We know of no other business that will be brought before the Special Meeting. If any other matter or any proposal should be properly presented
and should properly come before the meeting for action, the persons named in the accompanying proxy will, at their discretion and in accordance with their best judgment, vote upon such proposal.
We and some brokers have adopted householding, a procedure under which shareholders who have the same address will receive a
single set of proxy materials, unless one or more of these shareholders provides notice that they wish to continue receiving individual copies. Shareholders who participate in householding will continue to receive separate proxy cards.
If you participate in householding and wish to receive a separate set of these proxy materials, or if you wish to receive separate copies of
future notices, annual reports and proxy statements, please call 1-800-542-1061 or write to: Broadridge Financial Solutions, Inc., Householding Department, 51 Mercedes Way, Edgewood, New York 11717. We will deliver the requested documents to you
promptly upon your request.
Any shareholders of record who share the same address and currently receive multiple copies of proxy
materials who wish to receive only one copy of these materials per household in the future may contact Broadridge Financial Solutions, Inc. at the address or telephone number listed above. If you hold your shares through a broker, bank or other
nominee, please contact your broker, bank, or other nominee to request information about householding.
(ii) unless the context otherwise requires, any reference to an
Article, Section or an Exhibit refers to an Article, Section or an Exhibit, as the case may be, of this Agreement;
(i) any merger or consolidation of the Trust with (A) an Interested Shareholder, or (B) any other Person (whether or not itself an
Interested Shareholder) that is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with, or
proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder of any property or assets of the Trust having an aggregate Fair Market Value as of the date of consummation of the transaction giving
rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date;
(iii) the issuance
or transfer by the Trust, the Sponsor or any Subsidiary thereof (in one transaction or a series of transactions) of any securities of the Trust to, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an
Interested Shareholder in exchange for cash, securities or other property (or a combination thereof) having an aggregate Fair Market Value as of the date of consummation of the transaction giving rise to the Business Combination of not less than ten
percent (10%) of the Net Investment Value as of such date; or
(iv) any spin-off or split-up of any kind of the Trust thereof proposed
by or on behalf of an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder; or
(v) any reclassification of the
Shares (including any reverse split of Shares) or recapitalization of the Trust or any merger or consolidation of the Trust with the Sponsor or any Subsidiary thereof, or any other transaction (whether or not with or into or otherwise involving an
Interested Shareholder), that has the effect, directly or indirectly, of increasing the proportionate share of Outstanding Shares which is beneficially owned by an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder; or
(vi) any agreement, contract or other arrangement providing for any one or more of the actions specified in clauses (i) through
(iv) above.
(i) in the case of Shares, the average of the closing sale prices for such Shares during the ten (10) Business Days immediately preceding
such date:
(ii) if Shares are not so reported, quoted or listed, or in the case of any other Property, the fair market value of such
Shares or such Property on the date in question as determined by a majority of the Board of Directors in good faith;
provided,
that if the Manager shall dispute any such determination of fair market value by the Board of Directors, fair
market value shall be determined by the investment banking or professional valuation firm selected by the Board of Directors from among no fewer than three qualified candidates provided by the Manager.
(i) is, or was at any time within the three-year period immediately prior to such date, the Beneficial Owner of
fifteen percent (15%) or more of the then Outstanding
Voting
Shares and who did not become the Beneficial Owner of such amount of
Shares pursuant to a transaction that was approved by the affirmative vote of a majority of the Board of Directors; or
For the purpose of determining whether a Person is an Interested Shareholder, the Shares that may be issuable or exchangeable by
the Trust to the Interested Shareholder pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, shall be included, but not any other Shares that may be issuable or
exchangeable by the Trust pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the Interested Shareholder.
(iv) the aggregate amount held by the Sponsor and its Managed Subsidiaries in cash or cash
equivalents (but not including cash or cash equivalents held specifically for the benefit of any Subsidiary of a Managed Subsidiary) as of such date.
(a) The name of
the Trust shall continue to be Compass Diversified Holdings and all business of the Trust shall be conducted in such name
. The
;
provided, however,
that the
Sponsor, acting through the Board of Directors, may change the name of the Trust upon ten
(10) Business Days written notice to the Shareholders and the Trustees, which name change shall be effective upon the filing by the Regular Trustees of a certificate of amendment or a restated certificate pursuant to Section 3810 of
the Delaware Statutory Trust Act.
(b) The Regular Trustees shall take all action and do all things necessary to give effect to the
requirements of Section 9.5 of the Management Services Agreement.
(a) The Sponsor shall issue Sponsor Interests to the Trust and simultaneously therewith the Trust shall issue
Corresponding
Shares in accordance with the requirements of Section 2.3(b). Subject to Sections 9.2 and 9.3, it is intended that the
Trust shall be the sole holder and owner of one hundred percent (100%) of the Sponsor Interests, and the Sponsor shall not issue, sell, or otherwise transfer any of its Sponsor Interests to any Person other than the Trust. Subject to Sections
9.2 and 9.3, the Trust shall not sell, lease, exchange, mortgage, pledge or otherwise transfer any of its Sponsor Interests to any other Person.
(b) At all times, the Trust shall have outstanding the identical number of Shares as the number of Sponsor Interests that have been issued and
are outstanding
.
, which Shares shall be of the same class and series (
Corresponding
Shares
) as the corresponding Sponsor Interests.
At all times, the Trust shall be the sole owner of the Trust Property and shall only own the Trust Property.
(a) From time to time and at the direction of the Sponsor, acting through the Board of Directors, the Trust shall conduct a capital reduction,
including the repurchase of any number of
Outstanding
outstanding Corresponding
Shares, on similar terms to the capital reduction simultaneously conducted by the Sponsor with respect to the Sponsor Interests and shall ensure that an identical number of
each class and series of
Sponsor Interests and Shares are issued and outstanding at any one time.
(b) Any Shares tendered and repurchased by the Trust in accordance with this Section 2.7 shall not be deemed canceled pursuant to
Section 3818 of the Delaware Statutory Trust Act but instead, shall be deemed to be authorized and issued, but not outstanding, and may subsequently be sold or transferred for due consideration.
The
purposes of the Trust are to (i) issue Shares of beneficial interest in Trust Property, each Share corresponding to one Sponsor Interest held by the Trust, (ii) own the Sponsor Interests and (iii) engage in such other activities as
are necessary, convenient or incidental hereto. Each Shareholder registered on the books of the Trust shall be a beneficial owner within the meaning of the Delaware Statutory Trust Act. It is intended that the Trust shall qualify as a
partnership for U.S. federal income tax purposes. Subject to Article IX, the Trustees are not authorized to sell, exchange, convey, pledge, encumber, or otherwise transfer, assign or dispose of the Sponsor Interests held by the Trust nor invest or
reinvest the assets of the Trust. There shall be no implied duties or obligations of the Trustees hereunder. Any action by the Trustees in accordance with their respective powers shall constitute the act of and serve to bind the Trust. The Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware Trustee have any of the duties and responsibilities of the Sponsor, Manager, the Board of Directors or the Regular Trustees set forth herein. The Delaware Trustee shall be
one of the Trustees of the Trust for the sole and limited purpose of fulfilling the requirements of Section 3807 of the Delaware Statutory Trust Act and for taking such actions as are required to be taken by a Delaware trustee under the
Delaware Statutory Trust Act. The duties (including fiduciary duties), liabilities and obligations of the Delaware Trustee shall be limited to (a) accepting legal process served on the Trust in the State of Delaware and (b) the execution
of any certificates required to be filed with the Secretary of State of the State of Delaware that the Delaware Trustee is required to execute
hereunder or
under Section 3811 of the Delaware Statutory Trust Act and there shall be no other duties (including fiduciary duties) or obligations, express or implied, at law or in equity, of the Delaware Trustee.
Notwithstanding anything herein to the contrary, the Delaware Trustee shall not be liable for the acts or omissions of the Trust, the Sponsor, the Regular Trustees, the Manager or the Board of Directors.
Section 2.9 Authorization to Enter into Certain Transactions
(a) The Sponsor is hereby authorized and directed, as an agent on behalf of the Trust, to engage in the following activities:
(i) to prepare and file with the Commission and execute, in each case on behalf of the Trust, (a) any registration
statement from time to time on Form S-1 or any applicable form at such time, as applicable (a
1933 Act Registration Statement),
including any pre-effective or post-effective amendments thereto, including any preliminary
prospectus, prospectus, prospectus supplement, free writing prospectus or pricing supplement relating thereto, relating to the registration of any Shares under the Securities Act, (b) any registration statement filed, from time to time,
pursuant to Rule 462(b) under the Securities Act (the
462(b) Registration Statement
and, together with the 1933 Act Registration Statement, the
Registration Statements),
including any amendments
thereto, relating to the registration of any Shares under the Securities Act and (c) as applicable, a registration statement on Form 8-A (a
1934 Act Registration Statement
)
,
including any pre-effective or
post-effective amendments thereto, relating to the registration of any Shares under Section 12(b) or (g) of the Exchange Act;
(ii) to prepare and file with the New York Stock Exchange and/or any other securities exchange and execute, in each case on
behalf of the Trust, a listing application and all other applications, statements, certificates, agreements and other instruments as shall be necessary or desirable to cause the Shares to be listed or quoted on the New York Stock Exchange and/or any
other securities exchange;
(iii) to prepare and file and execute, in each case on behalf of the Trust, such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers, applications, filings and other documents as shall be necessary or desirable to register the Shares under the securities or blue
sky laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem necessary or desirable;
-11-
(iv) to select underwriters or other purchasing or placement agents relating to
the public offering or any issuance of any Shares pursuant to any Registration Statements;
(v) to negotiate the terms and
conditions of, and execute on behalf of the Trust, any underwriting agreements or other purchase or placement agreements or other agreements relating to the public or private offering of any Shares in exchange for Sponsor Interests, including,
without limitation, agreements relating to the registration of such Shares;
(vi) to execute and deliver, in each case on
behalf of the Trust, such certifications or reports required by the Sarbanes-Oxley Act of 2002 from time to time as may be necessary or proper to the conduct of the business of the Trust;
(vii) to pay any filing, application or other fees associated with any of the foregoing actions, including those to the
Commission, the National Association of Securities Dealers, any securities exchange, any agents or any other Person;
(viii) to select a transfer agent, including the Transfer Agent, and negotiate the terms and conditions of, and execute on
behalf of the Trust, a transfer agent agreement; and
(ix) to select a custodian as holder of any Trust Property and
negotiate the terms and conditions of, and execute on behalf of the Trust, a custodian agreement;
(x) to negotiate the
terms and conditions of, and execute on behalf of the Trust,
from time to time
a depositary share agreement
, or any replacement thereof,
with a nationally recognized bank with combined capital and surplus of $50 million or more for the purpose of
establishing a depositary share program for the Shares of the Trust
(the
Depositary Agreement)
and to engage such nationally recognized bank as agent with respect thereto;
(xi) to negotiate the terms and conditions of, and execute on behalf of the Trust, such agreements, documents and certificates,
and to do such other acts and things as the Sponsor may deem to be necessary or advisable in order to (w) give effect to any of the foregoing, (x) in connection with the public offering or any future issuance of the Shares, (y) carry
out the purpose and intent of the Trust or (z) to comply or give effect to any terms or provisions of this Agreement.
(b) It is
hereby acknowledged and agreed that in connection with any execution, filing or document referred to in clauses (i)(
ix
xi
) above, (A) any Regular Trustee or the Sponsor singly be, and hereby is, authorized on behalf of the Trust to file and execute
such document on behalf of the Trust and (B) the Delaware Trustee shall not be required or be deemed necessary to join in
any
such filing or action or execute on behalf of the Trust any such document or to take any such action.
Section 2.10 Title to Trust Property
Legal title to all Trust Property shall be vested at all times in the Trust and shall be held and administered by the Regular Trustees for the
benefit of the Trust and the Shareholders in accordance with this Agreement. No Shareholder shall have legal title to any part of the Trust Property, but shall have an undivided beneficial interest in the Trust Property.
-12-
Section 2.11 Certain Covenants of the Sponsor
The Sponsor shall use its best efforts, consistent with the terms and provisions of this Agreement, to cause the Trust to remain classified as
a partnership for U.S. federal income tax purposes.
ARTICLE III
DISTRIBUTIONS
Section 3.1
Distributions
The Regular Trustees shall pay Distributions, or cause the payment of Distributions, to the
applicable
Shareholders of all distributions received by the Trust with respect to the Sponsor Interests from the Sponsor within five
(5) Business Days of receipt thereof. Such Distributions shall be paid to Shareholders appearing on the Share Register for the Outstanding Shares who are Shareholders as of the record date established by the Sponsor for the payment of
distributions on the Sponsor Interests. Any such Distributions shall be allocated to Shareholders
of the Corresponding Shares
in
the same proportions as any such distributions were made per
the applicable
Sponsor Interest by the Sponsor.
Section 3.2 Payment Procedures
Payments of Distributions in respect of the Shares shall be made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear on the Share Register, or (ii) wire transfer of immediately available funds to an account maintained by the Person entitled thereto as specified in the Share Register.
Section 3.3 Tax Returns and Reports
The Regular Trustees shall prepare (or cause to be prepared), at the Trusts expense, and file or provide (or cause to be filed or
provided) all U.S. federal, state and local tax and information returns and reports required to be filed or provided to Shareholders by or in respect of the Trust. The Regular Trustees shall comply in all material respects with U.S. federal, state
and local withholding and backup withholding tax laws and information reporting requirements with respect to any payments to Shareholders upon the Shares. To the extent that the Trust is required to withhold and pay over any amounts to any authority
with respect to Distributions or allocations to any Shareholder, the amount withheld shall be deemed to be a distribution in the amount of the withholding to the Shareholder. In the event of any claimed over-withholding, Shareholders shall be
limited to an action against the applicable taxing jurisdiction.
Section 3.4 Allocation of Profits and Losses.
All Profits and Losses of the Trust (and related items of taxable income, loss, deduction and credit) shall be allocated to the Shareholders
, subject to any applicable Share Designations,
in accordance with their Percentage Interests. The provisions of Exhibit B shall apply with
respect to the Trust.
-13-
ARTICLE IV
SHARE CERTIFICATES
Section 4.1
Share Certificates
The Shares shall be issued in electronic book-entry form or shall
, subject to any applicable Share Designation,
be
otherwise
evidenced by
the
Share Certificates
that are issued substantially in the form of Exhibit A hereto
. Each Share Certificate shall bear a serial number, shall exhibit
the Shareholders name and the number of Shares evidenced thereby and shall be executed on behalf of the Trust by manual or facsimile signature of one of the Regular Trustees. Share Certificates bearing the manual or facsimile signatures of
individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Trust, shall be validly issued and entitled to the benefit of this Agreement, notwithstanding that such individuals or any of them
shall have ceased to be so authorized prior to the delivery of such Share Certificates or did not hold such offices at the date of delivery of such Share Certificates. A transferee of a Share Certificate shall become a Shareholder, and shall
, subject to any applicable Share Designation,
be entitled to the rights and subject to the obligations of a Shareholder hereunder, upon due
registration of such Share Certificate in such transferees name pursuant to Section 4.4.
Section 4.2 Share Register
The Sponsor shall retain the Transfer Agent to keep a register or registers (herein referred to as the
Share Register)
in which shall be recorded the name and address of each Person owning the Outstanding Shares as maintained by the Transfer Agent electronically with respect to any Shares issued in book-entry form or as otherwise evidenced by each Share
Certificate evidencing Shares issued by the Trust, the number of Shares evidenced by each such Share Certificate, the date of issuance thereof and, in the case of cancellation, the date of cancellation. Except as otherwise expressly required by law,
the Person or entity in whose name Shares stand on the Share Register of the Trust shall be deemed the Beneficial Owner and Shareholder of record thereof for all purposes.
-14-
Section 4.3 Transfer of Shares
Registration of transfers of Shares shall be made only in the Share Register of the Trust upon request of the registered Shareholder of such
Shares, or of his attorney thereunto authorized by power of attorney duly executed and filed with the Transfer Agent, and upon the surrender of the Share Certificate or Share Certificates or the corresponding book-entry position evidencing such
Shares properly endorsed or accompanied by a stock power duly executed, together with such proof of authenticity of signatures as the Transfer Agent may reasonably require, or as properly presented for transfer by a depositary or clearing agent with
respect to any book-entry position of Shares. All Share Certificates surrendered for transfer shall be canceled before new Share Certificates for the transferred Shares shall be issued. Upon surrender for registration of transfer, and cancellation,
of any Share Certificate, one of the Regular Trustees shall execute in the name of the designated transferee or transferees, one or more new Share Certificates.
Section 4.4 Mutilated, Lost, Destroyed or Stolen Share Certificates
Each Shareholder of record of Shares shall promptly notify the Trust of any mutilation, loss or destruction of any Share Certificate of which
such Shareholder is the recordholder. The Sponsor may, in its discretion, cause the Transfer Agent to issue a new Share Certificate in place of any Share Certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or
destroyed, upon surrender of the mutilated Share Certificate or, in the case of loss, theft or destruction of the Share Certificate, upon satisfactory proof of such loss, theft or destruction, and the Sponsor may, in its discretion, require the
Shareholder of record of the Shares evidenced by the lost, stolen or destroyed Share Certificate, or his legal representative, to give the Transfer Agent a bond sufficient to indemnify the Transfer Agent against any claim made against it on account
of the alleged loss, theft or destruction of any such Share Certificate or the issuance of such new Share Certificate.
Section 4.5 Rights of
Shareholders
The legal title to the Trust Property is vested exclusively in the Trust in accordance with Section 2.10, and the
Shareholders shall not have any right or title therein other than the undivided beneficial interest in the Trust Property conferred by their Shares and they shall have no right to call for any partition or division of Property, profits or rights of
the Trust except as described below
.
or in the applicable Share Designation.
The Shares shall be personal property giving only the rights specifically set forth therein and in this Agreement.
The
Subject to any applicable Share Designation, the
Shares shall have no preemptive or similar rights and, when issued and delivered to
Shareholders against payment of the purchase price therefor and otherwise in accordance with this Agreement, shall be deemed validly issued, fully paid and nonassessable undivided beneficial interests in Trust Property. Shareholders, in their
capacities as such, shall be entitled to the benefits provided in this Agreement and to the same limitation of personal liability extended to shareholders of private corporations for profit organized under the General Corporation Law of the State of
Delaware.
-15-
ARTICLE V
MEETINGS; VOTING
Section 5.1
Annual Meetings of Shareholders
The annual meeting of Shareholders to direct the voting of the Trust, as a member of the Sponsor,
shall be called by the Sponsor, pursuant to the Sponsor Agreement, and held at such date, at such time and at such place (if any) within or without the State of Delaware as may be designated by resolution adopted by a majority of the Board of
Directors. Any other business may be transacted at the annual meeting;
provided,
that it is properly brought before the meeting.
Section 5.2 Special Meetings of Shareholders
Special meetings of Shareholders shall be held on such date, at such time and at such place (if any) within or without the State of Delaware as
shall be designated from time to time by the Board of Directors and stated in the notice of the meeting. Special meetings of Shareholders may be called at any time only by the Chairman of the Board of Directors or by the Board of Directors pursuant
to a resolution adopted by a majority of the Board of Directors. Business transacted at any special meeting of Shareholders shall be limited to the purpose stated in the notice relating thereto.
Section 5.3 Place of Meeting
The
Board of Directors may designate the place (if any) of meeting for any meeting of Shareholders. If no designation is made by the Board of Directors, the place of meeting shall be the principal executive office of the Sponsor. In lieu of holding any
meeting of Shareholders at a designated place, the Board of Directors may, in its sole discretion, determine that any meeting of Shareholders may be held solely by means of remote communication.
Section 5.4 Notice of Meeting
(a) A
notice of meeting, stating the place (if any), day and hour of the meeting, and the means of remote communication, if any, by which Shareholders and proxy holders may be deemed to be present in person and vote at such meeting (the
Trusts Notice),
shall be prepared and delivered by the Sponsor not less than twenty (20) days and not more than sixty (60) days before the date of the meeting, either personally, by mail or, to the extent
and in the manner permitted by applicable law, electronically, to each Shareholder of record. In the case of special meetings, the notice shall state the purpose or purposes for which such special meeting is called. Such further notice shall be
given as may be required by applicable law. Any previously scheduled meeting of the Shareholders may be postponed, and (unless this Agreement otherwise provides) any special meeting of the Shareholders may be canceled, by resolution of the Board of
Directors upon public notice given prior to the time previously scheduled for such meeting of Shareholders.
(b) The Trusts Notice to
Shareholders shall be given personally, by mail or, to the extent and in the manner permitted by applicable law, electronically to each Shareholder of record. If mailed, such notice shall be delivered by postage prepaid envelope directed to each
holder at such Shareholders address as it appears in the records of the Trust and shall be deemed given when deposited in the United States mail.
-16-
Any Trusts Notice to Shareholders given by the Trust pursuant to this Section 5.4
shall be effective if given by a form of electronic transmission consented to by the Shareholder to whom the notice is given. Any such consent shall be revocable by the Shareholder by written notice to the Trust and shall also be deemed revoked if
(1) the Trust is unable to deliver by electronic transmission two consecutive notices given by the Trust in accordance with such consent, and (2) such inability becomes known to the Secretary of the Sponsor, the Transfer Agent or other
person responsible for the giving of notice;
provided,
that, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action.
Notice given by electronic transmission pursuant to this subsection shall be deemed given: (1) if by facsimile telecommunication, when
directed to a facsimile telecommunication number at which the Shareholder has consented to receive notice; (2) if by electronic mail, when directed to an electronic mail address at which the Shareholder has consented to receive notice;
(3) if by posting on an electronic network together with separate notice to the Shareholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and (4) if by any other form of
electronic transmission, when directed to the Shareholder. An affidavit of the Secretary or an assistant Secretary or of the Transfer Agent or other agent of the Sponsor that the notice has been given by personal delivery, mail or a form of
electronic transmission shall, in the absence of fraud, be
prima facie
evidence of the facts stated therein.
(c) In order that the
Trust may determine the Shareholders entitled to notice of or to vote at any meeting of Shareholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record date shall not be more than sixty (60) or fewer than twenty (20) days before the date of such meeting. If no record date is fixed by the Board of Directors, the
record date for determining Shareholders entitled to notice of or to vote at any meeting of Shareholders or any adjournment thereof shall be at the close of business on the day next preceding the day on which notice is given or, if notice is waived,
at the close of business on the day next preceding the day on which the meeting is held.
Section 5.5 Quorum and Adjournment
Except as otherwise provided by applicable law or by this Agreement, the Shareholders present in person or by proxy holding a majority of the
then Outstanding
Voting
Shares
entitled to
vote
, shall
, subject to any applicable Share Designation,
constitute a
quorum at a meeting of Shareholders. The Chairman or the holders of a majority of the then Outstanding
Voting
Shares
entitled to vote
so represented may adjourn the meeting from time to time, whether or not there is such a quorum. The Shareholders
present at a duly organized meeting at which a quorum is present in person or by proxy may continue to transact business until adjournment, notwithstanding the withdrawal of enough Shareholders to leave less than a quorum.
When a meeting is adjourned to another time and place, if any, unless otherwise provided by this Agreement, notice need not be given of the
reconvened meeting if the date, time and place, if any, thereof and the means of remote communication, if any, by which Shareholders and proxyholders may be deemed to be present in person and vote at such reconvened meeting are announced at the
meeting at which the adjournment is taken. If the time, date and place of the reconvened meeting are not announced at the meeting at which the adjournment is taken, then the Secretary of the Sponsor shall give written notice of the time, date and
place of the reconvened meeting not less than twenty (20) days prior to the date of the reconvened meeting.
-17-
At the reconvened meeting, the Shareholders may transact any business that might have been
transacted at the original meeting. A determination of Shareholders of record entitled to notice of or to vote at a meeting of Shareholders shall apply to any adjournment of such meeting;
provided, however,
that the Board of Directors may fix
a new record date for the reconvened meeting. If an adjournment is for more than thirty (30) days or if, after an adjournment, a new record date is fixed for the reconvened meeting, a notice of the reconvened meeting shall be given to each
Shareholder entitled to vote at the meeting.
Section 5.6 Voting
(a) Subject to the provisions of this Section 5.6 and Section 5.7, the Shareholders shall have the exclusive and absolute right to
direct the Regular Trustees with respect to the voting of the Trust on all matters that it, as holder of the Sponsor Interests, is entitled to vote upon under the terms of the Sponsor Agreement or applicable law and the Regular Trustees shall cause
the Trust to vote its Sponsor Interests as so directed by the Shareholders.
(b) When the Trust is required or permitted to vote with
respect to the Sponsor Interests, the Sponsor shall prepare and deliver to the Regular Trustees the form of proxy materials to enable the Regular Trustees to solicit from the Shareholders
entitled to vote
the manner in which
the
such
Shareholders desire the Regular Trustees to vote
the Sponsor
Interest corresponding to
their Shares.
Shareholders
A Shareholder
shall
, subject to any applicable Share Designation,
be entitled to one vote for each
Share
Outstanding Voting Share held by such Shareholder
in
respect of any matter as to which the Trust as a member of the Sponsor is entitled to vote as provided in the Sponsor Agreement.
(c) All
Shares
Sponsor Interests owned by the Trust
shall, to the extent practicable under the circumstances, be voted in the same proportion as
the Shares
such Sponsor Interests
are directed to be voted
by the Shareholders
entitled to vote
, including for purposes of determining a quorum, in favor of, in opposition to or
abstaining from the matter voted upon. If such calculation of votes would require a fractional vote, the Regular Trustees shall vote the next lower number of whole
Shares
Sponsor Interests
.
Section 5.7 Proxies
At all meetings
of Shareholders, a Shareholder
entitled to vote
may vote by proxy as may be permitted by applicable law;
provided,
that, no
proxy shall be voted after three (3) years from its date, unless the proxy provides for a longer period in accordance with this Agreement. Any proxy to be used at a meeting of Shareholders must be filed with the Secretary of the Sponsor or his
or her representative at or before the time of the meeting. A Shareholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary a revocation of the proxy or a new proxy bearing
a later date.
-18-
Section 5.8 Notice of Shareholder Business and Nominations
(a) Annual Meetings of Shareholders
(i) Nominations of individuals for election by the Trust to the Board of Directors, other than the Managers appointed
directors for so long as the Manager is entitled to appoint directors to the Board of Directors pursuant to the terms of the Sponsor Agreement, and the proposal of business to be considered by Shareholders, may be made at an annual meeting of
Shareholders (A) pursuant to the Trusts Notice of meeting delivered pursuant to Section 5.4 hereof, (B) by or at the direction of the Board of Directors or (C) by any Shareholder who is entitled to vote at the meeting, who
complies with the notice procedures set forth in clauses (ii) and (iii) of this Section 5.8(a).
