LIMITED LIABILITY COMPANY AGREEMENT
OF
NAVIGANTVACATIONS.COM, LLC
A DELAWARE LIMITED LIABILITY COMPANY
EFFECTIVE AS OF OCTOBER 13, 1999
THE INTERESTS DESCRIBED AND REPRESENTED BY THIS LIMITED LIABILITY COMPANY
AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT"
OR ANY APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND ARE RESTRICTED
SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY
NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE ACT AND APPLICABLE
STATE ACTS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE
SATISFACTION OF THE COMPANY.
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TABLE OF CONTENTS
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Article 1. DEFINITIONS.......................................................................... 1
1.1 Accretion Amount....................................................................... 1
1.2 Act.................................................................................... 1
1.3 Affiliate.............................................................................. 1
1.4 Agreement.............................................................................. 1
1.5 Business............................................................................... 1
1.6 Business Plan.......................................................................... 1
1.7 Capital Account........................................................................ 1
1.8 Capital Contribution................................................................... 1
1.9 Certificate of Formation or Certificate................................................ 2
1.10 Change of Control...................................................................... 2
1.11 Code................................................................................... 2
1.12 Common Unit............................................................................ 2
1.13 Company................................................................................ 2
1.14 Company Property....................................................................... 2
1.15 Confidential Information............................................................... 2
1.16 Deficit Capital Account................................................................ 3
1.17 Depreciation........................................................................... 3
1.18 Distributable Cash..................................................................... 3
1.19 Distribution........................................................................... 3
1.20 Economic Interest...................................................................... 3
1.21 Economic Interest Owner................................................................ 4
1.22 Entity................................................................................. 4
1.23 Equity Owner........................................................................... 4
1.24 Fiscal Year............................................................................ 4
1.25 Gross Asset Value...................................................................... 4
1.26 Holders................................................................................ 5
1.27 IPO.................................................................................... 5
1.28 Intellectual Property Rights........................................................... 5
1.29 License Agreement...................................................................... 5
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1.30 Majority Interest...................................................................... 6
1.31 Manager................................................................................ 6
1.32 Member................................................................................. 6
1.33 Membership Interest.................................................................... 6
1.34 Navigant............................................................................... 6
1.35 Navigant Options....................................................................... 6
1.36 Navigant Dilutive Units................................................................ 6
1.37 NII.................................................................................... 6
1.38 NII Sale............................................................................... 6
1.39 Noncompetitive Activity................................................................ 6
1.40 Och-Ziff Partners Domestic............................................................. 7
1.41 Och-Ziff Partners Overseas............................................................. 7
1.42 Och-Ziff Partners...................................................................... 7
1.43 Ownership Interest..................................................................... 7
1.44 Preferred Sale Fee..................................................................... 7
1.45 Proportionately Dilutive Units......................................................... 7
1.46 Put Period............................................................................. 7
1.47 Put Right.............................................................................. 7
1.48 Person................................................................................. 7
1.49 Preferred-to-Common Conversion Option.................................................. 8
1.50 Preferred Units........................................................................ 8
1.51 Profits and Losses..................................................................... 8
1.52 Proportionately........................................................................ 9
1.53 Redemption Price....................................................................... 9
1.54 Regulations............................................................................ 9
1.55 Reorganization......................................................................... 9
1.56 Reserves............................................................................... 9
1.57 Sale or Sell........................................................................... 9
1.58 Secretary of State..................................................................... 9
1.59 Selling Equity Owner................................................................... 9
1.60 Sharing Ratio.......................................................................... 9
1.61 State.................................................................................. 9
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1.62 Successor Corporation.................................................................. 9
1.63 Two-Thirds Interest.................................................................... 10
1.64 Unrecovered Losses..................................................................... 10
1.65 Voting Interest........................................................................ 10
Article 2. FORMATION OF COMPANY.................................................................. 10
2.1 Formation.............................................................................. 10
2.2 Name................................................................................... 10
2.3 Principal Place of Business............................................................ 10
2.4 Registered Office and Registered Agent................................................. 10
2.5 Term................................................................................... 10
Article 3. BUSINESS OF COMPANY................................................................... 10
3.1 Permitted Business..................................................................... 10
Article 4. NAMES AND ADDRESSES OF EQUITY OWNERS.................................................. 11
Article 5. RIGHTS AND DUTIES OF MANAGER AND OFFICERS............................................. 11
5.1 Management.............................................................................. 11
5.2 Number, Tenure and Qualifications....................................................... 12
5.3 Certain Powers of Manager............................................................... 12
5.4 Limitations on Authority................................................................ 13
5.5 Liability for Certain Acts.............................................................. 14
5.6 Manager and Members Have No Exclusive Duty to Company; Noncompetition Covenant.......... 14
5.7 Bank Accounts........................................................................... 16
5.8 Indemnity of the Manager, Employees and Other Agents.................................... 16
5.9 Resignation............................................................................. 16
5.10 Removal................................................................................ 16
5.11 Vacancies.............................................................................. 16
5.12 Compensation, Reimbursement, Organization Expenses..................................... 17
5.13 Annual Operating Plan.................................................................. 17
5.14 Right to Rely on the Manager........................................................... 18
5.15 Officers............................................................................... 18
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Article 6. RIGHTS AND OBLIGATIONS OF EQUITY OWNERS............................................... 20
6.1 Limitation of Liability................................................................ 20
6.2 List of Equity Owners.................................................................. 20
6.3 Equity Owners Have No Agency Authority................................................. 21
6.4 Company Books.......................................................................... 21
6.5 Priority and Return of Capital......................................................... 21
6.6 License Agreement...................................................................... 21
6.7 Warrants............................................................................... 21
Article 7. MEETINGS OF MEMBERS................................................................... 21
7.1 No Required Meetings................................................................... 21
7.2 Place of Meetings...................................................................... 21
7.3 Notice of Meetings..................................................................... 21
7.4 Meeting of all Members................................................................. 22
7.5 Record Date............................................................................ 22
7.6 Quorum................................................................................. 22
7.7 Manner of Acting....................................................................... 22
7.8 Proxies................................................................................ 22
7.9 Action by Members Without a Meeting.................................................... 23
7.10 Waiver of Notice....................................................................... 23
Article 8. CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS..................................... 23
8.1 Members' Capital Contributions......................................................... 23
8.2 Additional Contributions............................................................... 23
8.3 Capital Accounts....................................................................... 23
8.4 Withdrawal or Reduction of Equity Owners' Contributions to Capital..................... 24
Article 9. ALLOCATIONS, INCOME TAX, DISTRIBUTIONS, ELECTIONS AND REPORTS......................... 24
9.1 Allocations of Profits and Losses from Operations...................................... 24
9.2 Special Allocations to Capital Accounts................................................ 25
9.3 Credit or Charge to Capital Accounts................................................... 27
9.4 Distributions.......................................................................... 27
9.5 Limitation Upon Distributions.......................................................... 27
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9.6 Accounting Principles.................................................................. 28
9.7 Interest on and Return of Capital Contributions........................................ 28
9.8 Loans to Company....................................................................... 28
9.9 Accounting Period...................................................................... 28
9.10 Records and Reports.................................................................... 28
9.11 Returns and Other Elections............................................................ 29
9.12 Tax Matters Partner.................................................................... 30
9.13 Certain Allocations for Income Tax (But Not Book Capital Account) Purposes............. 31
Article 10. TRANSFERABILITY...................................................................... 31
10.1 General................................................................................ 31
10.2 Right of First Refusal and Co-Sale..................................................... 32
10.3 Transferee Not Member in Absence of Consent............................................ 33
10.4 Additional Conditions to Recognition of Transferee..................................... 34
10.5 Put Rights............................................................................. 35
10.6 Sales to Affiliates.................................................................... 37
10.7 Right of First Offer................................................................... 38
Article 11. ISSUANCE OF MEMBERSHIP INTERESTS; OPTIONS; CONVERSION RIGHTS......................... 39
11.1 Issuance of Additional Membership Interests to New Members; Right of First Offer....... 39
11.2 Navigant Options....................................................................... 39
11.3 Conversion of Preferred Units to Common Units.......................................... 40
11.4 Issuance of Common Units (and Options to Acquire Common Units) to Employees; Dilution.. 40
11.5 Conversion of Common Units Upon Reorganization......................................... 41
11.6 Part Year Allocations With Respect to New Members...................................... 42
Article 12. DISSOLUTION AND TERMINATION.......................................................... 42
12.1 Dissolution............................................................................ 42
12.2 Effect of Dissolution.................................................................. 42
12.3 Winding Up, Liquidation and Distribution of Assets..................................... 42
12.4 Filing or Recording Statements......................................................... 45
12.5 Return of Contribution Nonrecourse to Other Equity Owners.............................. 45
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Article 13. MISCELLANEOUS PROVISIONS............................................................. 45
13.1 Notices............................................................................... 45
13.2 Books of Account and Records.......................................................... 45
13.3 Application of State Law.............................................................. 45
13.4 Waiver of Action for Partition........................................................ 46
13.5 Amendments............................................................................ 46
13.6 Execution of Additional Instruments................................................... 46
13.7 Construction.......................................................................... 46
13.8 Effect of Inconsistencies with the Act................................................ 46
13.9 Waivers............................................................................... 47
13.10 Rights and Remedies Cumulative........................................................ 47
13.11 Attorneys' Fees....................................................................... 47
13.12 Severability.......................................................................... 47
13.13 Heirs, Successors and Assigns......................................................... 47
13.14 Creditors............................................................................. 47
13.15 Counterparts.......................................................................... 47
13.16 Rule Against Perpetuities............................................................. 48
13.17 Power of Attorney..................................................................... 48
13.18 Investment Representations............................................................ 48
13.19 Representations and Warranties........................................................ 49
13.20 ERISA Representation and Covenant..................................................... 51
13.21 Confidential Information.............................................................. 51
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This Limited Liability Company Agreement is made and entered into effective
as of the 13th day of October, 1999, (the "Effective Date") by and among the
Company and each of the Members whose signatures appear on the signature page
hereof (the "Initial Members"). In consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Members and the
Company (and each person who subsequently becomes an Equity Owner) hereby agree
as follows:
Article 1.
