses of
any representative of the Manager Member who attends each such meeting.
(b) At each meeting, the Officers shall make such presentations
regarding the LLC and its performance, operations and/or budgets as may be
reasonably requested by the Manager Member, and each of the attendees (whether
in person or by telephone) at such meeting shall have the right to submit
proposals and suggestions regarding the LLC, and the attendees at the meeting
shall discuss and consider such proposals and suggestions.
SECTION 9.5 TAX MATTERS.
(a) The Manager Member shall cause to be prepared and filed on or
before the due date (or any extension thereof) Federal, state, local and foreign
tax or information returns required to be filed by the LLC and shall provide to
the other Members, as soon as reasonably practicable following the close of each
taxable year of the LLC, any information which the Manager Member has which is
necessary to allow the Members to timely prepare and file any federal, state or
local income tax returns (including IRS Schedule K-1). The Manager Member, to
the extent that LLC funds are available, shall cause the LLC to pay any taxes
payable by the LLC (it being understood that the expenses of preparation and
filing of such tax returns, and the amounts of such taxes (except that UBT shall
be paid out of Free Cash Flow, except to the extent UBT is allocated pursuant to
the provisions of Section 4.6(g) hereof to Non-Manager Members in respect of
such guaranteed payments and bonus payments or by operation of the proviso of
the first sentence of Section 4.6(g)), are to be treated as operating expenses
of the LLC to be paid from Operating Cash Flow); provided that the Manager
Member shall not be required to cause the LLC to pay any tax so long as the
Manager Member or the LLC is in good faith and by appropriate legal proceedings
contesting the validity, applicability or amount thereof and such contest does
not materially endanger any right or interest of the LLC and adequate reserves
therefor have been set aside by the LLC. Neither the LLC nor any Non-Manager
Member shall do anything or take any action which would be inconsistent with the
foregoing or with the Manager Member's actions as authorized by the foregoing
provisions of this Section 9.5(a). Each Non-Manager Member shall cooperate with
the Manager Member in causing the LLC to make an election under Section 754 of
the Code with respect to its fiscal year ended on the Effective Date.
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(b) The Manager Member shall be the "tax matters partner" for the
LLC pursuant to Sections 6221 through 6233 of the Code.
ARTICLE X - LIABILITY, EXCULPATION AND INDEMNIFICATION.
SECTION 10.1 LIABILITY. Except as otherwise provided by the Act, the
debts, obligations and liabilities of the LLC, whether arising in contract, tort
or otherwise, shall be solely the debts, obligations and liabilities of the LLC,
and no Covered Person shall be obligated personally for any such debt,
obligation or liability of the LLC solely by reason of being a Covered Person.
SECTION 10.2 EXCULPATION.
(a) No Covered Person shall be liable to the LLC or any other
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that a Covered Person
shall be liable for any such loss, damage or claim incurred by reason of any
action or inaction of such Covered Person which constituted fraud, gross
negligence, bad faith, willful misconduct or a breach of this Agreement or, in
the case of a Non-Manager Member, the Non-Solicitation Agreement to which he is
a party.
(b) A Covered Person shall be fully protected in relying in good
faith upon the records of the LLC and upon such information, opinions, reports
or statements presented to the Covered Person by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the LLC of such Covered Person.
SECTION 10.3 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, a Covered Person has
duties (including fiduciary duties) and liabilities relating thereto to the LLC
or to any Member, a Covered Person acting under this Agreement shall not be
liable to the LLC or to any Member for its good faith reliance on the provisions
of this Agreement. The provisions of this Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the parties hereto to replace such other duties
and liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between the Manager Member and any other
Member the resolution or manner of resolution of which is not specifically
provided for herein, or (ii) whenever this Agreement or any other agreement
contemplated herein or therein provides that the Manager Member shall act in a
manner that is, or provides terms that are, fair and reasonable to the LLC or
any Member, the Manager Member shall resolve such conflict of interest, take
such action or provide such terms, considering in each case the relative
interest of each party (including its own interest) to such conflict, agreement,
transaction or situation and the benefits and burdens relating
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to such interests, any customary or accepted industry practices, and any
applicable generally accepted accounting practices or principles. In the absence
of bad faith by the Manager Member, the resolution, action or term so made,
taken or provided by the Manager Member shall not constitute a breach of this
Agreement or any other agreement contemplated herein or of any duty or
obligation of the Manager Member at law or in equity or otherwise.