In addition to any other
applicable requirements, for a nomination for election of a director of the Sponsor to be made by a Shareholder (other than the Managers appointed directors) or for business to be properly brought before an annual meeting by a Shareholder,
such Shareholder must (A) be a Shareholder of record on both (1) the date of the delivery of such nomination or the date of the giving of the notice provided for in this Section 5.8(a) and (2) the record date for the
determination of Shareholders entitled to vote at such annual meeting, and (B) have given timely notice thereof in proper written form in accordance with the requirements of this Section 5.8 (a) to the Secretary.
(ii) For nominations or other business to be properly brought before an annual meeting by a Shareholder pursuant to this
Section 5.8(a
)(i)(C
), a Shareholder must have given timely notice thereof in writing to the Secretary and, in the case
of business other than nominations, such other business must otherwise be a proper matter for Shareholder action. Except to the extent otherwise required by applicable law, to be timely, a Shareholders notice shall be delivered to the
Secretary at the principal executive offices of the Sponsor not less than one hundred and twenty (120) days nor more than one hundred and fifty (150) days prior to the first anniversary of the preceding years annual meeting;
provided, however,
that, in the event that the date of the annual meeting is more than thirty (30) days before or more than seventy (70) days after such anniversary date, notice by a Shareholder must be so delivered not earlier than
the close of business on the one hundred twentieth (120th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made by the Trust. In the case of the
first annual meeting of Shareholders, a Shareholders notice shall be timely if it is delivered to the Secretary at the principal executive offices of the Sponsor not earlier than the one hundred and twentieth (120th) day prior to such
annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made.
In no event shall the public announcement or an adjournment or postponement of an annual meeting commence a new time period for the giving of a Shareholders notice as described in this Section 5.8(a).
-19-
Subject to Section 5.8(a)(i), such Shareholders notice shall set forth: (A) as to
each individual whom the Shareholder proposes to nominate for election or reelection as a director of the Sponsor, all information relating to such individual that is required to be disclosed in solicitations of proxies for election of directors in
an election contest, or is otherwise required, pursuant to Regulation 14A under the Exchange Act, including such individuals written consent to being named in the proxy statement as a nominee and to serving as a director of the Sponsor if
elected; (B) as to any other business that the Shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any
resolutions proposed for consideration), the reasons for conducting such business at the meeting and any material interest in such business of such Shareholder and the Beneficial Owner
or
holder of Shares, if any, on whose behalf the proposal
is made; and (C) as to the Shareholder giving the notice and the Beneficial Owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such Shareholder as they appear on the Trusts books and of
such Beneficial Owner, (2) the number of, and evidence of such number of, Shares which are owned beneficially and of record by such Shareholder and such Beneficial Owner, (3) a representation that the Shareholder or Beneficial Owner, if
any, intends to appear in person or by proxy at the meeting to propose such business or nomination, and (4) a representation whether the Shareholder or the Beneficial Owner, if any, intends or is part of a group which intends (i) to
deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Trusts Outstanding
Voting
Shares
required to approve or adopt the proposal or elect the nominee and/or (ii) otherwise to solicit proxies from Shareholders in support of such proposal or nomination. The foregoing notice requirements shall be deemed satisfied by a Shareholder if
the Shareholder has notified the Trust of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a-8 (or any successor thereof) promulgated under the Exchange Act and such Shareholders proposal has been
included in a proxy statement that has been prepared by the Trust to solicit proxies for such annual meeting. The Trust may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of
such proposed nominee to serve as a director of the Sponsor or on any committee of the Board of Directors.
(iii)
Notwithstanding anything in the second sentence of clause (ii) of this Section 5.8(a) to the contrary, in the event that the number of directors to be elected to the Board of Directors is increased and there is no public announcement
naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Sponsor, on behalf of the Trust at least one hundred (100) days prior to the first anniversary of the preceding years annual
meeting, a Shareholders notice required by this Section 5.8 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal
executive offices of the Sponsor not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Sponsor, on behalf of the Trust.
(b) Special Meeting of Shareholders
-20-
Only such business shall be conducted at a special meeting of Shareholders as shall have been
brought before the meeting pursuant to the Trusts Notice of meeting pursuant to Section 5.4 of this Agreement. Nominations of individuals for election to the Board of Directors by the Trust, other than the Managers appointed
directors, for so long as the Manager is entitled to appoint directors of the Board of Directors pursuant to the terms of the Sponsor Agreement, may be made at a special meeting of Shareholders at which the Shareholders are to direct the Regular
Trustees with respect to the Trusts election of directors pursuant to the Trusts Notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any Shareholder who is entitled to vote at the meeting who
complies with the notice procedures set forth in this Section 5.8.
In addition to any other applicable requirements, for a
nomination for election by the Trust of a director to be made by a Shareholder, such Shareholder must (A) be a Shareholder of record on both (1) the date of the delivery of such nomination and (2) the record date for the determination
of Shareholders entitled to vote at such special meeting, and (B) have given timely notice thereof in proper written form in accordance with the requirements of this Section 5.8(b) to the Secretary.
In the event the Sponsor, on behalf of the Trust calls a special meeting of Shareholders
entitled to vote
for the purpose of their voting to direct the Trust with respect to its electing one or more directors to the Board of
Directors, any such Shareholder may nominate such number of individuals for election by the Trust to such position(s) as are specified in the Trusts Notice of Meeting, if the Shareholders notice as required by clause (ii) of
Section 5.8(a) of this Agreement shall be delivered to the Secretary at the principal executive offices of the Sponsor not earlier than the one hundred and twentieth (120th) day prior to such special meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such special meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting. In no event shall the public announcement of an adjournment or postponement of a special meeting commence a new time period for the giving of a Shareholders notice as described above.
(c) General
(i) Only individuals who are nominated in accordance with the procedures set forth in this Section 5.8 shall be eligible
to be considered for election by the Trust as directors of the Sponsor at a meeting of Shareholders and only such business shall be conducted at a meeting of Shareholders as shall have been brought before the meeting in accordance with the
procedures set forth in this Section 5.8. Except as otherwise provided by applicable law or this Section 5.8, the Chairman shall have the power and duty to determine whether a nomination or any business proposed to be brought before the
meeting was made in accordance with the procedures set forth in this Section 5.8 and, if any proposed nomination or business is not in compliance with this Section 5.8, to declare that such defective proposal or nomination shall be
disregarded.
(ii) For purposes of this Section 5.8,
Public Announcement
public announcement
shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Trust with the Commission pursuant to Sections 13, 14 or 15(d) of the
Exchange Act.
(iii) Notwithstanding the foregoing provisions of this Section 5.8, a Shareholder shall also
comply with all applicable requirements of the Exchange Act and the Rules and Regulations thereunder with respect to the matters set forth in this Section 5.8. Nothing in this Section 5.8 shall be deemed to affect any rights of
Shareholders to request inclusion of proposals in the Trusts proxy statement pursuant to Rule 14a-8 under the Exchange Act.
-21-
Section 5.9 Procedure for Election of Directors; Voting
The election of directors by the Trust submitted to Shareholders
entitled to vote
thereon
at any meeting shall
, subject to any applicable Share Designation,
be decided by a plurality of the votes cast thereon. The Regular Trustees shall cause the Trust to vote the
corresponding
Sponsor Interests in accordance with
section
Section
5.6. Except as otherwise
provided by applicable law or this Agreement, all matters other than the election of directors by the Trust submitted to Shareholders
entitled to vote thereon
at any meeting shall be decided by the affirmative vote of a majority of the then Outstanding
Voting
Shares present in person or represented by proxy at the meeting of Shareholders
and entitled to vote on such matters at such meeting
.
The
Subject to any applicable Share Designation, the
vote on any matter at a meeting, including the election of directors by the Trust, shall be
by written ballot. Each ballot shall be signed by
shareholder
the Shareholder
voting, or by such Shareholders proxy, and shall state the number of Shares voted.
Section 5.10
Inspectors of Elections; Opening and Closing the Polls
(a) The Board of Directors by resolution shall appoint one or more inspectors,
which inspector or inspectors shall not be directors, officers or employees of the Sponsor, to act at the meeting and make a written report thereof. One or more individuals may be designated as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate has been so appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of Shareholders, the Chairman shall appoint one or more inspectors to act at the meeting.
Each such inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties
prescribed by the General Corporation Law of the State of Delaware as if the Trust were a Delaware corporation.
(b) The Chairman shall fix
and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the Shareholders will vote at the meeting.
Section 5.11 Confidential Shareholder Voting
All proxies, ballots and votes, in each case to the extent they disclose the specific vote of an identified Shareholder, shall be tabulated and
certified by an independent tabulator, inspector of elections and/or other independent parties and shall not be disclosed to any director, officer or employee of the Sponsor or Trustee;
provided, however,
that, notwithstanding the foregoing,
any and all proxies, ballots and voting tabulations may be disclosed: (a) as necessary to meet legal requirements or to assist in the pursuit or defense of legal action; (b) if the Sponsor concludes in good faith that a bona fide dispute
exists as to the authenticity of one or more proxies, ballots or votes, or as to the accuracy of any tabulation of such proxies, ballots or votes; (c) in the event of a proxy, consent or other solicitation in opposition to the voting
recommendation of the Board of Directors; and (d) if a Shareholder requests or consents to disclosure of such Shareholders vote or writes comments on such Shareholders proxy card or ballot.
-22-
Section 5.12 Waiver of Notice
Whenever any notice is required to be given to any Shareholder by the terms of this Agreement, a waiver thereof in a writing, signed by the
Shareholder or Shareholders entitled to notice, whether such waiver is given before or after the time stated therein, shall be deemed equivalent to the giving of such notice. If such a waiver is given by electronic transmission, the electronic
transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the Shareholder. Neither the business to be transacted at, nor the purpose of, any annual or
special meeting of Shareholders need be specified in any written waiver of notice or any waiver by electronic transmission of such meeting. Notice of any meeting of Shareholders need not be given to any Shareholder if waived by such Shareholder
either in a writing signed by such Shareholder or by electronic transmission, whether such waiver is given before or after such meeting is held.
Section 5.13 Remote Communication
For the purposes of this Agreement, if authorized by the Board of Directors in its sole discretion, and subject to such guidelines and
procedures as the Board of Directors may adopt, Shareholders and proxyholders may, by means of remote communication:
(a) participate in a
meeting of Shareholders; and
(b) to the fullest extent permitted by applicable law, be deemed present in person and vote at a meeting of
Shareholders, whether such meeting is to be held at a designated place or solely by means of remote communication;
provided, however,
that
(i) the Sponsor, on behalf of the Trust, shall implement reasonable measures to verify that each Person deemed present and permitted to vote at the meeting by means of remote communication is a Shareholder or proxyholder, (ii) the Sponsor,
on behalf of the Trust, shall implement reasonable measures to provide such Shareholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to Shareholders, including an opportunity to read or
hear the proceedings of the meeting substantially and concurrently with such proceedings, and (iii) if any Shareholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other
action shall be maintained by the Sponsor, on behalf of the Trust.
Section 5.14 Action by Written Consent
For so long as the Trust remains the sole holder of Sponsor Interests, the Trust shall take any action required or permitted to be taken at any
meeting of the members of the Sponsor, by executing a written consent that shall reflect the vote of the Shareholders
entitled to vote thereon
as required by the terms of this Agreement, without such meeting, without prior notice, and without a vote. Proxy materials completed by the Shareholders
entitled to vote thereon
evidencing the result of a vote taken at a meeting of
the
such
Shareholders with at least the
minimum number of votes required to constitute an affirmative vote of the Shareholders
entitled to vote thereon
under this
Agreement shall be delivered to the Sponsor indicating the vote or action being approved or disapproved by such Shareholders with respect to those matters reserved to the Shareholders
entitled to vote thereon
by this Agreement.
-23-
Section 5.15 Inspection of Records
(a) The Sponsor, on behalf of the Trust, shall keep or cause to be kept at its principal executive office appropriate books and records with
respect to the Trust, including, without limitation, all books and records necessary to provide to the Shareholders any information, lists and copies of documents required to be provided pursuant to applicable law. Any books and records maintained
by or on behalf of the Trust in the regular course of its business, including, without limitation, the record of the Shareholders, books of account and records of Trust proceedings, may be kept in electronic or any other form;
provided,
that
the books and records so maintained are convertible into clearly legible written form within a reasonable period of time.
(b) The
Secretary shall make, at least ten (10) days before every meeting of Shareholders, a complete list of the Shareholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each Shareholder and the number
of Shares registered in the name of each Shareholder.
Such
Subject to Section 3819 of the Delaware
Statutory Trust Act, such
list shall be open to the examination of any Shareholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting:
(i) on a reasonably accessible electronic network;
provided,
that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the principal place of
business of the Trust. In the event that the Sponsor determines to make the list available on an electronic network, the Sponsor may take reasonable steps to ensure that such information is available only to Shareholders. The list shall be produced
and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any Shareholder who is present.
Any
Subject to Section 3819 of the Delaware Statutory Trust Act, any
Shareholder or Beneficial Owner, in person or by attorney or other agent, shall, upon written demand stating the purpose
thereof, have the right during the usual business hours to inspect for any proper purpose, and to make copies and extracts from: (1) the Trusts Share Register, a list of the Shareholders, and its other books and records or (2) the
Sponsors books and records;
provided,
that as of the date of the making of the demand, inspection of such books and records would not constitute a breach of any confidentiality agreement. In every instance where a person purports to be
a Beneficial Owner of Shares but who is not the holder of record as identified on the Share Register, the demand shall state such Persons status as a Beneficial Owner of Shares, be accompanied by documentary evidence of beneficial ownership of
Shares, and state that such documentary evidence is a true and correct copy of what it purports to be. A proper purpose shall mean a purpose reasonably related to such Persons interest as a Shareholder or Beneficial Owner of Shares.
-24-
ARTICLE VI
RIGHT OF SHAREHOLDERS TO ENFORCE PROVISIONS OF SPONSOR
AGREEMENTS AND BRING DERIVATIVE ACTION
Section 6.1 Right to Institute Legal Proceeding
Pursuant to Section 2.5 of the Sponsor Agreement, Shareholders have certain rights to institute legal proceedings against the Sponsor to
enforce the provisions of the Sponsor Agreement.
Section 6.2 Ten Percent (10%) or More Shareholder
Subject to the requirements of Section 3816 of the Delaware Statutory Trust Act and other applicable law, for so long as the Trust remains
the sole owner of Sponsor Interests, Shareholders holding at least ten percent (10%) or more of the
Common Shares that are
Outstanding Shares shall have the right to cause the Trust to institute any legal proceeding for any remedy available to the Trust, as a holder of Sponsor Interests, and, to the extent permitted
by applicable law, such Shareholders may direct the time, method and place of conducting any such legal proceeding brought by the Trust.
Except as expressly provided in this Agreement, nothing in this Agreement shall be deemed to give to any Person any benefit or any legal or
equitable right, remedy or claim under this Agreement.
ARTICLE VII
SHAREHOLDER VOTE REQUIRED IN CONNECTION WITH CERTAIN
BUSINESS COMBINATIONS OR TRANSACTIONS
Section 7.1 Vote Generally Required
Except as provided in Sections 9.2 and 9.3 and subject to the provisions of Section 7.2 hereof, the Trust shall not (a) merge or
consolidate with or into any limited liability company, corporation, statutory trust, business trust or association, real estate investment trust, common-law trust, or any other unincorporated business, including a partnership, or (b) sell,
lease or exchange all or substantially all of the Trust Property, unless the Sponsor, acting through the Board of Directors, adopts a resolution, by the affirmative vote of at least a majority of the Sponsors Board of Directors, approving such
action and unless such action shall be approved by the affirmative vote of the holders of a majority of the then Outstanding
Voting
Shares
outstanding and entitled to vote thereon
. The notice of
the meeting at which such resolution is to be considered shall so state.
Section 7.2 Vote for Business Combinations
The affirmative vote of the holders of record of Outstanding
Voting
Shares representing at least sixty-six and two-thirds percent (66 2/3%) of the then Outstanding
Voting
Shares (excluding Shares held by an Interested Shareholder or any Affiliate or Associate of an Interested Shareholder) shall be required to approve any Business Combination. Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by applicable law or in any agreement with any securities exchange or otherwise.
-25-
Section 7.3 Power of Continuing Directors
The Continuing Directors shall have the power and duty to determine, on the basis of information known to them after reasonable inquiry, all
facts necessary to determine compliance with this Article VII, including, without limitation, (a) whether a Person is an Interested Shareholder, (b) the number of Shares beneficially owned by any Person, (c) whether a Person is an
Affiliate or Associate of another and (d) the Fair Market Value of the Shares, the Sponsor Interests or any equity securities of any Subsidiary thereof; and the good faith determination of the Continuing Directors on such matters shall be
conclusive and binding for all the purposes of this Article VII.
Section 7.4 No Effect on Fiduciary Obligations
Nothing contained in this Article VII shall be construed to relieve the directors of the Board of Directors or an Interested Shareholder from
any fiduciary obligation imposed by applicable law.
ARTICLE VIII
THE TRUSTEES
Section 8.1 Certain
Duties and Responsibilities
(a) In addition to the duties and responsibilities provided for herein, the Regular Trustees shall have
the following exclusive duties:
(i)
to
negotiate, execute and deliver the Sponsor Agreement or any amendment thereto on behalf of the Trust (which may be executed by any one Regular Trustee);
(ii) to maintain bank accounts, brokerage accounts and other custody accounts that receive Trust income and receipts from which
Trust expenditures and distributions are disbursed;
(iii) to maintain the Trust Property;
(iv) to maintain Trust records;
(v) to maintain an office for Trust business;
(vi) to originate, facilitate and review Trust reports and other Trust communications;
(vii) to execute documents and authorize Trust account transactions;
(viii) to retain accountants, attorneys, agents and other advisors in connection with its duties under this Agreement;
-26-
(ix) to file reports and returns on behalf of the Trust with government agencies
to the extent required by applicable law and as specifically directed in writing by the Sponsor; and
(x) to perform such
other actions as are necessary to effect any of the foregoing duties.
(b) The duties and responsibilities of the Trustees shall be as
provided by this Agreement. Except as provided in Section 2.8 or other express provisions hereof, the Sponsor and the Trustees hereby acknowledge and agree that the Trustees are authorized, directed and instructed to act as specifically
authorized in writing by the Sponsor.
Any written instructions, notwithstanding any error in the transmission thereof or that such
instructions may not be genuine, shall, as against the Sponsor and in favor of the Trustees, be conclusively deemed to be valid instructions from the Sponsor to the Trustees for the purposes of this Agreement, if believed in good faith by the
Trustees to be genuine and if not otherwise insufficient on the face of such written instructions;
provided, however,
that a Trustee in its discretion may decline to act upon any instructions where they are not received by such Trustee in
sufficient time for such Trustee to act upon or in accordance with such instructions, where such Trustee has reasonable grounds for concluding that the same have not been accurately transmitted or are not genuine or where such Trustee believes in
good faith that complying with such instructions is contrary to applicable law or might subject such Trustee to any liability. If a Trustee declines to act upon any instructions for any reason set out in the preceding sentence, it shall notify (and
provide reasonable detail to) the Sponsor and the other Trustees in writing forthwith after it so declines. In addition, the Delaware Trustee shall not be required to take or refrain from taking any action if the Trustee shall have determined, or
shall have been advised by counsel, that such performance is likely to involve the Delaware Trustee in personal liability or is contrary to the terms of this Agreement, any other document to which the Trust is a party or otherwise contrary to law.
(c) The Trustees shall not be liable for any act or omission in the course of or connected with their performance hereunder, except only
that each Trustee shall be subject to liability and assume the entire responsibility for direct damages suffered by the Sponsor or any other Person occasioned by such Trustees own gross negligence or willful misconduct or the gross negligence
or willful misconduct of any of such Trustees directors, officers or employees in the rendering of its performance hereunder, as determined by a court of competent jurisdiction.
(d) The Trustees shall incur no liability to anyone in acting upon any document, including any certified items referenced herein, reasonably
believed by them to be genuine (which is not insufficient on its face) and to have been signed by the proper Person or Persons, including (i) written instructions from the Sponsor, and (ii) a certified copy of a resolution of the Board of
Directors or other governing body of any corporate party, which shall be conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the manner of ascertainment
of which is not specifically prescribed herein, the Trustees may for all purposes hereof rely on a certificate, signed by the Sponsor, as to such fact or matter, and such certificate, if relied upon by the Trustees in good faith, shall constitute
full protection to the Trustees for any action taken or omitted to be taken by them in good faith in reliance thereon.
-27-
In no event shall the Trustees be liable to any Persons for (A) acting in accordance with
instructions from the Sponsor, (B) any damages in the nature of special, indirect or consequential damages, however styled, including, without limitation, lost profits, or for any losses due to forces beyond the control of such Trustee,
including, without limitation, strikes, work stoppages, acts of war or terrorism, insurrection, revolution, nuclear or natural catastrophes or acts of God and interruptions, loss or malfunctions of utilities, communications or computer (software and
hardware) services provided to the Trustees by third parties or (C) the acts or omissions of their nominees, correspondents, designees, agents or subagents appointed by them in good faith.
(e) In the event that the Trustees are unsure of the course of action to be taken by them hereunder, the Trustees may request instructions from
the Sponsor as to such course of action to be taken. In the event that no instructions are provided within the time requested by the Trustees, they shall have no duty or liability for their failure to take any action or for any action they take in
good faith and in accordance with the terms hereof.
(f) In the exercise or
administration of the trusts hereunder, the Delaware Trustee may, at the expense of the Trust, consult with counsel, accountants and other experts, and it shall not be liable for anything done, suffered or omitted in good faith by it in accordance
with the advice or opinion of any such counsel, accountants or other experts. For the avoidance of doubt, the Delaware Trustee shall have no responsibility for any tax matters relating to the
Trust.
The
parties hereto hereby irrevocably waive, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding against the Delaware Trustee arising out of or relating to this Trust Agreement or the
transactions contemplated hereby.
Section 8.2 Not Responsible for Recitals or
Issuance of Shares
The recitals contained herein and in the Share Certificates shall not be taken as the statements of the Trustees,
and the Trustees do not assume any responsibility for their correctness.
Section 8.3 May Hold Shares
Any Trustee or any other agent of any Trustee or the Trust, in its individual or any other capacity, may become the owner or pledgee of Shares
and may otherwise deal with the Trust with the same rights it would have if it were not a Trustee or such other agent.
Section 8.4 Compensation;
Indemnity; Fees
The Sponsor agrees:
(i) to pay the Delaware Trustee from time to time such compensation for all services rendered by it hereunder as the parties shall agree from
time to time in writing (which compensation shall not be limited by any provision of applicable law in regard to the compensation of a trustee of an express trust);
(ii) except as otherwise expressly provided herein, to reimburse the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of this Agreement (including the reasonable compensation and the expenses and disbursements of its agents, counsel and experts), except any such expense, disbursement or
advance determined by a court of competent jurisdiction to have been caused by its own gross negligence or willful misconduct; and
(iii)
to the fullest extent permitted by applicable law, to indemnify and hold harmless (i) the Trustees, (ii) any officer, director, shareholder, employee, representative or agent of the Trustees, (iii) any employee or agent of the Trust,
and (iv) the Tax Matters Member (collectively, the
Indemnified Person
) from and against any loss, damage, liability, tax, penalty, expense or claim of any kind or nature whatsoever incurred by such Indemnified Person
by reason of the creation, operation or termination of the Trust or any act or omission performed or omitted by such Indemnified Person in good faith on behalf of the Trust and in a manner such Indemnified Person reasonably believed to be within the
scope of authority conferred on such Indemnified Person by this Agreement, except that no Indemnified Person shall be entitled to be indemnified in respect of any loss, damage, liability, tax, penalty, expense or claim of any kind or nature incurred
by such Indemnified Person by reason of gross negligence or willful misconduct with respect to such acts or omissions.
-28-
Section 8.5 Delaware Trustee Required; Eligibility of Trustees
(a) There shall at all times be a Delaware Trustee hereunder with respect to the Shares. The Delaware Trustee shall be either (i) a
natural person who is at least 21 years of age and a resident of the State of Delaware or (ii) a legal entity with its principal place of business in the State of Delaware and that otherwise meets the requirements of applicable Delaware law
that shall act through one or more persons authorized to bind such entity. If at any time the Delaware Trustee with respect to the Shares shall cease to be eligible in accordance with the provisions of this Section 8.5, it shall resign
immediately in the manner and with the effect hereinafter specified in this Article VIII.
(b) There shall at all times be at least one
Regular Trustee hereunder with respect to the Shares. The Regular Trustee shall be either a natural person who is at least 21 years of age or a legal entity that shall act through one or more persons authorized to bind that entity.
Section 8.6 Resignation and Removal; Appointment of Successor
(a) Subject to Sections 8.6(b) and 8.6(c), any Trustee (the
Relevant Trustee
)
may be appointed or removed
without cause upon thirty (30) days prior notice to such Trustee by the Sponsor.
(b) The Trustee that acts as Delaware Trustee shall
not be removed in accordance with Section 8.6(a) until a successor possessing the qualifications to act as Delaware Trustee under Section
8.5 (a
Successor Delaware Trustee
) has been appointed and has
accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the removed Delaware Trustee.
(c) A Trustee appointed to office shall hold office until his, her or its successor shall have been appointed or until his, her or its death,
removal, resignation, dissolution or liquidation. Any Trustee may resign from office (without need for prior or subsequent accounting) by an instrument in writing with thirty (30) days notice signed by the Trustee and delivered to the Sponsor
and the Trust, which resignation shall take effect upon such later date as is specified therein;
provided, however,
that no such resignation of the Trustee that acts as the Delaware Trustee shall be effective until a Successor Delaware
Trustee has been appointed and has accepted such appointment by instrument executed by such Successor Delaware Trustee and delivered to the Trust, the Sponsor and the resigning Delaware Trustee.
(d) If no Successor Delaware Trustee shall have been appointed and accepted appointment as provided in this Section 8.6 within sixty
(60) days after delivery pursuant to this Section 8.6 of an instrument of resignation or removal, the Delaware Trustee resigning or being removed, as applicable, may petition, at the expense of the Sponsor, any court of competent
jurisdiction for appointment of a Successor Delaware Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Delaware Trustee.
-29-
(e) No Delaware Trustee shall be liable for the acts or omissions to act of any Successor
Delaware Trustee, as the case may be.
(f) Notwithstanding the foregoing or any other provision of this Agreement, in the event a Regular
Trustee or a Delaware Trustee who is a natural person dies or becomes, solely in the opinion of the Sponsor, incompetent or incapacitated, the vacancy created by such death, incompetence or incapacity may be filled by the Sponsor (with the successor
in each case being a Person who satisfies the eligibility requirement for the Regular Trustee or the Delaware Trustee, as the case may be, set forth in Section 8.5).