DEFINITIONS
The following terms used in this Agreement shall have the following
meanings (unless otherwise expressly provided herein):
1.1 Accretion Amount. Accretion Amount shall mean an amount, computed
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without duplication, at the rate of six percent (6%) compounded annually on
$1,000 per Preferred Unit commencing on the Effective Date and ending on the
earlier of the date of dissolution of the Company, the date the Put Option is
exercised pursuant to Section 10.5 or the date the Preferred Units are converted
to Common Units, as appropriate.
1.2 Act. Act shall mean the Delaware Limited Liability Company Act, as
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amended from time to time.
1.3 Affiliate. Affiliate shall mean, with respect to any Person, (i) any
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Person directly or indirectly controlling, controlled by, or under common
control with such Person, and (ii) any Person owning or controlling ten percent
(10%) or more of the outstanding voting interests of such Person. For purposes
of this definition, the term "controls," "is controlled by," or "is under common
control with" shall mean 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.
1.4 Agreement. Agreement shall mean this Limited Liability Company
---------
Agreement as originally executed and as amended from time to time.
1.5 Business. Business is defined in Section 3.1.
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1.6 Business Plan. Business Plan is defined in Section 3.1.
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1.7 Capital Account. Capital Account as of any given date shall mean the
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Capital Account of each Equity Owner as described in Article 8 and maintained to
such date in accordance with this Agreement.
1.8 Capital Contribution. Capital Contribution shall mean any
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contribution to the capital of the Company in cash or property by an Equity
Owner whenever made. "Initial Capital Contribution" shall mean the initial
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contribution to the capital of the Company pursuant to this Agreement as shown
on Exhibit 8.1.
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1.9 Certificate of Formation or Certificate. The Certificate of Formation
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or Certificate shall mean the Certificate of Formation of the Company as filed
with the Secretary of State as the same may be amended from time to time.
1.10 Change of Control. Change of Control means (a) any merger or
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consolidation to which NII is a party except for a merger in which after giving
effect to such merger, the holders of NII's outstanding capital stock possessing
a majority of the voting power to elect a majority of the surviving
corporation's board of directors ("Voting Power") immediately prior to the
merger shall continue to own the surviving corporation's outstanding capital
stock possessing the Voting Power, and (b) any transaction or series of related
transactions in which capital stock representing in excess of 50% of NII's
Voting Power is transferred.
1.11 Code. Code shall mean the Internal Revenue Code of 1986, as amended
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from time to time.
1.12 Common Unit. Common Unit means an Ownership Interest in the Company
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which entitles the Equity Owner who holds such Common Unit to the following:
(a) a Proportionate share of the Profits and Losses allocated to all
Common Units,
(b) a Proportionate share of the Voting Interests attributable to all
Common Units held by Members, and
(c) such other rights and obligations set forth in this Agreement.
1.13 Company. Company shall mean NavigantVacations.com, LLC, a Delaware
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limited liability company.
1.14 Company Property. All assets (real or personal, tangible or
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intangible, including cash) of the Company.
1.15 Confidential Information. Confidential Information means any
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proprietary information, whether written or oral, pertaining to the business,
financial condition, strategies, plans, policies, clients or customers,
inventions, trade secrets, computer programs, or processes of the disclosing
party (i) that is furnished or disclosed by the disclosing party to the
recipient or to the recipient's employees, representatives or agents, and (A) in
the case of written information, is conspicuously marked as proprietary or
confidential, or (B) in the case of information which is provided orally, is
stated to be proprietary or confidential at the time of disclosure and after
disclosure is reduced to writing or other tangible form and delivered within 10
business days in accordance with this agreement to the party receiving such
disclosure. Confidential Information shall not include any information that (X)
is already known to the receiving party at the time of receipt, as evidenced by
written records made prior to such receipt,
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or (Y) is independently developed or formulated by the receiving party, or (Z)
otherwise is or becomes generally available to the public through no fault of
the receiving party.
1.16 Deficit Capital Account. Deficit Capital Account shall mean with
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respect to any Equity Owner, the deficit balance, if any, in such Equity Owner's
Capital Account as of the end of the Fiscal Year, after giving effect to the
following adjustments:
(a) credit to such Capital Account the amount, if any, which such
Equity Owner is obligated to restore under Section 1.704-1(b)(2)(ii)(c) of the
Regulations, as well as any addition thereto pursuant to the next to last
sentence of Sections 1.704-2(g)(1) and (i)(5) of the Regulations, after taking
into account thereunder any changes during such year in partnership minimum gain
as determined in accordance with Section 1.704-2(d) of the Regulations ("Company
Minimum Gain") and in any partner nonrecourse debt minimum as determined under
Section 1.704-2(i)(3) of the Regulations ("Member Minimum Gain"); and
(b) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
This definition of Deficit Capital Account is intended to comply with the
provisions of Regulations Sections 1.704-1(b)(2)(ii)(d) and 1.704-2, and shall
be interpreted consistently with those provisions.
1.17 Depreciation. For each Fiscal Year, an amount equal to the
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depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, 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 Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Manager.
1.18 Distributable Cash. All cash, whether revenues or other funds
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received by the Company, less the sum of the following to the extent paid or set
aside by the Company: (i) all principal and interest payments on indebtedness
of the Company and all other sums paid to lenders; (ii) all cash expenditures
incurred incident to the normal operation of the Company's business; and (iii)
Reserves.
1.19 Distribution. Any Sale of Company Property from the Company to or
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for the benefit of an Equity Owner by reason of such Equity Owner's ownership of
an Economic Interest.
1.20 Economic Interest. An Equity Owner's share of one or more of the
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Profits, Losses and Distributions pursuant to this Agreement and the Act,
including such rights
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that the Equity Owner has with respect to any Common Units or Preferred Units
held by it, but shall not include any right to participate in the management or
affairs of the Company, including, the right to vote on, consent to or otherwise
participate in any decision of the Members or Manager.
1.21 Economic Interest Owner. The owner of an Economic Interest who is
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not a Member.
1.22 Entity. Any general partnership (including a limited liability
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partnership), limited partnership (including a limited liability limited
partnership), limited liability company, corporation, joint venture, trust,
business trust, cooperative or association or any foreign trust or foreign
business organization.
1.23 Equity Owner. An Economic Interest Owner or a Member.
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1.24 Fiscal Year. The taxable year of the Company shall be a calendar
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year unless another year is required for federal income tax purposes.
1.25 Gross Asset Value. Gross Asset Value means, with respect to any
-----------------
asset, the asset's adjusted basis for federal income tax purposes, except as
follows:
(a) The initial Gross Asset Value of any asset contributed by an
Equity Owner to the Company shall be the gross fair market value of such asset,
as determined by the contributing Member and the Manager, provided that the
initial Gross Asset Values of the assets contributed to the Company pursuant to
Section 8.1 hereof shall be as set forth in Exhibit 8.1, and provided further
that, if the contributing Member is a Manager, the determination of the fair
market value of any other contributed asset shall require the consent of the
other Members owning a Majority Interest (determined without regard to the
Voting Interest of such contributing Member);
(b) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as reasonably determined by
the Manager as provided in Article 11 and as of the following times: (i) the
acquisition of an additional interest by any new or existing Equity Owner in
exchange for more than a de minimis contribution of property (including money);
(ii) the Distribution by the Company to an Equity Owner of more than a de
minimis amount of property as consideration for an Ownership Interest; and (iii)
the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(1) and (ii) above shall be made only if the Manager reasonably determines that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Equity Owners in the Company;
(c) The Gross Asset Value of any Company asset Distributed to any
Equity Owner shall be adjusted to equal the gross fair market value of such
asset on the date of Distribution as determined by an independent appraiser
selected by the Manager or by agreement of the Members holding not less 90% of
all Voting Interests; and
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(d) 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 Section 734(b) or Section 743(b) of the Code, but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and Section 8.3 and
subparagraph (e) under the definition of Profits and Losses; provided, however,
that Gross Asset Values shall not be adjusted pursuant to this subparagraph (d)
of this definition to the extent that the Manager determines that an adjustment
pursuant to subparagraph (b) of this definition is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this subparagraph (d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (a), (b) or (d) of this definition, then such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
1.26 Holders. Holders is defined in Section 10.5(a).
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1.27 IPO. IPO shall mean an initial public offering of Company common
---
stock which shall: (a) be effected by means of a firm-commitment underwriting
managed by one or more nationally recognized investment banking firms; (b) be
registered with the Securities and Exchange Commission under the Securities Act;
(c) involve the listing of the Company common stock on any national securities
exchange; and (d) raise gross proceeds to Company which result in a "total
valuation" of the Company immediately after the IPO of $75,000,000 or more. For
purposes of this definition, "total valuation" shall be (i) the initial price
per share of the Company's common stock offered to the public times the total
number of shares of the Company's common stock outstanding immediately after the
Closing of the offering, plus (ii) the fair market value (as determined in good
faith by the Manager) of any outstanding securities of the Company which are not
common stock.
1.28 Intellectual Property Rights. Intellectual Property Rights shall
----------------------------
mean any (i) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination, utility
model, certificate of invention and design patents, design patent applications,
design registrations and applications for design registrations, and mask work
rights, (ii) trademarks, tradenames, service marks, trade dress, logos, and
registrations and applications for registration thereof, (iii) copyrights and
registrations and applications for registration thereof, (iv) trade secrets and
confidential business information (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, and
copyrightable works, (v) other proprietary rights relating to any of the
foregoing, and (vi) copies and tangible embodiments thereof.
1.29 License Agreement. License Agreement is defined in Section 6.7.
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1.30 Majority Interest. One or more Voting Interests of Members which
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taken together exceed 50% of the aggregate of all Voting Interests.
1.31 Manager. Manager shall mean one or more Managers. Specifically,
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"Manager" shall mean Navigant, and any Person that succeeds it in that capacity.