(c) Whenever in this Agreement the Manager Member is permitted or
required to make a decision (i) in its "sole discretion" or under a grant of
similar authority or latitude, the Manager Member shall be entitled to consider
such interests and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any interest of or
factors affecting the LLC or any other Person, or (ii) in its "good faith",
"reasonable discretion" or under another express standard, the Manager Member
shall act under such express standard and shall not be subject to any other or
different standard imposed by this Agreement or other applicable law.
(d) Wherever in this Agreement a factual determination is called for
and the applicable provision of this Agreement does not indicate what party or
parties are to make the applicable factual determination, and/or the applicable
standard to be used in making the factual determination, such determination
shall be made by the Manager Member in the exercise of its good faith
discretion.
SECTION 10.4 INDEMNIFICATION. To the fullest extent permitted by
applicable law, a Covered Person shall be entitled to indemnification from the
LLC for any loss, damage or claim (including any amounts paid in settlement of
any such claims) incurred by such Covered Person by reason of any act or
omission performed or omitted by such Covered Person in good faith on behalf of
the LLC and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by this Agreement, except that no Covered
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Covered Person by reason of any action or inaction of
such Covered Person which constituted fraud, gross negligence, bad faith,
willful misconduct or a breach of this Agreement, the Purchase Agreement or, in
the case of the Non-Manager Member, the Non-Solicitation Agreement to which he
is a party; provided, however, that any indemnity under this Section 10.4 shall
be provided out of and to the extent of LLC assets only, and no Covered Person
shall have any personal liability to provide indemnity on account thereof.
SECTION 10.5 NOTICE; OPPORTUNITY TO DEFEND AND EXPENSES.
(a) Promptly after receipt by any Covered Person from any third
party of notice of any demand, claim or circumstance that, immediately or with
the lapse of time, would reasonably be expected to give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that could reasonably be expected to
result in any loss, damage or claim with respect to which the Covered Person
might be entitled to indemnification from the LLC under Section 10.4, the
Covered Person shall give notice thereof (the "Claims Notice") to the LLC;
provided, however, that a failure to give such notice shall not prejudice the
Covered Person's right to indemnification hereunder except to the extent that
the LLC is actually prejudiced thereby. The Claims Notice shall describe the
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Asserted Liability in such reasonable detail as is practicable under the
circumstances, and shall, to the extent practicable under the circumstances,
indicate the amount (estimated, if necessary) of the loss or damage that has
been or may be suffered by the Covered Person.
(b) The LLC may elect to compromise or defend, at its own expense
and by its own counsel, any Asserted Liability; provided, however, that if the
named parties to any action or proceeding include (or could reasonably be
expected to include) both the LLC and a Covered Person, or more than one Covered
Persons, and the LLC is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the Covered Person may engage separate counsel at the expense of the
LLC. If the LLC elects to compromise or defend such Asserted Liability, it shall
within twenty (20) business days (or sooner, if the nature of the Asserted
Liability so requires) notify the Covered Person of its intent to do so, and the
Covered Person shall cooperate, at the expense of the LLC, in the compromise of,
or defense against, such Asserted Liability. If the LLC elects not to compromise
or defend the Asserted Liability, fails to notify the Covered Person of its
election as herein provided, contests its obligation to provide indemnification
under this Agreement, or fails to make or ceases making a good faith and
diligent defense, the Covered Person may pay, compromise or defend such Asserted
Liability all at the expense of the Covered Person. Except as set forth in the
preceding sentence, neither the LLC nor the Covered Person may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the LLC and the Covered Person may participate at their own expense, in
the defense of such Asserted Liability. If the Covered Person chooses to
participate in the defense of any claim, the Covered Person shall make available
to the LLC any books, records or other documents within its control that are
necessary or appropriate for such defense, all at the expense of the LLC.
