Exhibit 10.65

Execution Copy

 

 

 

 

MICHAEL FOODS INVESTORS, LLC

A Delaware Limited Liability Company

 

 

THIRD AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

Dated as of December 21, 2009

THE COMPANY INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH INTERESTS MAY NOT
BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT
EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND
COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH
HEREIN.

THE COMPANY INTERESTS REPRESENTED BY THIS LIMITED LIABILITY COMPANY AGREEMENT
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER SPECIFIED IN THE
SECURITYHOLDERS AGREEMENT, DATED AS OF THE DATE HEREOF, AS AMENDED OR MODIFIED
FROM TIME TO TIME, AMONG THE COMPANY AND CERTAIN INVESTORS, AND THE COMPANY
RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH INTERESTS UNTIL SUCH TRANSFER
IS IN COMPLIANCE WITH SUCH SECURITYHOLDERS AGREEMENT. A COPY OF THE
SECURITYHOLDERS AGREEMENT SHALL BE FURNISHED BY THE COMPANY TO THE HOLDER OF
SUCH INTERESTS UPON WRITTEN REQUEST AND WITHOUT CHARGE.

 

 

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TABLE OF CONTENTS

 

               Page

ARTICLE I.         DEFINITIONS

   1   

SECTION 1.1

   Definitions    1   

SECTION 1.2

   Terms Generally    13

ARTICLE II.        GENERAL PROVISIONS

   14   

SECTION 2.1

   Formation    14   

SECTION 2.2

   Name    14   

SECTION 2.3

   Term    14   

SECTION 2.4

   Purpose; Powers    14   

SECTION 2.5

   Foreign Qualification    15   

SECTION 2.6

   Registered Office; Registered Agent; Principal Office; Other Offices    15   

SECTION 2.7

   No State-Law Partnership    15   

SECTION 2.8

   Amendment and Restatement    15   

SECTION 2.9

   Issuance of Additional Units    15

ARTICLE III.      MANAGEMENT

   16   

SECTION 3.1

   The Management Committee; Delegation of Authority and Duties    16   

SECTION 3.2

   Establishment of Management Committee    17   

SECTION 3.3

   Management Committee Meetings    18   

SECTION 3.4

   Chairman    19   

SECTION 3.5

   Approval or Ratification of Acts or Contracts    19   

SECTION 3.6

   Action by Written Consent or Telephone Conference    19   

SECTION 3.7

   Officers    20   

SECTION 3.8

   Management Matters    21   

SECTION 3.9

   Securities in Holdings    22   

SECTION 3.10

   Liability of Unitholders    22   

SECTION 3.11

   Indemnification by the Company    23

ARTICLE IV.      CAPITAL CONTRIBUTIONS; ALLOCATIONS; DISTRIBUTIONS

   24

 

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   SECTION 4.1    Capital Contributions    24    SECTION 4.2    Capital Accounts
   24    SECTION 4.3    Allocations of Net Income and Net Loss    24   
SECTION 4.4    Distributions    27    SECTION 4.5    Security Interest and Right
of Set-Off    36

ARTICLE V.       

  WITHDRAWAL; DISSOLUTION; TRANSFER OF MEMBERSHIP INTERESTS; ADMISSION OF NEW
MEMBERS    36

   SECTION 5.1    Unitholder Withdrawal    36    SECTION 5.2    Dissolution   
36    SECTION 5.3    Transfer by Unitholders    37    SECTION 5.4    Admission
or Substitution of New Members    38    SECTION 5.5    Compliance with Law    38

ARTICLE VI.      REPORTS TO MEMBERS; TAX MATTERS

   38    SECTION 6.1    Books of Account    38    SECTION 6.2    Reports    39
   SECTION 6.3    Fiscal Year    40    SECTION 6.4    Certain Tax Matters    40

ARTICLE VII.    MISCELLANEOUS

   41    SECTION 7.1    Schedules    41    SECTION 7.2    Governing Law    41   
SECTION 7.3    Successors and Assigns    42    SECTION 7.4    Confidentiality   
42    SECTION 7.5    Amendments    42    SECTION 7.6    Notices    43   
SECTION 7.7    Counterparts    43    SECTION 7.8    Power of Attorney    43   
SECTION 7.9    Entire Agreement; Interpretation    44    SECTION 7.10    Section
Titles    44

 

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THIRD AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

OF

MICHAEL FOODS INVESTORS, LLC

A Delaware Limited Liability Company

THIS THIRD AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Michael
Foods Investors, LLC, dated and effective as of December 21, 2009 (this
“Agreement”), is adopted and agreed to by and among Thomas H. Lee Equity Fund V,
L.P., a Delaware limited partnership, Thomas H. Lee Parallel Fund V, L.P.,
Thomas H. Lee Cayman Fund V, L.P., Thomas H. Lee Investors Limited Partnership,
1997 Thomas H. Lee Nominee Trust, Putnam Investments Holdings, LLC, Putnam
Investments Employees’ Securities Company I, LLC, Putnam Investments Employees’
Securities Company II, LLC (collectively the “THL Holders”), the Persons listed
on Schedule A attached hereto who executed the Original Agreement (as defined
below) or a joinder to this Agreement prior to the date hereof, and each other
Person who hereafter at any time becomes a Member in accordance with the terms
of this Agreement and the Act. Any reference in this Agreement to THL or any
other Member shall include such Member’s Successors in Interest to the extent
such Successors in Interest have become Substitute Members in accordance with
the provisions of this Agreement.

WHEREAS, on November 6, 2003, THL formed the Company as a limited liability
company under the Delaware Limited Liability Company Act, Title 6, §§ 18-101, et
seq, as it may be amended from time to time (the “Act”), by executing the
Limited Liability Company Agreement of THL-MF Investors, LLC, which agreement
was subsequently amended and restated pursuant to that certain Amended and
Restated Limited Liability Agreement dated as of November 20, 2003 and further
amended and restated by that certain Second Amended and Restated Limited
Liability Company Agreement dated as of October 23, 2009 (as amended and
restated, the “Original Agreement”); and

WHEREAS, the Members desire to amend and restate the Original Agreement in
accordance with Section 7.5 thereof for the purpose of setting forth the
agreements governing the relations among the Members and to admit an additional
member.

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, the parties hereto, each intending to be legally bound, agree as
follows:

ARTICLE I.

DEFINITIONS

SECTION 1.1 Definitions.

Unless the context otherwise requires, the following terms shall have the
following meanings for purposes of this Agreement:

“Act” has the meaning set forth in the preamble above.

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“Additional Member” means any Person that has been admitted to the Company as a
Member pursuant to Section 5.4 by virtue of having received its Membership
Interest from the Company and not from any other Member or Assignee.

“Adjusted Capital Account Deficit” means, with respect to any Unitholder, the
deficit balance, if any, in such Unitholder’s Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:

(i) credit to such Capital Account any amounts that such Unitholder is obligated
to restore pursuant to this Agreement or is deemed to be obligated to restore
pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the penultimate sentence
of each of Regulations Sections 1.704-2(i)(5) and 1.704-2(g)(1); and

(ii) debit to such Capital Account the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall
be interpreted and applied by the Management Committee consistently therewith.

“Affiliate” when used with reference to another Person means any Person (other
than the Company), directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with, such other Person. In
addition, Affiliates of a Member shall include all partners, officers, employees
and former partners, officers or employees of, all consultants or advisors to,
and all other Persons who directly or indirectly receive compensation from, such
Member.

“Assignee” means any transferee to which a Member or another Assignee has
transferred its interest in the Company in accordance with the terms of this
Agreement, but who is not a Member.

“Bankruptcy” means, with respect to any Person, the occurrence of any of the
following events: (i) the filing of an application by such Person for, or a
consent to, the appointment of a trustee or custodian of his assets; (ii) the
filing by such Person of a voluntary petition in Bankruptcy or the seeking of
relief under Title 11 of the United States Code, as now constituted or hereafter
amended, or the filing of a pleading in any court of record admitting in writing
his inability to pay his debts as they become due; (iii) the failure of such
Person to pay his debts as such debts become due; (iv) the making by such Person
of a general assignment for the benefit of creditors; (v) the filing by such
Person of an answer admitting the material allegations of, or his consenting to,
or defaulting in answering, a Bankruptcy petition filed against him in any
Bankruptcy proceeding or petition seeking relief under Title 11 of the United
States Code, as now constituted or as hereafter amended; or (vi) the entry of an
order, judgment or decree by any court of competent jurisdiction adjudicating
such Person a bankrupt or insolvent or for relief in respect of such Person or
appointing a trustee or custodian of his assets and the continuance of such
order, judgment or decree unstayed and in effect for a period of 60 consecutive
days.

 

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“Capital Account” means, with respect to any Unitholder, the account maintained
for such Unitholder in accordance with the following provisions:

(a) To each Unitholder’s Capital Account there shall be added such Unitholder’s
Capital Contributions, such Unitholder’s allocable share of Net Income and any
items in the nature of income or gain which are specially allocated to such
Unitholder pursuant to Section 4.3(c) hereof, and the amount of any Company
liabilities assumed by such Unitholder or which are secured by any property
distributed to such Unitholder.