(g) The indemnity provided to a Trustee under Section 8.4 shall survive any Trustees resignation or removal and the termination of
this Agreement.
Section 8.7 Acceptance of Appointment by Successor
(a) In case of the appointment hereunder of a Successor Trustee, such Successor Trustee so appointed shall execute, acknowledge and deliver to
the Trust and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such Successor Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers and duties of the retiring Trustee;
provided,
that on the request of the Sponsor or the Successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such Successor Trustee all the rights and powers of the retiring Trustee.
(b) No Successor Trustee shall accept its
appointment unless at the time of such acceptance such Successor Trustee shall be qualified and eligible under this Article VIII.
Section 8.8
Merger, Conversion, Consolidation or Succession to Business
Any Person into which the Delaware Trustee or the Regular Trustee that is
not a natural person may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which such Relevant Trustee shall be a party, or any Person succeeding to all or
substantially all the corporate trust business of such Relevant Trustee, shall be the successor of such Relevant Trustee hereunder;
provided,
such Person shall be otherwise qualified and eligible under this Article VIII, without the execution
or filing of any paper or any further act on the part of any of the parties hereto.
Section 8.9 Number of Trustees
(a) The number of Trustees shall be three;
provided,
that the Sponsor may increase or decrease the number of Regular Trustees, subject
to Section 8.5.
(b) If a Trustee ceases to hold office for any reason and the number of Regular Trustees is not reduced pursuant to
Section 8.9(a), or if the number of Trustees is increased pursuant to Section 8.9(a), a vacancy shall occur. The vacancy shall be filled by a Successor Trustee appointed in accordance with Section 8.6.
-30-
(c) The death, resignation, retirement, removal, bankruptcy, incompetence or incapacity to
perform the duties of a Trustee shall not operate to annul the Trust.
Section 8.10 Delegation of Power
(a) Any Regular Trustee may, by power of attorney consistent with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section 2.9.
(b) The Regular Trustees shall have power to
delegate from time to time to such of their number or to the Sponsor the doing of such things and the execution of such instruments either in the name of the Trust or the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or contrary to the provisions of the Trust, as set forth herein.
Section 8.11 Resignation and Appointment of Regular Trustees
(a) The Regular Trustees shall be Alan B. Offenberg and
James
Ryan
J.
Bottiglieri
Faulkingham
, each an individual and his successor shall be appointed by the Sponsor. Upon the resignation or removal of either individual,
the Sponsor shall appoint a successor Regular Trustee.
(b) Whenever a vacancy in the number of Regular Trustees shall occur, until
such vacancy is filled by the appointment of a Regular Trustee in accordance with this Section 8.11 or Section 8.6, the Regular Trustee(s) in office, if any, regardless of their number (and not withstanding any other provision of this
Agreement), shall have all the powers granted to the Regular Trustee and shall discharge all the duties imposed upon the Regular Trustee by this Agreement.
ARTICLE IX
TERMINATION
AND DISSOLUTION
Section 9.1 Termination or Dissolution
Unless terminated as provided herein, the Trust shall continue without limitation of time. If an Early Termination Event specified in
Section 9.4 occurs, the Trust shall be dissolved, and
, subject to Section 3808(e) of the Delaware Statutory Trust Act,
one
Sponsor Interest
of the corresponding class and series of Shares
shall be distributed to each Shareholder in exchange for each
Outstanding
Corresponding
Share
then outstanding
.
-31-
Section 9.2 Circumstances Under Which Shares Shall Be Voluntarily Exchanged for Sponsor Interests
In the event that the Sponsor, acting through the Board of Directors determines that the Trust or the Sponsor, or both, is, or is
reasonably likely to be, treated as a corporation for U.S. federal income tax purposes, or (B) the existence of the Trust otherwise results, or is reasonably likely to result, in a material tax detriment to the Trust, Shareholders, the Sponsor
or any member of the Sponsor, the Sponsor, acting through the Board of Directors (a) shall declare a record date and deliver a mandatory instruction to the Regular Trustees, together with any opinions of counsel or officers certificates
of the Sponsor as the Regular Trustees may reasonably request, directing the Regular Trustees to, subject to Section 3808(e) of the Delaware Statutory Trust Act, (i) deliver one Sponsor Interest
of the corresponding class and series of Shares
to each Shareholder in exchange for each
Outstanding
Corresponding
Share
then outstanding
(the
Voluntary Exchange)
and (ii) dissolve the Trust and (b) shall deliver to the
Transfer Agent notice of such Voluntary Exchange and shall cause the Transfer Agent to mail a copy of such notice to the Shareholders at least thirty (30) days prior to the Voluntary Exchange. Simultaneously with the completion of such
Voluntary Exchange, each Shareholder immediately prior to the completion of the Voluntary Exchange shall be admitted to the Sponsor as a member in respect of a number of Sponsor Interests previously held by the Trust equal in number to the
Outstanding Shares previously held by such Shareholder and each such member shall be issued a certificate evidencing the same, in accordance with the provisions of the Sponsor Agreement. Immediately thereafter, the Trust shall be deemed withdrawn
from the Sponsor as a member in respect of such Sponsor Interest(s), and the Trust shall tender its certificates evidencing Sponsor Interests to the Transfer Agent or Sponsor for cancellation.
Section 9.3 Circumstances Under Which Shares Shall Be Mandatorily Exchanged for Sponsor Interests
If at any time one Person is the Beneficial Owner of more than ninety percent (90%) of the then Outstanding
Voting
Shares (the
Acquirer
),
such Acquirer shall then have the right to direct the Sponsor, acting through
the Board of Directors, to (i) declare a record date and deliver a mandatory instruction to the Regular Trustees, together with any opinions of counsel or officers certificates of the Sponsor as the Regular Trustees may reasonably
request, directing the Regular Trustees to
, subject to Section 3808(e) of the Delaware Statutory Trust Act,
(A) deliver one Sponsor Interest
of the corresponding class and series of Shares
to each Shareholder, including the
Acquirer, in exchange for each
Outstanding
Corresponding
Share
then outstanding
(the
Acquisition Exchange
) and
(B) dissolve the Trust and (ii) deliver to the Transfer Agent notice of such Acquisition Exchange and cause the Transfer Agent to mail a copy of such notice to Shareholders at least thirty (30) days prior to the Acquisition Exchange.
Simultaneously with the completion of such Acquisition Exchange, each Shareholder immediately prior to the completion of the Acquisition Exchange shall, pursuant to the terms of the Sponsor Agreement, be admitted to the Sponsor as a member in
respect of a number of Sponsor Interests previously held by the Trust equal in number to the Outstanding Shares previously held by such Shareholder and each such member shall be issued a certificate evidencing the same, in accordance with the
provisions of the Sponsor Agreement. Immediately thereafter, the Trust shall be deemed withdrawn from the Sponsor as a member in respect of such Sponsor Interest(s), and the Trust shall tender its certificates evidencing Sponsor Interests to the
Transfer Agent or Sponsor for cancellation.
Section 9.4 Early Termination
The Trust shall dissolve upon the first to occur of any of the following events (each an
Early Termination Event
):
(i) the occurrence of a Voluntary Exchange pursuant to Section 9.2 or an Acquisition Exchange pursuant to Section 9.3;
-32-
(ii) the filing of a Certificate of Cancellation or its equivalent with respect to the Sponsor or
the failure of the Sponsor to revive its charter within ten (10) days following the revocation of the Sponsors charter;
(iii)
the entry of a decree of judicial dissolution by a court of competent jurisdiction of the Sponsor or the Trust; or
(iv) the written
election of the Sponsor.
As soon as is practicable after the occurrence of any event referred to above, the Regular Trustees shall notify
the Delaware Trustee and then shall wind-up the Trust pursuant to Section 3808(e) of the Delaware Statutory Trust Act and any one of the Regular Trustee shall execute and file a Certificate of Cancellation with the Secretary of State of the
State of Delaware.
Section 9.5 Termination of Obligations
The respective obligations and responsibilities of the Trustees and the Trust continued hereby shall terminate upon the latest to occur of the
following:
(i) the payment of all expenses owed by the Trust pursuant to Section 3808 of the Delaware Statutory Trust Act;
(ii) the discharge of all administrative duties of the Regular Trustees; and
(iii) the filing of a Certificate of Cancellation canceling the Trusts Certificate of Trust with the Secretary of State of the State of
Delaware by
the Delaware Trustee and
one of the Regular Trustees.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Limitation of Rights of Shareholders
The death or incapacity of any person having an interest, beneficial or otherwise, in Shares shall not operate to terminate this Agreement, nor
entitle the legal representatives or heirs of such person or any Shareholder for such person to claim an accounting, take any action or bring any proceeding in any court for a partition or winding-up of the arrangements contemplated hereby, nor
otherwise affect the rights, obligations and liabilities of the parties hereto or any of them.
-33-
Section 10.2 Amendment
This Agreement may be amended
, revised, supplemented or otherwise modified, and
the provisions hereof may be waived,
from time to time by the Sponsor, acting through the Board of Directors, and by the Regular Trustees at the direction of the Sponsor, acting through the Board
of Directors
without the vote of any Shareholder or the Delaware Trustee
;
provided, however,
that no such
amendment
modification
shall alter the rights, powers or
immunities of the Delaware Trustee without its written consent;
provided, further,
that
, subject to
Section 2.4(b)(ii),
the Sponsor shall not, and no Trustee shall, without the affirmative vote of a majority of the then Outstanding
Voting
Shares present in person or represented by proxy at a meeting of the Shareholders
entitled to vote thereon
(i) enter into or consent to any
amendment to
such modification or waiver of the provisions of
this Agreement which would cause the Trust to fail or cease to qualify for the exemption from the status of an investment company under the 1940 Act, (ii) cause the Trust to issue a class of
common
equity securities other than the
Common
Shares (it being understood that
a
separate series of the
Common
Shares shall not constitute a different class of equity security from the
Common
Shares) or issue any debt securities or any derivative securities or amend the provision of Section 2.4 of this Agreement
prohibiting such issuance, (iii) enter into or consent to any
amendment to
such modification or
waiver of the provisions of
this Agreement that would affect the exclusive and absolute right of the Shareholders
entitled to
vote
to direct the voting of the Trust, as a member of the Sponsor, pursuant to Section 5.6 of this Agreement, with respect to all matters reserved for the vote of members of the Sponsor
pursuant to the provisions of the Sponsor Agreement or (iv) effect the merger or consolidation of the Trust, effect the sale, lease or exchange of all or substantially all of the Trust Property and
, subject to Section 7.2 hereof,
certain other Business Combinations or transactions;
provided, further,
that
, subject to Section 2.4(b)(ii),
Section 2.4, Section 3.1 and this Section 10.2 of this Agreement may not be
amended
so modified
without the affirmative vote of a
majority of the then Outstanding
Voting
Shares present in person or represented by proxy at a meeting of Shareholders
entitled to vote
.
Section 10.3 Separability
In case
any provision in this Agreement or in the Share Certificates or the application of such provision to any person or circumstance, shall be held invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions
of this Trust Agreement or in the Shares Certificates or the application of such provision to persons or circumstances other than those to which it is held invalid, shall not in any way be affected or impaired thereby.
Section 10.4 Specific Performance
The Sponsor and the Trustees agree that each party to this Agreement would be irreparably damaged if any of the provisions of this Agreement
were not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, in addition to any other remedy to which the nonbreaching party may be entitled,
at law or in equity, each nonbreaching party shall be entitled to
seek
injunctive relief to prevent breaches of the provisions of this
Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.
-34-
Section 10.5 Governing Law
This Agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of
Delaware and all rights and remedies shall be governed by such laws without regard to the principles of conflict of laws;
PROVIDED, HOWEVER,
THAT THERE SHALL NOT BE APPLICABLE TO THE PARTIES HEREUNDER OR THIS TRUST AGREEMENT ANY
PROVISION OF THE LAWS (COMMON OR STATUTORY) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS (OTHER THAN THE DELAWARE STATUTORY TRUST ACT) THAT RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF, (A) THE FILING WITH ANY COURT OR
GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY FOR OBTAINING COURT OR OTHER
GOVERNMENTAL APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO
INCOME OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING, STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE
ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR REFERENCED IN THIS
AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE CODE SHALL NOT APPLY TO THE TRUST.
Section 10.6 Successors
This Agreement shall be binding upon and shall inure to the benefit of any successor to the Sponsor, the Trust or the Relevant Trustee,
including any successor by operation of law.
Section 10.7 Headings
The Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define
or limit the scope, extent or intent of this Agreement or any provision hereof.
-35-
Section 10.8 Communications, Notices and Demands
(a) Subject to Sections 5.4 and 5.8, any communications, notices or payment demands which are required or permitted to be given or served to or
upon any Shareholder or the Sponsor by any provision of this Agreement shall be in writing and delivered personally, or, when the same is actually received, if sent either by registered or certified mail, postage and charges prepaid, or by
facsimile, if such facsimile is followed by a hard copy of the facsimile communication sent promptly thereafter by registered or certified mail, postage and charges prepaid, addressed as follows, or to such other address as such Person may from time
to time specify by notice to the Shareholders:
If to the Shareholder, to such Shareholder as such Shareholders name and address may
appear in the Share Register.
If to the Sponsor, to:
Compass Group Diversified Holdings LLC
Sixty One Wilton Road, Second Floor
Westport, CT 06880
Attention:
Alan B. Offenberg
Facsimile No.: 203-221-8253
With a copy to:
Squire
, Sanders & Dempsey L.L.P.
Patton Boggs (US) LLP
221 East Fourth Street, Suite 2900
Cincinnati, Ohio 45202
Attention: Stephen C. Mahon
Facsimile No. 513-361-1201
And a copy to:
Richards,
Layton & Finger, P.A.
One Rodney Square
920 North King Street
Wilmington, Delaware 19801
Attention: Eric A. Mazie
Facsimile No.: (302) 651-7701
or to such
other address as such Person may from time to time specify by notice to the other parties hereto. Such communication, notice or demand to or upon a Shareholder shall be deemed to have been sufficiently given, or made, for all purposes, upon hand
delivery, mailing or transmission.
(b) Any notice, demand or other communication which by any provision of this Agreement is required or
permitted to be given or served to or upon the Trust, the Delaware Trustee or the Regular Trustees shall be given in writing (which may be by facsimile transmission) addressed (until another address is published by the Trust) as follows:
(a) with respect to the Delaware Trustee, to
The Bank of New York (
BNY Mellon Trust
Delaware
), 502 White Clay Center, Route 273 P.O. Box 6973,
Newark
, 301 Bellevue Parkway, 3
rd
Floor, Wilmington
, Delaware
19711
19809
, and (b) with respect to each
of the Regular Trustees, to him at the address for notices to the Sponsor, marked Attention: Alan B. Offenberg or Attention:
James
Ryan
J.
Bottiglieri
Faulkingham
. Such notice, demand or other communication to or upon the Trust shall be deemed to have been sufficiently given or made
only upon actual receipt of the writing by the Trust.
Section 10.9 Counterpart Execution
This Agreement may be executed in any number of counterparts with the same effect as if all of the Parties had signed the same document. All
counterparts shall be construed together and shall constitute one agreement.
[signatures on following page]
-36-
IN WITNESS WHEREOF,
the
parties hereto
Sponsor, by its officers hereunto duly authorized, and the Regular Trustees
have caused this
Second
Amended and Restated Trust Agreement to be duly executed
by their respective officers hereunto duly authorized
, as of the day and year first above written.
[Signature blocks intentionally omitted.]
-37-
EXHIBIT AFORM OF SHARE CERTIFICATE
SPECIMEN
CREATED UNDER THE LAWS
OF
THE STATE OF DELAWARE
COMPASS DIVERSIFIED HOLDINGS
This Certifies that
is the owner of Shares of
Compass Diversified Holdings, a Delaware statutory trust (
the
Trust
)
with such rights and privileges as are set forth in the
Second
Amended and Restated Trust
Agreement of the Trust dated
, 2006
as of , 2016
(the Trust Agreement), as it may be amended from time to time.
THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), THE SECURITIES LAWS OF ANY STATE (THE STATE ACTS) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND ARE BEING OFFERED
AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE SHARES
REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, BY ANY STATE SECURITIES COMMISSION OR BY ANY OTHER REGULATORY AUTHORITY OF ANY OTHER JURISDICTION. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
NEITHER THE SHARES
REPRESENTED BY THIS CERTIFICATE
NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR IN A
TRANSACTION WHICH IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR FOR WHICH SUCH REGISTRATION IS OTHERWISE NOT REQUIRED AND (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER ANY APPLICABLE STATE ACTS OR IN A TRANSACTION WHICH IS
EXEMPT FROM REGISTRATION UNDER SUCH STATE ACTS OR FOR WHICH SUCH REGISTRATION OTHERWISE IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE EVIDENCE THE PROPORTIONATE PORTION OF SUCH HOLDERS SHARES IN THE TRUST.
A
STATEMENT OF THE RELATIVE RIGHTS AND PREFERENCES OF THE TRUSTS SHARES WILL BE FURNISHED BY THE TRUST TO THE HOLDER HEREOF UPON REQUEST WITHOUT CHARGE.
IN WITNESS WHEREOF, said Trust has caused this Certificate to be signed by its Regular Trustee this
day of
, A.D.
2006.
.
|
|
|
COMPASS DIVERSIFIED HOLDINGS
|
|
|
By:
|
|
|
|
|
Name:
|
|
|
Title: Regular Trustee
|
-1-
EXHIBIT B ALLOCATIONS OF PROFITS AND LOSSES
ARTICLE B.I
DEFINITIONS
The
following additional definitions
, subject to any applicable Share Designation,
apply for purposes of this
Exhibt
Exhibit
B and the Agreement:
Adjusted Capital Account Deficit
means, with respect to any Shareholder, the deficit balance, if any, in such
Shareholders Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments:
(i) credit to such Capital Account any amounts which such Shareholder is deemed to be obligated to restore pursuant to the
penultimate sentence in each of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) debit to such
Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The
foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.
Allocation Year
means (i) the period ending on December 31, 2007, (ii) any subsequent twelve
(12)-month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in clause (i) or (ii) above for which the Trust is required to allocate Profits, Losses and other items of
Trust income, gain, loss or deduction pursuant to Section 3.4 and Article B.II.
Capital Account
means, with
respect to any Shareholder, the Capital Account established and maintained for such Shareholder by the Trust in accordance with the following provisions:
(i) to each Shareholders Capital Account there shall be credited (A) such Shareholders Capital Contributions
(net of any liabilities relating to such Property), and (B) such Shareholders distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Sections B.1 or B.2;
(ii) to each Shareholders Capital Account there shall be debited (A) the amount of money and the Gross Asset Value
of any Property distributed to such Shareholder pursuant to any provision of this Agreement (net of any liabilities relating to such Property), and (B) such Shareholders distributive share of Losses and any items in the nature of expenses
or losses which are specially allocated pursuant to Sections B.1 or B.2;
-1-
(iii) in the event Shares are Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred Shares; and
(iv) in determining the amount of any liability for purposes of subparagraphs (i) and (ii) above, there shall be
taken into account Code Section 752(c) and any other applicable provisions of the Code and the Regulations.
The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the
Board of Directors of the Sponsor shall determine that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Trust or any Shareholders) are computed in order to comply with such Regulations, the Board of Directors may make such modification;
provided
, that it is not likely to have a
material effect on the amounts distributed to any Person upon the dissolution of the Trust. The Board of Directors also shall (i) make any adjustments that are necessary or appropriate to maintain equality among the Capital Accounts of the
Shareholders and the amount of capital reflected on the Trusts balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
The Board of Directors may maintain separate Capital Accounts with respect
to Preferred Shares and Common Shares held by any Shareholder if they determine it is necessary to properly maintain the economic expectations for each class of Shares.
Capital Contributions
means, with respect to any Shareholder, the amount of money and the initial Gross Asset Value
of any Property (other than money) net of any liabilities relating to such Property contributed to the Trust with respect to the Shares of the Trust held or subscribed for by such Shareholder.
Code
means the United States Internal Revenue Code of 1986, as amended and in effect from time to time. Any reference
herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of law in effect in the future.
Depreciation
means, for each Allocation Year or part thereof, an amount equal to the depreciation, amortization, or
other cost recovery deduction allowable for federal income tax purposes with respect to an asset for such Allocation Year or part thereof, except that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such Allocation Year, the depreciation, amortization, or other cost recovery deduction for such Allocation Year or part thereof shall be an amount which bears the same ratio to such Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery deduction for such Allocation Year or part thereof bears to such adjusted tax basis, provided however, that if the adjusted basis for federal income tax purposes is zero, Depreciation
shall be determined with reference to the Gross Asset Value using any reasonable method determined by the Board of Directors of the Sponsor.
-2-
Dissolution Event
shall be any event that leads to the dissolution of
the Trust pursuant to Article IX.
Gross Asset Value
means, with respect to any asset, the assets adjusted
basis for U.S. federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed
by a Shareholder to the Trust shall be the gross fair market value of such asset, as determined by the Board of Directors;
(ii) the Gross Asset Values of all Trust assets shall be adjusted by the Tax Matters Member to equal their respective gross
fair market values (taking Code Section 7701(g) into account), as determined by the Tax Matters Member as of the following times: (A) the acquisition of an additional interest in the Trust by any new or existing Shareholder in exchange for
more than a de minimis Capital Contribution; (B) the distribution by the Trust to a Shareholder of more than a de minimis amount of Trust Property as consideration for an interest in the Trust; (C) in connection with the grant of an
interest in the Trust (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Trust by an existing Shareholder acting in a partner capacity or by a new Shareholder acting in a partner capacity
or in anticipation of being a Shareholder; or (D) the liquidation of the Trust within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); provided, that an adjustment described in clauses (A)
and (B
through (C
) of this subparagraph (ii) shall
be made only if the Tax Matters Member reasonably determines that such adjustment is necessary to reflect the relative economic interests of the Shareholders in the Trust;
(iii) the Gross Asset Value of any item of Trust assets distributed to any Shareholder shall be adjusted to equal the gross
fair market value (taking Code Section 7701(g) into account) of such asset on the date of distribution, as determined by the Tax Matters Member; and
(iv) the Gross Asset Values of Trust assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis
of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and
subparagraph (vi) of the definition of Profits and Losses;
provided, however,
that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to
subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).
If
the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted by Depreciation.
-3-
Losses
has the meaning set forth in the definition of
Profits
and
Losses
below.
Nonrecourse Deductions
has the
meaning set forth in Section 1.704-2(b)(1) of the Regulations.
Nonrecourse Liability
has the meaning set
forth in Section 1.704-2(b)(3) of the Regulations.
Percentage Interest
means,
as of any date of determination, (a)
with respect to any Shareholder as
of any date
to such Shareholders Shares other than Preferred Shares
, the ratio (expressed as a percentage) of the number of
such
Shares held by such
Shareholder on such date relative to the aggregate number of
such
Shares
then
outstanding as of such date
.
, and (b) with respect to any Shareholder as to such Shareholders Preferred Shares, the percentage established for such Preferred Shares and specified in the Share Designation
establishing such Preferred Shares.
Profits
and
Losses
mean, for each Allocation Year, an amount equal to the Trusts taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):
(i) any income of the Trust that is exempt from U.S. federal income tax and not otherwise taken into account in computing
Profits or Losses pursuant to this definition of Profits and Losses shall be added to such taxable income or loss;
(ii) any expenditures of the Trust described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses shall be subtracted from such
taxable income or loss;
(iii) in the event the Gross Asset Value of any Trust asset is adjusted pursuant to subparagraph
(ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment decreases the
Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;
(iv) gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for U.S. federal
income tax purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value;
(v) to the extent an adjustment to the adjusted tax basis of any Trust asset pursuant to Code Section 734(b) is required,
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Shareholders interest in the Trust, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Profits
or Losses; and
-4-
(vi) notwithstanding any other provision of this definition, any items which are
specially allocated pursuant to Sections B.1 or B.2 shall not be taken into account in computing Profits or Losses.
The amounts of the items of Trust
income, gain, loss or deduction available to be specially allocated pursuant to Section B.1 or B.2 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (v) above.
Regulations
means the income tax regulations, including temporary regulations, promulgated under the Code, as such
regulations are amended from time to time.
Regulatory Allocations
has the meaning set forth in Section B.2.
Shareholder Nonrecourse Debt
has the same meaning as the term partner nonrecourse debt in
Section 1.704-2(b)(4) of the Regulations.
Shareholder Nonrecourse Debt Minimum Gain
means an amount, with
respect to each Shareholder Nonrecourse Debt, equal to the Trust Minimum Gain that would result if such Shareholder Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
Shareholder Nonrecourse Deductions
has the same meaning as the term partner nonrecourse
deductions in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
Tax Matters Member
has the
meaning set forth in Section B.6
.
Trust Minimum Gain
has the same meaning as the term partnership minimum gain in Sections 1.704-2(b)(2)
and 1.704-2(d) of the Regulations.
ARTICLE B.II
ALLOCATIONS
In each case subject to any applicable Share Designation:
Section B.1 Special Allocations
The
following special allocations shall
, subject to any applicable Share Designation,
be made in the following order:
(a)
Minimum Gain Chargeback
. Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding
any other provision of Section 3.4 and this Article B.II, if there is a net decrease in Trust Minimum Gain during any Allocation Year, each Shareholder shall be specially allocated items of Trust income and gain for such Allocation Year (and,
if necessary, subsequent Allocation Years) in an amount equal to such Shareholders share of the net decrease in Trust Minimum Gain, determined in accordance with Regulations Section 1.704-2(g) and (h). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be allocated to each Shareholder pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Section B.1(a) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith.
-5-
(b)
Shareholder Minimum Gain Chargeback
. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of Section 3.4 and this Article B.II, if there is a net decrease in Shareholder Nonrecourse Debt Minimum Gain attributable to a Shareholder Nonrecourse Debt
during any Allocation Year, each Shareholder who has a share of the Shareholder Nonrecourse Debt Minimum Gain attributable to such Shareholder Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be
specially allocated items of Trust income and gain for such Allocation Year (and, if necessary, subsequent Allocation Years) in an amount equal to such Shareholders share of the net decrease in Shareholder Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Shareholder pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section B.1(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be
interpreted consistently therewith.
(c)
Qualified Income Offset
. In the event any Shareholder unexpectedly receives
any adjustments, allocations or distributions described in Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Trust income and gain shall be specially allocated to such Shareholder
in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of the Shareholder as quickly as possible; provided, that an allocation pursuant to this Section B.1(c) shall be made
only if and to the extent that the Shareholder would have an Adjusted Capital Account Deficit after all other allocations provided for in Section 3.4 and this Article B.II have been tentatively made as if this Section B.1(c) were not in this
Agreement.