(c) If the LLC elects not to compromise or defend an Asserted
Liability, or fails to notify the Covered Person of its election as above
provided, then, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Covered Person in defending any Asserted
Liability, shall, from time to time, be advanced by the LLC prior to the final
disposition of such claim, demand, action, suit or proceeding upon satisfaction
of any conditions required by applicable law and receipt by the LLC of an
undertaking by or on behalf of the Covered Person to repay such amount if it
shall be determined that the Covered Person is not entitled to be indemnified as
authorized in Section 10.4 hereof. The LLC may, if the Manager Member deems it
appropriate, require any Covered Person for whom expenses are advanced, to
deliver adequate security to the LLC for his obligation to repay such
indemnification.
SECTION 10.6 MISCELLANEOUS.
(a) The right of indemnification hereby provided shall not be
exclusive of, and shall not affect, any other rights to which a Covered Person
may be entitled. Nothing contained in this Article X shall limit any lawful
rights to indemnification existing independently of this Article X.
(b) The indemnification rights provided by this Article X shall also
inure to the benefit of the heirs, executors, administrators, successors and
assigns of a Covered Person and any
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officers, directors, partners, shareholders, employees and Affiliates of such
Covered Person (and any former officer, director, member, shareholder or
employee of such Covered Person, if the loss, damage or claim was incurred while
such person was an officer, director, member, shareholder or employee of such
Covered Person). The Manager Member or the Management Board may extend the
indemnification called for by Section 10.4 to non-employee agents of the LLC,
the Manager Member or its Affiliates.
ARTICLE XI - MISCELLANEOUS.
SECTION 11.1 NOTICES. All notices, requests, elections, consents or
demands permitted or required to be made under this Agreement ("Notices") shall
be in writing, signed by the Person or Persons giving such notice, request,
election, consent or demand and shall be delivered personally or by confirmed
facsimile, or sent by registered or certified mail, or by commercial courier to
the other Members, at their addresses set forth on the signature pages hereof or
on Schedule A hereto, or at such other addresses as may be supplied by written
notice given in conformity with the terms of this Section 11.1. All Notices to
the LLC shall be made to the Manager Member at the address set forth on the
signature pages hereof or on Schedule A hereto, with a copy (which shall not
constitute notice) to the President of the LLC at the principal offices of the
LLC. The date of any such personal or facsimile delivery or the date of delivery
by an overnight courier or the date five (5) days after the date of mailing by
registered or certified mail, as the case may be, shall be the date of such
notice.
SECTION 11.2 SUCCESSORS AND ASSIGNS. Subject to the restrictions on
Transfer set forth herein, this Agreement shall be binding upon and shall inure
to the benefit of the Members, their respective successors, successors-in-title,
heirs and assigns, and each and every successors-in-interest to any Member,
whether such successor acquires such interest by way of gift, purchase,
foreclosure or by any other method, and each shall hold such interest subject to
all of the terms and provisions of this Agreement.