(b) To each Unitholder’s Capital Account there shall be subtracted the amount of
cash and the Gross Asset Value of any property distributed to such Unitholder
pursuant to any provision of this Agreement, such Unitholder’s allocable share
of Net Losses and any items in the nature of expenses or losses which are
specially allocated to such Unitholder pursuant to Section 4.3(c) hereof, and
the amount of any liabilities of such Unitholder assumed by the Company or which
are secured by any property contributed by such Unitholder to the Company.

(c) In the event any interest in the Company is transferred in accordance with
the terms of this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the transferred interest.

(d) In determining the amount of any liability for purposes of subparagraphs
(a) and (b) hereof and Section 4.3(b) hereof, there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code and
Regulations.

(e) The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Code
Section 704(b) and the Regulations promulgated thereunder, and shall be
interpreted and applied by the Management Committee in a manner consistent with
such Regulations.

“Capital Contribution” means, with respect to any Unitholder, the amount of cash
and the initial Gross Asset Value of any property (other than money) contributed
from time to time to the Company by such Unitholder (it being understood that
the Gross Asset Value with respect to property in respect of a Unitholder’s
Initial Capital Contribution shall be as set forth on Exhibit I hereto).

“Certificate” has the meaning set forth in Section 2.1.

“Class A Units” means the Class A Units of the Company.

“Class B Units” means the Class B Units of the Company.

“Class C Fraction” means the lesser of (A) one and (B) a fraction, the numerator
of which is the number of Class C Units outstanding at the date of any such
determination and the denominator of which is the number of Class C Units
outstanding on the date of the Initial Capital Contribution after giving effect
to the Initial Capital Contribution, as each of the numerator and denominator
may be adjusted in the event of a recapitalization, split, dividend, or other
reclassification affecting the Class C Units.

 

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“Class C Units” means the Class C Units of the Company.

“Class E Applicable Percentage” shall mean 0.1244%.

“Class E Distribution Threshold Amount” means an amount equal to
(i) $570,000,000 plus (ii) any additional Capital Contributions by the Class A,
Class B or Class C Unitholders with respect to their Class A, Class B or Class C
Units after the Class E Effective Date.

“Class E Effective Date” means April 9, 2008.

“Class E Tier I Distribution Amount” shall mean the amount equal to (i) the
Class E Applicable Percentage multiplied by (ii) 100% of Distributable Assets in
excess of the Class E Distribution Threshold and up to the Class F/G
Distribution Threshold Amount to be distributed to the Unitholders less the
aggregate amount of Capital Contributions of the Class E Unitholders returned to
such Unitholders under Section 4.4(a)(2)(A).

“Class E Tier II Distribution Amount” shall mean the amount equal to (i) the
Class E Applicable Percentage multiplied by (ii) 100% of Distributable Assets in
excess of the Class F/G Distribution Threshold Amount and up to the Class H
Distribution Threshold Amount to be distributed to the Unitholders less (x) the
aggregate amount of Capital Contributions of the Class F Unitholders and Class G
Unitholders returned to such Unitholders under Section 4.4(a)(3)(A), and (y) the
Class F Tier I Distribution Amount actually paid to Class F Unitholders and the
Class G Tier I Distribution Amount actually paid to Class G Unitholders, under
Sections 4.4(a)(3)(B) and (C) hereof, as applicable.

“Class E Tier III Distribution Amount” shall mean the amount equal to (i) the
Class E Applicable Percentage multiplied by (ii) 100% of Distributable Assets to
be distributed to the Unitholders in excess of the Class H Distribution
Threshold Amount, less (x) the aggregate amount of Capital Contributions of the
Class H Unitholders returned to such Unitholders under Section 4.4(a)(4)(A), and
(y) the Class F Tier II Distribution Amount actually paid to Class F
Unitholders, the Class G Tier II Distribution Amount actually paid to Class G
Unitholders and the Class H Distribution Amount actually paid to Class H
Unitholders under Sections 4.4(a)(4)(B) and (C), as applicable.

“Class E Unitholder” means Thomas J. Jagiela and his permitted assigns and
transferees under this Agreement and the Securityholders Agreement, and any
other Person (and such Person’s permitted assigns and transferees) issued Class
E Units by the Company hereafter.

“Class E Units” means the Class E Units of the Company. The rights and
privileges associated with such Class E Units are intended to constitute a
“profits interest” in the Company within the meaning of Revenue Procedure 93-27,
1993-2 C.B. 343, or any successor Internal Revenue Service or Treasury
Department regulation or other pronouncement applicable at the date of issuance
of Class E Units.

 

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“Class F/G Applicable Percentages” shall mean the following: (i) 9.545% of any
Tier I Excess Threshold Amount or Tier II Excess Threshold Amount (collectively,
the “Excess Threshold Amount”) up to $28,524,600, and (ii) 4.120% of the Excess
Threshold Amount that is equal to or greater than $28,524,600 but less than
$68,524,600; and (iii) 3.949% of the Excess Threshold Amount that is equal to or
greater than $68,524,600 but less than $268,524,600; and (iv) 2.512% of the
Excess Threshold Amount that is equal to or greater than $268,524,600.

“Class F Tier I Distribution Amount” shall mean an amount equal to (A) 24.17%
multiplied by (B) the quotient of (i) the appropriate Class F/G Applicable
Percentages multiplied by (ii) 100% of Distributable Assets in excess of the
Class F/G Distribution Threshold Amount and up to the Class H Distribution
Threshold Amount to be distributed to the Unitholders less the aggregate amount
of Capital Contributions of the Class F Unitholders and Class G Unitholders
returned to such Unitholders pursuant to Section 4.4(a)(3)(A) hereof (the amount
of Distributable Assets referenced under this clause (ii) being referred to
herein as the “Tier I Excess Threshold Amount”.)

“Class F Tier II Distribution Amount” shall mean an amount equal to (A) 24.17%
multiplied by (B) the quotient of (i) the appropriate Class F/G Applicable
Percentages multiplied by (ii) 100% of Distributable Assets in excess of the
Class H Distribution Threshold Amount to be distributed to the Unitholders less
(x) the aggregate amount of Capital Contributions of the Class H Unitholders
returned to such Unitholders under Section 4.4(a)(4)(A), and (y) the Class H
Distribution Amount actually paid to Class H Unitholders under
Section 4.4(a)(4)(B) hereof (the amount of Distributable Assets referenced under
this clause (ii) being referred to herein as the “Tier II Excess Threshold
Amount”).

“Class F/G Distribution Threshold Amount” means an amount equal to
(i) $803,965,514 plus (ii) any additional Capital Contributions by the Class A,
Class B or Class C Unitholders with respect to their Class A, Class B or Class C
Units after the Class F/G Effective Date.

“Class F/G Effective Date” means October 23, 2009.

“Class F Unitholders” means each of Mark W. Westphal and Carolyn V. Wolski and
their respective permitted assigns and transferees under this Agreement and the
Securityholders Agreement, and any other Person (and such Person’s permitted
assigns and transferees) issued Class F Units by the Company hereafter.

“Class F Units” means the Class F Units of the Company. The rights and
privileges associated with such Class F Units are intended to constitute a
“profits interest” in the Company within the meaning of Revenue Procedure 93-27,
1993-2 C.B. 343, or any successor Internal Revenue Service or Treasury
Department regulation or other pronouncement applicable at the date of issuance
of Class F Units.

“Class G Tier I Distribution Amount” shall mean an amount equal to (A) 75.83%
multiplied by (B) the quotient of (i) the appropriate Class F/G Applicable
Percentages multiplied by (ii) the Tier I Excess Threshold Amount.

 

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“Class G Tier II Distribution Amount” shall mean an amount equal to (A) 75.83%
multiplied by (B) the quotient of (i) the appropriate Class F/G Applicable
Percentages multiplied by (ii) the Tier II Excess Threshold Amount.

“Class G Unitholders” means each of James E. Dwyer, Jr. and his permitted
assigns and transferees under this Agreement and the Securityholders Agreements,
and any other Person (and such Person’s permitted assigns and transferees)
issued Class G Units by the Company hereafter.

“Class G Units” means the Class G Units of the Company. The rights and
privileges associated with such Class G Units are intended to constitute a
“profits interest” in the Company within the meaning of Revenue Procedure 93-27,
1993-2 C.B. 343, or any successor Internal Revenue Service or Treasury
Department regulation or other pronouncement applicable at the date of issuance
of Class G Units.

“Class H Applicable Percentages” shall mean the following: (i) 0.769% of the
Class H Excess Threshold Amount (as defined in the definition of Class H
Distribution Amount) up to $28,524,600, and (ii) 0.3319% of the Class H Excess
Threshold Amount that is equal to or greater than $28,524,600 but less than
$68,524,600; and (iii) 0.3182% of the Class H Excess Threshold Amount that is
equal to or greater than $68,524,600 but less than $268,524,600; and
(iv) 0.2024% of the Class H Excess Threshold Amount that is equal to or greater
than $268,524,600.