1.32 Member. Each of the parties who executes a counterpart of this
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Agreement as a Member (an "Initial Member") and each of the parties who may
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hereafter become a Member. If a Person is a Member immediately prior to the
purchase or other acquisition by such Person of an Economic Interest, such
Person shall have all of the rights of a Member with respect to such purchased
or otherwise acquired Ownership Interest, as the case may be.
1.33 Membership Interest. A Member's entire interest in the Company,
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including such Member's Economic Interest and such other rights and privileges
that the Member may enjoy by being a Member.
1.34 Navigant. Navigant shall mean NavigantVacations.com Holdings, inc.
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a Delaware Corporation.
1.35 Navigant Options. Navigant Options is defined in Section 11.2(a).
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1.36 Navigant Dilutive Units. Navigant Dilutive Units is defined in
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Section 11.4(b).
1.37 NII. NII shall mean Navigant International, Inc., a Delaware
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Corporation.
1.38 NII Sale. NII Sale shall mean: (i) the sale for cash, promissory
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notes and/or stock of a corporation (other than NII or an Affiliate of NII
immediately before the sale) of 100 percent of the capital stock of NII and 100%
of all options and warrants to acquire capital stock of NII; or (ii) the merger
of NII with or into another corporation (other than NII or an Affiliate of NII
immediately before the sale) pursuant to which 100 percent of the issued and
outstanding capital shares of NII and 100 percent of the options and warrants to
purchase capital stock of NII are exchanged for cash, notes and/or publicly
traded capital stock of the acquiring corporation or an Affiliate of the
acquiring corporation, or (iii) a sale or other disposition of all or
substantially all of NII's assets. The value of the stock received, if any,
shall be determined as of the closing of the NII Sale, based upon the closing
price of such stock for the 15 trading days immediately preceding, and
including, the date of closing of the NII Sale.
1.39 Noncompetitive Activity. Noncompetitive Activity shall mean either:
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(a) Any leisure travel business booked through traditional channels,
including by way of a person-to-person meeting, telephone, facsimile, mail,
telephone or E-Mail provided that such business was not initiated from a web-
based contact; or
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(b) Any business travel booked through any means whatsoever,
including without limitation, from a web based contact.
1.40 Och-Ziff Partners Domestic. Och-Ziff Partners Domestic shall mean
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OZ Domestic Partners, L.P., a Delaware limited partnership.
1.41 Och-Ziff Partners Overseas. Och-Ziff Partners Overseas shall mean
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OZ SPCI, Ltd., a Cayman Islands exempt organization.
1.42 Och-Ziff Partners. Och-Ziff Partners shall mean collectively, Och-
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Ziff Partners Domestic and Och-Ziff Partners Overseas.
1.43 Ownership Interest. Ownership interest shall mean:
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(a) in the case of a Member, the Member's Membership Interest; and
(b) in the case of an Economic Interest Owner, the Economic Interest
Owner's Economic Interest.
1.44 Preferred Sale Fee. Preferred Sale Fee shall mean an amount equal
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to the sum of the following per Preferred Unit:
(a) $1,000, plus
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(b) the Accretion Amount through the closing date of the NII Sale,
plus
----
(c) the lesser of:
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(1) The product of: (x) positive remainder, if any, of the
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sales price per common share of NII (adjusted as appropriate to taking into
account any stock split or other recapitalization of NII's common stock
subsequent to the Effective Date), minus $9.00, multiplied by (y) 133.333,
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and
(2) $1,200.
1.45 Proportionately Dilutive Units. Proportionately Dilutive Units is
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defined in Section 11.4(c).
1.46 Put Period. Put Period means any period of time during which the
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Put Right may be exercised as set forth in Section 10.5.
1.47 Put Right. Put Right is defined in Section 10.5.
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1.48 Person. Any individual or Entity, and the heirs, executors,
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administrators, legal representatives, successors, and assigns of such "Person"
where the context so permits.
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1.49 Preferred-to-Common Conversion Option. Preferred-to-Common
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Conversion Option is defined in Section 10.5(c).
1.50 Preferred Units. Preferred Unit means an Ownership Interest in the
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Company which entitles the Equity Owner who holds such Preferred Unit to the
following:
(a) the Put Right described in Section 10.5, and
(b) such other rights set forth in this Agreement.
1.51 Profits and Losses. Profits and Losses shall mean for each Fiscal
------------------
Year of the Company an amount equal to the Company's net taxable income or loss
for such year as determined for federal income tax purposes (including
separately stated items) in accordance with the accounting method and rules used
by the Company and in accordance with Section 703 of the Code with the following
adjustments:
(a) Any items of income, gain, loss and deduction allocated to
Equity Owners pursuant to Sections 9.2, 9.3 or 9.13 shall not be taken into
account in computing Profits or Losses;
(b) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profits and Losses (pursuant
to this definition) shall be added to such taxable income or loss;
(c) Any expenditure of the Company described in Section 705(a)(2)(B)
of the Code and not otherwise taken into account in computing Profits and Losses
(pursuant to this definition) shall be subtracted from such taxable income or
loss;
(d) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (b) or (c) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Profits and Losses;
(e) Gain or loss resulting from any disposition of any Company asset
with respect to which gain or loss is recognized for federal income tax purposes
shall be computed with reference to the Gross Asset Value of the asset disposed
of, notwithstanding that the adjusted tax basis of such asset differs from its
Gross Asset Value;
(f) In lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year; and
(g) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Section 734(b) or Section 743(b) of the Code is
required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to be
taken into account
8
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in determining Capital Accounts as a result of a Distribution other than in
liquidation of an Ownership Interest, 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 the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Profits or Losses.
1.52 Proportionately. With respect to Common Units, Proportionately
---------------
means the number of Common Units held by an Equity Owner in proportion to the
number of Common Units held by all Equity Owners. With respect to Preferred
Units, Proportionately means the number of Preferred Units held by an Equity
Owner in proportion to the number of Preferred Units held by all Equity Owners.
1.53 Redemption Price. Redemption Price means the purchase price paid
----------------
upon exercise of the Put Right as set forth in Section 10.5.
1.54 Regulations. Regulations shall include proposed, temporary and
-----------
final regulations promulgated under the Code in effect as of the date of filing
the Certificate and the corresponding sections of any regulations subsequently
issued that amend or supersede such regulations.
1.55 Reorganization. Reorganization shall mean the conversion of the
--------------
Company to a corporation, an IPO or the sale of all Ownership Interests in the
Company.
1.56 Reserves. Reserves shall mean, with respect to any fiscal period,
--------
funds set aside or amounts allocated during such period to reserves which shall
be maintained in amounts deemed sufficient by the Manager for working capital
and for payment of taxes, insurance, debt service or other costs or expenses
incident to the ownership or operation of the Company's business.
1.57 Sale or Sell. A sale, assignment, exchange or other transfer
------------
(whether or not such transfer is for consideration and, in the case of transfers
of Preferred Units or Common Units, whether or not such transfer is a direct or
indirect transfer of such Units). A Sale shall include a direct pledge,
hypothecation or grant of a security interest.
1.58 Secretary of State. The secretary of state of the State.
------------------
1.59 Selling Equity Owner. Any Equity Owner which Sells all or any
--------------------
portion of its Ownership Interest.
1.60 Sharing Ratio. Sharing Ratio shall be as shown on Exhibit 1.
------------- ---------
1.61 State. State shall mean the State of Delaware.
-----
1.62 Successor Corporation. Successor Corporation is defined in Section
---------------------
11.5.
9
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1.63 Two-Thirds Interest. Two Thirds Interest shall mean one or more
-------------------
Voting Interests of Members which when taken together exceed 66.67% of the
aggregate of all Voting Interests at the time of the determination thereof.
1.64 Unrecovered Losses. Unrecovered Losses shall have the meaning set
------------------
forth in Section 9.1.
1.65 Voting Interest. The Voting Interest of a Member shall be
---------------
determined by dividing the number of Common Units owned by a Member by the total
number of Common Units held by all Members. As of the date of this Agreement,
the Voting Interests are as shown on Exhibit 1.
---------
Article 2.
FORMATION OF COMPANY
2.1 Formation. On September 22, 1999, the Company was formed pursuant
---------
to the Act by the execution and delivery of a Certificate of Formation to the
Secretary of State in accordance with and pursuant to the Act. The Company and
the Members hereby forever discharge the organizer, and the organizer shall be
indemnified by the Company and the Member from and against, any expense or
liability actually incurred by the organizer by reason of having been the
organizer of the Company.
2.2 Name. The name of the Company is NavigantVacations.com, LLC.
----
2.3 Principal Place of Business. The principal place of business of
---------------------------
the Company shall be 84 Inverness Circle East, Englewood, Colorado 80112. The
Company may locate its places of business and registered office at any other
place or places as the Manager may from time to time deem advisable.
2.4 Registered Office and Registered Agent. The Company's initial
--------------------------------------
registered office and the name of the registered agent at such address shall be
as set forth in the Certificate. The registered office and registered agent may
be changed from time to time by filing the address of the new registered office
and/or the name of the new registered agent with the Secretary of State pursuant
to the Act.
2.5 Term. The term of the Company shall commence with the filing of
----
the Certificate of Formation and shall continue in existence until it terminates
in accordance with the provisions of this Agreement or the Act.
Article 3.
BUSINESS OF COMPANY
3.1 Permitted Business. The business of the Company shall be:
------------------
(a) To implement the electronic consumer leisure travel business as
such services are more fully described on identified on Exhibit 3.1 (the
"Business"), in
10
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accordance with the initial business plan (the "Business Plan") which is
attached as Exhibit 3.1;
(b) To own, operate, expand or Sell the Business, including without
limitation engaging in a Reorganization;
(c) To acquire the assets, stock or other equity interests of other
businesses or assets which are necessary to, or reasonably connected with, the
Business;
(d) To invest cash or other assets in other Entities, if such
investment is necessary to or reasonably connected with the Business;
(e) To exercise all other powers necessary to, or reasonably
connected with, the Business which may be legally exercised by limited liability
companies under the Act.