(d)
Nonrecourse Deductions
. Nonrecourse Deductions for any Allocation Year shall be specially allocated
to the Shareholders in the manner elected by the Tax Matters Member in conformity with the provisions of Regulations 1.704-2, and in the absence of such an election, to the Shareholders in proportion to their respective Percentage Interests.
-6-
(e)
Shareholder Nonrecourse Deductions
. Any Shareholder Nonrecourse
Deductions for any Allocation Year shall be specially allocated to the Shareholder who bears the economic risk of loss with respect to the Shareholder Nonrecourse Debt to which such Shareholder Nonrecourse Deductions are attributable in accordance
with Regulations Section 1.704-2(i)(1).
(f)
Section 754 Adjustments
. To the extent an adjustment to the
adjusted tax basis of any Trust asset, pursuant to Code Section 734(b) or Code Section 743(b), is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Shareholder in complete liquidation of such Shareholders interest in the Trust, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Shareholders in accordance with their interests in the Trust in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies or to the Shareholder to whom such distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(g)
Allocations Relating to Taxable Issuance of Trust Shares
. Any income, gain, loss or deduction realized as a direct
or indirect result of the issuance of Shares by the Trust to a Shareholder (the
Issuance Items
) shall be allocated among the Shareholders so that, to the extent possible, the net amount of such Issuance Items, together with
all other allocations made under this Agreement to each Shareholder, shall be equal to the net amount that would have been allocated to each such Shareholder if the Issuance Items had not been realized.
Section B.2 Curative Allocations
The allocations set forth in Sections B.1(a), B.1(b), B.1(c), B.1(d), B.1(e), B.1(f), B.1(g) and B.3 (the
Regulatory
Allocations
) are intended to comply with certain requirements of the Regulations. It is the intent of the Shareholders that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or
with special allocations of other items of Trust income, gain, loss or deduction pursuant to this Section B.2. Therefore, notwithstanding any other provision of Section 3.4 or this Article B.II (other than the Regulatory Allocations), the Board
of Directors shall make such offsetting special allocations of Trust income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Shareholders Capital Account balance
is, to the extent possible, equal to the Capital Account balance such Shareholder would have had if the Regulatory Allocations were not part of this Agreement and all Trust items were allocated pursuant to Section 3.4.
-7-
Section B.3 Loss Limitation
Losses allocated pursuant to Section 3.4 shall not exceed the maximum amount of Losses that can be allocated without causing any
Shareholder to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the Shareholders would have Adjusted Capital Account Deficits as a consequence of an allocation of Losses pursuant to
Section 3.4, the limitation set forth in this Section B.3 shall be applied on a Shareholder-by-Shareholder basis, and Losses not allocable to any Shareholder as a result of such limitation shall be allocated to the other Shareholders in
accordance with the positive balances in such Shareholders Capital Accounts so as to allocate the maximum permissible Losses to each Shareholder under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
Section B.4 Other Allocation Rules
(a) For purposes of determining the Profits and Losses or any other items allocable to any period, Profits, Losses, and any
other such items shall be determined on a monthly or other basis, as determined by the Trust using any method permissible under Code Section 706 and the Regulations thereunder.
(b) The Shareholders are aware of the income tax consequences of the allocations made by Section 3.4 and this Article B.II
and hereby agree to be bound by the provisions of Section 3.4 and this Article B.II in reporting their shares of Trust income and loss for income tax purposes.
(c) Solely for purposes of determining a Shareholders proportionate share of the excess nonrecourse
liabilities of the Trust within the meaning of Regulations Section 1.752-3(a)(3), the Shareholders interests in Trust profits are in proportion to their Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Trustees shall endeavor to treat
distributions as having been made from the proceeds of a Nonrecourse Liability or a Shareholder Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Shareholder.
(e) To the extent the Tax Matters Member determines, in consultation with the Trusts tax advisors, that any distribution
pursuant to Article III to a Shareholder hereunder (or portion of such distribution) would more properly be characterized as a payment described in Code Section 707(a) or 707(c), such payment may be so characterized in the Trusts tax
filings, and in such event, shall be taken into account for federal income tax purposes as an expense of the Trust, and not as an allocation of income to a Shareholder affecting such Shareholders Capital Account.
Section B.5 Tax Allocations; Code Section 704(c)
In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any Property
contributed to the capital of the Trust shall, solely for tax purposes, be allocated among the Shareholders so as to take account of any variation between the adjusted basis of such Property to the Trust for U.S. federal income tax purposes and its
initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value) using a method, selected in the discretion of the Board of Directors of the Sponsor in accordance with Section 1.704-3 of the Regulations.
-8-
In the event the Gross Asset Value of any Trust asset is adjusted pursuant to subparagraph
(ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes
and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder.
Any elections or other
decisions relating to such allocations shall be made by the Board of Directors in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section B.5 are solely for purposes of U.S. federal,
state and local taxes and shall not affect, or in any way be taken into account in computing, any Shareholders Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.
Section B.6 Tax Elections
(a) The
Regular
Trustees shall, without any further consent of the Shareholders being required (except as specifically required herein), make
(i) the election to adjust the basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state, local or foreign law, in connection with Transfers of Shares and Trust distributions; and (ii) any and
all other elections for U.S. federal, state, local and foreign tax purposes, including, without limitation, any election, if permitted by applicable law: (x) to extend the statute of limitations for assessment of tax deficiencies against the
Shareholders with respect to adjustments to the Trusts U.S. federal, state, local or foreign tax returns;
and
(y) to the extent provided in Code Sections 6221 through 6231
(as in effect prior to amendment by the Bipartisan
Budget Act of 2015, P.L. 114-74 (BBA)) and Code Sections 6221 through 6235 (following the effective date of the BBA)
and similar provisions of U.S. federal, state, local or foreign
law, to represent the Trust and the Shareholders before taxing authorities or courts of competent jurisdiction in tax matters affecting the Trust or the Shareholders in their capacities as Shareholders, and to file any tax returns and execute any
agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Shareholders with respect to such tax matters or otherwise affect the rights of the Trust and the Shareholders
. James J. Bottiglieri is specifically authorized to act as the Tax Matters Member
, and
(z) following the effective date of the BBA, to make all decisions and elections which in their sole discretion will allocate audit adjustments among the Shareholders in an equitable and practicable manner, including the payment and/or
allocation of taxes resulting from such audit adjustments. Ryan J. Faulkingham is specifically authorized to act as the tax matters partner (as defined in Code Section 6231(a)(7) prior to amendment by the BBA) and as partner
representative (as referenced in Code Section 6223(a) following amendment by the BBA) (both such roles referred to herein and in the Agreement as Tax Matters Member)
under
the Code and in any similar capacity under state or local law.
-9-
(b) The Board of Directors of the Sponsor may, by the affirmative vote of at least a majority of
the entire Board of Directors, and without any further consent of the Shareholders being required, cause the Trust to elect to be treated as a corporation for U.S. federal income tax purposes;
provided, however,
that such action shall be
taken only if the Board of Directors first obtains an opinion from a nationally recognized financial advisor to the effect that it expects the market valuation of the Trust to be significantly lower as a result of the Trust continuing to be treated
as a partnership for U.S. federal income tax purposes than if the Trust instead elected to be treated as a corporation for U.S. federal income tax purposes.
Section B.7 Distributions on Liquidation; Compliance with Certain Requirements of Regulations; Deficit Capital Accounts.
In the event the Trust is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), notwithstanding
Section 3.1, distributions shall
, subject to any applicable Share Designation,
be made to the Shareholders who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Shareholder has a deficit balance in its Capital Account (after giving effect to all contributions, distributions and allocations for all Allocation Years,
including the Allocation Year during which such liquidation occurs), such Shareholder shall have no obligation to make any contribution to the capital of the Trust with respect to such deficit, and such deficit shall not be considered a debt owed to
the Trust or to any other Person for any purpose whatsoever.
-10-
Exhibit B
FOURTH
FIFTH
AMENDED AND RESTATED
OPERATING AGREEMENT
OF
COMPASS GROUP
DIVERSIFIED HOLDINGS LLC
Dated as of
January 1,
2012
[
], 2016
|
|
|
|
|
ARTICLE 1 THE COMPANY
|
|
|
1
|
|
|
|
Section 1.1 Formation.
|
|
|
1
|
|
|
|
Section 1.2 Name.
|
|
|
1
|
|
|
|
Section 1.3 Purpose; Powers; Company Not to Be an Investment Company; Prior
Authorization of Actions Valid
.
|
|
|
2
|
|
|
|
Section 1.4 Principal Place of Business; Registered Office; Registered
Agent.
|
|
|
3
2
|
|
|
|
Section 1.5 Term
.
|
|
|
3
|
|
|
|
Section 1.6 Filings
.
|
|
|
3
|
|
|
|
Section 1.7 Title to Property.
|
|
|
3
|
|
|
|
Section 1.8 Payments of Individual Obligations.
|
|
|
4
3
|
|
|
|
Section 1.9 Interpretations; Definitions.
|
|
|
4
3
|
|
|
|
ARTICLE 2 THE TRUST
|
|
|
23
|
|
|
|
Section 2.1 Trust to Be Sole Holder of Trust
Interests
.
|
|
|
23
|
|
|
|
Section 2.2 Trust Shares to Represent Trust
Interests
.
|
|
|
23
|
|
|
|
Section 2.3 Voluntary Exchange of Trust Shares for Trust Interests
.
|
|
|
23
|
|
|
|
Section 2.4 Acquisition Exchange of Trust Shares for Trust Interests
.
|
|
|
23
|
|
|
|
Section 2.5 Right of Holders of Trust Shares and Members to Enforce
Provisions of this Agreement and Bring Derivative Action
.
|
|
|
24
|
|
|
|
Section 2.6 Reimbursement of Regular Trustees
|
|
|
24
|
|
|
|
ARTICLE 3 CLASSES AND ISSUANCE OF LLC INTERESTS; TRANSFER
|
|
|
24
|
|
|
|
Section 3.1 LLC
Interests
.
|
|
|
24
|
|
|
|
Section 3.2 Issuance of Additional Trust Interests.
|
|
|
26
27
|
|
|
|
Section 3.3 Trust Interest Certificates; Admission of Additional
Members.
|
|
|
26
27
|
|
|
|
Section 3.4 Repurchase of Trust Interests by the Company.
|
|
|
26
28
|
|
|
|
Section 3.5 Mutilated, Lost, Destroyed or Stolen Certificates
|
|
|
27
28
|
|
|
|
ARTICLE 4 ALLOCATIONS
|
|
|
27
28
|
|
|
|
Section 4.1 General Application
|
|
|
27
28
|
|
|
|
Section 4.2 Allocations of Profits and Losses.
|
|
|
27
29
|
|
|
|
Section 4.3 Special Allocations.
|
|
|
28
29
|
|
|
|
Section 4.4 Curative Allocations.
|
|
|
30
31
|
|
|
|
Section 4.5 Loss Limitation.
|
|
|
30
31
|
|
|
|
Section 4.6 Other Allocation Rules.
|
|
|
30
31
|
|
|
|
Section 4.7 Tax Allocations: Code Section 704(c).
|
|
|
31
32
|
|
i
|
|
|
|
|
ARTICLE 5 DISTRIBUTIONS
|
|
|
31
33
|
|
|
|
Section 5.1 Distributions to Members.
|
|
|
31
33
|
|
|
|
Section 5.2 Distributions to the Allocation Member.
|
|
|
31
33
|
|
|
|
Section 5.3 Amounts Withheld.
|
|
|
37
40
|
|
|
|
Section 5.4 Limitations on Dividends and Distributions.
|
|
|
37
40
|
|
|
|
ARTICLE 6 BOARD OF DIRECTORS
|
|
|
37
40
|
|
|
|
Section 6.1
Initial
Current
Board
.
|
|
|
37
40
|
|
|
|
Section 6.2 General Powers.
|
|
|
37
41
|
|
|
|
Section 6.3 Duties of Directors.
|
|
|
38
41
|
|
|
|
Section 6.4 Number, Tenure and Qualifications.
|
|
|
38
41
|
|
|
|
Section 6.5 Election of Directors.
|
|
|
39
42
|
|
|
|
Section 6.6 Removal.
|
|
|
39
42
|
|
|
|
Section 6.7 Resignations.
|
|
|
39
42
|
|
|
|
Section 6.8 Vacancies and Newly Created Directorships.
|
|
|
39
42
|
|
|
|
Section 6.9 Appointment of or Nomination and Election of Chairman.
|
|
|
40
43
|
|
|
|
Section 6.10 Chairman of the Board.
|
|
|
40
43
|
|
|
|
Section 6.11 Regular Meetings.
|
|
|
40
43
|
|
|
|
Section 6.12 Special Meetings.
|
|
|
4
0
43
|
|
|
|
Section 6.13 Notice for Special Meetings.
|
|
|
41
43
|
|
|
|
Section 6.14 Waiver of Notice.
|
|
|
41
44
|
|
|
|
Section 6.15 Action Without Meeting.
|
|
|
41
44
|
|
|
|
Section 6.16 Conference Telephone Meetings.
|
|
|
41
44
|
|
|
|
Section 6.17 Quorum.
|
|
|
42
44
|
|
|
|
Section 6.18 Committees.
|
|
|
42
45
|
|
|
|
Section 6.19 Committee Members.
|
|
|
43
46
|
|
|
|
Section 6.20 Committee Secretary.
|
|
|
44
47
|
|
|
|
Section 6.21 Compensation.
|
|
|
44
47
|
|
|
|
Section 6.22 Indemnification, Advances and Insurance.
|
|
|
44
47
|
|
|
|
Section 6.23 Reliance; Limitations in Liability.
|
|
|
46
49
|
|
|
|
ARTICLE 7 OFFICERS
|
|
|
47
50
|
|
|
|
Section 7.1 General.
|
|
|
47
50
|
|
|
|
Section 7.2 Duties of Officers.
|
|
|
48
51
|
|
ii
|
|
|
|
|
Section 7.3 Election and Term of Office.
|
|
|
48
51
|
|
|
|
Section 7.4 Chief Executive Officer.
|
|
|
48
51
|
|
|
|
Section 7.5 Chief Financial Officer.
|
|
|
49
51
|
|
|
|
Section 7.6 Reserved.
|
|
|
49
51
|
|
|
|
Section 7.7 Secretary.
|
|
|
49
52
|
|
|
|
Section 7.8 Resignations.
|
|
|
49
52
|
|
|
|
Section 7.9 Vacancies.
|
|
|
49
52
|
|
|
|
ARTICLE 8 MANAGEMENT
|
|
|
49
52
|
|
|
|
Section 8.1 Duties of the Manager.
|
|
|
49
52
|
|
|
|
Section 8.2 Secondment of the Chief Executive Officer and Chief Financial
Officer.
|
|
|
49
52
|
|
|
|
Section 8.3 Secondment of Additional Officers.
|
|
|
50
52
|
|
|
|
Section 8.4 Status of Seconded Officers and Employees.
|
|
|
50
52
|
|
|
|
Section 8.5 Removal of Seconded Officers.
|
|
|
50
53
|
|
|
|
Section 8.6 Replacement Manager.
|
|
|
5
0
53
|
|
|
|
ARTICLE 9 THE MEMBERS
|
|
|
50
53
|
|
|
|
Section 9.1 Rights or Powers.
|
|
|
50
53
|
|
|
|
Section 9.2 Annual Meetings of Members.
|
|
|
51
|
|
|
|
Section 9.3 Special Meetings of Members.
|
|
|
51
53
|
|
|
|
Section 9.4 Place of Meeting.
|
|
|
51
53
|
|
|
|
Section 9.5 Notice of Meeting.
|
|
|
51
54
|
|
|
|
Section 9.6 Quorum and Adjournment.
|
|
|
52
55
|
|
|
|
Section 9.7 Proxies.
|
|
|
53
55
|
|
|
|
Section 9.8 Notice of Member Business and Nominations.
|
|
|
53
56
|
|
|
|
Section 9.9 Procedure for Election of Directors; Voting.
|
|
|
56
59
|
|
|
|
Section 9.10 Inspectors of Elections; Opening and Closing the
Polls.
|
|
|
56
59
|
|
|
|
Section 9.11 Confidential Member Voting.
|
|
|
57
59
|
|
|
|
Section 9.12 Waiver of Notice.
|
|
|
57
60
|
|
|
|
Section 9.13 Remote Communication.
|
|
|
57
60
|
|
|
|
Section 9.14 Member Action Without a Meeting.
|
|
|
58
60
|
|
|
|
Section 9.15 Return on Capital Contribution.
|
|
|
58
61
|
|
|
|
Section 9.16 Member Compensation.
|
|
|
58
61
|
|
iii
|
|
|
|
|
|
|
Section 9.17 Member Liability.
|
|
|
58
61
|
|
|
|
MEMBER VOTE REQUIRED IN CONNECTION WITH CERTAIN BUSINESS COMBINATIONS OR TRANSACTIONS
|
|
|
58
61
|
|
|
|
Section 10.1 Vote Generally Required
|
|
|
58
61
|
|
|
|
Section 10.2 Vote for Business Combinations
|
|
|
59
61
|
|
|
|
Section 10.3 Power of Continuing Directors
|
|
|
59
61
|
|
|
|
Section 10.4 No Effect on Fiduciary Obligations
|
|
|
59
62
|
|
|
|
ARTICLE 11 BOOKS AND RECORDS
|
|
|
59
62
|
|
|
|
Section 11.1 Books and Records; Inspection by Members
|
|
|
59
62
|
|
|
|
Section 11.2 Reports.
|
|
|
60
63
|
|
|
|
Section 11.3 Preparation of Tax Returns
|
|
|
61
63
|
|
|
|
Section 11.4 Tax Elections
|
|
|
61
64
|
|
|
|
Section 11.5 Tax Information
|
|
|
62
64
|
|
|
|
ARTICLE 12 AMENDMENTS
|
|
|
62
65
|
|
|
|
ARTICLE 13 TRANSFERS; MONTHLY ALLOCATIONS
|
|
|
62
65
|
|
|
|
ARTICLE 14 DISSOLUTION AND WINDING UP
|
|
|
63
66
|
|
|
|
Section 14.1 Dissolution Events
|
|
|
63
66
|
|
|
|
Section 14.2 Winding Up
|
|
|
63
66
|
|
|
|
Section 14.3 Compliance with Certain Requirements of Regulations; Deficit Capital
Accounts
|
|
|
64
67
|
|
|
|
Section 14.4 Deemed Distribution and Recontribution
|
|
|
65
67
|
|
|
|
Section 14.5 Rights of Members
|
|
|
65
68
|
|
|
|
Section 14.6 Notice of Dissolution/Termination
|
|
|
65
68
|
|
|
|
Section 14.7 Allocations During Period of Liquidation
|
|
|
65
68
|
|
|
|
Section 14.8 Character of Liquidating Distributions
|
|
|
65
68
|
|
|
|
Section 14.9 The Liquidator
|
|
|
65
68
|
|
|
|
Section 14.10 Form of Liquidating Distributions
|
|
|
66
69
|
|
|
|
ARTICLE 15 MISCELLANEOUS
|
|
|
66
69
|
|
|
|
Section 15.1 Notices
|
|
|
66
69
|
|
|
|
Section 15.2 Binding Effect
|
|
|
67
70
|
|
|
|
Section 15.3 Construction
|
|
|
67
70
|
|
|
|
Section 15.4 Time
|
|
|
67
70
|
|
|
|
Section 15.5 Headings
|
|
|
67
70
|
|
iv
|
|
|
|
|
Section 15.6 Severability.
|
|
|
67
70
|
|
Section 15.7 Incorporation by Reference.
|
|
|
67
70
|
|
Section 15.8 Variation of Terms.
|
|
|
67
70
|
|
Section 15.9 Governing Law and Consent to Jurisdiction/Service of Process.
|
|
|
67
70
|
|
Section 15.10 Waiver of Jury Trial.
|
|
|
68
71
|
|
Section 15.11 Counterpart Execution.
|
|
|
68
71
|
|
Section 15.12 Specific Performance.
|
|
|
68
71
|
|
Exhibit A Specimen LLC Interest Certificate
|
|
|
A-1
|
|
This
FOURTH
FIFTH
AMENDED AND RESTATED OPERATING AGREEMENT (the
Agreement
) shall be effective as of
January 1,
2012
[
], 2016
and is entered into by Compass Diversified Holdings and Compass Group Management LLC, as Members hereunder and pursuant to the provisions of
the Act as in effect on the date hereof. Such Members hereby agree to the amendment and restatement of
the Fourth Amended and Restated Operating Agreement, effective as of
January 1, 2012, which amended and restated
the Third Amended and Restated Operating Agreement, effective as of November 1, 2010, which amended and restated the Second Amended and
Restated Operating Agreement, effective as of January 9, 2007 which amended and restated the Amended and Restated Operating Agreement, dated as of April 25, 2006, which amended and restated the Operating Agreement, dated as of
November 18, 2005 (the
Original Agreement
), as set forth herein. Capitalized terms used in this Agreement without definition shall have the respective meanings specified in Section 1.9 and, unless otherwise
specified, article and section references used herein refer to Articles and Sections of this Agreement.
ARTICLE 1
THE COMPANY
Section 1.1
Formation
. Pursuant to the terms of the Original Agreement, the Manager formed the Company as a limited liability
company under and pursuant to the provisions of the Act and upon the terms and conditions set forth in the Original Agreement. The fact that the Certificate is on file in the office of the Secretary of State of the State of Delaware shall constitute
notice that the Company is a limited liability company. Simultaneously with the execution of Original Agreement and the formation of the Company, the Manager was admitted as a Member of the Company.
Each member of the Board of Directors was designated as an authorized person within the meaning of the Act under the Original Agreement, and I. Joseph Massoud has executed,
delivered and filed the Certificate with the Secretary of State of the State of Delaware, such execution, delivery and filing being hereby ratified in all respects. Upon the effectiveness of this Agreement, the powers of each member of the Board of
Directors as an authorized person shall cease, and the Manager shall become the designated authorized person within the meaning of the Act and shall continue as the designated authorized person within the meaning of the
Act.
The Manager shall be the designated authorized person of the Company within the meaning of the Act.
The
Manager shall execute, deliver and file any other certificates (and any amendments and/or restatements thereof) necessary for the Company to qualify to do business in
Connecticut and in any other
any
jurisdiction
in which the Company may wish to conduct business. The rights and liabilities of the Members
are, and
shall be
,
as provided under the Act, the Certificate and this Agreement.
Section 1.2
Name
.
(a) Subject to Section 1.2(b), the name of the Company shall continue to be Compass Group Diversified Holdings LLC and all business of the
Company shall be conducted in such name. The Board of Directors may change the name of the Company upon ten (10) Business Days written notice to the Members, which name change shall be effective upon the filing of a certificate of
amendment of the Certificate with the Secretary of State of the State of Delaware, and an amendment of this Agreement (which amendment shall not require the consent of any Member or other Person notwithstanding any other provision of this
Agreement).
1
(b) The Board of Directors shall take all action and do all things necessary to give effect to
Section 9.5 of the Management Services Agreement.
Section 1.3
Purpose; Powers; Company Not to Be an Investment Company;
Prior Authorization of Actions Valid
.
(a) The purposes of the Company are (i) to conduct or promote any lawful business, purpose
or activity permitted for a limited liability company of the State of Delaware under the Act, (ii) to make such additional investments and engage in such additional activities as the Board of Directors may approve, and (iii) to engage in
any and all activities related or incidental to the purposes set forth in clauses (i) and (ii);
provided
,
however
, that the Company is not permitted to engage in any activities that would cause it to become an investment
company as defined in Section 3(a)(1) of the Investment Company Act of 1940, as amended and as may be amended from time to time, or any successor provision thereto.
(b) The Company has the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or in furtherance
of the purposes of the Company set forth in this Section 1.3 and has, without limitation, any and all powers that may be exercised on behalf of the Company by the Board of Directors pursuant to Article 6 hereof.
(c) Notwithstanding anything in this Agreement to the contrary, any actions and things (including the entering into and performance of any
agreements or other documents) properly authorized, in the name and on behalf of the Company, by the Board of Directors as constituted at the time of any such authorization, whether prior to the date of this Agreement
(including under the Original Agreement)
or under and in accordance with this Agreement
(or the Original Agreement),
,
were, are and shall continue
to be valid and duly authorized, and the Company shall continue to have the power and authority to take and do all such actions and things (including to enter into and perform all such agreements or other documents), whether or not such actions or
things have already been taken or done (or such agreements or other documents entered into and/or performed), and regardless of whether the composition of the Board of Directors has changed
, whether the Original Agreement or this Agreement has been amended, whether the Initial Public Offering has closed or otherwise prior to the actual taking or doing of any such actions or
things (including the entering into or performance of any such documents) by the Company
.
(d) The Company, and the Company on behalf of the Trust, is hereby authorized to execute, deliver and perform, and the Manager or any member of
the Board of Directors or the Chief Executive Officer or the Chief Financial Officer, or any Person authorized by the Board of Directors on behalf of the Company, are hereby authorized to execute and deliver, the
Management Services Agreements, the Trust Agreement and the other
Transaction Documents
(as such term is defined in the Original Agreement)
and all documents, agreements, certificates, or financing statements contemplated
thereby or related thereto, all without any further act, vote or approval of any other Person notwithstanding any other provision of this Agreement. The foregoing authorizations shall not be deemed a restriction on the powers of the Manager or the
Board of Directors to enter into (or for the Board of Directors to delegate to other Persons the power to enter into) other agreements on behalf of the Company.
Section 1.4
Principal Place of Business; Registered Office; Registered Agent
. The principal executive offices of the Company are
at 61 Wilton Road, Westport, CT 06880. The Board of Directors may change the principal executive offices of the Company to any other place within or without the State of Delaware upon written notice to the Members. The address of the Companys
registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent for service of process in the State of Delaware at such address is The
Corporation Trust Company or any successor registered agent for service of process as shall be appointed by the Board of Directors in accordance with the Act. The Company may have such offices, either within or without the State of Delaware, as the
Board of Directors may designate or as the business of the Company may from time to time require.
2
Section 1.5
Term
. The term of the Company commenced on the date the Certificate was
first filed in the Office of the Secretary of State of the State of Delaware in accordance with the Act and shall continue until the winding up of the Company is completed following a Dissolution Event, as provided in Article 14 and the Certificate
is cancelled as provided in the Act.
Section 1.6
Filings
.
(a) The Board of Directors shall take any and all other actions, as may be reasonably necessary, to perfect and maintain the status of the
Company as a limited liability company or similar type of limited liability entity under the laws of the State of Delaware and under the laws of any other jurisdictions in which the Company engages in business, including causing the Company to
prepare, execute and file such amendments to the Certificate and such other assumed name certificates, documents, instruments and publications as may be required by law, including, without limitation, action to reflect:
(i) a change in the Company name; or
(ii) a correction of false or erroneous statements in the Certificate to accurately represent the information contained
therein.