“Class H Distribution Amount” shall mean an amount equal to (i) the appropriate
Class H Applicable Percentages multiplied by (ii) 100% of Distributable Assets
in excess of the Class H Distribution Threshold Amount to be distributed to the
Unitholders less the aggregate amount of Capital Contributions of the Class H
Unitholders returned to such Unitholders under Section 4.4(a)(4)(A) hereof (the
amount of Distributable Assets referenced under this clause (ii) being referred
to herein as the “Class H Excess Threshold Amount”).

“Class H Distribution Threshold Amount” means an amount equal to
(i) $865,085,811 plus (ii) any additional Capital Contributions by the Class A,
Class B or Class C Unitholders with respect to their Class A, Class B or Class C
Units after the Class H Effective Date.

“Class H Effective Date” means December 21, 2009.

“Class H Unitholders” means Jonathan A. Merkle and his permitted assigns and
transferees under this Agreement and the Securityholders Agreement, and any
other Person (and such Person’s permitted assigns and transferees) issued
Class H Units by the Company hereafter.

“Class H Units” means the Class H Units of the Company. The rights and
privileges associated with such Class H Units are intended to constitute a
“profits interest” in the Company within the meaning of Revenue Procedure 93-27,
1993-2 C.B. 343, or any successor Internal Revenue Service or Treasury
Department regulation or other pronouncement applicable at the date of issuance
of Class H Units.

 

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“Code” means the Internal Revenue Code of 1986, as amended from time to time, or
any successor statute. Any reference herein to a particular provision of the
Code shall mean, where appropriate, the corresponding provision in any successor
statute.

“Company” means Michael Foods Investors, LLC, a Delaware limited liability
company.

“Company Minimum Gain” has the meaning set forth in Regulations Section 1.704-
2(d).

“Depreciation” means, for each fiscal year or other period, an amount equal to
the depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period, 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 year or other period, 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 year or other period bears to such beginning adjusted tax basis;
provided, however, that if the federal income tax depreciation, amortization or
other cost recovery deduction for such year is zero, Depreciation shall be
calculated with reference to such beginning Gross Asset Value using any
reasonable method selected by the Management Committee.

“Distributable Assets” means, with respect to any fiscal period, all cash
receipts (including from any operating, investing, and financing activities) and
(if distribution thereof is determined to be necessary by a majority of the
Management Committee) other assets of the Company from any and all sources,
reduced by operating cash expenses, contributions of capital to subsidiaries of
the Company and payments (if any) required to be made in connection with any
loan to the Company and any reserve for contingencies or escrow required, in the
good faith judgment of the Management Committee, in connection therewith.

“Economic Interest” means a Member’s or Assignee’s share of the Company’s net
profits, net losses and distributions pursuant to this Agreement and the Act,
but shall not include any right to participate in the management or affairs of
the Company, including the right to vote in the election of Representatives,
vote on, consent to or otherwise participate in any decision of the Members or
Representatives, or any right to receive information concerning the business and
affairs of the Company, in each case except as expressly otherwise provided in
this Agreement or required by the Act.

“First Performance Hurdle” means, that the Target Holders shall have received
(i) on or prior to the first anniversary of the date of this Agreement,
aggregate distributions with respect to Class A Units equal to 150% of the
aggregate Capital Contributions of Target Holders, (ii) on or prior to the
second anniversary of the date of this Agreement, aggregate distributions with
respect to Class A Units equal to 175% of the aggregate Capital Contributions of
Target Holders, (iii) on or prior to the third anniversary of the date of this
Agreement, aggregate distributions with respect to Class A Units equal to 200%
of the aggregate Capital Contributions of Target Holders, (iv) on or prior to
the fourth anniversary of the date of this Agreement, aggregate distributions
with respect to Class A Units equal to 225% of the aggregate Capital
Contributions of Target Holders, (v) on or prior to the fifth anniversary of the
date of this

 

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Agreement, aggregate distributions with respect to Class A Units equal to 249%
of the aggregate Capital Contributions of Target Holders or (vi) at any time
after the fifth anniversary of the date of this Agreement, aggregate
distributions with respect to Class A Units equal to an amount that would
produce a Target Holders’ IRR equal to or in excess of 20%; it being understood
that the terms contained in clauses (i) through (vi) of this definition shall
remain constant and in effect throughout the periods indicated.

“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 a Unitholder to
the Company shall be the gross fair market value of such asset on the date of
the contribution, as determined by the contributing Unitholder and the Company.

(b) The Gross Asset Values of all Company assets shall be adjusted to equal
their respective gross fair market values, as determined by the Management
Committee, as of the following times:

(i) the acquisition of an additional interest in the Company after the date
hereof by a new or existing Unitholder in exchange for more than a de minimis
Capital Contribution, if the Management Committee reasonably determines that
such adjustment is necessary or appropriate to reflect the relative Economic
Interests of the Unitholders in the Company;

(ii) the distribution by the Company to a Unitholder of more than a de minimis
amount of Company property as consideration for an interest in the Company, if
the Management Committee reasonably determines that such adjustment is necessary
or appropriate to reflect the relative Economic Interests of the Unitholders in
the Company;

(iii) the liquidation of the Company within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g);

(iv) the grant of an interest in the Company (other than a de minimis interest)
as consideration for the provision of services to or for the benefit of the
Company by an existing Member acting in a Member capacity or by a new Member
acting in a Member capacity or in anticipation of being a Member; and

(v) such other times as the Management Committee shall reasonably determine
necessary or advisable in order to comply with Regulations Sections 1.704-1(b)
and 1.704-2.

(c) The Gross Asset Value of any Company asset distributed to a Unitholder shall
be the gross fair market value of such asset on the date of distribution, as
reasonably determined by the Management Committee taking into account the
following proviso; provided that, in the case of such assets which are
securities, the fair market value thereof shall be reduced (a) if and to the
extent that a block sale of all of such

 

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securities is reasonably likely, in the good faith judgment of a registered
broker-dealer affiliated with a reputable, nationally recognized brokerage
house, to depress the trading price of such securities, (b) if and to the extent
appropriate, in the good faith judgment of the Management Committee, due to
illiquidity of such securities and (c) for any sales or other commissions
reasonably likely to be incurred or applied in a sale of such securities.

(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 Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this subparagraph (d) to the extent
that the Management Committee determines that an adjustment pursuant to
subparagraph (b) of this definition of Gross Asset Value is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (d).

“Holdings” means M-Foods Holdings, Inc., a Delaware corporation.

“Initial Capital Contribution” has the meaning set forth in Section 4.1.

“Management Committee” means the Management Committee established pursuant to
Section 3.2.

“Management Unit Subscription Agreements” has the meaning set forth in
Section 2.9.

“Member” means each THL Holder and the Persons listed on Schedule A attached
hereto and each other Person who is hereafter admitted as a Member in accordance
with the terms of this Agreement and the Act. The Members shall constitute the
“members” (as that term is defined in the Act) of the Company. Except as
otherwise set forth herein or in the Act, the Members shall constitute a single
class or group of members of the Company for all purposes of the Act and this
Agreement.

“Member Minimum Gain” means minimum gain attributable to Member Nonrecourse Debt
determined in accordance with Regulations Section 1.704- 2(i).

“Member Nonrecourse Debt” has the meaning set forth in Regulations
Section 1.704-2(b)(4).

“Member Nonrecourse Deduction” has the meaning set forth in Regulations
Section 1.704- 2(i)(2).

“Membership Interest” means, with respect to each Member, such Member’s Economic
Interest and rights as a Member.

“Michael Foods” means Michael Foods, Inc., a Delaware corporation.

 

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“Net Income” or “Net Loss” means for each fiscal year of the Company, an amount
equal to the Company’s taxable income or loss for such fiscal year, determined
in accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

(a) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Net Income or Net Loss pursuant to
this definition of Net Income or Net Loss shall be added to such taxable income
or loss;

(b) Any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Net Income or Net Loss pursuant to this definition of Net Income or Net Loss
shall be subtracted from such taxable income or loss;

(c) In the event the Gross Asset Value of any Company asset is adjusted pursuant
to subparagraph (b) or (c) of the definition of Gross Asset Value, the amount of
such adjustment shall be taken into account as gain (if the adjustment increases
the Gross Asset Value of the asset) or loss (if the adjustment decreases the
Gross Asset Value of the asset) from the disposition of such asset for purposes
of computing Net Income or Net Loss;

(d) Gain or loss resulting from any disposition of property with respect to
which gain or loss is recognized for federal income tax purposes shall be
computed by reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs from its
Gross Asset Value;

(e) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
Depreciation shall be taken into account for such fiscal year;

(f) To the extent an adjustment to the adjusted tax basis of any Company asset
pursuant to Code Section 734(b) or 743(b) is required pursuant to Regulations
Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a
Unitholder’s interest in the Company, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for purposes of
computing Net Income or Net Loss; and

(g) Notwithstanding any other provision of this definition of Net Income or Net
Loss, any items which are specially allocated pursuant to Section 4.3(c) hereof
shall not be taken into account in computing Net Income or Net Loss. The amounts
of the items of Company income, gain, loss, or deduction available to be
specially allocated pursuant to Section 4.3(c) hereof shall be determined by
applying rules analogous to those set forth in this definition of Net Income or
Net Loss.