SECTION 11.3 AMENDMENTS. No amendments may be made to this Agreement
without the prior written consent of (i) the Manager Member and (ii) the
Management Board, except that in the event that the Manager Member has at any
time exercised any of its rights under Section 3.3(b)(iv) with respect to the
composition of the Management Board, thereafter no amendments may be made to
this Agreement without the prior written consent of (I) the Manager Member and
(II) Non-Manager Members holding not less than a majority of all LLC Points then
held by all Non-Manager Members; provided, however, that, in any event without
the vote, consent or approval of any other Member, (x) the Manager Member shall
make such amendments and additions to Schedule A hereto as are required by the
provisions hereof, and (y) the Manager Member may amend this Agreement to
correct any printing, stenographic or clerical errors or omissions; provided,
further, however, that if at any time the distributions to the Manager Member
from the LLC hereunder are less than thirty percent (30%) of the unconsolidated
gross revenues of AMG, upon the written request of the Management Board (if the
Manager Member has not at such time exercised any of its rights under Section
3.3(b)(iv)) or upon the written request of Non-Manager Members holding not less
than a majority of all LLC Points then held by all Non-Manager Members (if the
Manager Member has at such time exercised any of its rights
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<PAGE> 74
under Section 3.3(b)(iv)), the Manager Member and the Management Board shall
amend this Agreement to delete Section 3.3(b)(iv). Except as otherwise
specifically provided for herein, (a) an amendment or modification changing
adversely the rights of a Non-Manager Member with respect to distributions or
allocations or Puts, Calls or Repurchases (on a basis that is disproportionate
to any changes effected with respect to the rights of other Non-Manager Members
holding LLC Interests of the same class) shall be effective only with that
Non-Manager Member's consent (unless such change is expressly provided for by
this Agreement), (b) an amendment or a modification increasing any liability of
a Non-Manager Member to the LLC or the other Members, or adversely affecting the
limitation of the liability of a Non-Manager Member with respect to the LLC,
shall be effective only with that Non-Manager Member's consent, (c) an amendment
or modification reducing the required percentage of LLC Points for any consent
or vote in this Agreement shall be effective only with the consent or vote of
Members having the percentage of LLC Points theretofore required. and (d) an
amendment or modification which significantly and adversely affects a particular
Non-Manager Member differently from some other Non-Manager Member, shall be
effective only with the prior written consent of the Member which would be so
affected or with the vote or consent of three quarters (3/4) of the Management
Board.
SECTION 11.4 NO PARTITION. No Member nor any successor-in-interest to any
Member, shall have the right while this Agreement remains in effect to have the
property of the LLC partitioned, or to file a complaint or institute any
proceeding at law or in equity to have the property of the LLC partitioned, and
each Member, on behalf of himself, his successors, representatives, heirs and
assigns, hereby waives any such right. It is the intent of the Members that
during the term of this Agreement, the rights of the Members and their
successors-in-interest, as among themselves, shall be governed by the terms of
this Agreement, and that the right of any Member or successors-in-interest to
Transfer or otherwise dispose of his interest in the LLC shall be subject to the
limitations and restrictions of this Agreement.
SECTION 11.5 NO WAIVER; CUMULATIVE REMEDIES. The failure of any Member to
insist upon strict performance of a covenant hereunder or of any obligation
hereunder, irrespective of the length of time for which such failure continues,
shall not be a waiver of such Member's right to demand strict compliance in the
future. No consent or waiver, express or implied, to or of any breach or default
in the performance of any obligation hereunder, shall constitute a consent or
waiver to or of any other breach or default in the performance of the same or
any other obligation hereunder. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies. Said
rights and remedies are given in addition to any other rights the parties may
have by law, statute, ordinance or otherwise.
SECTION 11.6 DISPUTE RESOLUTION. All disputes arising in connection with
this Agreement shall be resolved by binding arbitration in accordance with the
applicable rules of the American Arbitration Association. The arbitration shall
be held in Massachusetts before a single arbitrator selected in accordance with
Section 12 of the American Arbitration Association Commercial Arbitration Rules
who shall have substantial business experience in the investment advisory
industry, and shall otherwise be conducted in accordance with the American
Arbitration Association Commercial Arbitration Rules.