(f) To engage in all activities necessary, customary, convenient or
incident to any of the foregoing.
Article 4.
NAMES AND ADDRESSES OF EQUITY OWNERS
The names and addresses of the Initial Members are as set forth on Exhibit
-------
13.1.
----
The names and addresses of other Equity Owners shall be maintained as
provided under Section 13.1.
Article 5.
RIGHTS AND DUTIES OF MANAGER AND OFFICERS
5.1 Management. The business and affairs of the Company shall be
----------
managed by its Manager. Except for situations in which the approval of the
Members is expressly required by this Agreement or by non-waivable provisions of
applicable law, the Manager shall have full and complete authority, power and
discretion to manage and control the business, affairs and properties of the
Company, to make all decisions regarding those matters and to perform any and
all other acts and activities customary or incident to the management of the
Company's business. At any time when there is more than one Manager, any one
Manager may take any action permitted to be taken by the Manager, unless the
approval of all of the Managers then appointed is expressly required pursuant to
this Agreement or the Act or unless a majority of the Managers provide written
notice to the remaining Manager(s) prior to such Manager(s) taking a specified
action that the Manager is not authorized to take such action. Unless
authorized to do so by this Agreement or by the Manager, no officer, attorney-
in-fact, employee or other agent of the Company shall have any power or
authority to bind the Company in any way, to pledge its credit or to render it
liable pecuniarily for any purpose.
11
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5.2 Number, Tenure and Qualifications. The Company shall initially have
---------------------------------
one (1) Manager. The number of Managers shall be fixed from time to time by the
affirmative vote of Members holding at least a Two-Thirds Interest, but in no
instance shall there be less than one Manager. Each Manager shall hold office
until such Manager resigns pursuant to Section 5.9 or is removed pursuant to
Section 5.10. A Manager shall be appointed by the affirmative vote of Members
holding at least a Two-Thirds Interest. A Manager need not be a resident of the
State or a Member.
5.3 Certain Powers of Manager. Without limiting the generality of
-------------------------
Section 5.1 but subject to the limitations of Section 5.4, the Manager shall
have power and authority on behalf of the Company:
(a) To acquire property from any Person as the Manager may
determine. The fact that a Manager or an Equity Owner is directly or indirectly
Affiliated or connected with any such Person shall not prohibit the Manager from
dealing with that Person, provided that except as otherwise expressly provided
in this Agreement (including without limitation, Section 8.1), the terms of any
such dealing are not less favorable to the Company than could be obtained from
an unrelated party; and provided further that except as expressly provided
otherwise in this Agreement, the aggregate fair market value of any property
acquired by the Company from NII or its Affiliates during any Fiscal Year shall
not exceed $50,000 in any Fiscal Year without Oz Domestic's prior written
consent;
(b) To borrow money for the Company from banks, other lending
institutions, on such terms as the Manager deems appropriate, and in connection
therewith, to hypothecate, encumber and grant security interests in Company
Property to secure repayment of the borrowed sums;
(c) To purchase liability and other insurance to protect the
Company's property and business;
(d) To hold and own any Company real and/or personal properties in
the name of the Company;
(e) To invest any Company funds (by way of example but not
limitation) in time deposits, short-term governmental obligations, commercial
paper or other investments;
(f) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts, notes and other
negotiable instruments; mortgages or deeds of trust; security agreements;
financing statements; documents providing for the acquisition, mortgage or
disposition of Company Property; assignments; bills of sale; leases; partnership
agreements; operating (or limited liability company) agreements of other limited
liability companies; and any other instruments or documents necessary, in the
opinion of the Manager, to the conduct of the business of the Company;
12
<PAGE>
(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from Company
funds;
(h) To enter into any and all other agreements on behalf of the
Company, with any other Person for any purpose (including fulfillment and other
contracts with NII and its Affiliates), in such forms as the Manager may approve
provided that except as otherwise expressly provided in this Agreement the terms
of any such dealing are not less favorable to the Company than are provided by
NII or its Affiliates to unrelated third parties;
(i) To execute and file such other instruments, documents and
certificates which may from time to time be required by the laws of the State or
any other jurisdiction in which the Company shall determine to do business, or
any political subdivision or agency thereof, to effectuate, implement, continue
and defend the valid existence of the Company;
(j) To enter into the License Agreement attached hereto as Exhibit
5.3(j);
(k) To appoint officers of the Company (subject to Section
5.4(a)(1)); and
(l) To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business.
5.4 Limitations on Authority.
------------------------
(a) Notwithstanding any other provision of this Agreement, the
Manager shall not cause or commit the Company to do any of the following without
consulting with the Och-Ziff Partners:
(1) Appoint or elect a president of the Company;
(2) Enter into any agreement for the purchase of stock or of
all or substantially all of the assets of any Person or Entity, or for the
merger or consolidation with or into any Person or Entity if the purchase
price is not greater than $5,000,000; or
(3) Cause the Company to issue additional Common Units, except
as provided in Article 11;
(b) Without the prior written approval of both Navigant and Och-
Ziff Partners, which approval may not be unreasonably withheld if so requested
by the Manager, the Manager shall not cause or commit the Company to do any of
the following:
13
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(1) Except as provided in Section 5.3(a), 5.3(h), 5.3(j) and
5.12 or otherwise expressly provided in this Agreement, engage in
transactions with Affiliates without the consent of both Och-Ziff Partners
and Navigant;
(2) Issue Preferred Units to any Person other than Och-Ziff
Partners;
(3) Cause the Company to undergo a Reorganization (subject also
to the notice requirement contained in Section 10.5(c));
(4) Enter into any agreement for the purchase of stock or of all
or substantially all of the assets of any Person or Entity, or for the
merger or consolidation with or into any Person or Entity if the purchase
price is greater than $5,000,000; or
(5) The sale of all or substantially all of the Company's
assets.
(c) All of Och-Ziff Partners' approval rights pursuant to this
Section 5.4(b) shall terminate in the event that it exercises the Put Right, and
thereafter the Manager shall not cause or commit the Company to do any of things
specified in Section 5.4(b) without the consent of a Majority Interest, which
consent may be unreasonably withheld.
5.5 Liability for Certain Acts.
--------------------------
(a) Subject only to Section 10.5, the Manager does not, in any way,
guarantee the return of the Equity Owners' Capital Contributions or a profit for
the Equity Owners from the operations of the Company.
(b) The Manager shall not be liable to the Company or to any Member
for any loss or damage sustained by the Company or any Member (or successor
thereto), except to the extent, if any, that the loss or damage shall have been
the result of gross negligence, fraud, deceit or willful misconduct.
5.6 Manager and Members Have No Exclusive Duty to Company;
------------------------------------------------------
Noncompetition Covenant.
-----------------------
(a) Except as expressly provided in Section 5.6(b):
(1) The Manager and the Members shall have no exclusive duty to
act on behalf of the Company.
(2) Each Manager and Member may have other business interests
and may engage in other activities in addition to those relating to the
Company.
14
<PAGE>
(3) Neither the Company nor any Manager shall have any right, by
virtue of this Agreement, to share or participate in any other investments
or activities of any other Manager or Member.
(4) Neither any Manager nor any Equity Owner shall incur any
liability to the Company or to any of the Equity Owners as a result of
engaging in any other business or venture.
(b) Restriction on Competition.
(1) During the term of the Term of this Agreement, neither the
Manager nor the Members shall directly or indirectly, for their own account
or on behalf of or in conjunction with any other person, company,
partnership, corporation, business, group, or other entity (each, a
"Person"):
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant, advisor, or sales
representative, in (A) any travel agency business in direct competition
with the Company or (B) any business selling any products or services in
direct competition with the Company;
(ii) call upon any Person who is an employee of the Company
or its subsidiaries for the purpose or with the intent of enticing such
employee away from or out of the employ of the Company or its subsidiaries;
or
(iii) call upon any Person who or that is, at that time, or
has been, within one (1) year prior to that time, a customer of the Company
for the purpose of soliciting or selling products or services in direct
competition with the Company.
(2) The foregoing covenants shall not be deemed to prohibit the
Manager or the Members from acquiring as an investment not more than fifty
percent (50%) of the capital stock of a competing business, so long as the
Manager or Member does not effectively control such business or participate
in the day to day management of such business.
(3) NII further agrees that it will conduct all of its
electronic consumer leisure travel business through the Company.
(4) The restrictions on competition contained in this Section
5.6 shall not apply to Noncompetitive Activities. Noncompetitive Activities
shall not be deemed to be competitive with the Company's business, and
neither NII nor its Affiliates shall be restricted in any way from engaging
in Noncompetitive Activities:
15
<PAGE>
5.7 Bank Accounts. The Manager may from time to time open bank
-------------
accounts in the name of the Company, and the Manager shall be the sole signatory
thereon, unless the Manager determine otherwise.
5.8 Indemnity of the Manager, Employees and Other Agents.
----------------------------------------------------
(a) The Company shall indemnify each Manager and make advances for
expenses to the maximum extent permitted under the Act, except to the extent the
claim for which indemnification is sought results from an act or omission for
which the Manager may be held liable to the Company or a Member under Section
5.5(b). The Company shall indemnify its employees and other agents who are not a
Manager to the fullest extent permitted by law, provided that such
indemnification in any given situation is approved by a Majority Interest.
(b) Expenses (including legal fees and expenses) incurred by a
Manager in defending any claim, demand, action, suit or proceeding subject to
subsection (a) above shall be paid by the Company in advance of the final
disposition of such claim, demand, action, suit or proceeding upon receipt of an
undertaking (which need not be secured) by or on behalf of the Manager to repay
such amount if it shall ultimately be finally determined by a court of competent
jurisdiction and not subject to appeal, that the Manager is not entitled to be
indemnified by the Company as authorized hereunder.
5.9 Resignation. Any Manager may resign at any time by giving written
-----------
notice to the Members. The resignation of any Manager shall take effect upon
receipt of notice thereof or at such later time as shall be specified in such
notice; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective. The resignation of a
Manager who is also an Equity Owner shall not affect the Manager's rights as an
Equity Owner.