(b) Upon the dissolution and completion of the winding up of the Company in accordance with Article 14, the Board of Directors
shall cause the Company to promptly execute and file a Certificate of Cancellation in accordance with the Act and the laws of any other jurisdiction in which the Board of Directors deems such filing necessary or advisable.
Section 1.7
Title to Property
. All Property owned by the Company shall be owned by the Company as an entity and no Member shall
have any ownership interest in such Property in its individual name, and each Members interest in the Company shall be personal property for all purposes. At all times after the Effective Date, the Company shall hold title to all of its
Property in the name of the Company and not in the name of any Member.
Section 1.8
Payments of Individual Obligations
. The
Companys credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be Transferred or encumbered for, or in payment of, any individual obligation of any Member.
Section 1.9
Interpretations; Definitions
.
(a) Interpretations
. For all purposes of this Agreement (as defined herein), except as otherwise expressly provided or unless the context otherwise requires:
(i) the terms defined in this
Article
Section 1.9
have the meanings assigned to them in this
Article
Section
and include the plural as well
as the singular;
3
(ii) unless the context otherwise requires, any reference to an Article,
Section or an Exhibit refers to an Article, Section or an Exhibit, as the case may be, of this Agreement;
and
(iii) the words herein, hereinafter, hereof,
hereto and hereunder and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other
subdivision
:
; and
(iv) the term including is not limiting and means including but
not limited to.
(b) Definitions.
Acquirer
has the meaning set forth in the Trust Agreement.
Acquisition Exchange
has the meaning set forth in the Trust Agreement.
Act
means the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as amended from time to
time (or any corresponding provisions of succeeding law) and, for the avoidance of doubt, includes all applicable jurisprudence.
Adjusted Capital Account Deficit
means, with respect to any Member, the deficit balance, if any, in such
Members Capital Account as of the end of the relevant Allocation Year, after giving effect to the following adjustments:
(i) credit
to such Capital Account any amounts which such Member is deemed to be obligated to restore pursuant to the penultimate sentence in each of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) debit to such Capital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6)
of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith.
Adjusted Net
Assets
shall be equal to, with respect to any Person as of any date, the
sum
of (i) such Persons consolidated total assets (as determined in accordance with GAAP) as of such date,
plus
(ii) the absolute
amount of consolidated accumulated amortization of intangibles of such Person (as determined in accordance with GAAP) as of such date,
minus
(iii) the absolute amount of Adjusted Total Liabilities of such Person as of such date.
Adjusted Profit Distribution Amount
has the meaning set forth in Section 5.2(b).
4
Adjusted Total Liabilities
shall be equal to, with respect to any
Person as of any date, such Persons consolidated total liabilities (as determined in accordance with GAAP) as of such date, after excluding the effect of any outstanding indebtedness of such Person.
Administrator
means, as of any Calculation Date, (i) the Manager as of such Calculation Date, and (ii) if
there is no Manager, the Chief Financial Officer in all other cases.
Affiliate
means, with respect to any
Person, (i) any Person directly or indirectly controlling, controlled by or under common control with such Person or (ii) any officer, director, general member, member or trustee of such Person. For purposes of this definition, the terms
controlling,
controlled by
or
under common control with
shall mean, with respect to any Persons, the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise, or the power to elect at least fifty percent (50%) of the directors, managers, general members or Persons
exercising similar authority with respect to such Person.
Agreement
has the meaning set forth in the
introductory paragraph hereof.
Allocated Share of Company Overhead
means, with respect to any Profit
Distribution Subsidiary during any Measurement Period as of any Calculation Date, the aggregate amount of such Profit Distribution Subsidiarys Quarterly Share of the Companys Overhead for each Fiscal Quarter ending during such
Measurement Period.
Allocation Interests
means the limited liability company interests in the Company designated
under the Original Agreement as the Class B Interests and
subsequently
redesignated
herein
as Allocation Interests, as authorized pursuant to Section 3.1(b), and having the rights provided herein.
Allocation Interest Certificate
means a certificate representing Allocation Interests substantially in
the form attached hereto as Exhibit A.
Allocation Member
means the Manager, in its capacity as a Member.
Allocation Year
means (i) the period commencing on the Effective Date and ending on December 31, 2005,
(ii) any subsequent twelve (12)-month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in clause (i) or (ii) above for which the Company is required to allocate
Profits, Losses and other items of Company income, gain, loss or deduction pursuant to Article 4.
Applicable Listing
Rules
means the applicable rules, if any, of the principal U.S. securities exchange or the New York Stock Exchange, as the case may be, on which the Trust Shares or Trust Interests, as applicable, are listed or quoted, as the case may
be.
Appointed Director
has the meaning set forth in Section 6.4.
Approved Profit Distribution
has the meaning set forth in Section 5.2(c).
5
Approved Profit Distribution Payment Date
means, with respect to any
Calculation Date, ten (10) Business Days after the date upon which the Approved Profit Distribution as of such Calculation Date is deemed approved in accordance with Sections 5.2(c) or 5.2(d).
Associate
has the meaning ascribed to such term in Rule 12b-2 of the rules promulgated under the Exchange Act.
Audit Committee
means the Audit Committee of the Board of Directors established pursuant to Section 6.18(a)(ii).
Average Allocated Share of Consolidated Equity
shall be equal to, with respect to any Profit Distribution
Subsidiary during any Measurement Period as of any Calculation Date, the average (
i.e.
the arithmetic mean) of the Profit Distribution Subsidiarys Quarterly Allocated Share of Consolidated Equity for each Fiscal Quarter ending during
such Measurement Period.
Beneficial Owner
has the meaning ascribed to such term in Rule 13d-3 of the Rules and
Regulations promulgated under the Exchange Act.
Board
or
Board of Directors
means the
Board of Directors referred to in Article 6.
Business Combination
means:
(i) any merger or consolidation of the Company or any Subsidiary thereof with (A) an Interested Shareholder, or (B) any other Person
(whether or not itself an Interested Shareholder) that is, or after such merger or consolidation would be, an Affiliate or Associate of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with, or
proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder of any property or assets of the Company or any Subsidiary thereof having an aggregate Fair Market Value as of the date of the
consummation of the transaction giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date; or
(iii) the issuance or transfer by the Trust, the Company or any Subsidiary thereof (in one transaction or a series of transactions) of any
securities of the Trust, the Company or any Subsidiary thereof to, or proposed by or on behalf of, an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder in exchange for cash, securities or other property (or a
combination thereof) having an aggregate Fair Market Value as of the date of the consummation of the transaction giving rise to the Business Combination of not less than ten percent (10%) of the Net Investment Value as of such date; or
(iv) any spin-off or split-up of any kind of the Company or any Subsidiary thereof, proposed by or on behalf of an Interested Shareholder or an
Affiliate or Associate of an Interested Shareholder; or
6
(v) any reclassification of the Trust Interests or securities of a Subsidiary of the Company
(including any reverse split of Trust Interests or such securities) or recapitalization of the Company or such Subsidiary, or any merger or consolidation of the Company or such Subsidiary with any other Subsidiary thereof, or any other transaction
(whether or not with or into or otherwise involving an Interested Shareholder), that has the effect, directly or indirectly, of increasing the proportionate share of (A) Outstanding LLC Interests or such securities or securities of such
Subsidiary which are beneficially owned by an Interested Shareholder or an Affiliate or Associate of an Interested Shareholder or (B) any securities of the Company or such Subsidiary that are convertible into or exchangeable for Trust Interests
or such securities of such Subsidiary, that are directly or indirectly owned by an Interested Shareholder or any of its Affiliates or Associates; or
(vi) any agreement, contract or other arrangement providing for any one or more of the actions specified in clauses (i) through
(v) above.
Business Day
means any day other than a Saturday, a Sunday or a day on which banks in The City
of New York are required, permitted or authorized, by applicable law or executive order, to be closed for regular banking business.
Calculation Date
means, with respect to any Trigger Event, the last day of the Fiscal Quarter in which such Trigger
Event occurs.
Capital Account
means, with respect to any Member, the Capital Account established and maintained
for such Member by the Company in accordance with the following provisions:
(i) to each Members Capital Account there shall be
credited (A) such Members Capital Contributions (net of any liabilities relating to such Property), and (B) such Members distributive share of Profits and any items in the nature of income or gain which are specially allocated
pursuant to Sections 4.3 or 4.4;
(ii) to each Members Capital Account there shall be debited (A) the amount of money and the
Gross Asset Value of any Property distributed to such Member pursuant to any provision of this Agreement (net of any liabilities relating to such Property), and (B) such Members distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to Sections 4.3 or 4.4;
(iii) in the event LLC Interests are Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the Transferred LLC Interests; and
(iv) in determining the amount of any liability for purposes of subparagraphs (i) and (ii) above, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and the Regulations.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Regulations. In the event the Board of Directors shall
determine that it is prudent to modify the manner in which the Capital Accounts or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or
which are assumed by the Company or any Members) are computed in order to comply with such Regulations, the Board of Directors may make such modification; provided, that it is not likely to have a material effect on the amounts distributed to any
Person pursuant to Article 14 upon the dissolution of the Company. The Board of Directors also shall (i) make any adjustments that are necessary or appropriate to maintain equality among the Capital Accounts of the Members and the amount of
capital reflected on the Companys balance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).
The Manager may maintain separate Capital Accounts with respect to the Trust Preferred Interests and
the Trust Common Interests if it determines it is necessary to properly maintain the economic expectations for each class of LLC Interests.
7
Capital Contributions
means, with respect to any Member, the amount of
money and the initial Gross Asset Value of any Property (other than money) net of any liabilities relating to such Property contributed to the Company with respect to the LLC Interests of the Company held or subscribed for by such Member.
Capital Gains
(i) shall mean, with respect to any Person, capital gains (as determined in accordance with GAAP)
that are calculated in connection with the sale of capital stock or assets of such Person and which gave rise to a Sale Event and the calculation of the Profit Distribution Amount, and (ii) shall be equal to the amount, adjusted for minority
interests, by which (x) the net sales price of such capital stock or assets, as the case may be,
exceeded
(y) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the
time of such sale thereof, as reflected on the Companys consolidated balance sheet prepared in accordance with GAAP;
provided
, that such amount shall not be less than zero.
Capital Losses
(i) shall mean, with respect to any Person, capital losses (as determined in accordance with
GAAP) that are calculated in connection with the sale of capital stock or assets of such person and which gave rise to a Sale Event and the calculation of the Profit Distribution Amount, and (ii) shall be equal to the amount, adjusted for
minority interests, by which (x) the net book value (as determined in accordance with GAAP) of such capital stock or assets, as the case may be, at the time of such sale thereof, as reflected on the Companys consolidated balance sheet
prepared in accordance with GAAP,
exceeded
(y) the net sales price of such capital stock or assets, as the case may be;
provided
, that the absolute amount shall not be less than zero.
Cash Available for Distribution
means, for any period, the
sum
of (i) gross cash proceeds of the Company
for such period (which includes the proceeds of borrowings by the Company)
minus
(ii) the portion thereof used to pay or establish reserves for Company expenses, debt payments, capital improvements, replacements and contingencies, in
each case, as determined by the Board of Directors. Cash Available for Distribution shall not be reduced by depreciation, amortization, cost recovery deductions or similar allowances, but shall be increased by any reductions of reserves
described in clause (ii) of the prior sentence.
8
Certificate
means the certificate of formation of the Company filed
with the Secretary of State of the State of Delaware pursuant to the Act on November 18, 2005, as originally executed and amended, modified, supplemented or restated from time to time as the context requires.
Certificate of Cancellation
means a certificate of cancellation of the Certificate filed in accordance with 6 Del.
C. § 18-203.
Chairman
means the director designated or nominated and elected, as the case may be, as
Chairman of the Board of Directors, in accordance with Section 6.9, with such powers and duties as are set forth in Section 6.10.
Chief Executive Officer
means the Chief Executive Officer of the Company, including any interim Chief Executive
Officer of the Company, with such powers and duties as are set forth in Section 7.4.
Chief Financial Officer
means the Chief Financial Officer of the Company, including any interim Chief Financial Officer of the Company, with such powers and duties as are set forth in Section 7.5.
Closing Price
means, as of any date:
(i) the closing sale price (or, if no closing price is reported, the last reported sale price) of one Trust Share on the New York Stock
Exchange on such date;
(ii) if the Trust Shares are not so quoted on the New York Stock Exchange on any such date, the last reported sale
price as reported in the composite transactions for the principal U.S. securities exchange on which the Trust Shares are so listed on such date;
(iii) if the Trust Shares are not so reported, the last quoted bid price for the Trust Shares in the over-the-counter market as reported by the
National Quotation Bureau or a similar organization on such date; or
(iv) if the Trust Shares are not so quoted, the average of the
midpoint of the last bid and ask prices for the Trust Shares from at least three nationally recognized investment banking firms that the Company selects for such purpose on such date.
Code
means the United States Internal Revenue Code of 1986, as amended and in effect from time to time. Any
reference herein to a specific section of the Code shall be deemed to include a reference to any corresponding provision of law in effect in the future.
Commission
means the U.S. Securities and Exchange Commission.
Common Shares
has the meaning set forth in the Trust
Agreement.
Company
means the limited liability
company formed pursuant to the Original Agreement and the Certificate, and continued pursuant to this Agreement.
9
Company Minimum Gain
has the same meaning as the term partnership
minimum gain in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
Company Only Financial
Statements
means, with respect to any accounting period, the unconsolidated financial statements of the Company prepared in accordance with GAAP.
Compass Diversified Investments, Inc.
means
Compass Diversified Investments, Inc. a Bahamian international business corporation wholly owned by Compass Group Investments, Inc.
Compensation Committee
means the Compensation Committee of the Board of Directors established pursuant to
Section 6.18(a)(iii).
Consolidated Net Equity
shall be equal to, with respect to the Company as of any
date, the
sum
of (i) the Companys consolidated total assets (as determined in accordance with GAAP) as of such date,
plus
(ii) the aggregate amount of assets impairments (as determined in accordance with GAAP) that were
taken relating to any Subsidiaries of the Company as of such date,
plus
(iii) the consolidated accumulated amortization of intangibles (as determined in accordance with GAAP) of the Company as of such date,
minus
(iv) the
Companys consolidated total liabilities (as determined in accordance with GAAP) as of such date
plus
(v) to the extent included in the Companys consolidated
total liabilities (as determined in accordance with GAAP) as of such date, the absolute amount of the Companys liabilities (as determined in accordance with GAAP) in respect of its obligations under the Supplemental Put
Agreement
.
Continuing Director
means
(i) any director of the Company who (A) is neither the Interested Shareholder involved in the Business Combination as to which a determination of Continuing Directors is provided hereunder, nor an Affiliate, Associate, employee, agent or
nominee of such Interested Shareholder, or a relative of any of the foregoing, and (B) was a member of the Board of Directors prior to the time that such Interested Shareholder became an Interested Shareholder, or (ii) any successor of a
Continuing Director described in clause (i) above who is recommended or elected to succeed a Continuing Director by the affirmative vote of a majority of Continuing Directors then on the Board of Directors.
Contribution-Based Profits
shall be equal to, with respect to any Profit Distribution Subsidiary for any Measurement
Period as of any Calculation Date, the
sum
of (i) the aggregate amount of such Profit Distribution Subsidiarys net income (loss) (as determined in accordance with GAAP and adjusted for minority interests) with respect to such
Measurement Period (without giving effect to
(x)
any Capital Gains or Capital Losses realized by such Profit
Distribution Subsidiary that arise with respect to the sale of capital stock or assets held by such Profit Distribution Subsidiary and which gave rise to a Sale Event and a calculation of Profit Distribution Amount
or (y) any expense attributable to the accrual or payment of any amount of Profit Distribution or any amount arising under the Supplemental Put Agreement, in each case,
to the extent included in the calculation of such Profit Distribution Subsidiarys net income (loss)),
plus
(ii) the absolute aggregate amount of such Profit Distribution
Subsidiarys Loan Expense with respect to such Measurement Period,
minus
(iii) the absolute aggregate amount of such Profit Distribution Subsidiarys Allocated Share of the Companys Overhead with respect to such
Measurement Period.
Control Date
means the date upon which the Acquirer becomes the Beneficial Owner of
at least 90% of the Outstanding Trust Interests.
Credit
Agreement
means the Credit Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and the Borrower (as defined therein).
Corresponding Trust
Shares
has the meaning set forth in Section 3.1(a)(i).
Cumulative Capital Gains
shall be equal to, as of any Calculation Date, the aggregate amount of Capital Gains
realized by the Company as of such calculation date, after giving effect to any Capital Gains realized by the Company on such Calculation Date, since its inception.
10
Cumulative Capital Losses
shall be equal to, as of any Calculation
Date, the aggregate amount of Capital Losses realized by the Company, after giving effect to any Capital Losses realized by the Company on such Calculation Date, since its inception.
Cumulative Gains and Losses
shall be equal to, with respect to the Company as of any Calculation Date, an amount
equal to the
sum
of (i) the amount of Cumulative Capital Gains as of such Calculation Date,
minus
(ii) the absolute amount of Cumulative Capital Losses as of such Calculation Date.
Current Board
has the meaning set forth in Section
6.1.
Current Director
has the meaning set forth in
Section 6.1.
Debt
means (i) any
indebtedness for borrowed money or the deferred purchase price of property as evidenced by a note, bonds or other instruments, (ii) obligations as lessee under capital leases, (iii) obligations secured by any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind existing on any asset owned or held by the Company, whether or not the Company has assumed or become liable for the obligations secured thereby, (iv) any obligation under any interest rate swap
agreement, (v) accounts payable, and (vi) obligations under direct or indirect guarantees of (including obligations, contingent or otherwise, to assure a creditor against loss in respect of) indebtedness or obligations of the kinds
referred to in clauses (i), (ii), (iii), (iv) and (v) above;
provided
, that Debt shall not include obligations in respect of any accounts payable that are incurred in the ordinary course of the Companys business and are not
delinquent or are being contested in good faith by appropriate proceedings.
DGCL
means the Delaware General
Corporation Law, 8 Del. C. §§ 101
et seq
., as amended from time to time (or any corresponding provisions of succeeding law) and, for the avoidance of doubt, includes all applicable jurisprudence.
Direct Company Expenses
means, with respect to any period, that portion of the Companys operating expenses
(including any management fees paid by the Company) for such period that are not incurred with respect to any Subsidiary for such period.
Disputed Profit Distribution
has the meaning set forth in Section 5.2(c).
Disputed Profit Distribution Date
has the meaning set forth in Section 5.2(c).
Disputed Profit Distribution Payment Date
means, with respect to any Calculation Date, (i) if the Administrator
does not disagree with the Audit Committees calculation of Disputed Profit Distribution in accordance with Section 5.2(e)(i)(B), ten (10) Business Days after the Disputed Profit Distribution Date as of such Calculation Date or
(ii) in all other cases, twenty-one (21) Business Days after the Disputed Profit Distribution Date as of such Calculation Date.
Distribution Entitlement
has the meaning set forth in Section 5.2(l).
11
Distribution Entitlement Amount
shall be equal to, as of any date of a
Distribution Entitlement Notice, the
sum
of (i) the aggregate amount of all Distribution Entitlements elected to be such by the Allocation Member on all Profit Distribution Payment Dates occurring prior to the date of such Distribution
Entitlement Notice,
minus
(ii) the aggregate amount of all Distribution Entitlement Payments paid by the Company to the Manager on all Distribution Entitlement Payment Dates occurring prior to the date of such Distribution Entitlement
Notice.
Distribution Entitlement Notice
has the meaning set forth in Section 5.2(l).
Distribution Entitlement Payment
has the meaning set forth in Section 5.2(l).
Distribution Entitlement Payment Date
has the meaning set forth in Section 5.2(l).
Disinterested Director
means a director of the Company who is not and was not a party to the proceeding or matter in
respect of which indemnification is sought by the claimant.
Dissolution Event
has the meaning set forth in
Section 14.1.
Effective Date
means November 18, 2005, being the date of the effectiveness of the filing of
the Certificate.
Election Period
means, with respect to any Holding Date or anniversary thereof, the 30-day
period immediately following such Holding Date or anniversary thereof.
Entire Board of Directors
has the
meaning set forth in Section 6.17.
Escrow
Agreement
means the Escrow Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and The Bank of New York, Inc. or any successor(s) thereto and the other parties names
therein.
Exchange Act
means the Securities
Exchange Act of 1934, as amended.
Fair Market Value
means, as of any date:
(i) in the case of any equity securities, the average of the closing sale prices for such equity securities during the ten (10) Business
Days immediately preceding such date:
(A) as reported in composite transactions by the New York Stock Exchange;
(B) if such equity securities are not so reported by the New York Stock Exchange, as reported in the composite transactions for the principal
U.S. securities exchange on which such equity securities are so listed;
(C) if such equity securities are not so reported, the last
quoted bid price for such equity securities, in the over-the-counter market as reported by the National Quotation Bureau or a similar organization; or
12
(ii) if such equity securities are not so reported, quoted or listed, or in the case of any other
Property, the fair market value of such equity securities or such Property as of such date as determined by a majority of the Board of Directors in good faith;
provided
, that if the Manager shall dispute any such determination of fair market
value by the Board of Directors, fair market value shall be determined instead by the investment banking or professional valuation firm selected by the Board of Directors from among no fewer than three qualified candidates provided by the Manager.
Fiscal Quarter
means the Companys fiscal quarter for purposes of its reporting obligations under the
Exchange Act.
Fiscal Year
means the Companys fiscal year for purposes of its reporting obligations under
the Exchange Act.
Future Investments
means contractual commitments to invest represented by definitive
agreements.
GAAP
means generally accepted accounting principles in effect in the United States, consistently
applied.
Gross Asset Value
means, with respect to any asset, the assets adjusted basis for U.S. federal
income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a Member to the Company shall be the
gross fair market value of such asset, as determined by the Board of Directors;
(ii) the Gross Asset Values of all Company assets shall be
adjusted by the Tax Matters Member to equal their respective gross fair market values (taking Code Section 7701(g) into account), as determined by the Tax Matters Member as of the following times: (A) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution; (B) the distribution by the Company to a Member of more than a de minimis amount of Company Property as consideration for an
interest in the Company; (C)
in connection with the grant of an interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the
benefit of the Company by an existing Member acting in a partner capacity or by a new Member acting in a partner capacity or in anticipation of being a Member; (D)
the liquidation of the
Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) or (
D
E
) upon the declaration of a Holding Event;
provided
, that an adjustment described in clauses (A)
and (B
through (C
) of this subparagraph (ii) shall be made only if the Tax Matters Member reasonably determines that such adjustment is
necessary to reflect the relative economic interests of the Members in the Company;
(iii) the Gross Asset Value of any item of
Company assets distributed to any Member shall be adjusted to equal the gross fair market value (taking Code Section 7701(g) into account) of such asset on the date of distribution, as determined by the Tax Matters Member; and
(iv) the Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m) and subparagraph
(vi) of the definition of Profits and Losses;
provided
,
however
, that Gross Asset Values shall not be adjusted pursuant to this subparagraph (iv) to the extent that an adjustment pursuant to
subparagraph (ii) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).
13
If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (ii) or (iv),
such Gross Asset Value shall thereafter be adjusted by depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.
High Water Mark
means, as of any Calculation Date, the highest positive amount of the Companys Cumulative
Gains and Losses as of such Calculation Date that were calculated in connection with any Qualifying Trigger Event that occurred prior to such Calculation Date.
High Water Mark Allocation
shall be equal to, as of any Calculation Date, the
product
of (i) the amount
of the High Water Mark as of such Calculation Date,
multiplied by
(ii) 20%.
Holding Date
means, with
respect to any Subsidiary, the fifth anniversary of the date upon which the Company acquired a controlling interest in such Subsidiary;
provided,
that if the Allocation Member has previously elected that a Holding Event has occurred with
respect to any Subsidiary, then Holding Date shall mean, with respect to such Subsidiary, the fifth anniversary of the Calculation Date with respect to such previously elected Holding Event.
Holding Event
means, with respect to any Subsidiary, (i) the election by the Allocation Member on or after the
Holding Date with respect to such Subsidiary that a Holding Event has occurred;
provided
, that the Allocation Member must make such election during the Election Period with respect to such Holding Date, or (ii) the election by the
Allocation Member on or after each anniversary of any Holding Date with respect to such Subsidiary that a Holding Event has occurred;
provided
, that the Allocation Member must make such election during the Election Period with respect to such
anniversary of such Holding Date.
Independent Director
means a director who (i) (a) is not an officer
or employee of the Company, or an officer, director or employee of any Subsidiary of the Company, (b) was not appointed as a director pursuant to the terms of the Management Services Agreement, and (c) for so long as the Management
Services Agreement is in effect, is not affiliated with the Manager or any of its Affiliates, and (ii) who satisfies the independence requirements under the Applicable Listing Rules as determined by the Board of Directors.
Independently Calculated Profit Distribution
has the meaning set forth in Section 5.2(d).
Independently Calculated Profit Distribution Payment Date
means, with respect to any Calculation Date, ten
(10) Business Days after the receipt by the Administrator and the Audit Committee of the calculation of Profit Distribution Amount as of such Calculation Date by the independent accounting firm in accordance with Section 5.2(d).
14
Initial
Board
has the meaning set forth in Section 6.1.
Initial Director
has the meaning set forth in Section 6.1.
Initial Public Offering
means the initial public offering of Trust Shares by the Trust
, closing
on
the date hereof
May 16, 2006
.
Interested Shareholder
means any Person (other than the Manager, the Members, the Company or any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any Subsidiary thereof or any trustee or fiduciary with respect to any such plan when acting in such capacity) that:
(i) is, or was at any time within the three-year period immediately prior to the date in question, the Beneficial Owner of fifteen percent
(15%) or more of the then Outstanding
Voting
Trust Interests and who did not become the Beneficial Owner of such amount of Trust
Interests pursuant to a transaction that was approved by the affirmative vote of a majority of the Entire Board of Directors; or
(ii) is an assignee of, or has otherwise succeeded to, any Trust Interests of which an Interested Shareholder was the Beneficial Owner at any
time within the three-year period immediately prior to the date in question, if such assignment or succession occurred in the course of a transaction, or series of transactions, not involving a public offering within the meaning of the Securities
Act.
For the purpose of determining whether a Person is an Interested Shareholder, the Trust Interests that may be issuable or exchangeable by the
Company to the Interested Shareholder pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, shall be included, but not any other Trust Interests that may be issuable or
exchangeable by the Company pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, warrants or options, or otherwise, to any Person who is not the Interested Shareholder.