 

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“Nonrecourse Deductions” has the meaning set forth in Regulations Section 1.704-
2(b).

“Officer” means each Person designated as an officer of the Company pursuant to
and in accordance with the provisions of Section 3.7, subject to any resolution
of the Management Committee appointing such Person as an officer or relating to
such appointment.

“Original Agreement” has the meaning set forth in the preamble above.

“Preferred Return” with respect to each holder of Class A Units and Class B
Units means an amount, accrued on a daily basis commencing on the date hereof
and, beginning January 1, 2004, compounded quarterly on
April 1, July 1, October 1 and January 1 of each year, from the day on which
such Unitholder makes a Capital Contribution through the date of distribution
equal to 8% per annum of the excess, if any, of (i) such Unitholder’s aggregate
Capital Contribution plus the aggregate amount compounded pursuant to this
definition through the end of the previous quarter on each day during such
period over (ii) the aggregate amount of all distributions made on or prior to
such day to such Unitholder. For purposes of computing the Preferred Return,
each Capital Contribution shall be treated as having been made on the last day
of the calendar month in which such Capital Contribution is received by the
Company (except for the Initial Capital Contribution, which shall be deemed to
have been made on the date hereof), and distributions shall be deemed to have
been made on the last day of the month in which they are made.

“Proceeding” has the meaning set forth in Section 3.11.

“Regulations” means the Income Tax Regulations, including temporary Regulations,
promulgated under the Code, as such Regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).

“Regulatory Allocations” has the meaning set forth in Section 4.3(c) of this
Agreement.

“Representative” has the meaning set forth in Section 3.2(a) of this Agreement.

“Sale of the Company” shall mean a “Sale of the Company” (as defined in the
Securityholders Agreement) or a dissolution of the Company in accordance with
this Agreement (other than transactions effected for the purpose of changing,
directly or indirectly, the form of organization or the organizational structure
of the Company and/or any of its subsidiaries).

“Second Performance Hurdle” means that the Target Holders shall have received
(i) on or prior to the first anniversary of the date of this Agreement,
aggregate distributions with respect to Class A Units equal to 200% of the
aggregate Capital Contributions of Target Holders, (ii) on or prior to the
second anniversary of the date of this Agreement, aggregate distributions with
respect to Class A Units equal to 225% of the aggregate Capital Contributions of
Target Holders, (iii) on or prior to the third anniversary of the date of this
Agreement, aggregate distributions with respect to Class A Units equal to 250%
of the aggregate Capital Contributions of Target Holders, (iv) on or prior to
the fourth anniversary of the date of this Agreement, aggregate distributions
with respect to Class A Units equal to 275% of the aggregate Capital

 

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Contributions of Target Holders, (v) on or prior to the fifth anniversary of the
date of this Agreement, aggregate distributions with respect to Class A Units
equal to 305% of the aggregate Capital Contributions of Target Holders or
(vi) at any time after the fifth anniversary of the date of this Agreement,
aggregate distributions with respect to Class A Units equal to an amount that
would produce a Target Holders’ IRR equal to or in excess of 25%; it being
understood that the terms contained in clauses (i) through (vi) of this
definition shall remain constant and in effect throughout the periods indicated.

“Securities” means any debt or equity securities of any issuer, including common
and preferred stock and interests in limited liability companies (including
warrants, rights, put and call options and other options relating thereto or any
combination thereof), notes, bonds, debentures, trust receipts and other
obligations, instruments or evidences of indebtedness, other property or
interests commonly regarded as securities, interests in real property, whether
improved or unimproved, interests in oil and gas properties and mineral
properties, short-term investments commonly regarded as money market
investments, bank deposits and interests in personal property of all kinds,
whether tangible or intangible.

“Securityholders Agreement” means the Securityholders Agreement dated as of
November 20, 2003 among the Company and each Member, as it may be amended or
supplemented from time to time.

“Substitute Member” means any Person that has been admitted to the Company as a
Member pursuant to Section 5.4 by virtue of such Person receiving all or a
portion of a Membership Interest from a Member or its Assignee and not from the
Company.

“Successor in Interest” means any (i) trustee, custodian, receiver or other
Person acting in any Bankruptcy or reorganization proceeding with respect to;
(ii) assignee for the benefit of the creditors of; (iii) trustee or receiver, or
current or former officer, director or partner, or other fiduciary acting for or
with respect to the dissolution, liquidation or termination of; or (iv) other
executor, administrator, committee, legal representative or other successor or
assign of, any Unitholder, whether by operation of law or otherwise.

“Target Holders” means the holders of Class A Units.

“Target Holders’ IRR” shall mean the cumulative internal rate of return of the
Target Holders (calculated as provided below), as of any date, where the
internal rate of return for such Target Holders shall be the annually compounded
rate of return which results in the following amount having a net present value
equal to zero: (i) the aggregate amount of cash and Gross Asset Value of any
assets distributed to such Target Holders pursuant to Sections 4.4 and 5.2 of
this Agreement and from time to time on a cumulative basis through such date
(provided that, in no circumstances shall any fees paid to such Target Holders
or expenses reimbursed to such Target Holders from time to time under this
Agreement or otherwise be included in this clause (i)), minus (ii) the aggregate
amount of the Capital Contributions made by such Target Holders from time to
time on a cumulative basis through such date. In determining the Target Holders’
IRR, the following shall apply: (a) any Capital Contributions under clause
(ii) above shall be deemed to have been made on the last day of the month in
which they are actually made (except for the Initial Capital Contribution (as
such term is defined herein), which shall be

 

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deemed to have been made on the date hereof; (b) distributions under clause
(i) above shall be deemed to have been made on the last day of the month in
which they are actually made; (c) all distributions shall be based on the amount
distributed prior to the application of any U.S. federal, state, local, or
foreign income taxation to the Target Holders; and (d) the rates of return shall
be per annum rates and all amounts shall be calculated on an annually compounded
basis, and on the basis of a 365-day year.

“Tax Matters Member” has the meaning set forth in Section 6.4(b).

“Third Performance Hurdle” means that the Target Holders shall have received
(i) on or prior to the first anniversary of the date of this Agreement,
aggregate distributions with respect to Class A Units equal to 300% of the
aggregate Capital Contributions of Target Holders, (ii) on or prior to the
second anniversary of the date of this Agreement, aggregate distributions with
respect to Class A Units equal to 325% of the aggregate Capital Contributions of
Target Holders, (iii) on or prior to the third anniversary of the date of this
Agreement, aggregate distributions (pursuant to this Agreement) with respect to
Class A Units equal to 350% of the aggregate Capital Contributions of Target
Holders, (iv) on or prior to the fourth anniversary of the date of this
Agreement, aggregate distributions with respect to Class A Units equal to 375%
of the aggregate Capital Contributions of Target Holders, (v) on or prior to the
fifth anniversary of the date of this Agreement, aggregate distributions with
respect to Class A Units equal to 448% of the aggregate Capital Contributions of
Target Holders or (vi) at any time after the fifth anniversary of the date of
this Agreement, aggregate distributions with respect to Class A Units equal to
an amount that would produce a Target Holders’ IRR equal to or in excess of 35%;
it being understood that the terms contained in clauses (i) through (vi) of this
definition shall remain constant and in effect throughout the periods indicated.

“Unitholder” means a Member or Assignee who holds an Economic Interest in
Class A Units, Class B Units, Class C Units, Class E Units, Class F Units,
Class G Units or Class H Units.

“Unpaid Preferred Return” with respect to each holder of Class A Units and Class
B Units means the excess, if any, of (i) such Unitholder’s Preferred Return as
of the date of any such determination over (ii) the aggregate amount of all
distributions made to such Unitholder pursuant to or in accordance with
Section 4.4(a)(ii).

“Unreturned Capital” with respect to each Unitholder means the excess, if any,
of (i) such Unitholder’s aggregate Capital Contributions over (ii) the aggregate
amount of all distributions made to such Unitholder pursuant to or in accordance
with Section 4.4(a).

SECTION 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally
to both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The term “person” or “Person” includes individuals, partnerships
(whether general or limited), joint ventures, corporations, limited liability
companies, trusts, estates, custodians, nominees, governments (or agencies or
political subdivisions thereof) and other associations, entities or groups (as
defined in the Securities Exchange Act of 1934, as amended). The words
“include,” “includes” and “including” shall be deemed to be followed by the
phrase “without limitation.”

 

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All terms herein that relate to accounting matters shall be interpreted in
accordance with generally accepted accounting principles from time to time in
effect. All references to “Sections” and “Articles” shall refer to Sections and
Articles of this Agreement unless otherwise specified. The words “hereof” and
“herein” and similar terms shall relate to this Agreement.