5.10 Removal. At a meeting called expressly for that purpose, all or
-------
any lesser number of Managers may be removed, with or without cause, only with
the consent of Members holding a Two-Thirds Interest (inclusive of any Voting
Interests held by the Manager or its Affiliates). The removal of a Manager who
is also a Member shall not affect the Manager's rights as a Member and shall not
constitute a withdrawal of a Member.
5.11 Vacancies. Any vacancy occurring for any reason in the number of
---------
Managers shall be filled by the affirmative vote of Members holding a Two-Thirds
Interest (determined without regard to any Voting Interest owned by a Manager
who was removed pursuant to Section 5.10 during the preceding 24-month period).
Any Manager's position to be filled by reason of an increase in the number of
Managers shall be filled by the affirmative vote of a Two-Thirds Interest.
16
<PAGE>
5.12 Compensation, Reimbursement, Organization Expenses.
--------------------------------------------------
(a) Except as provided in Section 5.12(c), the Manager shall not be
compensated for its services to the Company, except as approved by both Navigant
and Och-Ziff Partners. Upon the submission of appropriate documentation each
Member shall be reimbursed by the Company for reasonable out-of-pocket expenses
incurred on behalf, or at the request, of the Company.
(b) Upon the submission of appropriate documentation the Company
shall reimburse Och-Ziff Partners and NII for their legal expenses reasonably
incurred by them in connection with the formation, organization and
capitalization of the Company, including the legal fees incurred in connection
with negotiating and drafting this Agreement and any ancillary document;
provided that such reimbursement shall not exceed $65,000 for either Och-Ziff
Partners (collectively) or NII.
(c) NII shall be reimbursed for expenses it incurs in connection
with shared services (including without limitation, ticket fulfillment, payroll,
human resources, accounting, 24-hour services, facilities, rent, utilities,
administrative costs, and third party expenses). Such reimbursement shall be on
a per transaction, per call, per person or other reasonable basis, provided that
the terms of any such reimbursement are not less favorable to the Company than
could be obtained from an unrelated party.
(d) The Manager shall cause the Company to make an appropriate
election to treat the expenses incurred by the Company in connection with the
formation and organization of the Company to be amortized under the 60-month
period beginning with the month in which the Company begins business to the
extent that such expenses constitute "organizational expenses" of the Company
within the meaning of Code Section 709(b)(2).
5.13 Annual Operating Plan. The Manager shall prepare for the approval
---------------------
of the Members holding a Two-Thirds Interest each Fiscal Year (no later than
thirty (30) days prior to the end of the then current Fiscal Year) a business
plan ("Annual Operating Plan") for the next Fiscal Year, setting forth at a
minimum the estimated receipts (including capital calls) and expenditures
(capital, operating and other) of the Company in sufficient detail to provide an
estimate of cash flow, capital proceeds and other financial requirements of the
Company for such year. Any such Annual Operating Plan shall also include such
other information or other matters necessary in order to inform the Members of
the Company's business and to enable the Members to make an informed decision
with respect to their approval of such Annual Operating Plan. The Members shall
review the proposed Annual Operating Plan and shall offer any revisions thereto
within 30 days. After the final Annual Operating Plan has been approved by the
Members holding a Two-Thirds Interest, the Manager shall implement the Annual
Operating Plan and shall be authorized to make only the expenditures and incur
only the obligations provided for therein (subject to Section 5.4(b)).
Notwithstanding the foregoing, the Manager may make any expenditure or incur any
obligation, whether or not such expenditure or obligation is provided for in an
Annual Operating Plan, which is
17
<PAGE>
the legal obligation of the Company and not within the reasonable control of the
Manager (e.g., real or personal property taxes). If Members holding a Two-Thirds
Interest are not able to agree on an Annual Operating Plan for any year, each
line item in the Annual Operating Plan for the prior year shall be increased by
the percentage increase in the CPI Index from the first day for which the
previous Annual Operating Plan was in effect to the first day for which the new
Annual Operating Plan is to be in effect. As used herein, "CPI Index" shall mean
the Consumer Price Index for All Items All Urban Consumers (DPI-U)
(1982-84 = 100) for the United States, as published by the United States
Department of Labor's Bureau of Labor Statistics (the "Bureau"). Should the
Bureau discontinue the publication of the above index, or publish the index less
frequently, or alter the index in some other manner, then the Manager shall,
from time to time, adopt a substitute index or substitute procedure which
reasonably reflects and monitors consumer prices, and the resulting plan shall
be the Annual Operating Plan for the current year.
5.14 Right to Rely on the Manager.
----------------------------
(a) Any Person dealing with the Company may rely (without duty of
further inquiry) upon a certificate signed by any Manager as to:
(i) The identity of any Manager or Equity Owner;
(ii) The existence or nonexistence of any fact or facts
which constitute a condition precedent to acts on behalf of the Company
by any Manager or which are in any other manner germane to the affairs of
the Company;
(iii) The Persons who are authorized to execute and deliver
any instrument or document of the Company; or
(b) Any act or failure to act by the Company or any other matter
whatsoever involving the Company or any Equity Owner.
5.15 Officers. In exercising the authority, powers and rights granted
--------
to it under this Agreement, the Manager may exercise such authority, powers and
rights directly or through officers appointed by the Manager pursuant to the
following terms and conditions.
(a) The Manager at any time and from time to time shall have the
authority to appoint a President, a Chairman, one or more Vice Presidents, a
Secretary, a Treasurer and a Controller. The Manager at any time and from time
to time may also appoint such other officers as it shall deem necessary,
including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries, who shall hold their offices
for such terms as shall be determined by the Manager, and shall exercise such
powers and perform such duties as shall be determined from time to time by the
Manager.
18
<PAGE>
(b) The salaries of the officers shall be fixed by the Manager,
except that the Manager may delegate to any officer or officers the power to fix
the compensation of any officer appointed in accordance with the second sentence
of 5.5(a).
(c) Each officer shall hold office for one (1) year after his or
her appointment by the Manager and until his or her successor is chosen or until
his or her earlier resignation, death, removal or termination of his or her
office. Any officer may be removed with or without cause by the Manager whenever
in its judgment the best interests of the Company would be served thereby. Any
officer may resign by giving written notice to the Manager. The resignation
shall be effective upon receipt, or at such time as may be specified in such
notice.
(d) The Chairman, when one is appointed, may be declared by the
Manager to be the Chief Executive Officer of the Company and, if so, shall have
general and active management of the business of the Company and shall see that
all orders and resolutions of the Manager are carried into effect. He shall be
ex officio a member of all standing committees, unless otherwise provided in the
resolution appointing the same. The Chairman shall call meetings of the Members
and the Manager to order and shall act as chairman of such meetings.
(e) When no Chairman has been appointed, or if a Chairman has been
appointed and not declared to be the Chief Executive Officer, or in the event of
the death or disability of the Chairman or at his request, the President shall
have general and active management of the business of the Company and shall see
that all orders and resolutions of the Manager are carried into effect. The
President shall also have such powers and perform such duties as are
specifically imposed upon him by law and as may be assigned to him by the
Manager or the Chairman. The President shall be ex officio a member of all
standing committees, unless otherwise provided in the resolution appointing such
committees. In the absence of a Chairman serving as Chief Executive Officer,
the President shall call meetings of the Members and the Manager to order and
shall act as chairman of such meetings. If no other officers are appointed, the
President shall also have all of the powers and perform the duties of Secretary
and Treasurer.
(f) The Vice Presidents shall perform such duties as are generally
performed by vice presidents of corporations. The Vice Presidents shall perform
such other duties and exercise such other powers as the Manager, the Chairman or
the President shall request or delegate. The Assistant Vice Presidents shall
have such powers, and shall perform such duties, as may be prescribed from time
to time by the Manager, the Chairman or the President.
(g) The Secretary shall attend all meetings of the Manager and all
meetings of the Members and shall record all votes and the minutes of all
proceedings in books to be kept for that purpose. He or she shall give, or
cause to be given, any notices required to be given of any meetings of the
Members and of the Manager, and shall perform such other duties as may be
prescribed by the Manager, the Chairman or the President. The Assistant
Secretary or Assistant Secretaries shall, in the absence or
19
<PAGE>
disability of the Secretary, or at the Secretary's request, perform the duties
and exercise the powers and authority herein granted to the Secretary.
(h) The Treasurer shall have charge of and be responsible for all
funds, securities, receipts and disbursements of the Company, and shall deposit
or cause to be deposited, in the name of the Company, all moneys or other
valuable effects in such banks, trust companies, or other depositories as shall
from time to time be selected by the Manager. He or she shall render to the
Chairman, the President and the Manager, whenever requested, an account of the
financial condition of the Company, and, in general, he or she shall perform all
the duties incident to the office of treasurer of a corporation, and such other
duties as may be assigned to him or her by the Manager, the Chairman or the
President.
(i) The Manager may appoint a Controller who shall keep or cause to
be kept in the books of the Company provided for that purpose a true account of
all transactions, and of the assets and liabilities, of the Company. The
Controller shall prepare and submit to the Chairman or the President such
financial statements and schedules as may be required to keep such officer
currently informed of the operations and financial condition of the Company, and
shall perform such other duties as may be assigned by the Manager, the Chairman
or the President.
(j) In case of the absence of any officer of the Company, or for
any other reason that the Manager may deem sufficient, the Manager may delegate,
for the time being, any or all of the powers or duties of such officer to any
other officer.
(k) The Manager may authorize any officer or officers, agent or
agents, to enter into any contract or execute and deliver any instrument in the
name of and on behalf of the Company. Such authority may be general or confined
to specific instances. No loans shall be contracted on behalf of the Company
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Manager. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Company shall be signed by the President, or by such officer or officers,
agent or agents of the Company as authorized by the Manager and in such manner
as shall from time to time be determined by written resolution of the Manager.
Article 6.