70
<PAGE> 75
SECTION 11.7 PRIOR AGREEMENTS SUPERSEDED; CERTAIN AGREEMENTS INCORPORATED
HEREIN. This Agreement and the schedules and exhibits hereto supersede the prior
understandings and agreements among the parties with respect to the subject
matter hereof and thereof. The Employment Agreements, the Non-Solicitation
Agreements and the Incentive Program are incorporated herein by reference and
form a part of this Agreement; and each of the Members acknowledges and agrees
that certain Members (in their capacity as such and/or in their capacity as
employees of the LLC), AMG and the LLC are entitled to certain rights and bound
by certain obligations under such agreements and program which shall be treated
as rights and obligations hereunder.
SECTION 11.8 CAPTIONS. Titles or captions of Articles or Sections
contained in this Agreement are inserted as a matter of convenience and for
reference, and in no way define, limit, extend or describe the scope of this
Agreement or the intent of any provision hereof.
SECTION 11.9 COUNTERPARTS. This Agreement may be executed in a number of
counterparts, all of which together shall for all purposes constitute one
Agreement, binding on all the Members notwithstanding that all Members have not
signed the same counterpart.
SECTION 11.10 APPLICABLE LAW; JURISDICTION. This Agreement and the rights
and obligations of the parties hereunder shall be governed by and interpreted,
construed and enforced in accordance with the laws of the State of Delaware,
without applying the choice of law or conflicts of law provisions thereof.
SECTION 11.11 INTERPRETATION. All terms herein using the singular shall
include the plural; all terms using the plural shall include the singular; in
each case, the term shall be as appropriate to the context of each sentence.
Throughout this Agreement, nouns, pronouns and verbs shall be construed as
masculine, feminine and neuter, whichever shall be applicable.
SECTION 11.12 SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted.
SECTION 11.13 CREDITORS. None of the provisions of this Agreement shall be
for the benefit of or enforceable by any creditor of (i) any Member or (ii) the
LLC, other than a Member who is also a creditor of the LLC.
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<PAGE> 76
IN WITNESS WHEREOF the Non-Manager Members and the Manager Member have
executed and delivered this Limited Liability Company Agreement as of the day
and year first above written.
MANAGER MEMBER
Name and Signature Address
AMG/TBC HOLDINGS, INC. c/o Affiliated Managers Group, Inc.
Two International Place, 23rd Floor
Boston, MA 02110
Telephone: (617) 747-3300
By:/s/ Sean M. Healey Facsimile: (617) 747-3380
------------------------------------
Name: Sean M. Healey
Title: President
NON-MANAGER MEMBERS
Name and Signature Address
/s/ Christopher H. Browne c/o Tweedy, Browne Company LLC
- -------------------------- 52 Vanderbilt Avenue
Christopher H. Browne New York City, New York 10017
Telephone: (212) 916-0600
Facsimile: (212) 916-0666
/s/ William H. Browne c/o Tweedy, Browne Company LLC
- -------------------------- 52 Vanderbilt Avenue
William H. Browne New York City, New York 10017
Telephone: (212) 916-0600
Facsimile: (212) 916-0666
/s/ John D. Spears c/o Tweedy, Browne Company LLC
- -------------------------- 52 Vanderbilt Avenue
John D. Spears New York City, New York 10017
Telephone: (212) 916-0600
Facsimile: (212) 916-0666
72
<PAGE> 77
/s/ James M. Clark, Jr. c/o Tweedy, Browne Company LLC
- -------------------------- 52 Vanderbilt Avenue
James M. Clark, Jr. New York City, New York 10017