ARTICLE II.

GENERAL PROVISIONS

SECTION 2.1 Formation. The Company has been organized as a Delaware limited
liability company by the execution and filing of a Certificate of Formation (the
“Certificate”) by THL, as an initial Member, under and pursuant to the Act. The
rights, powers, duties, obligations and liabilities of the Members shall be
determined pursuant to the Act and this Agreement. To the extent that the
rights, powers, duties, obligations and liabilities of any Member are different
by reason of any provision of this Agreement than they would be in the absence
of such provision, this Agreement shall, to the extent permitted by the Act,
control.

SECTION 2.2 Name. The name of the Company is “Michael Foods Investors, LLC,” and
all Company business shall be conducted in that name or in such other names that
comply with applicable law as the Management Committee may select from time to
time.

SECTION 2.3 Term. The term of the Company commenced on the date the Certificate
was filed with the office of the Secretary of State of the State of Delaware and
shall continue in existence perpetually until termination or dissolution in
accordance with the provisions of Section 5.2.

SECTION 2.4 Purpose; Powers.

(a) General Powers. The nature of the business or purposes to be conducted or
promoted by the Company is to engage in any lawful act or activity for which
limited liability companies may be organized under the Act. The Company may
engage in any and all activities necessary, desirable or incidental to the
accomplishment of the foregoing. Notwithstanding anything herein to the
contrary, nothing set forth herein shall be construed as authorizing the Company
to possess any purpose or power, or to do any act or thing, forbidden by law to
a limited liability company organized under the laws of the State of Delaware.

(b) Company Action. Subject to the provisions of this Agreement and except as
prohibited by applicable law (i) the Company may, with the approval of the
Management Committee, enter into and perform any and all documents, agreements
and instruments contemplated thereby, all without any further act, vote or
approval of any Member and (ii) the Management Committee may authorize any
Person (including any Member or Officer) to enter into and perform any document
on behalf of the Company.

(c) Merger. Subject to the provisions of this Agreement, the Company may, with
the approval of the Management Committee and without the need for any further
act, vote or approval of any Member, merge with, or consolidate into, another
limited liability company (organized under the laws of Delaware or any other
state), a corporation (organized under the laws of Delaware or any other state)
or other business

 

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entity (as defined in Section 18-209(a) of the Act), regardless of whether the
Company is the survivor of such merger or consolidation; provided that, to the
extent applicable in connection with any transaction described in this
Section 2.4(c), each Unitholder shall be afforded any rights to which it is
entitled to pursuant to Article IV of the Securityholders Agreement.

SECTION 2.5 Foreign Qualification. Prior to the Company’s conducting business in
any jurisdiction other than Delaware, the Management Committee shall cause the
Company to comply, to the extent procedures are available and those matters are
reasonably within the control of the Officers, with all requirements necessary
to qualify the Company as a foreign limited liability company in that
jurisdiction.

SECTION 2.6 Registered Office; Registered Agent; Principal Office; Other
Offices. The registered office of the Company required by the Act to be
maintained in the State of Delaware shall be the office of the initial
registered agent named in the Certificate or such other office (which need not
be a place of business of the Company) as the Management Committee may designate
from time to time in the manner provided by law. The registered agent of the
Company in the State of Delaware shall be the initial registered agent named in
the Certificate or such other Person or Persons as the Management Committee may
designate from time to time in the manner provided by law. The principal office
of the Company shall be at such place as the Management Committee may designate
from time to time, which need not be in the State of Delaware, and the Company
shall maintain records at such place. The Company may have such other offices as
the Management Committee may designate from time to time.

SECTION 2.7 No State-Law Partnership. The Unitholders intend that the Company
shall not be a partnership (including a limited partnership) or joint venture,
and that no Unitholder, Representative or Officer shall be a partner or joint
venturer of any other Unitholder, Representative or Officer by virtue of this
Agreement, for any purposes other than as set forth in the last sentence of this
Section 2.7, and this Agreement shall not be construed to the contrary. The
Unitholders intend that the Company shall be treated as a partnership for
federal and, if applicable, state or local income tax purposes, and each
Unitholder and the Company shall file all tax returns and shall otherwise take
all tax and financial reporting positions in a manner consistent with such
treatment.

SECTION 2.8 Amendment and Restatement. This Agreement amends, restates and
supersedes in its entirety the Original Agreement.

SECTION 2.9 Issuance of Additional Units. The Management Committee shall have
the right to cause the Company to create and issue preferred units in connection
with the exercise of the Company’s rights and/or obligations to purchase Class A
Units, Class B Units, Class C Units, Class E Units, Class F Units, Class G Units
and Class H Units from certain Members each of whom is also a party to a
Management Unit Subscription Agreement by and between such Member and the
Company (collectively, the “Management Unit Subscription Agreements”). Subject
to the provisions of the Management Unit Subscription Agreement, the Management
Committee shall determine the terms and conditions governing the issuance of any
of such preferred units. In addition, the Management Committee shall have the
right to issue Class B Units and Class C Units; provided that, the Management
Committee shall not authorize

 

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the issuance of either Class B Units or Class C Units in excess of the number of
such Class B Units and Class C Units, as the case may be, issued as of the date
hereof (it being understood that any Class B Units or Class C Units repurchased
by the Company shall no longer be considered “issued” for purposes hereof)
unless (A) for so long as he serves as Chief Executive Officer of Michael Foods,
Gregg A. Ostrander provides his written consent to such issuance or (B) if Gregg
A. Ostrander shall cease to be the Chief Executive Officer of Michael Foods, the
holders of a majority of the outstanding Class B Units or Class C Units, as the
case may be, approve such issuance. In addition, the holders of a majority of
Class A Units shall have the right to cause the Company to create and issue
additional units and classes of units; provided that (i) no such issuance shall
adversely affect the relationship among the Class A Units, Class B Units and
Class C Units as set forth herein without the consent of the holders of a
majority in interest of the Units of each Class so affected, or (ii) adversely
affect the relationship among the Class A Units, Class B Units and Class C
Units, on the one hand, and the Class E Units, on the other hand without the
consent of the holders of a majority in interest of the Units of each Class so
affected (taking the Class A Units, Class B Units and Class C Units together as
one Class), or (iii) adversely affect the relationship among the Class A Units,
Class B Units and Class C Units, on the one hand, and the Class F Units, on the
other hand, without the consent of the holders of a majority in interest of the
Units of each Class so affected (taking the Class A Units, Class B Units and
Class C Units together as one Class), (iv) adversely affect the relationship
among the Class A Units, Class B Units and Class C Units, on the one hand, and
the Class G Units, on the other hand, without the consent of the holders of a
majority in interest of the Units of each Class so affected (taking the Class A
Units, Class B Units and Class C Units together as one Class), or (v) adversely
affect the relationship among the Class A Units, Class B Units and Class C
Units, on the one hand, and the Class H Units, on the other hand, without the
consent of the holders of a majority in interest of the Units of each Class so
affected (taking the Class A Units, Class B Units and Class C Units together as
one Class).

ARTICLE III.

MANAGEMENT

SECTION 3.1 The Management Committee; Delegation of Authority and Duties.

(a) Members and Management Committee. The Members shall possess all rights and
powers as provided in the Act and otherwise by law. Except as otherwise
expressly provided for herein, the Members hereby consent to the exercise by the
Management Committee of all such powers and rights conferred on them by the Act
with respect to the management and control of the Company. Notwithstanding the
foregoing and except as explicitly set forth in this Agreement, if a vote,
consent or approval of the Members is required by the Act or other applicable
law with respect to any act to be taken by the Company or matter considered by
the Management Committee, each Member agrees that it shall be deemed to have
consented to or approved such act or voted on such matter in accordance with a
vote of the Management Committee on such act or matter. No Member, in its
capacity as a Member, shall have any power to act for, sign for or do any act
that would bind the Company. The Members, acting through the Management
Committee, shall devote such time and effort to the affairs of the Company as
they may deem appropriate for the oversight of the management and affairs of the
Company. Each Member acknowledges and agrees that no Member shall, in its
capacity

 

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as a Member, be bound to devote all of such Member’s business time to the
affairs of the Company, and that each Member and such Member’s Affiliates do and
will continue to engage for such Member’s own account and for the account of
others in other business ventures.

(b) Delegation by Management Committee. The Management Committee shall have the
power and authority to delegate to one or more other Persons the Management
Committee’s rights and powers to manage and control the business and affairs of
the Company, including to delegate to agents and employees of a Member, a
Representative or the Company (including Officers), and to delegate by a
management agreement or another agreement with, or otherwise to, other Persons.
The Management Committee may authorize any Person (including, without
limitation, any Member, Officer or Representative) to enter into and perform
under any document on behalf of the Company.