RIGHTS AND OBLIGATIONS OF EQUITY OWNERS
6.1 Limitation of Liability. Except as otherwise provided by the
-----------------------
non-waivable provisions of the Act or by this Agreement, no Equity Owner shall
be liable for an obligation of the Company solely by reason of being or acting
as an Equity Owner.
6.2 List of Equity Owners. Upon written request of any Member made in
---------------------
good faith and for a purpose reasonably related to the Member's rights as Member
under this Agreement (which reason shall be set forth in the written request),
the Manager shall
20
<PAGE>
provide a list showing the names, addresses and Ownership Interests of all
Equity Owners. Economic Interest Owners shall have no rights to information
under this Section 6.2.
6.3 Equity Owners Have No Agency Authority. Except as expressly
--------------------------------------
provided in this Agreement, the Equity Owners (in their capacity as Equity
Owners) shall have no agency authority on behalf of the Company.
6.4 Company Books. In accordance with Section 9.10 herein, the Manager
-------------
shall maintain and preserve, during the term of the Company, and for five (5)
years thereafter, all accounts, books, and other relevant Company documents.
Upon reasonable request, each Member shall have the right, during ordinary
business hours, to inspect and copy such Company documents at the requesting
Member's expense.
6.5 Priority and Return of Capital. Except as may be expressly
------------------------------
provided in Article 9, no Equity Owner shall have priority over any other Equity
Owner, either as to the return of Capital Contributions or as to Profits, Losses
or Distributions; provided, however, that this Section 6.5 shall not apply to
loans (as distinguished from Capital Contributions) which an Equity Owner has
made to the Company.
6.6 License Agreement. Simultaneous with the execution of this
-----------------
Agreement, NII and the Company shall execute a License Agreement, substantially
in the form attached as Exhibit 5.3(j) (the "License Agreement").
6.7 Warrants. Simultaneous with the execution of this Agreement, the
--------
Company shall issue a warrant to purchase an aggregate of 50,000 Common Units to
the Och-Ziff Partners (in proportion to their respective Sharing Ratios)
substantially in the form attached hereto as Exhibit 6.7.
Article 7.
MEETINGS OF MEMBERS
7.1 No Required Meetings. The Members may, but shall not be required
--------------------
to hold any annual, periodic or other formal meetings. However, meetings of the
Members may be called by any Manager, or by any Member or Members holding at
least 10% of the Voting Interests.
7.2 Place of Meetings. The Member or Members calling the meeting may
-----------------
designate any place within the State as the place of meeting for any meeting of
the Members; and Members holding a Two-Thirds Interest may designate any place
outside the State as the place of meeting for any meeting of the Members. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal executive office of the Company in the State.
7.3 Notice of Meetings. Except as provided in Section 7.4, written
------------------
notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than ten
(10) nor more than fifty (50) days
21
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before the date of the meeting, either personally or by mail, by or at the
direction of the Member or Members calling the meeting, to each Member entitled
to vote at such meeting.
7.4 Meeting of all Members. If all of the Members shall meet at any
----------------------
time and place, either within or outside of the State, and consent to the
holding of a meeting at such time and place, such meeting shall be valid without
call or notice, and at such meeting lawful action may be taken.
7.5 Record Date. For the purpose of determining Members entitled to
-----------
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to receive payment of any Distribution, or in order to make a
determination of Members for any other purpose, the date on which notice of the
meeting is mailed or the date on which the resolution declaring such
Distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section 7.5, such
determination shall apply to any adjournment thereof.
7.6 Quorum. Members holding at least a Majority Interest, represented
------
in person or by proxy, shall constitute a quorum at any meeting of Members. In
the absence of a quorum at any such meeting, a majority of the Voting Interests
so represented may adjourn the meeting from time to time for a period not to
exceed 60 days without further notice. However, if the adjournment is for more
than 60 days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
Member of record entitled to vote at the meeting. At such adjourned meeting at
which a quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally noticed. The
Members present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal during such meeting of that
number of Voting Interests whose absence would cause less than a quorum.
7.7 Manner of Acting. If a quorum is present, the affirmative vote of
----------------
Members holding a Two-Thirds Interest shall be the act of the Members, unless
the vote of a greater or lesser proportion or number is otherwise required by
the Act or by this Agreement. Unless otherwise expressly provided herein,
Members who have an interest (economic or otherwise) in the outcome of any
particular matter upon which the Members vote or consent may vote or consent
upon any such matter and their Voting Interest, vote or consent, as the case may
be, shall be counted in the determination of whether the requisite matter is
approved by the Members.
7.8 Proxies. At all meetings of Members, a Member who is qualified to
-------
vote may vote in person or by proxy executed in writing by the Member or by a
duly authorized attorney-in-fact. Such proxy shall be filed with the Manager
before or at the time of the meeting. No proxy shall be valid after eleven
months from the date of its execution, unless otherwise provided in the proxy.
22
<PAGE>
7.9 Action by Members Without a Meeting. Action required or permitted
-----------------------------------
to be taken at a meeting of Members may be taken without a meeting if the action
is evidenced by one or more written consents or approvals describing the action
taken and signed by Members holding sufficient Voting Interests, as the case may
be, to approve such action had such action been properly voted on at a duly
called meeting of the Members. Action taken under this Section 7.9 is effective
when Members with the requisite Interests or Voting Interests, as the case may
be, have signed the consent or approval, unless the consent specifies a
different effective date. The record date for determining Members entitled to
take action without a meeting shall be the date the first Member signs a written
consent.
7.10 Waiver of Notice. When any notice is required to be given to any
----------------
Member, a waiver thereof in writing signed by the person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
Article 8.
CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
8.1 Members' Capital Contributions. Not later than three days after
------------------------------
each of the parties has executed this Agreement and delivered an executed copy
of same to the Manager, each Equity Owner shall contribute such amount as is set
forth in Exhibit 8.1 hereto as its share of the Initial Capital Contribution.
-----------
8.2 Additional Contributions. Except as set forth in Section 8.1, no
------------------------
Equity Owner shall be required to make any Additional Capital Contributions. To
the extent unanimously approved by the Manager, from time to time, the Equity
Owners may be permitted to make additional Capital Contributions if and to the
extent they so desire, and if the Manager determines that such additional
Capital Contributions are necessary or appropriate in connection with the
conduct of the Company's business (including without limitation, expansion or
diversification). In such event, the Equity Owners shall have the opportunity
(but not the obligation) to participate in such additional Capital Contributions
proportionate to their Sharing Ratios.
8.3 Capital Accounts.
----------------
(a) A separate Capital Account shall be maintained for each Equity
Owner. Each Equity Owner's Capital Account shall be increased by (1) the amount
of money contributed by such Equity Owner to the Company; (2) the fair market
value of property contributed by such Equity Owner to the Company (net of
liabilities secured by such contributed property that the Company is considered
to assume or take subject to under Section 752 of the Code); (3) allocations to
such Equity Owner of Profits; and (4) any items in the nature of income and gain
which are specially allocated to the Equity Owner pursuant to Sections 9.2 and
9.3. Each Equity Owner's Capital Account shall be decreased by (1) the amount
of money Distributed to such Equity Owner by the Company; (2) the fair market
value of property Distributed to such Equity Owner by the Company (net of
liabilities secured by such Distributed property that such Equity Owner
23
<PAGE>
is considered to assume or take subject to under Section 752 of the Code); (3)
any items in the nature of deduction and loss that are specially allocated to
the Equity Owner pursuant to Sections 9.2 and 9.3; and (4) allocations to such
Equity Owner of Losses.
(b) Without limiting the other rights and duties of a transferee of
an Ownership Interest pursuant to this Agreement, in the event of a permitted
sale or exchange of an Ownership Interest in the Company, (1) the Capital
Account of the transferor shall become the Capital Account of the transferee to
the extent it relates to the transferred Ownership Interest in accordance with
Section 1.704-1(b)(2)(iv) of the Regulations; and (2) the transferee shall be
treated as the transferor for purposes of allocations and distributions pursuant
to Article 9 to the extent that such allocations and distributions relate to the
transferred Ownership Interest.
(c) Subject to Section 11.5, upon liquidation of the Company,
liquidating Distributions shall be made in accordance with the positive Capital
Account balances of the Equity Owners, as determined after taking into account
all Capital Account adjustments for the Company's taxable year during which the
liquidation occurs. Liquidation proceeds shall be paid in accordance with
Section 12.3 and Section 9.4(b). The Company may offset damages for breach of
this Agreement by any Equity Owner whose interest is liquidated (either upon the
withdrawal of the Equity Owner or the liquidation of the Company) against the
amount otherwise Distributable to such Equity Owner. Subject to Section 8.1, no
Equity Owner shall have any obligation to restore all or any portion of a
deficit balance in such Equity Owner's Capital Account.
8.4 Withdrawal or Reduction of Equity Owners' Contributions to Capital.
------------------------------------------------------------------
(a) An Equity Owner shall not receive a Distribution of any part of
its Capital Contribution to the extent such Distribution would violate Section
9.5.
Article 9.
ALLOCATIONS, INCOME TAX,
DISTRIBUTIONS, ELECTIONS AND REPORTS
9.1 Allocations of Profits and Losses from Operations. Except as
-------------------------------------------------
provided in Sections 9.2 and Section 9.3, and Article 11, the Profits and Losses
for each Fiscal Year shall be allocated as follows:
(a) Losses shall be allocated as follows:
(1) First, to the Och-Ziff Partners pro rata in accordance
with their respective Common Units until the total Unrecovered Losses (as
defined in Section 9.1(b)(1)) allocated pursuant to this Section
9.1(a)(1) equals $2,500,000;
(2) Thereafter, to the Equity Owners Proportionately in
accordance with their Common Units.