Telephone: (212) 916-0600
Facsimile: (212) 916-0666
/s/ Thomas Shrager c/o Tweedy, Browne Company LLC
- -------------------------- 52 Vanderbilt Avenue
Thomas Shrager New York City, New York 10017
Telephone: (212) 916-0600
Facsimile: (212) 916-0666
/s/ Robert Q. Wyckoff, Jr. c/o Tweedy, Browne Company LLC
- -------------------------- 52 Vanderbilt Avenue
Robert Q. Wyckoff, Jr. New York City, New York 10017
Telephone: (212) 916-0600
Facsimile: (212) 916-0666
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<PAGE> 78
SCHEDULE A
LLC INTERESTS AND CAPITAL ACCOUNTS
<TABLE>
<CAPTION>
MEMBER LLC RESERVED CAPITAL CLASS B
POINTS POINTS* ACCOUNT POINTS
- --------------------------------- ----------- -------------- ------------------ ------------
<S> <C> <C> <C> <C>
Affiliated Managers Group, Inc. 71.18702 0 $300,000,000.00 0
Christopher H. Browne 5.89473 2.50667 $ 30,536,467.00 17.40741
John D. Spears 5.89473 2.50667 $ 30,536,467.00 17.40741
William H. Browne 5.14222 2.18666 $ 26,638,196.00 15.18518
Thomas Shrager 1.00000 0 0 0
Robert Q. Wyckoff, Jr. 1.00000 0 0 0
James M. Clark, Jr. 1.88130 0.80000 0 0
TOTAL 92.00000 8.00000 $387,711,130.00 50.00000
- --------------------------------- ----------- -------------- ------------------ ------------
</TABLE>
- --------
* Issued to the indicated Member and held for his benefit, subject to sale
or transfer pursuant to the Incentive Plan, but not constituting an "LLC Point"
until held by a Non-Manager Member other than an Original Principal or Clark.
74
<PAGE> 79
SCHEDULE B
INITIAL MANAGEMENT BOARD MEMBERS
Christopher H. Browne
William H. Browne
John D. Spears
75
<PAGE> 80
SCHEDULE C
The provisions of this Schedule C are merely illustrative examples and are not a
part of the agreement between the parties to the Limited Liability Company
Agreement of Tweedy, Browne Company LLC (the "LLC Agreement"). Capitalized terms
used in this Schedule have the meanings set forth in the LLC Agreement.
This example assumes that the termination of employment occurs immediately
following the Effective Date
This example further assumes that there was no Operating Shortfall or Manager
Member Excess Loss Allocations
1) Calculation of Repurchase Price
(a) MULTIPLE 3
(b) RUN RATE FREE CASHFLOW $ 40,000,000
(c) OPERATING SHORTFALL 0
(d) MANAGER MEMBER
EXCESS LOSS ALLOCATIONS 0
(e) (a) * ((b)-(c)-(d)) $120,000,000
(f) UNAMORTIZED PORTION OF
MANAGER MEMBERS CAPITAL
ACCOUNT $300,000,000
--------
TOTAL LLC POINTS HELD BY NON MANAGER MEMBERS 20.81298
--------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Percentage Repurchase Allocation of Repurchase Price
Member Partnership Points Ownership Price Unamortized Capital 100% of Points
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AMG 71.187020 71.187020% N/A N/A N/A
C. Browne 5.894734 5.894734% $ 7,073,680 $(17,684,201) $(10,610,520.61)
J. Spears 5.894734 5.894734% $ 7,073,680 $(17,684,201) $(10,610,520.61)
W. Browne 5.142215 5.142215% $ 6,170,658 $(15,426,644) $ (9,255,986.39)
J. Clark 1.881298 1.881298% N/A N/A N/A
T. Shrager 1.000000 1.000000% $ 1,200,000 $ (3,000,000) $ (1,800,000.00)
R. Wyckoff 1.000000 1.000000% $ 1,200,000 $ (3,000,000) $ (1,800,000.00)
Reserve 8.000000 8.000000% N/A N/A N/A
----------------------------------------------------------------------------------------
TOTAL 100.000000 100.0000% $22,718,018 $(56,795,046) $(34,077,027.60)
- -----------------------------------------------------------------------------------------------------
</TABLE>
Resulting Repurchase Price for each Non-Manager Members' LLC Points is,
therefore, zero.
76