(c) Committees. The Management Committee may, from time to time, designate one
or more committees, each of which shall be comprised of at least two
Representatives. Any such committee, to the extent provided in the enabling
resolution and until dissolved by the Management Committee, shall have and may
exercise any or all of the authority of the Management Committee. At every
meeting of any such committee, the presence of a majority of all the
representatives thereof shall constitute a quorum, and the affirmative vote of a
majority of the representatives present shall be necessary for the adoption of
any resolution. The Management Committee may dissolve any committee at any time,
unless otherwise provided in the Certificate or this Agreement.

SECTION 3.2 Establishment of Management Committee.

(a) Representatives. There shall be established a Management Committee composed
of up to seven (7) Persons all of whom shall be individuals (“Representatives”)
who shall be elected by a majority vote of the holders of Class A Units and
Class B Units, voting together as a single class, and each such Member shall
have one vote for each Class A Unit and/or Class B Unit held by such Member. Any
Representative may be removed from the Management Committee at any time by the
holders of a majority of the total voting power of the outstanding Class A Units
and Class B Units. Each Representative shall remain in office until his or her
death, resignation or removal, and in the event of death, resignation or removal
of a Representative, the party or parties, as applicable, which designated such
Representative shall fill the vacancy created.

(b) Duties. The Representatives, in the performance of their duties, shall owe
to the Company and the Members duties of loyalty and due care of the type owed
by the directors of a corporation to such corporation and its stockholders under
the laws of the State of Delaware.

(c) Absence. A Representative may, in isolated instances arising from exigent
circumstances, designate a Person to act as his or her substitute and in his or
her place at any meeting of the Management Committee. Such Person shall have all
power of

 

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the absent Representative, and references herein to a “Representative” at a
meeting shall be deemed to include his or her substitute. Notwithstanding
anything in this Agreement to the contrary, Representatives, in their capacities
as such, shall not be deemed to be “members” or “managers” (as such terms are
defined in the Act) of the Company; provided that, for the purpose of clarity
and the avoidance of doubt, nothing contained in this sentence shall relieve or
diminish any Representative’s duties under Section 3.2(b) hereof.

(d) No Individual Authority. No Representative has the authority or power to act
for or on behalf of the Company, to do any act that would be binding on the
Company or to make any expenditures or incur any obligations on behalf of the
Company or authorize any of the foregoing, other than acts that are expressly
authorized by the Management Committee.

(e) Conflict. Each provision of this Section 3.2 is subject to the terms and
provisions of the Securityholders Agreement, and to the extent any such
provisions apply, they are then to be construed as being incorporated in this
Agreement and made a part hereof.

SECTION 3.3 Management Committee Meetings.

(a) Quorum. A majority of the total number of Representatives shall constitute a
quorum for the transaction of business of the Management Committee and, except
as otherwise provided in this Agreement, the act of a majority of the
Representatives present at a meeting of the Management Committee at which a
quorum is present shall be the act of the Management Committee. A Representative
who is present at a meeting of the Management Committee at which action on any
matter is taken shall be presumed to have assented to the action unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the Person acting as secretary of the
meeting before the adjournment thereof or shall deliver such dissent to the
Company immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Representative who voted in favor of such action.

(b) Place, Waiver of Notice. Meetings of the Management Committee may be held at
such place or places as shall be determined from time to time by resolution of
the Management Committee. At all meetings of the Management Committee, business
shall be transacted in such order as shall from time to time be determined by
resolution of the Management Committee. Attendance of a Representative at a
meeting shall constitute a waiver of notice of such meeting, except where a
Representative attends a meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.

(c) Regular Meetings. Regular meetings of the Management Committee shall be held
at such times and places as shall be designated from time to time by resolution
of the Management Committee. Notice of such meetings shall not be required.

 

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(d) Special Meetings. Special meetings of the Management Committee may be called
on at least 24 hours notice to each Representative by the chairman or any two
Representatives. Such notice need not state the purpose or purposes of, nor the
business to be transacted at, such meeting, except as may otherwise be required
by law or provided for in this Agreement.

(e) Notice. Notice of any special meeting of the Management Committee or other
committee may be given personally, by mail, facsimile, courier or other means
and, if other than personally, shall be deemed given when written notice is
delivered to the office of the Representative at the address of the
Representative in the books and records of the Company.

SECTION 3.4 Chairman. The Management Committee shall designate a Representative
to serve as chairman. The chairman shall preside at all meetings of the
Management Committee. If the chairman is absent at any meeting of the Management
Committee, a majority of the Representatives present shall designate another
Representative to serve as interim chairman for that meeting. The chairman shall
have no authority or power to act for or on behalf of the Company, to do any act
that would be binding on the Company or to make any expenditure or incur any
obligations on behalf of the Company or authorize any of the foregoing.

SECTION 3.5 Approval or Ratification of Acts or Contracts. Any act or contract
that shall be approved or be ratified by the Management Committee shall be as
valid and as binding upon the Company and upon all the Members (in their
capacity as Members) as if it shall have been approved or ratified by every
Member of the Company; provided, however, the Management Committee shall not
permit the Company or its subsidiaries to engage in any act or enter into any
contract or other arrangement involving the payment by the Company or its
subsidiaries of any fees or compensation to THL or its Affiliates (excluding
from this proviso any fees or compensation payable pursuant to that certain
Management Agreement, dated as of the date hereof, by and among Michael Foods
and THL Managers V, LLC) unless a majority of the Representatives (excluding the
THL Directors (as such term is defined in the Securityholders Agreement) provide
written consent to such action, contract or other arrangement.

SECTION 3.6 Action by Written Consent or Telephone Conference. Any action
permitted or required by the Act, the Certificate or this Agreement to be taken
at a meeting of the Management Committee or any committee designated by the
Management Committee may be taken without a meeting if a consent in writing,
setting forth the action to be taken, is signed by a majority of the
Representatives or representatives of such other committee, as the case may be.
Such consent shall have the same force and effect as a vote at a meeting and may
be stated as such in any document or instrument filed with the Secretary of
State of the State of Delaware, and the execution of such consent shall
constitute attendance or presence in person at a meeting of the Management
Committee or any such other committee, as the case may be. Subject to the
requirements of this Agreement for notice of meetings, the Representatives, or
representatives of any other committee designated by the Management Committee,
may participate in and hold a meeting of the Management Committee or any such
other committee, as the case may be, by means of a conference telephone or
similar communications equipment by means of which all Persons participating in
the meeting can hear each other, and participation in such meeting shall

 

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constitute attendance and presence in person at such meeting, except where a
Person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.

SECTION 3.7 Officers.

(a) Designation and Appointment. The Management Committee may, from time to
time, employ and retain Persons as may be necessary or appropriate for the
conduct of the Company’s business (subject to the supervision and control of the
Management Committee), including employees, agents and other Persons (any of
whom may be a Member or Representative) who may be designated as Officers of the
Company, with titles including “chief executive officer,” “chairman,”
“president,” “vice president,” “treasurer,” “secretary,” “general manager,”
“director” and “chief financial officer,” as and to the extent authorized by the
Management Committee. Any number of offices may be held by the same Person. In
its discretion, the Management Committee may choose not to fill any office for
any period as it may deem advisable. Officers need not be residents of the State
of Delaware or Members. Any Officers so designated shall have such authority and
perform such duties as the Management Committee may, from time to time, delegate
to them. The Management Committee may assign titles to particular Officers. Each
Officer shall hold office until his successor shall be duly designated and shall
qualify or until his death or until he shall resign or shall have been removed
in the manner hereinafter provided. The salaries or other compensation, if any,
of the Officers of the Company shall be fixed from time to time by the
Management Committee.

(b) Resignation/Removal. Any Officer may resign as such at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or if no time is specified, at the time of its receipt by the
Management Committee. The acceptance of a resignation shall not be necessary to
make it effective, unless expressly so provided in the resignation. Subject to
clauses (d), (e) and (f) of this Section 3.7, any Officer may be removed as
such, either with or without cause at any time by the Management Committee.
Designation of an Officer shall not of itself create any contractual or
employment rights.

(c) Duties of Officers Generally. The Officers, in the performance of their
duties as such, shall owe to the Company duties of loyalty and due care of the
type owed by the officers of a corporation to such corporation and its
stockholders under the laws of the State of Delaware.

(d) Chief Executive Officer. Subject to the powers of the Management Committee,
the chief executive officer of the Company shall be in general and active charge
of the entire business and affairs of the Company, and shall be its chief policy
making officer.

(e) President. The president shall, subject to the powers of the Management
Committee and chief executive officer, have general and active management of the
business of the Company; and shall see that all orders and resolutions

 

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of the Management Committee are carried into effect. The president shall have
such other powers and perform such other duties as may be prescribed by the
chief executive officer or the Management Committee.

(f) Chief Financial Officer. The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and
records of accounts of the properties and business transactions of the Company,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses and capital. The chief financial officer shall have the custody of the
funds and securities of the Company, and shall keep full and accurate accounts
of receipts and disbursements in books belonging to the Company, and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Company in such depositories as may be designated by the Management
Committee. The chief financial officer shall have such other powers and perform
such other duties as may from time to time be prescribed by the chief executive
officer or the Management Committee.