24
<PAGE>
(b) Profits shall be allocated as follows:
(1) First, to each Equity Owner which previously has been
allocated Losses pursuant to Section 9.1(a) which have not been fully
offset by allocations of Profit pursuant to this Section 9.1(b)(1),
Section 11.2, Section 11.3 and Section 11.4 ("Unrecovered Losses") until
the total amount of Profits allocated to each such Equity Owner pursuant
to this Section 9.1(b)(1), Section 11.2, Section 11.3 and Section 11.4 is
equal to the total amount of Losses which have been allocated to such
Equity Owner pursuant to Section 9.1(a). Profits allocated pursuant to
this Section 9.1(b)(1) shall be allocated to the Equity Owners in
proportion to their respective Unrecovered Losses; and
(2) Second, to the holders of the Common Units,
Proportionately.
9.2 Special Allocations to Capital Accounts. Notwithstanding Section
---------------------------------------
9.1 hereof:
(a) In the event that any Equity Owner unexpectedly receives any
adjustments, allocations or Distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Regulations, which create or
increase a Deficit Capital Account of such Equity Owner, then items of Company
income and gain (consisting of a pro rata portion of each item of Company
income, including gross income, and gain for such year and, if necessary, for
subsequent years) shall be specially allocated to such Equity Owner in an amount
and manner sufficient to eliminate, to the extent required by the Regulations,
the Deficit Capital Account so created as quickly as possible. It is the intent
that this Section 9.2(a) be interpreted to comply with the alternate test for
economic effect set forth in Section 1.704-1(b)(2)(ii)(d) of the Regulations.
(b) The Losses allocated pursuant to Section 9.1 hereof shall not
exceed the maximum amount of Losses that can be so allocated without causing any
Member to have a Deficit Capital Account at the end of any Fiscal Year. In the
event that some, but not all, of the Members would have Deficit Capital Accounts
as a consequence of an allocation of Losses pursuant to Section 9.1 hereof, the
limitation set forth in the preceding sentence shall be applied on a Member by
Member basis so as to allocate the maximum permissible Losses to each Member
under Section 1.704-1(b)(2)(ii)(d) of the Regulations. All Losses in excess of
the limitation set forth in this Section 9.2(b) shall be allocated to the
Members in proportion to their respective positive Capital Account balances, if
any, and thereafter to the Members in accordance with their interests in the
Company as determined by the Manager in their reasonable discretion. In the
event that any Equity Owner would have a Deficit Capital Account at the end of
any Fiscal Year which is in excess of the sum of any amount, if any, that such
Equity Owner is obligated to restore to the Company under Section
1.704-1(b)(2)(ii)(c) of the Regulations and such Equity Owner's share of Company
Minimum Gain as defined in Section 1.704-2(g)(1) of the Regulations (which is
also treated as an obligation to restore in accordance with Section
1.704-1(b)(2)(ii)(d) of the Regulations), the Capital Account of such Equity
25
<PAGE>
Owner shall be specially credited with items of Company income (including gross
income) and gain in the amount of such excess as quickly as possible.
(c) Notwithstanding any other provision of this Section 9.2, if
there is a net decrease in the Company Minimum Gain as during a Fiscal Year,
then the Capital Accounts of each Equity Owner shall be allocated items of
income (including gross income) and gain for such Fiscal Year (and if necessary
for subsequent Fiscal Years) equal to that Equity Owner's share of the net
decrease in Company Minimum Gain. This Section 9.2(c) is intended to comply with
the minimum gain chargeback requirement of Section 1.704-2 of the Regulations
and shall be interpreted consistently therewith. If in any Fiscal Year that the
Company has a net decrease in the Company Minimum Gain, if the minimum gain
chargeback requirement would cause a distortion in the economic arrangement
among the Equity Owners and it is not expected that the Company will have
sufficient other income to correct that distortion, the Manager may in their
discretion (and shall, if requested to do so by a Member) seek to have the
Internal Revenue Service waive the minimum gain chargeback requirement in
accordance with Section 1.704-2(f)(4) of the Regulations.
(d) Notwithstanding any other provision of this Section 9.2 except
Section 9.2(c), if there is a net decrease in Member Minimum Gain attributable
to a Member Nonrecourse Debt during any Company Fiscal Year, each Member who has
a share of the Member Minimum Gain as of the beginning of the Fiscal Year shall
be specially allocated items of Company income and gain for such Fiscal Year
(and, if necessary, subsequent Fiscal Years) equal to such Member's share of the
net decrease in Member Minimum Gain attributable to such Member Nonrecourse
Debt. A Member's share of the net decrease in Member Minimum Gain shall be
determined in accordance with Section 1.704-2(i)(4) of the Regulations;
provided, however, that a Member shall not be subject to this provision to the
extent that an exception is provided by Section 1.704-2(i)(4) of the Regulations
and any Revenue Rulings issued with respect thereto. Any Member Minimum Gain
allocated pursuant to this provision shall consist of first, gains recognized
from the disposition of Company property subject to the Member Nonrecourse Debt,
and, second, if necessary, a pro rata portion of the Company's other items of
income or gain (including gross income) for that Fiscal Year. This Section
9.2(d) 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.
(e) Items of Company loss, deduction and expenditures described in
Section 705(a)(2)(B) of the Code which are attributable to any nonrecourse debt
of the Company and are characterized as partner nonrecourse deductions under
Section 1.704-2(i) of the Regulations shall be allocated to the Equity Owners'
Capital Accounts in accordance with said Section 1.704-2(i) of the Regulations.
(f) Beginning in the first taxable year in which there are
allocations of "nonrecourse deductions" (as described in Section 1.704-2(b) of
the Regulations), such deductions shall be allocated to the Equity Owners in the
same manner as Loss is allocated for such period.
26
<PAGE>
(g) To the extent that an adjustment to the adjusted tax basis of
any Company asset pursuant to Section 734(b) or 743(b) of the Code is required
pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) of the
Regulations, to be taken into account in determining Capital Accounts as the
result of a Distribution to an Equity Owner in complete liquidation of its
Ownership Interest, 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 Equity Owners in accordance with their interests in
the Company in the event Section 1.704-1(b)(2)(iv)(m)(2) of the Regulations
applies, or to the Equity Owner to whom such Distribution was made in the event
Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
(h) Any income, gain, loss or deduction realized by the Company as
a direct or indirect result of the issuance of an interest in the Company by the
Company to an Equity Owner (the "Issuance Items") shall be allocated among the
Equity Owners so that, to the extent possible, Capital Accounts of the Equity
Owners with respect to each their Common Units (i.e., determined without regard
to the portion of an Equity Owner's Capital Account which is determined with
reference to such Equity Owner's Preferred Units) is Proportionate.
9.3 Credit or Charge to Capital Accounts. Any credit or charge to the
------------------------------------
Capital Accounts of the Equity Owners pursuant to Sections 9.2(a), 9.2(b),
9.2(c), 9.2(d), 9.2(e), 9.2(f) and 9.2(g) ("Regulatory Allocations") hereof
shall be taken into account in computing subsequent allocations of Profits and
Losses pursuant to Section 9.1, so that the net amount of any items charged or
credited to Capital Accounts pursuant to Section 9.1 and the Regulatory
Allocations hereof and this Section 9.3 shall to the extent possible, be equal
to the net amount that would have been allocated to the Capital Account of each
Equity Owner pursuant to the provisions of this Article 9 if the special
allocations required by the Regulatory Allocations hereof had not occurred.
9.4 Distributions. Except as provided in Sections 8.3(c) (with respect
-------------
to liquidating Distributions), Section 10.5 with respect to the Put Right, and
Section 9.5 (with respect to limitations on Distributions), the Manager shall
Distribute Distributable Cash to the Equity Owners not less frequently than
quarterly as follows:
(a) Distributions made before the dissolution of the Company shall
be to the holders of the Common Units, Proportionately.
(b) Distributions made after the dissolution of the Company shall
be to the Equity Owners in accordance with their positive Capital Accounts,
provided, however, that all liquidating distributions shall be made first to the
Holders who hold Preferred Units at the time of dissolution, if any, until such
Holders have received a liquidating distribution equal to $1,000 per Preferred
Unit plus the Accretion Amount.
9.5 Limitation Upon Distributions. No Distribution shall be made if
-----------------------------
such Distribution would violate the Act.
27
<PAGE>
9.6 Accounting Principles. For financial reporting purposes, the
---------------------
Company shall use accounting principles applied in accordance with generally
accepted accounting principles using the accrual method of accounting, unless
the Company is required to use a different method of accounting for federal
income tax purposes, in which case that method of accounting shall be the
Company's method of accounting.
9.7 Interest on and Return of Capital Contributions. No Member shall
-----------------------------------------------
be entitled to interest on its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for herein.
9.8 Loans to Company. Nothing in this Agreement shall prevent any
----------------
Member from making secured or unsecured loans to the Company by agreement with
the Company.
9.9 Accounting Period. The Company's accounting period shall be the
-----------------
Fiscal Year.
9.10 Records and Reports. At the expense of the Company, the Manager
-------------------
shall maintain records and accounts of all operations and expenditures of the
Company as follows:
(a) At a minimum the Company shall keep at its principal place of
business the following records:
(1) A current list of the full name and last known business,
residence, or mailing address of each Equity Owner and Manager, both past
and present;
(2) A copy of the Certificate of Formation of the Company
and all amendments thereto, together with executed copies of any powers
of attorney pursuant to which any amendment has been executed;
(3) Copies of the Company's federal, state, and local income
tax returns and reports, if any, for the four (4) most recent Fiscal
Years;
(4) Copies of the Company's currently effective written
Agreement, copies of any writings permitted or required with respect to
an Equity Owner's obligation to contribute cash, property or services,
and copies of any financial statements of the Company for the three (3)
most recent Fiscal Years;
(5) Minutes of every annual, special meeting and court-
ordered meeting;
(6) Any written consents obtained from Members for actions
taken by Members without a meeting.
28
<PAGE>
(b) The Company shall cause the preparation and distribution to
each Member of the following reports on the activities and financial position of
the Company, which reports shall be prepared in accordance with generally
accepted accounting principles consistently applied:
(1) Within 30 days after the end of each of the first three
quarters, (A) balance sheet as of the end of such quarter, and (B) a
detailed statement of income or loss both for the quarterly period just
ended and with respect to the second and third quarters, for the period
commencing with the first day of the Fiscal year and ending on the last
day of the respective quarter ("Year-To-Date).