IPO Entity
has the meaning set forth in Section 5.2(b).
IPO Event
has the meaning set forth in Section 5.2(b).
Issuance Items
has the meaning set forth in Section 4.3(g).
Level 1 Hurdle Amount
shall be equal to, with respect to any Profit Distribution Subsidiary as of any Calculation
Date, the
product
of (i) (x) 1.75%
multiplied by
(y) the number of Fiscal Quarters ending during the Measurement Period with respect to such Profit Distribution Subsidiary as of such Calculation Date,
multiplied by
(ii) such Profit Distribution Subsidiarys Average Allocated Share of Consolidated Equity for each Fiscal Quarter ending during such Measurement Period.
Level 2 Hurdle Amount
shall be equal to, with respect to any Profit Distribution Subsidiary as of any Calculation
Date, the
product
of (i) (x) 2.1875%,
multiplied by
(y) the number of Fiscal Quarters ending during the Measurement Period with respect to such Profit Distribution Subsidiary as of such Calculation Date,
multiplied by
(ii) such Profit Distribution Subsidiarys Average Allocated Share of Consolidated Equity for each Fiscal Quarter ending during such Measurement Period.
15
Liquidation Period
has the meaning set forth in Section 14.7.
Liquidator
means a Person appointed by the Board of Directors to oversee the winding up of the Company.
LLC Interests
means, collectively, the Trust Interests and the Allocation Interests.
Loan Expense
means, with respect to any Profit Distribution Subsidiary for any Measurement Period as of any
Calculation Date, the aggregate amount of all interest or other expenses paid by such Profit Distribution Subsidiary with respect to indebtedness of such Profit Distribution Subsidiary to either the Company or other Subsidiaries of the Company with
respect to such Measurement Period.
Losses
has the meaning set forth in the definition of
Profits
and
Losses
below.
Management Fee
means the
management fee payable by the Company pursuant to the Management Services Agreement with respect to the provision of management services to the Company.
Management Services Agreement
means the Management Services Agreement, dated as of
the date hereof
May 16, 2006
, as
amended and as
may be
further
amended from time to time
hereafter
, entered into by and between the Company and the
Manager.
Manager
means Compass Group Management LLC, and any successor thereto.
Market Value
means, as of any date, the
product
of (1) the average number of, if the Trust is in
existence as of such date, Trust Shares or, if the Trust is not in existence as of such date, Trust Interests, as applicable, issued and Outstanding, other than treasury shares or treasury Trust Interests, as applicable, during the last fifteen
(15) Business Days of the most recently completed Fiscal Quarter as of such date
multiplied
by (2) the volume weighted average trading price per Trust Share or per Trust Interest, as applicable, as determined by reference to the
relevant securities exchange identified in clause (i) of the definition of Fair Market Value, over such fifteen (15) Business Days.
Measurement Period
means, with respect to any Profit Distribution Subsidiary as of any Calculation Date, the period
from and including the later of: (i) the date upon which the Company acquired a controlling interest in such Profit Distribution Subsidiary and (ii) the immediately preceding Calculation Date as of which Contribution-Based Profits were
calculated with respect to such Profit Distribution Subsidiary and with respect to which Profit Distributions were paid (or, at the election of the Allocation Member, deferred) by the Company, up to and including such Calculation Date.
16
Member
means, as of any date, any holder of Trust Interests or
Allocation Interests, as of such date.
Member Nonrecourse Debt
has the same meaning as the term partner
nonrecourse debt in Section 1.704-2(b)(4) of the Regulations.
Member Nonrecourse Debt Minimum Gain
means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Regulations.
Member Nonrecourse Deductions
has the same meaning as the term partner nonrecourse
deductions in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
Net Investment Value
means, as
of any date, the
sum
of:
(i) the Market Value as of such date;
plus
(ii) the amount of any borrowings (other than intercompany borrowings) of the Company and its Subsidiaries (but not including borrowings on
behalf of any Subsidiary of such Subsidiaries) as of such date;
plus
(iii) the value of Future Investments of the Company and/or
any of its Subsidiaries other than cash or cash equivalents, as calculated by the Manager and approved by a majority of the Continuing Directors as of such date;
provided
, that such Future Investments have not been outstanding for more than
two consecutive full Fiscal Quarters as of such date;
less
(iv) the aggregate amount held by the Company and its Subsidiaries in
cash or cash equivalents (but not including cash or cash equivalents held specifically for the benefit of any Subsidiary of such Subsidiaries) as of such date.
Net Long Term Capital Gain
has the meaning set forth in Code Section 1222(7).
New York Stock Exchange
means the New York Stock Exchange or any successor thereto.
Nominating and Governance Committee
means the Nominating and Governance Committee of the Board of Directors
established pursuant to Section 6.18(a)(i).
Nonrecourse Deductions
has the meaning set forth in
Section 1.704-2(b)(1) of the Regulations.
Nonrecourse Liability
has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
17
Offer Price
means, as of any Control Date, the average Closing Price
per Trust Share or Trust Interest, as applicable, on the twenty (20) Business Days immediately prior to, but not including, such Control Date.
Original Agreement
has the meaning set forth in the introductory paragraph hereof.
Outstanding
means, as of any date, with respect to any security theretofore issued by the Company, except:
(i) such securities as represented by certificates or electronic positions evidencing such securities that have been canceled or delivered for
cancellation; and
(ii) such security as represented by certificates or electronic positions that have been exchanged for or in lieu of
which other securities have been executed and delivered pursuant to Section 3.5.
Overhead
shall be equal to, with respect to the Company for any Fiscal Quarter, the
sum
of (i) that portion of the Companys operating
expenses (as determined in accordance with GAAP) (without giving effect to any expense attributable to the accrual or payment of any amount of Profit Distribution
or any amount
arising under the Supplemental Put Agreement
to the extent included in the calculation of the Companys operating expenses), including any Management Fees actually paid by the Company to
the Manager, with respect to such Fiscal Quarter that are not attributable to any Subsidiary of the Company (
i.e.
, operating expenses that do not correspond to operating expenses of a Subsidiary of the Company with respect to such Fiscal
Quarter),
plus
(ii) the Companys accrued interest expense (as determined in accordance with GAAP) on any outstanding Third Party Indebtedness of the Company with respect to such Fiscal Quarter,
minus
(iii) revenue,
interest income and other income reflected in the Company Only Financial Statements.
Over-Paid Profit
Distributions
shall be equal to, as of any Calculation Date, the amount by which (i) the aggregate amount of Profit Distributions that were actually paid by the Company with respect to all Profit Distribution Payment Dates
immediately preceding such Calculation Date,
exceeded
(ii) the aggregate amount of Profit Distributions that were actually due and payable by the Company with respect to all such Profit Distribution Payment Dates, as determined in
accordance with Section 5.2;
provided
, that such amount shall not be less than zero.
Percentage
Interest
means,
as of any date of determination, (a)
with respect to any Member as
of any date
to such Members Trust Common Interests
,
the ratio (expressed as a percentage) of the number of
LLC
Trust Common
Interests held by such Member on such date relative to the aggregate number of
LLC
Trust Common Interests then Outstanding as of such date, (b) with respect to any Member as to such Members Trust Preferred Interests, the percentage established for such Preferred
Trust Interests by the Board of Directors in the relevant Trust Interest Designation as a part of the issuance of such Preferred Trust Interests, and (c) with respect to any Member as to such Members Allocation Interests, the ratio
(expressed as a percentage) of the number of Allocation Interests held by such Member on such date relative to the aggregate number of Allocation
Interests then Outstanding as of such date.
18
Person
means any individual, company (whether general or limited),
limited liability company, corporation, trust, estate, association, nominee or other entity.
Profit
Distribution
means, as of any Calculation Date, any Approved Profit Distribution as of such Calculation Date, Disputed Profit Distribution as of such Calculation Date, the Independently Calculated Profit Distribution as of such
Calculation Date or the Profit Distribution Amount as of such Calculation Date, originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c), as the case may be. For the avoidance of doubt, Profit Distribution
shall also mean any portion of the foregoing payable on any applicable Profit Distribution Payment Date, including any Independently Calculated Profit Distribution Payment Date or Submission Failure Payment Date, as the case may be.
Profit Distribution Amount
shall be equal to, with respect to any Profit Distribution Subsidiary as of any
Calculation Date, the
sum
of (i) the amount by which Total Profit Allocation with respect to such Profit Distribution Subsidiary as of such Calculation Date
exceeds
such Profit Distribution Subsidiarys Level 1 Hurdle Amount
as of such Calculation Date but is less than such Profit Distribution Subsidiarys Level 2 Hurdle Amount as of such Calculation Date,
plus
(ii) the
product
of (x) the amount by which Total Profit Allocation with respect
to such Profit Distribution Subsidiary as of such Calculation Date
exceeds
such Profit Distribution Subsidiarys Level 2 Hurdle Amount as of such Calculation Date,
multiplied by
(y) 20%,
minus
(iii) the High Water
Mark Allocation, if any, as of such Calculation Date.
Profit Distribution Payment Date
means any Approved
Profit Distribution Payment Date, as of any Calculation Date, with respect to Approved Profit Distribution, any Disputed Profit Distribution Payment Date, as of any Calculation Date, with respect to Disputed Profit Distribution, any Submission
Failure Payment Date, as of any Calculation Date, with respect to Approved Profit Distribution, or any Independently Calculated Profit Distribution Payment Date, as of any Calculation Date, with respect to the Independently Calculated Profit
Distribution, as the case may be.
Profit Distribution Subsidiary
has the meaning set forth in Section 5.2(b).
Profits
and
Losses
mean, for each Allocation Year, an amount equal to the
Companys taxable income or loss for such Allocation Year, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments (without duplication):
(i) any income
of the Company that is exempt from U.S. federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses shall be added to such taxable income or loss;
(ii) any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Profits or Losses pursuant to this definition of Profits and Losses shall be subtracted from such taxable income or
loss;
19
(iii) in the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraph (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Gross Asset Value of the asset) or an item of loss (if the adjustment
decreases the Gross Asset Value of the asset) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses;
(iv) gain or loss resulting from any disposition of Property with respect to which gain or loss is recognized for U.S. federal income tax
purposes shall be computed by reference to the Gross Asset Value of the Property disposed of, notwithstanding that the adjusted tax basis of such Property differs from its Gross Asset Value;
(v) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Members interest in the Company, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) from the disposition of such asset and shall be taken into account for purposes of computing Profits or Losses; and
(vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Sections 4.3 or 4.4 shall not
be taken into account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss or deduction available to be specially
allocated pursuant to Sections 4.3 and 4.4 shall be determined by applying rules analogous to those set forth in subparagraphs (i) through (v) above.
Property
means all real and personal property acquired by the Company, including cash, and any improvements thereto,
and shall include both tangible and intangible property.
Qualifying Trigger Event
means any Trigger Event with
respect to a Profit Distribution Subsidiary (i) that gave rise to the calculation of Total Profit Allocation with respect to such Profit Distribution Subsidiary as of any Calculation Date and (ii) where the amount of Total Profit
Allocation so calculated as of such Calculation Date exceeded such Profit Distribution Subsidiarys Level 2 Hurdle Amount as of such Calculation Date.
Quarterly Allocated Share of Consolidated Equity
shall be equal to, with respect to any Profit Distribution
Subsidiary for any Fiscal Quarter, the
product
of (i) the Companys Consolidated Net Equity as of the last day of such Fiscal Quarter,
multiplied by
(ii) a fraction, the numerator of which is such Profit Distribution
Subsidiarys Adjusted Net Assets as of the last day of such Fiscal Quarter and the denominator of which is the
sum
of the Adjusted Net Assets of all of the Subsidiaries owned by us as of the last day of such Fiscal Quarter.
Quarterly Share of Company Overhead
shall be equal to, with respect to any Profit Distribution Subsidiary for any
Fiscal Quarter, the
product
of (i) the absolute amount of the Companys Overhead with respect to such Fiscal Quarter,
multiplied by
(ii) a fraction, the numerator of which is such Profit Distribution Subsidiarys
Adjusted Net Assets as of the last day of such Fiscal Quarter and the denominator of which is the sum of the Adjusted Net Assets of all of the Subsidiaries owned by us as of the last day of such Fiscal Quarter.
20
Register
has the meaning set forth in Section 3.3.
Regular Trustees
has the meaning set forth in the Trust Agreement.
Regulations
means the income tax regulations, including temporary regulations, promulgated under the Code, as such
regulations are amended from time to time.
Regulatory Allocations
has the meaning set forth in Section 4.4.
Repurchase Date
has the meaning set forth in
Section 3.4(b).
Rules and Regulations
means
the rules and regulations promulgated under the Exchange Act or the Securities Act.
Sale Event
means, with
respect to any Subsidiary, the sale of a material amount, as determined by the Allocation Member and consented to by a majority of the Board of Directors, such consent not to be unreasonably withheld, conditioned or delayed, of the capital stock or
assets of such Subsidiary or a Subsidiary of such Subsidiary.
Secretary
means the Secretary of the Company,
with such powers and duties as set forth in Section 7.7.
Securities Act
means the Securities Act of 1933, as
amended.
Stock Transfer Agency Agreement
means the Stock Transfer Agency Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the Company and The Bank of New York, Inc. or any successor(s) thereto.
Submission Date
has the meaning set forth in Section 5.2(d).
Submission Failure Payment Date
means, with respect to any Calculation Date, ten (10) Business Date after
the Submission Date with respect to such Calculation Date.
Subsidiary
means, with respect to any Person, any
corporation, company, joint venture, limited liability company, association or other Person in which such Person owns, directly or indirectly, more than 50% of the Outstanding equity securities or interests, the holders of which are generally
entitled to vote for the election of the board of directors or other governing body of such Person.
Supplemental Put Agreement
means the Supplemental Put Agreement, dated as of the date hereof, as may be amended from time to time, entered into by and between the
Company and the Allocation Member.
Tax
Distribution
has the meaning set forth in Section 5.2(h).
Tax Distribution Payment Date
has the
meaning set forth in Section 5.2(h).
Tax Matters Member
has the meaning set forth in Section 11.4(a).
Third Party Indebtedness
means, with respect to any Person, indebtedness of such Person owed to any third party
lenders that are not Affiliated with such Person.
21
Total Profit Allocation
shall be equal to, with respect to any Profit
Distribution Subsidiary as of any Calculation Date, the
sum
of (i) the Contribution-Based Profits of such Profit Distribution Subsidiary for the Measurement Period with respect to such Profit Distribution Subsidiary as of such
Calculation Date,
plus
(ii) if the Trigger Event underlying the calculation of Total Profit Allocation as of such Calculation Date is a Sale Event, the Companys Cumulative Gains and Losses as of such Calculation Date.
Transaction Documents
means the Management
Services Agreements, the Trust Agreement, the Supplemental Put Agreement, the Credit Agreement, the Underwriting Agreement, the Stock Transfer Agency Agreement, the Escrow Agreement and all documents and certificates contemplated thereby or
delivered in connection therewith.
Transfer
means, as a noun, any voluntary or involuntary transfer, sale, pledge or hypothecation or other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge or hypothecate or otherwise dispose of.
Transfer Agent
means, with respect to the Trust Shares and the LLC Interests,
Broadridge Corporate Issues Solutions, Inc.
The Bank of New York,
Inc.,
or any successor(s) thereto.
Trigger
Event
means, with respect to any Subsidiary, the occurrence of either a Sale Event or a Holding Event with respect to such Subsidiary.
Trust
means Compass Diversified Holdings, a Delaware statutory trust.
Trust Agreement
means the
Second
Amended and Restated Trust Agreement, dated as of the date hereof, entered into by and among the Company and
The Bank
BNY Mellon Trust
of
New York (
Delaware
),
,
a
Delaware banking corporation, as property trustee, and the Regular Trustees.
Trust Interests
means the limited liability company interests in the Company designated under the Original Agreement as the Class A Interests and
redesignated herein as Trust Interests, as authorized pursuant to Section 3.1(a), and having the rights provided herein.
Trust Common Interests
means any Trust Interests that
are not Trust Preferred Interests.
Trust Interest
Certificates
means
, with respect to Trust Common Interests,
a certificate
representing Trust Interests
substantially in the form attached hereto as Exhibit A
and, with respect to Trust Preferred Interests, such certificates, if any, as specified in the applicable Trust Interest Designation
.
Trust Interest Designation
has the meaning
assigned to such term in Section 3.1(a).
Trust Interests
means limited liability company interests issued by the Company that evidence a Members rights, powers and duties with respect to the Company
pursuant to this Agreement and the Act, other than Allocation Interests. Trust Interests may be Trust Common Interests or Trust Preferred Interests, and may be issued in one or more series or, in the case of Trust Preferred Interests,
classes.
Trust Member
means any holder of a Trust
Interest, in its capacity as a Member.
Trust Preferred
Interests
means a class or series of limited liability interests in the Company that entitles the Person in whose name such limited liability interests are registered on the books that the Company has caused to be kept as of the
opening of business on a particular Business Day to a preference or priority over the holders of any other class or series of limited liability interests in the Company in (i) the right to share Profits or Losses or items thereof, (ii) the
right to share in Company distributions, and/or (iii) rights upon dissolution or liquidation of the Company.
22
Trust Shares
means the shares of the Trust, each representing one
undivided beneficial interest in the assets of the Trust.
Under-Paid Profit Distributions
shall be equal to, as
of any Calculation Date, the amount by which (i) the aggregate amount of Profit Distributions that were actually due and payable by the Company with respect to all Profit Distribution Payment Dates immediately preceding such Calculation Date,
as determined in accordance with Section 5.2
exceeded
(ii) the aggregate amount of Profit Distributions that were actually paid by the Company with respect to all such Profit Distribution Payment Dates;
provided
, that such
amount shall not be less than zero.
Underwriting
Agreement
means the Underwriting Agreement, dated as of the date hereof, entered into by and among the Company, the Trust, the Manager, Ferris, Baker Watts, Incorporated, and the other parties thereto.
Voluntary Exchange
has the meaning set forth in the Trust
Agreement.
Voting Trust Interests
means, at any
time, all Trust Interests then Outstanding with respect to which the holder thereof is, pursuant to this Agreement or the applicable Trust Interest Designation, entitled to vote on matters submitted for consent or approval of holders of Trust
Interests under this Agreement.
ARTICLE 2
THE TRUST
Section 2.1
Trust to Be Sole Holder of Trust Interests
. The Company
shall issue
issued
Trust Interests to the Trust as the
initial Trust Member, and the Trust
shall
be
was
admitted to the Company as a Member of the Company in respect thereof upon its execution of a counterpart of
this
the Original
Agreement. For so long as the
Trust remains in existence, subject to Sections 2.3 and 2.4(a), it is intended that the Trust shall be the sole Trust Member and the sole owner of one hundred percent (100%) of the Trust Interests, and, during such period, the Company shall not
issue, sell or otherwise transfer any of its Trust Interests to any Person other than the Trust. Each Trust Member agrees with the Company to be bound by the terms of this Agreement.
Section 2.2
Trust Shares to Represent Trust Interests
. Each Trust Share represents one undivided beneficial interest in the assets
of the Trust, which assets consist of the underlying Trust Interests.
Section 2.3
Voluntary Exchange of Trust Shares for Trust
Interests
. The Company, acting through its Board of Directors, shall take all actions and do all things necessary to give effect to a Voluntary Exchange on the terms and conditions set forth in Section 9.2 of the Trust Agreement.
Section 2.4
Acquisition Exchange of Trust Shares for Trust Interests
.
(a)
Right to Acquisition Exchange
. The Company, acting through its Board of Directors, shall take all actions and do all things
necessary to give effect to an Acquisition Exchange on the terms and conditions set forth in Section 9.3 of the Trust Agreement.
23
(b)
Right to Acquire Trust Interests of Remaining Holders for Cash
. Following the
completion of an Acquisition Exchange, the Acquirer shall have the right to purchase, solely for cash, and Members other than the Acquirer shall be required to sell, all, but not less than all, of the Outstanding Trust Interests not then held by the
Acquirer, at the Offer Price. The Acquirer may exercise its right to effect such purchase by delivering written notice to the Company and the Transfer Agent of its election to make the purchase not less than sixty (60) days prior to the Control
Date. Promptly after receipt of such notice, the Board of Directors shall declare a record date. The Company will cause the Transfer Agent to mail a copy of such notice to the Trust Members at least thirty (30) days prior to such Control Date.
Section 2.5
Right of Holders of Trust Shares and Members to Enforce Provisions of this Agreement and Bring Derivative Action
.
(a) The Allocation Member, individually, and any other Member or Members holding, in the aggregate, at least ten percent (10%) of the
Outstanding Trust
Common
Interests, shall have the right to institute any legal proceeding against the Company to enforce the
provisions of this Agreement, and to the fullest extent permitted by applicable law, no other Member or Members shall have the right to institute any legal proceeding against the Company to enforce the provisions of this Agreement.
(b) For so long as the Trust remains the sole holder of Trust Interests, holders of at least ten percent (10%) of the
Common Shares then
Outstanding
Trust Shares
shall have the right to cause the Trust to institute any legal proceeding for any remedy available to the Trust, as a holder of Trust Interests and, to the extent permitted by applicable law, such holders of
Trust
Common
Shares may direct the time, method
and place of conducting any such legal proceeding brought by the Trust. For so long as the Trust remains the sole holder of Trust Interests, holders of record of at least ten percent (10%) of the
Common Shares then
Outstanding
Trust Shares
shall also have the right to institute directly against the Company any legal proceeding available to the Trust against the Company to enforce the provisions of this Agreement. Solely for purposes of this
Section 2.5(b) and only to the extent provided herein, the holders of
the Outstanding
Trust
Common
Shares shall be deemed to be third-party beneficiaries of this Agreement to the same extent as if they were
signatories hereto.
(c) Except as expressly provided in this Agreement, nothing in this Agreement shall be deemed to give to any Person any benefit or any legal or
equitable right, remedy or claim under this Agreement.
Section 2.6
Reimbursement of Regular Trustees
. The Company shall
reimburse the Regular Trustees for any expenses, out-of-pocket or otherwise, incurred on behalf of the Trust or otherwise in connection with performing any of their duties or obligations under the Trust Agreement.
24
ARTICLE 3
CLASSES AND ISSUANCE OF LLC INTERESTS; TRANSFER
Section 3.1
LLC Interests
. The Company shall be authorized to issue
two classes of limited liability company interests to the Members:
Trust Interests and Allocation Interests
to the Members
as provided in Sections 3.1(a) and
(b
).
):
(a)
Trust Interests.
(i)
Generally
. The Company, and the Board of Directors by resolution on behalf of the Company, shall
, without the vote or consent of any Member or other Person,
initially be authorized to issue up to five hundred million
(500,000,000) Trust
Common
Interests in one or more series and
[
( )] million Trust Preferred Interests in one or more classes or series and
, for so long as the Trust remains the sole holder
of Trust Interests,
the Company
shall cause to be issued to the Trust, as of any date, the identical number of
each class or series of
Trust Interests as the number of
each class or
series of
Trust Shares that are issued and Outstanding
.
(such corresponding Trust Shares sometimes referred to herein as
Corresponding Trust
Shares
).
The aggregate number of Trust Interests that are authorized
to be issued
may be increased from time to time by an amendment to this Agreement upon the adoption of a resolution by the affirmative vote
of at least a majority of the Entire Board of Directors declaring such amendment to be advisable and the approval of such amendment by the affirmative vote of the holders of a majority of the
Voting
Trust Interests then Outstanding present in person or represented by proxy at a meeting of the Members. Each Member holding a Trust
Interest shall have all the rights, privileges and obligations set forth herein pertaining to holders of Trust Interests, and shall
, subject to any applicable Trust Interest
Designation,
have one vote per Trust Interest in accordance with the terms of this Agreement. The Trust Interests shall
, subject
to any applicable Trust Interest Designation,
be certificated in the form of a Trust Interest Certificate or represented by electronic book-entry position.
(ii) Trust Preferred Interests.
(A) Without the
consent or approval of any Members, Trust Preferred Interests may be issued by the Company, and by the Board of Directors on behalf of the Company, in one or more classes or series, with such designations, preferences, rights, powers and duties
(which may be junior to, equivalent to, or senior or superior to, any existing class or series of Trust Interests) as shall be fixed by the Board of Directors and reflected in a written action or actions approved by the Board of Directors (each, a
Trust Interest Designation), including (i) the right to share Company Profits and Losses or items thereof; (ii) the right to share in Company distributions, the dates distributions will be payable and whether distributions with
respect to such series or class will be cumulative or non-cumulative; (iii) rights upon dissolution and liquidation of the Company; (iv) whether, and the terms and conditions upon which, the Company may redeem such Trust Preferred
Interests; (v) whether such Trust Preferred Interests are issued with the privilege of conversion or exchange and, if so, the conversion or exchange price or prices or rate or rates, any rate adjustments, the date or dates on which, or the
period or period during which, such Trust Preferred Interests will be convertible or exchangeable and all other terms and conditions upon which the conversion or exchange may be made; (vi) the terms and conditions upon which such Trust
Preferred Interests will be issued, evidenced by certificates and assigned or transferred; (vii) the method for determining the Percentage Interest as to such Trust Preferred Interests; (viii) the terms and amounts of any sinking fund
provided for the purchase or redemption of such Trust Preferred Interests of the class or series; (ix) whether there will be restrictions on the issuance of Trust Preferred Interests of the same class or series or any other class or series; and
(x) the right, if any, of the holder of each such Trust Preferred Interests to vote on Company matters, including matters relating to the relative rights, preferences and privileges of such Trust Interests. A Trust Interest Designation (or any
resolution of the Board of Directors amending any Trust Interest Designation) shall be effective when a duly executed original of the same is delivered to the Secretary of the Company for inclusion among the books and records of the Company, and
shall be annexed to, and constitute part of, this Agreement. Unless otherwise provided in the applicable Trust Interest Designation, subject to Section 3.1(a)(i), the Board of Directors may at any time increase or decrease the amount of Trust
Preferred Interests of any class or series, but not below the number of Trust Preferred Interests of such class or series then Outstanding.
25
(B) Subject to
clause (B) of Article 12 but otherwise notwithstanding anything to the contrary contained in this Agreement (including Article 12 except for clause (B) thereof), the Board of Directors may, without the consent or approval of any Members,
amend this Agreement and make any filings under the Act or otherwise to the extent the Board of Directors determines that it is necessary or desirable in order to effectuate any issuance of Trust Preferred Interests pursuant to this Article 3. The
terms of any Trust Interest Designation adopted hereunder may amend the provisions of this Agreement or any other Trust Interest Designation.
(C) The Board of Directors may classify any unissued Trust
Preferred Interests and reclassify any previously classified but unissued Trust Preferred Interests of any series from time to time, in one or more classes or series.