(g) Vice President(s). The vice president(s) shall perform such duties and have
such other powers as the chief executive officer or the Management Committee may
from time to time prescribe.

(h) Secretary.

(i) The secretary shall attend all meetings of the Management Committee, and
shall record all the proceedings of the meetings in a book to be kept for that
purpose, and shall perform like duties for the standing committees of the
Management Committee when required.

(ii) The secretary shall keep all documents described in Article VI and such
other documents as may be required under the Act. The secretary shall perform
such other duties and have such other authority as may be prescribed elsewhere
in this Agreement or from time to time by the chief executive officer or the
Management Committee. The secretary shall have the general duties, powers and
responsibilities of a secretary of a corporation.

(iii) If the Management Committee chooses to appoint an assistant secretary or
assistant secretaries, the assistant secretaries, in the order of their
seniority, in the absence, disability or inability to act of the secretary,
shall perform the duties and exercise the powers of the secretary, and shall
perform such other duties as the chief executive officer or the Management
Committee may from time to time prescribe.

SECTION 3.8 Management Matters.

(a) Transfer of Property. All property owned by the Company shall be registered
in the Company’s name, in the name of a nominee or in “street name” as the
Management Committee may from time to time determine. Any corporation, brokerage
firm or transfer agent called upon to transfer any Securities to or from the
name of the Company shall be entitled to rely on instructions or assignments
signed or purported to be

 

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signed by any Officer or Representative without inquiry as to the authority of
the Person signing or purporting to sign such instructions or assignments or as
to the validity of any transfer to or from the name of the Company. At the time
of any such transfer, any such corporation, brokerage firm or transfer agent
shall be entitled to assume that (i) the Company is then in existence and
(ii) that this Agreement is in full force and effect and has not been amended,
in each case unless such corporation, brokerage firm or transfer agent shall
have received written notice to the contrary.

(b) Existence and Good Standing. The Management Committee may take all action
which may be necessary or appropriate (i) for the continuation of the Company’s
valid existence as a limited liability company under the laws of the State of
Delaware (and of each other jurisdiction in which such existence is necessary to
enable the Company to conduct the business in which it is engaged) and (ii) for
the maintenance, preservation and operation of the business of the Company in
accordance with the provisions of this Agreement and applicable laws and
regulations. The Management Committee may file or cause to be filed for
recordation in the office of the appropriate authorities of the State of
Delaware, and in the proper office or offices in each other jurisdiction in
which the Company is formed or qualified, such certificates (including
certificates of limited liability companies and fictitious name certificates)
and other documents as are required by the applicable statutes, rules or
regulations of any such jurisdiction or as are required to reflect the identity
of the Members and the amounts of their respective capital contributions.

(c) Investment Company Act. The Management Committee shall use its best efforts
to assure that the Company shall not be subject to registration as an investment
company pursuant to the Investment Company Act of 1940, as amended.

(d) No UBTI;ECI. The Company shall not, directly or through any pass-through
entity in which it holds an interest, engage in any transaction or activity that
shall cause its Unitholders, or any of such Unitholder’s limited partners,
which, in the case of clause (i), are exempt from income taxation under
Section 501(a) of the Code, or, in the case of clause (ii), are non-U.S.
persons, to recognize (i) unrelated business taxable income, as defined in
Section 512 and Section 514 of the Code, that is taxable to such Persons under
Section 511 of the Code or (ii) income that is or is deemed to be “effectively
connected” with a U.S. trade or business, as defined in Section 864(b) of the
Code or income received directly or indirectly from a commercial activity within
the meaning of Section 892(a)(2) of the Code.

SECTION 3.9 Securities in Holdings. The Company shall vote all of the securities
it holds in Holdings as directed by the Management Committee.

SECTION 3.10 Liability of Unitholders.

(a) No Personal Liability. Except as otherwise required by applicable law and as
expressly set forth in this Agreement, no Unitholder shall have any personal
liability whatsoever in such Person’s capacity as a Unitholder, whether to the
Company, to any of the other Unitholders, to the creditors of the Company or to
any other third

 

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party, for the debts, liabilities, commitments or any other obligations of the
Company or for any losses of the Company. Each Unitholder shall be liable only
to make such Unitholder’s Initial Capital Contribution to the Company, if
applicable, and the other payments provided expressly herein.

(b) Return of Distributions. In accordance with the Act and the laws of the
State of Delaware, a member of a limited liability company may, under certain
circumstances, be required to return amounts previously distributed to such
member. It is the intent of the Members that no distribution to any Member
pursuant to Article V hereof shall be deemed a return of money or other property
paid or distributed in violation of the Act. The payment of any such money or
distribution of any such property to a Member shall be deemed to be a compromise
within the meaning of the Act, and the Member receiving any such money or
property shall not be required to return to any Person any such money or
property. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, any Member is obligated to
make any such payment, such obligation shall be the obligation of such Member
and not of any Representative or other Member.

SECTION 3.11 Indemnification by the Company. Subject to the limitations and
conditions provided in this Section 3.11, each Person who was or is made a party
or is threatened to be made a party to or is involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or arbitrative (hereinafter a “Proceeding”), or any appeal in such a Proceeding
or any inquiry or investigation that could lead to such a Proceeding, by reason
of the fact that he, she, or it, or a Person of which he, she or it is the legal
representative, is or was a Unitholder, Officer or Representative shall be
indemnified by the Company to the fullest extent permitted by applicable law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide
prior to such amendment) against all judgments, penalties (including excise and
similar taxes and punitive damages), fines, settlements and reasonable expenses
(including reasonable attorneys’ fees and expenses) actually incurred by such
Person in connection with such Proceeding, appeal, inquiry or investigation if
such Person acted in Good Faith, and indemnification under this Section 3.11
shall continue as to a Person who has ceased to serve in the capacity which
initially entitled such Person to indemnity hereunder. The rights granted
pursuant to this Section 3.11 shall be deemed contract rights, and no amendment,
modification or repeal of this Section 3.11 shall have the effect of limiting or
denying any such rights with respect to actions taken or Proceedings, appeals,
inquiries or investigations arising prior to any amendment, modification or
repeal. It is expressly acknowledged that the indemnification provided in this
Section 3.11 could involve indemnification for negligence or under theories of
strict liability. “Good Faith” shall mean a Person having acted in good faith
and in a manner such Person reasonably believed to be in or not opposed to the
best interests of the Company, and, with respect to a criminal proceeding,
having had no reasonable cause to believe such Person’s conduct was unlawful.

 

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ARTICLE IV.

CAPITAL CONTRIBUTIONS; ALLOCATIONS; DISTRIBUTIONS

SECTION 4.1 Capital Contributions. The Members listed on Schedule A hereto have
made initial Capital Contributions to the Company in the amounts and of the type
set forth in Exhibit I hereto (with respect to each Member, an “Initial Capital
Contribution”).

SECTION 4.2 Capital Accounts.

(a) Creation. There shall be established for each Unitholder on the books of the
Company a Capital Account which shall be increased or decreased in the manner
set forth in this Agreement.

(b) Negative Balance. A Unitholder shall not have any obligation to the Company
or to any other Unitholder to restore any negative balance in the Capital
Account of such Unitholder.

SECTION 4.3 Allocations of Net Income and Net Loss.

(a) Timing and Amount of Allocations of Net Income and Net Loss. Net Income and
Net Loss of the Company shall be determined and allocated with respect to each
fiscal year of the Company as of the end of each such year or as circumstances
otherwise require or allow. Subject to the other provisions of this Section 4.3,
an allocation to a Unitholder of a share of Net Income or Net Loss shall be
treated as an allocation of the same share of each item of income, gain, loss or
deduction that is taken into account in computing Net Income or Net Loss.

(b) General Allocations.

(i) Net Income and Net Loss. After giving effect to the special allocations
provided in Sections 4.3(c) all Net Income and Net Loss of the Company for a
fiscal year shall be allocated to the Unitholders as follows:

(A) first, Net Income will be allocated to the Unitholders having deficit
balances in their Capital Accounts (computed after giving effect to all
contributions, distributions, allocations and other Capital Account adjustments
for all taxable years (other than the items comprising the Net Income or Net
Loss of the Company being allocated to the Unitholders for the current fiscal
year), after adding back each Unitholder’s share of Company Minimum Gain and
Member Minimum Gain as provided in Regulations Sections 1.704-2(g) and
1.704-2(i)(5)), to the extent of, and in proportion to, those deficits, unless
satisfied by allocations under Section 4.3(c) hereof; and

(B) second, Net Income and Net Loss not allocated under Section 4.3(b)(i)(A)
will be allocated so as to cause the credit balance in each Unitholder’s Capital
Account (computed in the same manner as provided parenthetically in
Section 4.3(b)(i)(A) hereof) to equal, as nearly as possible, the amount such
Unitholder would receive if the Company sold all of its assets for the Gross
Asset Value of each such asset and distributed the proceeds thereof (after
satisfaction of any liabilities of the Company) in accordance with the
provisions of Section 4.4 hereof.