(2) Within 60 days after the end of each Fiscal Year, (A) a
balance sheet as of the end of such Fiscal Year, and (B) a detailed
statement of income or loss for such Fiscal Year.
(3) The Company shall also provide audited financial
statements to each Member no later than 75 days after the end of each
Fiscal Year.
9.11 Returns and Other Elections.
---------------------------
(a) Subject to Section 9.11(b), the Manager shall cause the
preparation and timely filing of all tax returns required to be filed by the
Company pursuant to the Code and all other tax returns deemed necessary and
required in each jurisdiction in which the Company does business. Copies of
such returns, or pertinent information therefrom, shall be furnished to the
Equity Owners within a reasonable time after the end of the Fiscal Year.
(b) With respect to any income tax returns required to be filed by
the Company, the Manager shall provide Och-Ziff Partners Domestic and its
authorized representatives with copies of such completed tax returns and any
applicable work papers on or prior to the fifteenth day of the third month
following the close of the Company's taxable year, and Och-Ziff Partners
Domestic and its authorized representatives shall have the right to review such
tax returns prior to their filing. The Manager and Och-Ziff Partners Domestic
agree to consult and resolve in good faith any issues arising as a result of the
review of such tax returns by Och-Ziff Partners Domestic or its authorized
representatives and to mutually consent to their filing. If the Manager and Och-
Ziff Partners Domestic agree as to the contents of such returns, then the
Manager shall file such returns as soon as practicable thereafter. In the event
the parties are unable to resolve any dispute prior to the first day of the
fourth month following the close of the Company's taxable year, the parties
shall jointly select an independent accounting firm to resolve any issue in
dispute as promptly as possible. If such accounting firm is unable to make a
determination with respect to any disputed issue prior to the due date
(including extensions) for filing the tax returns in question, then the Manager
may file such tax returns on the due date (including extensions) therefor
29
<PAGE>
without such determination having been made and without Och-Ziff Partners
Domestic's consent. Notwithstanding the filing of such tax returns, the
accounting firm mutually selected by the parties to resolve the dispute shall
make a determination with respect to any disputed issues, and the Company shall
file amended tax returns consistent with such determination if the determination
of the accounting firm is inconsistent with the manner in which such disputed
matter was reported on the tax return.
(c) All elections permitted to be made by the Company under federal
or state laws shall be made by the Manager in its sole discretion; provided,
however, that the Manager shall make any tax election requested by Members
owning a Majority Interest.
9.12 Tax Matters Partner.
-------------------
(a) Navigant is hereby designated the Tax Matters Partner ("TMP")
as defined in Section 6231(a)(7) of the Code. The TMP and the other Members
shall use their reasonable efforts to comply with the responsibilities outlined
in Sections 6221 through 6233 of the Code (including any Regulations promulgated
thereunder), and in doing so shall incur no liability to any other Member.
(b) Except as expressly authorized by this Agreement, the TMP shall
not make any decision or take any action without the prior authorization of
Members holding a Majority Interest.
(c) The TMP shall cause the Och-Ziff Partners to be treated as
"notice partners" within the meaning of Section 6231(a)(8) of the Code. The TMP
shall notify the Och-Ziff Partners regarding, and the Och-Ziff Partners shall
have the right to participate in, (i) any administrative or judicial proceeding
relating to the determination of partnership items at the Company level, and
(ii) any discussions with the Internal Revenue Service relating to any Member
related tax matters. In addition, the TMP shall provide the Och-Ziff Partners,
if they so request, with copies of notices, correspondence, work papers,
documents or such other relevant tax related information as such Member
reasonably may request. The TMP shall from time to time upon request of an Och-
Ziff Partner confer, and cause the Company accountants and tax attorneys to
confer, with such Och-Ziff Partner and its attorneys and accountants on any
matters relating to a Company tax item, return or election. The TMP and the
Och-Ziff Partners shall attempt in good faith to agree upon (i) the filing of
any amended income tax returns, (ii) any proposed extension of the statute of
limitations, (iii) the initiation and conduct of any administrative or judicial
contest of any disputed issue with the IRS and (iv) any proposed settlement or
compromise of any disputed issue.
(d) Subject to Section 9.12(c), the TMP shall not, except with the
prior approval of Members holding a Majority Interest, (i) initiate any action
or proceeding or file any pleading, (ii) compromise or settle any issue, (iii)
extend any statute of limitations, or (iv) take any action contemplated by
Sections 6222 through 6232 of the
30
<PAGE>
Code. Notwithstanding the foregoing, the TMP shall not without the prior written
approval of the Och-Ziff Partners enter into a settlement agreement which binds
the Och-Ziff Partners pursuant to Section 6224(c)(3) of the Code. The Och-Ziff
Partners shall have the maximum rights permitted by law to elect not to be bound
by the TMP in any administrative or judicial matter and, at the request of the
Och-Ziff Partners, the TMP shall cooperate fully with the Och-Ziff Partners in
making any such election.
(e) An Och-Ziff Partner may engage legal counsel, certified public
accountants, or others in its own behalf at its sole cost and expense. The
provisions of this Section 9.13 shall survive the termination of the Company or
the termination of any Member's interest, and shall remain binding on the
Members for a period of time necessary to resolve with the Internal Revenue
Service any and all matters whether in an administrative or judicial proceeding
regarding the federal income taxation of the Company for any open tax year or
years.
9.13 Certain Allocations for Income Tax (But Not Book Capital Account)
-----------------------------------------------------------------
Purposes.
--------
(a) In accordance with Section 704(c)(1)(A) of the Code and Section
1.704-1(b)(2)(i)(iv) of the Regulations, if a Member contributes property with
an initial Gross Asset Value that differs from its adjusted basis at the time of
contribution, income, gain, loss and deductions with respect to the property
shall, solely for federal income tax purposes (and not for Capital Account
--------------------------------------
purposes), be allocated among the Equity Owners so as to take account of any
variation between the adjusted basis of such property to the Company and its
Gross Asset Value at the time of contribution pursuant to the traditional method
under Section 1.704-3(b) of the Regulations.
(b) All recapture of income tax deductions resulting from Sale or
disposition of Company property shall be allocated to the Equity Owners to whom
the deduction that gave rise to such recapture was allocated hereunder to the
extent that such Equity Owner is allocated any gain from the Sale or other
disposition of such property.
Article 10.
TRANSFERABILITY
10.1 General.
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(a) Except as otherwise specifically provided herein, no Equity
Owner shall have the right to Sell the Equity Owner's Ownership Interest.
(b) Subject to: (i)the Put Right (defined in Section 10.5), (ii)
Section 11.2, (iii) Section 11.4, and (iv) a Reorganization of the Company
pursuant to the terms of this Agreement, no Equity Owner shall have the right to
Sell that Equity Owner's Ownership Interest for a period of 24 months following
the Effective Date of this
31
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Agreement without the unanimous written consent of all Members, which may be
unreasonably withheld.
(c) Each Equity Owner hereby acknowledges the reasonableness of
the restrictions on Sale of Ownership Interests imposed by this Agreement in
view of the Company purposes and the relationship of the Equity Owners.
Accordingly, the restrictions on Sale contained herein shall be specifically
enforceable.
(d) In the event that any Equity Owner pledges or otherwise
encumbers any of its Ownership Interest as security for repayment of a
liability, any such pledge or hypothecation shall be made pursuant to a pledge
or hypothecation agreement that requires the pledgee or secured party to be
bound by all the terms and conditions of this Article 10, and shall require the
prior unanimous written consent of all Members.
10.2 Right of First Refusal and Co-Sale.
----------------------------------
(a) Upon the expiration of the 24-month period described in
Section 10.1(b) above, subject to Sections 11.2 and 11.4, and provided that an
IPO has not occurred, an Equity Owner which desires to sell all or any portion
of its Ownership Interest to a third party purchaser other than a Member shall
obtain from such third party purchaser ("Third Party Purchaser") a bona fide
written offer to purchase such interest, stating the terms and conditions upon
which the purchase is to be made and the consideration offered therefor ("Third
Party Offer"). The Selling Equity Owner shall give written notification ("Notice
of Sale") to the Company and the other Equity Owners who are Members (the
"Remaining Members"), by certified mail or personal delivery, of its intention
to so Sell such Ownership Interest (the "Offered Interest"). The Notice of Sale
shall be accompanied by a copy of the Third Party Offer. If any portion of the
purchase price offered by such third party purchaser consists of consideration
other than cash or a promissory note ("Non-cash Consideration"), then: the
Notice of Sale also shall be accompanied by a good faith estimate by the Selling
Equity Owner of the fair market value of the Non-cash Consideration ("Purchase
Price").
(b) The Remaining Members shall have the option ("Buy Option") to
purchase all, but not less than all, of the Offered Interest, on a basis pro
rata to the Sharing Ratios of the Remaining Members exercising such option
pursuant to this Section 10.2(b). The Buy Option may be exercised by one or more
of the Remaining Members by giving written notification ("Buy Notice") to the
Selling Equity Owner within thirty (30) days after receiving the Notice of Sale
(the "Option Period"). Each Remaining Member who timely gives a Buy Notice
("Buying Member") shall purchase such portion of the Offered Interest which is
equal to the relative Sharing Ratios of all of the Buying Members. Subject to
Section 10.2(d), if there are no Buying Members, the Buy Option shall terminate
and at any time within ninety (90) days following the expiration of the Option
Period, the Selling Equity Owner shall be entitled to consummate the Sale of the
Offered Interest to the Third Party Purchaser or one or more of its Affiliates
upon terms no less favorable than are set forth in the Third Party Offer.
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(c) If there is at least one Buying Member (i) the Buying Members
shall designate the time, date and place of closing, provided that the date of
closing shall be within thirty (30) days after the receipt of the Buy Notice,
and (ii) at the closing, the Buying Members shall purchase, and the Selling
Equity Owner shall Sell, the Offered Interest for an amount equal to the lesser
of (i) the Purchase Price, or (ii) the amount of the Selli