(ii)
(iii)
Restrictions on Transfer of Trust Interests
. Except as otherwise provided in Article 2, the Trust to the fullest extent
permitted by law shall not be permitted to transfer, and the Company shall not recognize any purported transfer of, nor in any respect treat any purported transferee as the owner of, any Trust Interests held by the Trust.
(b)
Allocation Interests.
(i)
Generally
. The Company is authorized to issue one thousand (1,000) Allocation Interests. As of the date hereof,
all one thousand (1,000) Allocation Interests have been
or are hereby
issued to the Allocation Member. One hundred
percent (100%) of the Allocation Interests shall be issued to the Manager. Each Member holding an Allocation Interest shall have all the rights, privileges and obligations set forth herein pertaining to holders of Allocation Interests. The
Allocation Interests shall be certificated in the form of an Allocation Interest Certificate. The holders of Allocation Interests shall not be entitled to vote with respect to any issue relating to the Company notwithstanding the Act or other
applicable law, except as provided in Article 10 (in which case, the holders of Allocation Interests shall have one vote per Allocation Interest). For the avoidance of doubt, the parties intend that the Manager not be a manager within
the meaning of Section 18-402 of the Act.
26
(ii)
Restrictions on Transfer of Allocation Interests
. Until such time as
the Management Services Agreement is terminated, the Manager (or any Allocation Member holding Allocation Interests in accordance with this Section 3.1(b)) to the fullest extent permitted by law shall not be permitted to transfer, and the
Company shall not recognize any purported transfer of, nor in any respect treat any purported transferee as the owner of, any Allocation Interests held by the Manager;
provided
, that any Allocation Member may transfer Allocation Interests to
any Affiliate of the Manager, and any Allocation Interests so transferred shall remain subject to the restrictions of this Section 3.1(b)(i) in the hands of such permitted transferee.
Section 3.2
Issuance of Additional Trust Interests
. For so long as the Trust remains the sole holder of Trust Interests,
(a) the Board of Directors shall have authority to issue to the Trust, from time to time without any vote or other action by the Members, in one or more
classes or
series
, as applicable
, any or all Trust Interests of the Company at any time authorized, and
(b) the Company will issue additional Trust Interests
,
in one or more
classes or
series
, as applicable,
to the Trust in exchange for an equal number of
Corresponding
Trust Shares which the Company may sell or distribute in any manner, subject to applicable law, that the Board of Directors in its sole discretion deems appropriate and advisable.
Section 3.3
Trust Interest Certificates; Admission of Additional Members
.
The
Subject to any applicable Trust Interest Designation,
the
Trust Interest Certificates shall be conclusive evidence of ownership of the related Trust Interests, and every holder of record of Trust Interests of the Company shall be entitled to one or
more Trust Interest Certificates representing the number of Trust Interests held by such holder of record. Any Trust Interest Certificates of the Company to be issued shall be issued under the seal of the Company, or a facsimile thereof, and shall
be numbered and shall be entered in the books of the Company as they are issued. If and when issued, each Trust Interest Certificate shall bear a serial number, shall exhibit the holders name and the number of Trust Interests evidenced thereby
and shall be signed by the Chief Executive Officer or the Chief Financial Officer. Any or all of the signatures on the Trust Interest Certificates may be facsimiles. If any officer or Transfer Agent who has signed or whose facsimile signature has
been placed upon a Trust Interest Certificate shall have ceased to be such officer or Transfer Agent before such Trust Interest Certificate is issued, the Trust Interest Certificate may be issued by the Company with the same effect as if such Person
or entity were such officer or Transfer Agent at the date of issue.
From the time of the closing of the Initial Public Offering, the
The
Company shall
at all times
retain the Transfer Agent to maintain a register of the Trust Interests (the
Register
), the Transfer Agent, in such capacity shall be known as the Registrar, and cause such Registrar to
register thereon any transfer of Trust Interest Certificates. Transfer of Trust Interests of the Company shall be made on the Register only upon surrender to the Transfer Agent of the Trust Interest Certificates
, if any,
duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer;
provided
,
however
, that such succession, assignment or transfer is not prohibited by the Trust Interest Certificates, this Agreement,
any applicable Trust Interest Designation,
applicable law or contract. Thereupon, the Company shall issue a new Trust Interest Certificate (if
applicable and
requested) to the Person entitled thereto, cancel
the
any
old Trust Interest Certificate,
and
shall
instruct the Registrar to record the transaction upon the Register.
27
Section 3.4
Repurchase of Trust Interests by the Company
.
(a) The Board of Directors shall have authority to cause the Company to conduct a capital reduction, including the repurchase of any number of
issued and Outstanding Trust Interests;
provided
,
however
, that the Company shall not purchase or redeem its Trust Interests for cash or other property if any such purchase or redemption would be inconsistent with the requirements of
Section 18-607 or Section 18-804 of the Act;
provided
,
further
, that so long as the Trust remains the sole holder of Trust Interests, the Company, as sponsor of the Trust, acting through its Board of Directors, shall cause the
Trust to conduct a capital reduction on similar terms and shall ensure that an identical number of Trust Interests and Trust Shares are issued and Outstanding at any one time.
(b)
In the event the Board of Directors determines that the Company shall
make an offer to repurchase any number of issued and Outstanding Trust Interests, the Board of Directors shall deliver to the Transfer Agent notice of such offer to repurchase indicating the repurchase price and the date of repurchase (the
Repurchase Date
) and shall cause the Transfer Agent to mail
a copy of such notice to the Members and holders of Trust Shares, as the case may be, at least thirty (30) days prior to the Repurchase Date.
Any Trust Interests tendered and repurchased
by the Company, in accordance with this Section 3.4, shall be deemed to be authorized and issued, but not Outstanding and, subject to Section 2.1, may subsequently be sold or Transferred for due consideration.
Section 3.5
Mutilated, Lost, Destroyed or Stolen Certificates
. Each holder of record of Trust Interests and Allocation Interests
shall promptly notify the Company of any mutilation, loss or destruction of any certificate of which such holder is the record holder. The Company may, in its discretion, cause the Transfer Agent to issue a new certificate in place of any
certificate theretofore issued by it and alleged to have been mutilated, lost, stolen or destroyed, upon surrender of the mutilated Share certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such
loss, theft or destruction, and the Board of Directors may, in its discretion, require the holder of record of the Trust Interests or Allocation Interests evidenced by the lost, stolen or destroyed certificate, or his legal representative, to give
the Transfer Agent a bond sufficient to indemnify the Transfer Agent against any claim made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.
ARTICLE 4
ALLOCATIONS
Section 4.1
General Application
. The rules set forth below in this Article 4 shall
, subject to any applicable Trust Interest Designation,
apply for the purposes of determining each Members allocable share of the items
of income, gain, loss and expense of the Company comprising Profits or Losses of the Company for each Allocation Year, determining special allocations of other items of income, gain, loss and expense, and adjusting the balance of each Members
Capital Account to reflect the aforementioned general and special allocations. For each Allocation Year, the special allocations in Section 4.3 shall be made immediately prior to the general allocations of Section 4.2.
28
Section 4.2
Allocations of Profits and Losses
.
(a)
Special Allocations Following Capital Gain Transactions
. If the Company has a Sale Event during the Allocation Year, any Company Net
Long Term Capital Gain shall be allocated:
(i) First to the Allocation Member to the extent of any amounts payable to the
Allocation Member with respect to the Allocation Year pursuant to Section 5.2, and
(ii) The balance of such Net Long
Term Capital Gain shall
, subject to any applicable Trust Interest Designation,
be allocated among the Members in accordance with the
general allocation of Profits or Losses for such year, as provided in Section 4.2(b) or (c).
(b)
Allocation of Profit
.
If the Company has Profits during the Allocation Year, after excluding the amount of any Net Long Term Capital Gain allocated to the Allocation Member pursuant to Section 4.2(a), such Profits (as so reduced) shall be allocated:
(i) First to the Allocation Member to the extent of the any amounts payable to the Allocation Member with respect to the
Allocation Year pursuant to Section 5.2, but without duplicating any allocations of Net Long Term Capital Gain to the Allocation Member for such Allocation Year pursuant to Section 4.2(a), and
(ii)
The
Subject to any applicable Trust Interest Designation, the
balance to the Members in accordance with their Percentage Interests.
(c)
Allocation of Losses
. If the Company has Losses during the Allocation Year, after excluding the amount of any Net Long Term Capital
Gain allocated to the Allocation Member pursuant to Section 4.2(a), such Losses (as so increased) shall be allocated, subject to the limitations of Section 4.5:
(i) First to the Members in accordance with their Percentage Interests, up to, but not exceeding, the amount that would cause
the Capital Account of any Member to be a negative number; and
(ii) The balance, if any, shall be allocated among the
Trust Members in accordance with their Percentage Interests.
(d)
Character of Allocations
. Allocations to Members of Profits or
Losses pursuant to Sections 4.2(b) and 4.2(c) shall consist of a proportionate share of each Company item of income, gain, expense and loss entering into the computation of Profits or Losses for such Allocation Year (other than the portion of each
Net Long Term Capital Gain that is specially allocated to the Allocation Member pursuant to Section 4.2(a)).
29
Section 4.3
Special Allocations
. The following special allocations shall
, subject to any applicable Trust Interest Designation,
be made in the following order:
(a)
Minimum Gain Chargeback
. Except as otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any other
provision of this Article 4, if there is a net decrease in Company Minimum Gain during any Allocation Year, each Member shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent Allocation
Years) in an amount equal to such Members share of the net decrease in Company Minimum Gain, determined in accordance with Regulations Section 1.704-2(g) and (h). Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations. This Section 4.3(a) is intended
to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently therewith.
(b)
Member Minimum Gain Chargeback
. Except as otherwise provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any
other provision of this Article 4, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any Allocation Year, each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially allocated items of Company income and gain for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Members share of the net decrease in Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 4.3(b)
is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently therewith.
(c)
Qualified Income Offset
. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in
Section 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit of the Member as quickly as possible;
provided
, that an allocation pursuant to this Section 4.3(c) shall be made only if and to the extent that the Member would have an
Adjusted Capital Account Deficit after all other allocations provided for in this Article 4 have been tentatively made as if this Section 4.3(c) were not in this Agreement.
(d)
Nonrecourse Deductions
. Nonrecourse Deductions for any Allocation Year shall be specially allocated to the Members in the manner
elected by the Tax Matters Member in conformity with the provisions of Regulations 1.704-2, and in the absence of such an election, to the Trust Members in proportion to their respective Percentage Interests.
30
(e)
Member Nonrecourse Deductions
. Any Member Nonrecourse Deductions for any Allocation
Year shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Regulations Section 1.704-2(i)(1).
(f)
Section 754 Adjustments
. To the extent an adjustment to the adjusted tax basis of any Company asset, pursuant to Code
Section 734(b) or Code Section 743(b), is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a
Member in complete liquidation of such Members interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies or to the Member to whom such
distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(g)
Allocations Relating to Taxable
Issuance of Company LLC Interests
. Any income, gain, loss or deduction realized as a direct or indirect result of the issuance of LLC Interests by the Company to a Member (the
Issuance Items
) shall be allocated among
the Members (the Trust
Members
Member
and Allocation
Members
Member
) so that, to the extent
possible, the net amount of such Issuance Items, together with all other allocations made under this Agreement to each Member, shall be equal to the net amount that would have been allocated to each such Member if the Issuance Items had not been
realized.
Section 4.4
Curative Allocations
. The allocations set forth in Sections 4.3(a), 4.3(b), 4.3(c), 4.3(d),
4.3(e), 4.3(f), 4.3(g) and 4.5 (the
Regulatory Allocations
) are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall
be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 4.4. Therefore, notwithstanding any other provision of this Article 4 (other than
the Regulatory Allocations), the Board of Directors shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each
Members Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this Agreement and all Company items were allocated pursuant to Sections
4.1, 4.2 and 4.3(h).
Section 4.5
Loss Limitation.
Losses allocated pursuant to Section 4.2 shall not exceed the maximum
amount of Losses that can be allocated without causing any Member to have an Adjusted Capital Account Deficit at the end of any Allocation Year. In the event some but not all of the Members would have Adjusted Capital Account Deficits as a
consequence of an allocation of Losses pursuant to Section 4.2, the limitation set forth in this Section 4.5 shall be applied on a Member-by-Member basis, and Losses not allocable to any Member as a result of such limitation shall be
allocated to the other Members in accordance with the positive balances in such Members Capital Accounts so as to allocate the maximum permissible Losses to each Member under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
31
Section 4.6
Other Allocation Rules
.
(a) For purposes of determining the Profits and Losses or any other items allocable to any period, Profits, Losses, and any other such items
shall be determined on a monthly or other basis, as determined by the Company using any method permissible under Code Section 706 and the Regulations
thereunder
.
(b) The Members are aware of the income tax consequences of the allocations made by this Article 4 and hereby agree to be bound by the
provisions of this Article 4 in reporting their shares of Company income and loss for income tax purposes.
(c) Solely for purposes of
determining a Members proportionate share of the excess nonrecourse liabilities of the Company within the meaning of Regulations Section 1.752-3(a)(3), the Members interests in Company profits are in proportion to their
Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the Regulations, the Manager shall endeavor to treat
distributions as having been made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse Debt only to the extent that such distributions would cause or increase an Adjusted Capital Account Deficit for any Member.
(e) To the extent the Tax Matters Member determines, in consultation with the Companys tax advisors, that any distribution pursuant to
Article 5 to a Member hereunder (or portion of such distribution) would more properly be characterized as a payment described in Code Section 707(a) or 707(c), such payment may be so characterized in the Companys tax filings, and in such
event, shall be taken into account for federal income tax purposes as an expense of the Company, and not as an allocation of income to a Member affecting such Members Capital Account.
Section 4.7
Tax Allocations: Code Section 704(c)
. In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss and deduction with respect to any Property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such Property
to the Company for U.S. federal income tax purposes and its initial Gross Asset Value (computed in accordance with the definition of Gross Asset Value) using a method, selected in the discretion of the Board of Directors in accordance with
Section 1.704-3 of the Regulations.
In the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraph
(ii) of the definition of Gross Asset Value, subsequent allocations of income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for U.S. federal income tax purposes
and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations thereunder.
32
Any elections or other decisions relating to such allocations shall be made by the Board of
Directors in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.7 are solely for purposes of U.S. federal, state and local taxes and shall not affect, or in any way be taken
into account in computing, any Members Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement.
ARTICLE 5
DISTRIBUTIONS
Section 5.1
Distributions to Members
. Except as otherwise provided in Section 5.3 and Article 14, the Board of Directors may,
in its sole discretion and at any time, declare and pay distributions with respect to the LLC Interests to the Members, as of any record date established by the Board of Directors with respect to such distributions, from Cash Available for
Distribution to all Members
, subject to any applicable Trust Interest Designation,
in proportion to their Percentage Interests.
Section 5.2
Distributions to the Allocation Member
.
(a)
In General
. Except as otherwise provided in Section 5.3 and Article 14 and subject to the other terms and conditions set forth
in this Section 5.2, for so long as the Allocation Interests are Outstanding (i) the Administrator shall calculate (x) the Profit Distribution Amount, and the components thereof, in accordance with Section 5.2(b) and (y) Tax
Distributions, and the components thereof, in accordance with Section 5.2(i) and (ii) the Company shall pay (x) Profit Distributions in accordance with Section 5.2(e) and (y) Tax Distributions in accordance with
Section 5.2(h).
(b)
Calculation of Profit Distribution Amount Upon Trigger Event
. Subject to Section 5.2(g), upon the
occurrence of a Trigger Event with respect to any Subsidiary (the
Profit Distribution Subsidiary
), the Administrator, as of the relevant Calculation Date with respect to such Trigger Event, shall:
(i) calculate, on or promptly following such Calculation Date, the Profit Distribution Amount with respect to such Profit Distribution
Subsidiary as of such Calculation Date; and
(ii) adjust such Profit Distribution Amount (as adjusted, the
Adjusted Profit
Distribution Amount
) so calculated, on a dollar-for-dollar basis, by:
(A)
reducing
such Profit Distribution Amount
by the aggregate amount of any Over-Paid Profit Distributions, if any, existing as of such Calculation Date;
(B)
increasing
such
Profit Distribution Amount by the aggregate amount of any Under-Paid Profit Distributions, if any, existing as of such Calculation Date; and
33
(C)
reducing
such Profit Distribution Amount by the aggregate amount of any Tax
Distributions, if any, that were previously received by the Allocation Member on any Tax Distribution Payment Date prior to such Calculation Date, to the extent such amount of Tax Distributions have not been previously applied towards a reduction of
Profit Distribution Amount in accordance with this Section 5.2(b).
If more than one Trigger Event takes place during any Fiscal
Quarter which would cause the calculation of the Profit Distribution Amount with respect to more than one Profit Distribution Subsidiary as of the Calculation Date with respect to such Trigger Event, then the Profit Distribution Amount shall be
calculated under this Section 5.2(b) with respect to each Profit Distribution Subsidiary separately and in the order in which controlling interest in each such Profit Distribution Subsidiary was acquired or otherwise obtained by the Company,
and the resulting amounts so calculated shall be aggregated to determine the total amount of the Profit Distribution Amount as of such Calculation Date for any purpose hereunder;
provided
, that if controlling interest in such Profit
Distribution Subsidiaries was acquired or otherwise obtained at the same time, then the Profit Distribution Amount shall be further calculated under this Section 5.2(b) with respect to each Profit Distribution Subsidiary separately and in the
order in which each such Profit Distribution Subsidiary was sold.
Notwithstanding anything to the contrary in this Agreement (including,
for the avoidance of doubt, the definitions of Calculation Date and Total Profit Allocation), upon the closing of an initial public offering (an
IPO Event
) by any Subsidiary (an
IPO
Entity
), such IPO Event and the receipt of proceeds from such IPO Event shall be treated as a Sale Event subject to the following provisions:
(1) The calculation by the Administrator and the payment by the Company of the Adjusted Profit Distribution Amount in
connection with the IPO Event shall be calculated and paid in quarterly installments upon the receipt by the Company of proceeds from the sale of equity securities of such IPO Entity, either in connection with the IPO Event or thereafter, regardless
of whether such IPO Entity is thereafter a Subsidiary;
(2) If on the date of the IPO Event the IPO Entity had positive
Contribution-Based Profits for the Measurement Period ending on the IPO Event, then the Administrator shall calculate and the Company shall pay the first installment of the Adjusted Profit Distribution Amount inclusive of the entire amount
attributable to the Contribution-Based Profits of the IPO Entity as though a Holding Event had been declared in conjunction with the IPO Event;
(3) If on the date of the IPO Event the IPO Entity had negative Contribution-Based Profits for the Measurement Period ending on
the IPO Event, then no installments of the Adjusted Profit Distribution Amount shall be payable to the Allocation Member until, and to the extent, the Total Profit Allocation with respect to the IPO Entity recalculated as of the date of payment is a
positive number.
34
(4) Upon an IPO Event, the Contribution-Based Profits in respect of the IPO
Entity shall be fixed and no further Contribution-Based Profits shall be taken into account in respect of the IPO Entity, regardless of whether the IPO Entity is or is not then a Subsidiary.
(5) In conjunction with the IPO Event, the Administrator shall allocate to each share of equity securities of the IPO Entity
held by the Company plus each share sold in the IPO Event a ratable portion of the Companys book basis (as calculated in accordance with GAAP) in the aggregate shares, such that the Administrator is able to calculate readily an installment of
the Adjusted Profit Distribution Amount to be distributed to the Allocation Member in connection with each disposition by the Company of shares of equity securities in the IPO Entity. This allocation by the Administrator shall be fixed and shall not
be adjusted thereafter, notwithstanding that the Companys book basis in any such shares held by the Company may thereafter be adjusted in accordance with GAAP.
(6) On the last day of the first twelve Fiscal Quarters following an IPO Event, and subject to the Audit Committee approvals
and review procedures provided in Section 5.2(c), (d) and (g), the Administrator shall recalculate and the Company shall pay such installments of the Adjusted Profit Distribution Amount on a per share basis to the extent the Company has
received proceeds from the disposition of equity securities in such IPO Entity during such Fiscal Quarter.
(7) On the last
day of the twelfth Fiscal Quarter following the IPO Event, subject to the Audit Committee approvals and review procedures provided for in Section 5.2(c), (d) and (g), the Administrator shall recalculate the Adjusted Profit Distribution as
if all shares of the IPO Entity held by the Company on that date were sold for cash equal to their fair market value, and shall pay the Adjusted Profit Distribution, as so calculated, to the Allocation Member in the form of shares of the IPO Entity
with a fair market value equal to the Adjusted Profit, unless the Allocation Member elects to be paid in immediately available funds or a combination of shares of the IPO Entity and immediately available funds. Any such final payment shall be based
upon the average of the closing price of the shares of the IPO Entity for the fifteen (15) trading days that precede the third anniversary and such payment shall be made without discount of any kind (including discounts that might be based upon
lack of control, liquidity or other factors); provided that if such shares are not then traded on either the New York Stock Exchange or the NASDAQ (or such applicable successor market thereto), then such payment shall be based upon a fair market
evaluation of such shares performed by the Administrator and approved by the Audit Committee in accordance with this Agreement.
(8) In connection with an IPO Event, all calculations related to the Profit Distribution Amount shall use the Level 1 Hurdle
Amount and Level 2 Hurdle Amount calculated as of the date of the IPO Event as though all the Companys equity interest in the IPO Entity were disposed of by the Company on the date of the IPO Event at the price per share achieved in the IPO
Event, regardless of how many shares of the IPO Entity were disposed of by the Company in the IPO Event. Cumulative Gains and Losses shall be taken into account in an IPO Event in connection with each calculation and payment of an installment of the
Profit Distribution Amount (including, for the avoidance of doubt, for purposes of the calculations called for by sub-clause (5) above).
35
(c)
Approval of Profit Distributions
. The Administrator shall promptly submit in writing
any calculation of the Adjusted Profit Distribution Amount to the Audit Committee, in sufficient detail to permit a prompt review and approval by the Audit Committee. Any calculation of the Adjusted Profit Distribution Amount so submitted by the
Administrator shall be deemed automatically approved by the Audit Committee ten (10) Business Days after the date submitted by the Administrator (such approved Adjusted Profit Distribution Amount, as well as any amounts deemed to be Approved
Profit Distributions pursuant to Sections 5.2(c) or 5.2(d)), the
Approved Profit Distribution
);
provided
, that if the Audit Committee, by resolution, disapproves of the calculation of such Adjusted Profit
Distribution Amount submitted to it by the Administrator within such ten (10) Business Days, then, within ten (10) Business Days after the date of such resolution of disapproval, the Audit Committee shall recalculate, or cause the
recalculation of, such Adjusted Profit Distribution Amount as of the relevant Calculation Date in accordance with this Section 5.2 (such recalculated Adjusted Profit Distribution Amount, the
Disputed Profit
Distribution
) and present in writing its calculation of the Disputed Profit Distribution to the Administrator in sufficient detail to permit a prompt review by the Administrator (such date of presentation, the
Disputed
Profit Distribution Date
);
provided
,
further
, that if the Audit Committee fails to present such a calculation of Disputed Profit Distribution to the Administrator by the tenth (10
th
) Business Day after the date it disapproves of the calculation of Adjusted Profit Distribution Amount submitted to it by the Administrator, then the calculation of the Adjusted Profit
Distribution Amount originally submitted to the Audit Committee by the Administrator shall be deemed an Approved Profit Distribution on such tenth (10
th
) Business Day.
(d)
Independent Accounting Firm
. The Administrator shall have ten (10) Business Days to review the Audit Committees
calculation of any Disputed Profit Distribution presented to it pursuant to Section 5.2(c), and if the Administrator disagrees with such calculation, then the Administrator shall have the right, pursuant to a written notice that must be
delivered during such ten (10) Business Day period, to direct the Audit Committee to engage, at the Companys cost and expense, an independent accounting firm to calculate the Adjusted Profit Distribution Amount as of the relevant
Calculation Date in accordance with this Section 5.2. Such notice from the Administrator shall state any points of disagreement with the Audit Committees calculation and shall designate no fewer than three independent accounting firms to
calculate the Adjusted Profit Distribution Amount. The Audit Committee shall engage one of the designated independent accounting firms within ten (10) Business Days. If the Audit Committee fails to engage one of the designated independent
accounting firms within ten (10) Business Days, then the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c) shall be deemed an Approved Profit
Distribution. The Audit Committee shall direct the designated independent accounting firm to deliver its calculation of the Adjusted Profit Distribution Amount, calculated in accordance with this Section 5.2 (as calculated, the
Independently Calculated Profit Distribution
), within twenty (20) Business Days of its engagement (the
Submission Date
) to both the Administrator and the Audit Committee at the same time. If
the independent accounting firm so engaged fails to deliver its calculation of the Adjusted Profit Distribution Amount within the time required hereby, then the calculation of the Adjusted Profit Distribution Amount originally submitted to the Audit
Committee by the Administrator pursuant to Section 5.2(c) shall be deemed an Approved Profit Distribution. In making its calculation of the Adjusted Profit Distribution Amount, the independent accounting firm shall (i) review and consider
any documentation submitted by the Administrator and the Audit Committee in support of their respective calculations of the Adjusted Profit Distribution Amount, and (ii) be based on the most recently available consolidated financial statements
of the Company and its Subsidiaries (audited or unaudited). The Independently Calculated Profit Distribution shall be final, conclusive and binding on the Administrator, the Audit Committee, the Company and the Allocation Member.
36
(e)
Payment of Profit Distributions
. Subject to 5.2(l), the Company shall pay, on the
applicable Profit Distribution Payment Date with respect to any Calculation Date, Profit Distribution in the following manner:
(i)
First
, one of the following amounts of Profit Distribution:
(A) if the calculation of the Adjusted Profit Distribution Amount as
of such Calculation Date submitted by the Administrator to the Audit Committee is deemed approved in accordance with Section 5.2(c) or 5.2(d), then the Company shall pay to the Allocation Member on the Approved Profit Distribution Payment Date
an amount equal to the Approved Profit Distribution as of such Calculation Date, or
(B) if (x) the calculation of the Adjusted
Profit Distribution Amount as of such Calculation Date submitted by the Administrator to the Audit Committee is disapproved by the Audit Committee and recalculated by the Audit Committee and (y) the Administrator does not disagree with such
calculation of Disputed Profit Distribution pursuant to Section 5.2(d), then the Company shall pay to the Allocation Member on the Disputed Profit Distribution Payment Date an amount equal to the Disputed Profit Distribution as of such
Calculation Date; or
(C) if (x) the calculation of the Adjusted Profit Distribution Amount as of such Calculation Date submitted by
the Administrator to the Audit Committee is disapproved by the Audit Committee and recalculated by the Audit Committee and (y) the Administrator disagrees with such calculation of Disputed Profit Distribution and directs the Audit Committee to
engage an independent accounting firm pursuant to Section 5.2(d) and the Audit Committee engages such independent accounting firm, then the Company shall pay to the Allocation Member on the Disputed Profit Distribution Payment Date the
lesser
of an amount equal to (A) the Profit Distribution Amount, as of such Calculation Date, originally submitted to the Audit Committee by the Administrator pursuant to Section 5.2(c), and (B) the Disputed Profit Distribution
as of the relevant Calculation Date; and
(ii)
Second
, one of the following amounts of Profit Distribution:
(A) if an independent accounting firm delivers its Independently Calculated Profit Distribution as of such Calculation Date to the
Administrator and the Audit Committee in accordance with Section 5.2(d), then the Company shall pay to the Allocation Member on the Independently Calculated Profit Distribution Payment Date an amount equal to the amount by which (x) the
Independently Calculated Profit Distribution as of such Calculation Date
exceeds
(y) the amount of Profit Distribution, as the case may be and as of such Calculation Date, paid by the Company in accordance with Section 5.2(e)(i)(C),
or
37
(B) if (x) an independent accounting firm fails to delivers its calculation of Adjusted
Profit Distribution Amount as of such Calculation Date to the Administrator and the Audit Committee in accordance with Section 5.2(d) and (y) the Profit Distribution Amount originally submitted to the Audit Committee by the Administrator
pursuant to Section 5.2(c) is greater than the Disputed Profit Distribution, then the Company shall pay to the Allocation Member on the Submission Failure Payment Date, the amount by which Approved Profit Distribution as of such Calculation
Date
exceeds
(y) the amount of Profit Distribution, as the case may be and as of such Calculation Date, paid by the Company in accordance with Section 5.2(e)(i)(C).
Any Profit Distributions will be due and payable on the applicable Profit Distribution Payment Date by the Company, in arrears, in immediately
available funds by wire transfer to an account designated by the Allocation Member from time to time.
Notwithstanding anything to the
contrary contained in the Agreement, including this Section 5.2(e), the Company also shall pay any amounts called for by the final paragraph (including all sub-clauses thereof) of Section 5.2(b).
(f)
Reserved.
(g)
True-Up and Review of Profit Distributions
. The calculation to be made by any Person hereunder of any Profit Distribution or Adjusted Profit Distribution Amount, in each case, as of any Calculation Date, shall be based on, in the following
order (i) audited consolidated financial statements to the extent available with respect to any Person underlying such calculation of Profit Distribution, (ii) if audited consolidated financial statements are not available with respect to
such Person, then unaudited consolidated financial statements to the extent available with respect to such Person, and (iii) if neither audited nor unaudited consolidated financial statements are available with respect to such Person, then the
books and records of such Person then available;
provided
, that, with respect to any calculation of the Profit Distribution based on the books and records of any Person related to such calculation of Profit Distribution, upon availability of,
in the first instance, audited consolidated financial statements with respect to such Person or, in the second instance, unaudited consolidated financial statements with respect to such Person, in each case, relating to amounts previously calculated
on such Calculation Date by reference to the books and records of such relevant Person, the Profit Distribution Amount, and any components thereof, as of such Calculation Date shall be recalculated to determine if any Over-Paid Profit Distributions
or Under-Paid Profit Distributions were created as of such Calculation Date. In making any determination under this Section 5.2 with respect to any individual calculation of the Profit Distribution Amount or Adjusted Profit Distribution Amount,
in each case, as of any Calculation Date, such determination shall be based on only one of the following, in the following order, with respect to such calculation of Profit Distribution Amount or Adjusted Profit Distribution Amount, as the case may
be: (x) the Independently Calculated Profit Distribution calculated as of such Calculation Date, (y) if no Independently Calculated Profit Distribution was calculated as of such Calculation Date, the Approved Profit Distribution as of such
Calculation Date, and (z) if no Approved Profit Distribution or Independently Calculated Profit Distribution, in each case, was calculated as of such Calculation Date (
i.e.
, if the Profit Distribution Amount calculated by the
Administrator as of such Calculation Date was not approved by the Audit Committee, automatically or otherwise, or the Administrator did not disagree with the Audit Committees calculated of Disputed Profit Distribution as of such Calculation
Date), the Disputed Profit Distribution as calculated as of the Calculation Date.
38
(h)
Payment of Tax Distributions
. With respect to any calendar year in which the
Allocation Member shall be allocated income pursuant to Article 4, but with respect to which the Allocation Member has not, prior to April 15 of the following year, received Profit Distributions from the Company pursuant to Section 5.2(e)
in amounts at least equal to the Allocation Members tax liability arising from allocations of income hereunder to the Allocation Member with respect to such calendar year, the Company shall make a distribution to the Allocation Member in an
amount calculated in accordance with Section 5.2(i) (the
Tax Distribution
) by April 15 of such following year (such date of payment, the
Tax Distribution Payment Date
).
(i)
Calculation of Tax Distributions
. The amount of Tax Distributions to be paid on any Tax Distribution Payment Date pursuant to
Section 5.2(h) shall be calculated as if the items of income, gain, deduction, loss and credit in respect of the Company were the only such items entering into the computation of tax liability of the Allocation Member for the calendar year and
as if the Allocation Member were subject to tax at the highest marginal effective rate of Federal, state and local income tax applicable to an individual resident in New York City, taking account of any difference in rates applicable to ordinary
income and long terms capital gains and any allowable deductions in respect of such state and local taxes in computing the Allocation Members liability for Federal income taxes.
(j)
Books and Records
. The Administrator shall maintain cumulative books and records with respect to the details of any calculations
made pursuant to this Section 5.2, which records shall be available for inspection and reproduction at any time upon request by the Board of Directors and the Allocation Member.
(k)
Sufficient Liquidity
. If the Company does not have sufficient liquid assets to pay the entire amount of Profit Distributions and/or
Tax Distributions, including any accrued and unpaid Profit Distributions and/or Tax Distribution to date, on any applicable Profit Distribution Date, the Company shall liquidate assets or incur indebtedness in order to pay such Profit Distribution
and/or Tax Distribution, as the case may be, in full on such Profit Distribution Payment Date;
provided
, that the Allocation Member may elect, in its sole discretion, on such Profit Distribution Payment Date and/or Tax Distribution Payment
Date, as the case may be, to allow the Company to defer the payment of all or any portion of the Profit Distribution and/or Tax Distribution, as the case may be, then accrued and unpaid until the next succeeding Profit Distribution Payment Date or
Tax Distribution Payment Date, as the case may be, and, thereby, enable to the Company to avoid such liquidation or incurrence. For the avoidance of doubt, the Allocation Member may make such election to allow the Company to defer the payment of the
Profit Distributions and/or Tax Distributions more than once.
39
(l)
Distribution Entitlement
. The Allocation Member shall have the right to elect, in its
sole discretion, on any applicable Profit Distribution Payment Date to defer payment by the Company of all or any portion of the amount of Profit Distribution payable by the Company in accordance with Section 5.2(e) on such Profit Distribution
Payment Date. Such election shall become effective upon the delivery of a written notice to the Company indicating the amount of Profit Distribution that the Allocation Member is electing to defer (such amount, the
Distribution
Entitlement
). Once deferred, the Company shall pay, on twenty (20) Business Days prior written notice delivered by the Allocation Member and received by the Company (the
Distribution Entitlement Notice
),
all or any portion of the Distribution Entitlement Amount as designated by the Allocation Member in the Distribution Entitlement Notice (the
Distribution Entitlement Payment
) on the date specified in the Distribution
Entitlement Notice (the
Distribution Entitlement Payment Date
). Any Distribution Entitlement Notice delivered by the Allocation Member pursuant to this Section 5.2(l) shall specify (i) the Distribution Entitlement
Amount as of the date of such Distribution Entitlement Notice, (ii) the calculation of the Distribution Entitlement Amount, (iii) the portion of the Distribution Entitlement that the Allocation Member is electing to receive, and
(iv) the Distribution Entitlement Payment Date with respect to the amount so elected to be received by the Allocation Member.
Section 5.3
Amounts Withheld
. All amounts withheld pursuant to the Code or any provision of any state, local or foreign tax law
with respect to any payment, dividend or other distribution or allocation to the Company or the Members shall be treated as amounts paid to the Members with respect to which such amounts were withheld pursuant to this Section 5.3 for all
purposes under this Agreement. The Company is authorized to withhold from payments or with respect to allocations to the Members, and to pay over to any U.S. federal, state and local government or any foreign government, any amounts required to be
so withheld pursuant to the Code or any provisions of any other U.S. federal, state or local law or any foreign law, and shall allocate any such amounts to the Members with respect to which such amounts were withheld. For so long as the Trust is the
sole Trust Member, all amounts withheld in accordance with this Section 5.3 will be treated as amounts paid to holders of the Trust Shares and any such amounts shall be allocated to the holders of the Trust Shares in the same proportion as any
such allocations were made per Trust Interest.
Section 5.4
Limitations on Dividends and Distributions
.
(a) The Company shall pay no distributions to the Members except as provided in this Article 5 and Article 14
or in any applicable Trust Interest Designation
.
(b) A Member may not receive, and the Company, and Board of Directors on behalf of the Company may not make, distributions from the Company to
the extent such distribution is inconsistent with, or in violation of, the Act or any provision of this Agreement.
40
ARTICLE 6
BOARD OF DIRECTORS
Section 6.1
Initial
Current
Board
. The Board of Directors is comprised of the seven following individuals:
I. Joseph Massoud
Alan B. Offenberg
, C. Sean Day, James J.
Bottiglieri, D. Eugene Ewing,
Ted Waitman
Gordon Burns
, Mark H. Lazarus and Harold S. Edwards (each,
an
Initial
a
Current
Director
and, collectively, the
Initial
Current
Board
). Each
Initial
Current
Director shall hold office until his
successor is elected or appointed and qualified, or until his or her earlier death, resignation or removal in accordance with this Article 6. The
Initial
Current
Board shall have all of the powers and authorities accorded to the Board of Directors, and each
Initial
Current
Director shall have all of the powers and
authorities accorded the directors of the Company under the terms of this Agreement.
Section 6.2
General Powers
. The
business and affairs of the Company shall be managed by or under the direction of its Board of Directors. Each director of the Company, when acting in such capacity, is a manager within the meaning of Section 18-402 of the Act and
as such is vested with the powers and authorities necessary for the management of the Company, subject to the terms of this Agreement and the Management Services Agreement;
provided
, that no director is authorized to act individually on
behalf of the Company and the Board of Directors shall only take action in accordance with the requirements of this Agreement. In addition to the powers and authorities expressly conferred upon it by this Agreement, the Board of Directors may
exercise all such powers of the Company and do all such lawful acts and things as are not prohibited by applicable law, including the Rules and Regulations, or by this Agreement required to be exercised or done by the Members. Without limiting the
generality of the foregoing, it shall be the responsibility of the Board of Directors to establish broad objectives and the general course of the business, determine basic policies, appraise the adequacy of overall results, and generally represent
and further the interests of the Members.
Section 6.3
Duties of Directors
. Except as provided in this Agreement or otherwise
required by the Act, each director of the Company shall have the same fiduciary duties to the Company and the Members as a director of a corporation incorporated under the DGCL has to such corporation and its stockholders, as if such directors of
the Company were directors of a corporation incorporated under the DGCL. Except as provided in this Agreement, the parties intend that the fiduciary duties of the directors of the Company shall be interpreted consistently with the jurisprudence
regarding such fiduciary duties of directors of a corporation under the DGCL. It shall be expressly understood that, to the fullest extent permitted by law, no director of the Company has any duties (fiduciary or otherwise) with respect to any
action or inaction of the Manager, and that, to the fullest extent permitted by law, any actions or inactions of the directors of the Company that cause the Company to act in compliance or in accordance with the Management Services Agreement shall
be deemed consistent and compliant with the fiduciary duties of such directors and shall not constitute a breach of any duty hereunder or existing in law, in equity or otherwise.
Section 6.4
Number, Tenure and Qualifications
. As provided by Section 6.1, the
Initial
Current
Board
shall be
is
comprised of seven (7)
Initial
Current
Directors and at all times
from and after the closing of the Initial Public Offering the composition of the Board of Directors
shall consist of at least a
majority of Independent Directors. Subject to this Section 6.4, the number of directors shall be fixed from time to time exclusively pursuant to a resolution adopted by the Board of Directors, but shall consist of not less than five
(5) nor more than thirteen (13) directors. However, no decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
41
Subject to the next sentence, the Board of Directors shall be divided into three classes: Class
I, Class II, Class III, with the holders of Trust Interests entitled to elect or appoint the Class I, II, and III directors.
On the date hereof, each Current Director shall continue in the
same class of directors (i.e., Class I, Class II or Class III) as such Current Director was elected into prior to the effectiveness of this Agreement.
In addition, the Board of Directors shall
include one (1) director (or, if there are nine (9) or more directors then serving on the Board of Directors, two (2) directors), who shall not be a member of any class (each, an
Appointed Director
), and who
shall be elected or appointed by the Allocation Member.
Classes I, II and III shall be divided as nearly equal in numbers as the
then total number of directors constituting such classes permits, with the term of office of each class expiring in succeeding years, so that (except for the initial terms provided below) each such director shall be elected for a three year term. If
the number of such directors is not evenly divisible by three, the greatest number of such directors shall be in Class III and the least number in Class I.
The initial Class I
directors shall hold office for a term expiring at the first annual meeting of the Members following closing of the Initial Public Offering, the initial Class II directors shall hold office for a term expiring at the second succeeding annual meeting
of the Members following closing of the Initial Public Offering, and the initial Class III directors shall hold office for a term expiring at the third succeeding annual meeting of the Members following closing of the Initial Public Offering. The
initial Class I directors are Mark H. Lazarus and Harold S. Edwards. The initial Class II directors are James J. Bottiglieri and Ted Waitman. The initial Class III directors are C. Sean Day and D. Eugene Ewing.
Any director filling any Class I, II or III vacancy pursuant to Section 6.8 shall hold office until the next election of the class for which such directors shall have been chosen and until their successors
shall be elected and qualified. The term of each director in Classes I, II and III shall be the period from the effective date of such directors election until the end of the term provided in this paragraph, or until such directors
successor is duly elected and qualified, or until such directors earlier death, resignation or removal. Directors need not be residents of the State of Delaware or Members.
The Allocation Member has designated
I. Joseph Massoud
Alan B. Offenberg
as the
initial
Appointed Director. The Appointed Director shall hold office until his successor is elected or appointed and qualified, or until his or her earlier death, resignation or removal in accordance with this Article 6.
Any director filling a Appointed Director vacancy pursuant to Section 6.8 shall hold office until his successor is elected or appointed and qualified, or until his or her earlier death, resignation or removal in accordance with this Article 6.
Section 6.5
Election of Directors
. Except as provided in Sections 6.1, 6.4 and 6.8, the Class I, II and III directors
shall be elected at the annual meeting of Members. At any meeting of Members duly called and held for the election of directors at which a quorum is present, directors shall
, subject to
any Trust Interest Designation,
be elected by a plurality of the Trust Interests present in person or represented by proxy at the meeting of Members. Except as provided in Sections 6.1 and 6.8,
the Appointed Director shall be elected or appointed at such time or times as the Allocation Member so determines, pursuant to written notice delivered to the Chairman or, if none then serving, the Board of Directors as constituted immediately prior
to such election or appointment.
Section 6.6
Removal
. Any director may be removed from office, with or without cause,
by the affirmative vote of the Members holding at least eighty-five percent (85%) of the applicable issued and Outstanding
Voting
Trust Interests that so elected or appointed such director. In the case of an Appointed Director, any such removal shall be evidenced in writing by the Allocation Member, which shall be delivered
to the Chairman or, if none then serving, the Board of Directors as constituted immediately after such removal.
42
Section 6.7
Resignations
. Any director, whether elected or appointed, may resign at
any time upon notice of such resignation to the Company. An Independent Director who ceases to be independent shall promptly resign to the extent required for the Company or the Allocation Member to comply with applicable laws, rules and
regulations.
Section 6.8
Vacancies and Newly Created
Directorships
.
Until the second annual election of directors following the Initial Public Offering and other than with respect to the Appointed Director, any vacancies on the
Board of Directors, including vacancies resulting from any increase in the authorized number of directors, shall be filled by the Chairman for the applicable term relating to director position so filled. Thereafter, subject
Subject
to Section 6.9 and other than with respect to an Appointed Director and except as otherwise provided herein, any vacancies on
the Board of Directors, including vacancies resulting from any increase in the authorized number of directors, shall be filled by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director.
Notwithstanding anything to the contrary contained in the preceding sentences of this Section 6.8, any director filling any such vacancy shall satisfy the Applicable Listing Standards and the Rules and Regulations, and any necessary or required
qualifications under the Applicable Listing Standards and the Rules and Regulations for applicable committee membership. Subject to Section 6.9, any vacancies in the Appointed Director for any reason, and any newly created directorships
resulting from any increase in the authorized number of Appointed Directors may be filled by the Allocation Member at such time or times as the Allocation Member so determines, pursuant to written notice delivered to the Chairman or, if none then
serving, the Board of Directors as constituted immediately prior to filling such vacancy, or such election or appointment.
Section 6.9
Appointment of or Nomination and Election of Chairman
. C. Sean Day shall be the
initial
Chairman
,
and shall hold
such
office
for a term expiring at
until
the
second annual meeting
earlier
of
the Members following the closing of the Initial Public Offering, or until such Chairmans successor is duly elected and qualified, or until
such Chairmans
earlier
death, resignation or removal.
As of the expiration of the term of the initial Chairman (and of any subsequent Chairman) or upon
any
Upon
such
Chairmans
earlier
Chairmans
death, resignation or removal, a majority of the Board of Directors shall elect a
successor
Chairman, who shall hold office
for at least one
(1) year, or
until
the earlier of
such
Chairmans
successor
is duly elected and qualified,
or until such
Chairmans
earlier
death, resignation or
removal.
Section 6.10
Chairman of the Board
. The Chairman shall be a member of the Board of Directors. The Chairman is
not required to be an employee of the Company. The Chairman, if present, shall preside at all meetings of the Board of Directors. If the Chairman is unavailable for any reason, the duties of the Chairman shall be performed, and the Chairmans
authority may be exercised, by a director designated for this purpose by the remaining directors of the Board of Directors. The Chairman shall perform such other duties and have such other powers as may be prescribed by the Board of Directors or
this Agreement, all in accordance with basic policies as may be established by the Company, and subject to the approval and oversight of the Board of Directors.
Section 6.11
Regular Meetings
. A regular meeting of the Board of Directors shall be held without any other notice than this
Agreement, immediately after, and at the same place (if any) as, each annual meeting of Members. The Board of Directors may, by resolution, provide the time and place (if any) for the holding of additional regular meetings without any other notice
than such resolution. Unless otherwise determined by the Board of Directors, the Secretary of the Company shall act as Secretary at all regular meetings of the Board of Directors and in the Secretarys absence a temporary Secretary shall be
appointed by the chairman of the meeting.
43
Section 6.12
Special Meetings
. Special meetings of the Board of Directors shall be
called at the request of the Chief Executive Officer, the Chairman or of eighty-five percent (85%) of the directors of the Board of Directors. The Person or Persons authorized to call special meetings of the Board of Directors may fix the place
and time of the meetings. Unless otherwise determined by the Board of Directors, the Secretary of the Company shall act as Secretary at all special meetings of the Board of Directors and in the Secretarys absence a temporary Secretary shall be
appointed by the chairman of the meeting.
Section 6.13
Notice for Special Meetings
. Notice of any special meeting of the
Board of Directors shall be mailed by first class mail, postage paid, to each director at his or her business or residence or shall be sent by telegraph, express courier service (including, without limitation, Federal Express) or facsimile (directed
to the facsimile number to which the director has consented to receive notice) or other electronic transmission (including, but not limited to, an e-mail address at which the director has consented to receive notice) not later than three
(3) days before the day on which such meeting is to be held if called by the Chief Executive Officer or the Chairman and twenty one (21) days before the day on which such meeting is to be held in all other cases. Except in the case where
the business to be transacted at such special meeting includes a proposed amendment to this Agreement, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the
notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in accordance with Section 9.12, either before or after such meeting.
Section 6.14
Waiver of Notice
. Whenever any notice is required to be given to any director of the Company under the terms of this
Agreement, a waiver thereof in writing, signed by the Person or Persons entitled to such notice, or a waiver thereof by electronic transmission by the Person or Persons entitled to notice, whether before or after the time stated in such notice,
shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at, nor the purpose of, any meeting of the Board of Directors or committee thereof need be specified in any written waiver of notice or any waiver by
electronic transmission of notice of such meeting.
Section 6.15
Action Without Meeting
. Any action required or permitted to
be taken at any meeting by the Board of Directors or any committee or subcommittee thereof, as the case may be, may be taken without a meeting, without a vote and without prior notice if a consent thereto is signed or transmitted electronically, as
the case may be, by the Chairman and at least eighty-five percent (85%) of the directors of the Board of Directors or of such committee or subcommittee, as the case may be, and the writing or writings or electronic transmission or transmissions
are filed with the minutes of proceedings of the Board of Directors or such committee or subcommittee;
provided
,
however
, that such electronic transmission or transmissions must either set forth or be submitted with information from
which it can be determined that the electronic transmission or transmissions were authorized by the director. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are
maintained in electronic form.
Section 6.16
Conference Telephone Meetings
. Directors of the Board of Directors, or any
committee or subcommittee thereof, may participate in a meeting of the Board of Directors or such committee or subcommittee by means of conference telephone or other communications equipment by means of which all Persons participating in the meeting
can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.
44
Section 6.17
Quorum
. Except as otherwise provided in this Agreement, at all meetings
of the Board of Directors, at least thirty-five percent (35%) of the then total number of directors in office (such total number of directors, the
Entire Board of Directors
) shall constitute a quorum for the
transaction of business. At all meetings of any committee of the Board of Directors, the presence of a majority of the total number of members of such committee (assuming no vacancies) shall constitute a quorum. The act of a majority of the
directors or committee members present at any meeting at which there is a quorum shall be the act of the Board of Directors or such committee, as the case may be. If a quorum shall not be present at any meeting of the Board of Directors or any
committee, a majority of the directors or members, as the case may be, present thereat may adjourn the meeting from time to time without further notice other than announcement at the meeting. The directors of the Board of Directors present at a duly
organized meeting at which a quorum is present may continue to transact business until adjournment, notwithstanding the withdrawal of enough directors of the Board of Directors to leave less than a quorum.
Section 6.18
Committees
.
(a)
Upon the effectiveness of the Initial Public Offering,
the
The
Company shall have three standing committees: the Nominating and Governance Committee, the Audit Committee and
the Compensation Committee, as set out below. Each of the Nominating and Governance Committee, the Audit Committee and the Compensation Committee shall adopt by resolution a charter to establish the rules and responsibilities of such committee in
accordance with applicable law, including the Rules and Regulations and the Applicable Listing Rules.
(i)
Nominating and Corporate Governance Committee
. The Board of Directors, by resolution adopted by a majority of the Entire Board of Directors, has designated a Nominating and Corporate Governance Committee comprised solely of Independent
Directors, which committee shall oversee the Companys commitment to good corporate governance, develop and recommend to the Board a set of corporate governance principles and oversee the evaluation of the performance of the Board of Directors.
The Nominating and Corporate Governance Committee shall have the duties and responsibilities enumerated in its charter, as amended from time to time by the Board of Directors.
Subject to Section 6.8, the Nominating and Corporate Governance Committee will solicit recommendations for director nominees (other than
the Appointed Director) from the Chairman and the Chief Executive Officer. The Nominating and Corporate Governance Committee may also recommend to the Board specific policies or guidelines concerning the structure and composition of the Board of
Directors or committees of the Board of Directors, and the tenure and retirement of directors (other than the Appointed Director) and matters related thereto.
45
(ii)
Audit Committee
. The Board of Directors, by resolution adopted by a
majority of the Entire Board of Directors, has designated an Audit Committee comprised of not fewer than three (3) nor more than seven (7) directors, all of whom shall be Independent Directors, who shall collectively meet the financial
literacy requirements of the Exchange Act, the Rules and Regulations and of the Applicable Listing Rules. At least one member of the Audit Committee will meet the accounting or related financial management expertise required to be established by the
Board of Directors. The Audit Committee shall have the duties and responsibilities enumerated in its charter, as amended from time to time by the Board of Directors.
The Company shall provide appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the
Board of Directors for payment of:
(A) compensation to any registered public accounting firm engaged for the purpose of
preparing or issuing an audit report or performing other audit, review or attest services for the Company;
(B)
compensation to independent counsel and other advisors engaged for any reason by the Audit Committee; and
(C) ordinary
administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.
(iii)
Compensation Committee
. The Board of Directors, by resolution adopted by a majority of the Entire Board of Directors, has designated a Compensation Committee comprised solely of Independent Directors. The Compensation Committee shall have the
duties and responsibilities enumerated in its charter, as amended from time to time by the Board of Directors.
(b) In addition, the Board
of Directors may designate one or more additional committees or subcommittees, with each such committee or subcommittee consisting of such number of directors of the Company and having such powers and authority as shall be determined by resolution
of the Board of Directors.
(c) All acts done by any committee or subcommittee within the scope of its powers and authority pursuant to
this Agreement and the resolutions adopted by the Board of Directors in accordance with the terms hereof shall be deemed to be, and may be certified as being, done or conferred under authority of the Board of Directors. The Secretary is empowered to
certify that any resolution duly adopted by any such committee is binding upon the Company and to execute and deliver such certifications from time to time as may be necessary or proper to the conduct of the business of the Company.
(d) Regular meetings of committees shall be held at such times as may be determined by resolution of the Board of Directors or the committee or
subcommittee in question and no notice shall be required for any regular meeting other than such resolution. A special meeting of any committee or subcommittee shall be called by resolution of the Board of Directors or by the Secretary upon the
request of the Chief Executive Officer, the Chairman or a majority of the members of any committee. Notice of special meetings shall be given to each member of the committee in the same manner as that provided for in Section 6.13.
46
Section 6.19
Committee Members.
(a) Each member of any committee of the Board of Directors shall hold office until such members successor is elected and has qualified,
unless such member sooner dies, resigns or is removed.
(b) Subject to Section 6.8, the Board of Directors may designate one or more
directors as alternate members of any committee to fill any vacancy on a committee and to fill a vacant chairmanship of a committee, occurring as a result of a member or chairman leaving the committee, whether through death, resignation, removal or
otherwise.
Section 6.20
Committee Secretary
. The Secretary of the Company shall act as Secretary of any committee or
subcommittee, unless otherwise provided by the Board of Directors or the committee or subcommittee, as applicable.