 

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(c) Additional Allocation Provisions. Notwithstanding the foregoing provisions
of this Section 4.3:

(i)

(A) If there is a net decrease in Company Minimum Gain or Member Minimum Gain
during any fiscal year, the Unitholders shall be allocated items of Company
income and gain for such fiscal year (and, if necessary, for subsequent fiscal
years) in accordance with Regulations Section 1.704-2(f) or 1.704-2(i)(4), as
applicable. It is intended that this Section 4.3(c)(i)(A) qualify and be
construed as a “minimum gain chargeback” and a “chargeback of partner
nonrecourse debt minimum gain” within the meaning of such Regulations, which
shall be controlling in the event of a conflict between such Regulations and
this Section 4.3(c)(i)(A).

(B) Any Nonrecourse Deductions for any fiscal year shall be specially allocated
to the holders of Class A Units in accordance with the number of Class A Units
held by each such Unitholder. Any Member Nonrecourse Deductions for any fiscal
year shall be specially allocated to the Unitholder(s) who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable, in accordance with Regulations
Section 1.704- 2(i).

(C) If any Unitholder unexpectedly receives an adjustment, allocation or
distribution described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or
(6), items of Company income and gain shall be allocated, in accordance with
Regulations Section 1.704—1(b)(2)(ii) (d), to the Unitholder in an amount and
manner sufficient to eliminate, to the extent required by such Regulations, the
Adjusted Capital Account Deficit of the Unitholder as quickly as possible. It is
intended that this Section 4.3(c)(i)(C) qualify and be construed as a “qualified
income offset” within the meaning of Regulations 1.704-1(b)(2)(ii)(d), which
shall be controlling in the event of a conflict between such Regulations and
this Section 4.3(c)(i)(C).

(D) The allocations set forth in Sections 4.3(c)(i)(A), (B) and (C) (the
“Regulatory Allocations”) are intended to comply with certain regulatory
requirements, including the requirements of Regulations Sections 1.704-1(b) and
1.704-2. Notwithstanding the provisions of Section 4.3(b), the Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, loss and deduction among the Unitholders so that, to the extent possible,
the net amount of such

 

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allocations of other items and the Regulatory Allocations to each Unitholder
shall be equal to the net amount that would have been allocated to each such
Unitholder if the Regulatory Allocations had not occurred.

(ii) For any fiscal year during which a Unitholder’s interest in the Company is
assigned by such Unitholder, the portion of the Net Income and Net Loss of the
Company that is allocable in respect of such Unitholder’s interest shall be
apportioned between the assignor and the assignee of such Unitholder’s interest
using any permissible method under Code Section 706 and the Regulations
thereunder, as determined by the Management Committee.

(iii) In the event that any amount claimed by the Company to constitute a
deductible expense in any fiscal year is treated for federal income tax purposes
as a distribution made to a Unitholder in its capacity as a partner of the
Company and not a payment to a Unitholder not acting in its capacity as a
partner under Code Section 707(a), then the Unitholder who is deemed to have
received such distribution shall first be allocated an amount of Company gross
income equal to such payment, its Capital Account shall be reduced to reflect
the distribution, and for purposes of Section 4.3, Net Income and Net Loss shall
be determined after making the allocation required by this Section 4.3(c)(iii).

(iv) In the event that any amount claimed by the Company to constitute a
distribution made to a Unitholder in its capacity as a partner of the Company is
treated for federal income tax purposes as a deductible expense of the Company
for a payment to a Unitholder not acting in its capacity as a partner of the
Company, then the Unitholder who is deemed to have received such payment shall
first be allocated the Company expense item attributable to such payment, its
Capital Account shall be reduced to reflect the allocation, and for purposes of
Section 4.3, Net Income and Net Loss shall be determined after making the
allocation required by this Section 4.3(c)(iv).

(d) Required Tax Allocations. All items of income, gain, loss, deduction and
credit for federal income tax purposes shall be allocated to each Unitholder in
the same manner as the Net Income or Net Loss (and each item of income, gain,
loss and deduction related thereto) that is allocated to such Unitholder
pursuant to Section 4.3(a), (b) and (c) to which such tax items relate.
Notwithstanding the foregoing provisions of this Section 4.3, income, gain,
loss, deduction, and credits with respect to property contributed to the Company
by a Unitholder shall be allocated among the Unitholders for federal and state
income tax purposes pursuant to Regulations promulgated under Section 704(c) of
the Code, so as to take account of the variation, if any, between the adjusted
basis for federal income tax purposes of the property to the Company and its
initial Gross Asset Value at the time of contribution. In the event the Gross
Asset Value of any Company asset is adjusted pursuant to subparagraph (b), (c),
or (d) of the definition of Gross Asset Value, subsequent allocations of income,
gain, loss, deduction, and credits with respect to such asset shall take account
of the variation, if any, between the adjusted basis of such asset for federal
income tax purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the applicable Regulations

 

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consistent with the requirements of Treasury Regulation
Section 1.704-1(b)(2)(iv)(g). Allocations pursuant to this Section 4.3(d) are
solely for purposes of federal, state and local income taxes and shall not
affect, or in any way be taken into account in computing, any Unitholder’s
Capital Account or share of Net Income, Net Loss, other tax items or
distributions pursuant to any provision of this Agreement.

(e) Unitholders’ Tax Reporting. The Unitholders acknowledge and are aware of the
income tax consequences of the allocations made by this Section 4.3 and, except
as may otherwise be required by applicable law or regulatory requirements,
hereby agree to be bound by the provisions of Section 4.3 in reporting their
shares of Company income, gain, loss, deductions, and credits for federal, state
and local income tax purposes.

(f) Withholding. Each Unitholder hereby authorizes the Company to withhold and
to pay over any taxes payable by the Company or any of its Affiliates as a
result of the participation by such Unitholder (or any Assignee of, or Successor
in Interest to, such Unitholder) in the Company; provided that, prior to
withholding any amount in respect of Minnesota income taxes from any Unitholder,
the Company shall provide such Unitholder a reasonable opportunity to provide
the Company an exemption certificate, or its equivalent, to exonerate the
Company from any obligation to withhold such tax. If and to the extent that the
Company shall be required to withhold any taxes, such Unitholder shall be deemed
for all purposes of this Agreement to have received a payment from the Company
as of the time such withholding is required to be paid, which payment shall be
deemed to be a distribution to such Unitholder under Section 4.4(a) or
Section 5.2 to the extent that the Unitholder is entitled to receive a
distribution and shall be taken into account in determining the amount of future
distributions to such Unitholder. To the extent that the aggregate of such
payments to a Unitholder for any period exceeds the distributions to which such
Unitholder is entitled for such period, the amount of such excess shall be
considered a demand loan from the Company to such Unitholder, with interest at
an interest rate of 9% compounded annually, which interest shall be treated as
an item of Company income until discharged by such Unitholder by repayment,
which may be made in the sole discretion of the Management Committee out of
distributions to which such Unitholder would otherwise be subsequently entitled.
The withholdings referred to in this Section 4.3 shall be made at the maximum
applicable statutory rate under applicable tax law unless the Management
Committee receives documentation, satisfactory to the Management Committee, to
the effect that a lower rate is applicable, or that no withholding is
applicable.

SECTION 4.4 Distributions.

(a) Priority. Distributable Assets will be distributed (or set aside for the
benefit of the applicable Unitholder in the discretion of the Management
Committee) as soon as reasonably practical after such Distributable Assets
become available to the Company, subject to Sections 4.4(b) and (c), as outlined
in this Section 4.4(a).

1. Until the aggregate amount of distributions to Unitholders pursuant to this
Section 4.4(a), taking into account only the current distribution and any

 

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previous distributions made after the Class E Effective Date, equal the Class E
Distribution Threshold Amount, 100% of Distributable Assets shall be distributed
in accordance with Section 4.4(a)(4)(E)(i) through (vii) below; provided that,
no distributions under Section 4.4(a)(4)(E)(i) below shall be made to the Class
E Unitholders, the Class F Unitholders, the Class G Unitholders or the Class H
Unitholders.

2. After the aggregate of all distributions made after the Class E Effective
Date equal the Class E Distribution Threshold Amount, then 100% of the
Distributable Assets up to an amount when the aggregate of all such
distributions equal the Class F/G Distribution Threshold Amount shall be made as
follows:

(A) first, 100% of such Distributable Assets shall be distributed to the Class E
Unitholders pro rata in accordance with each Class E Unitholders’ Unreturned
Capital until each such Class E Unitholders’ Unreturned Capital has been reduced
to zero;

(B) next, an amount equal to the Class E Tier I Distribution Amount shall be
distributed to the Class E Unitholders pro rata in accordance with the number of
Class E Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class E Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement. Any amount that would otherwise be distributed to a
Class E Unitholder pursuant to this Section 4.4(a)(2)(B) but for the application
of the preceding sentence shall instead be retained by the Company and paid to
such Class E Unitholder if, as and when the unvested units to which such
retained amounts relates vests pursuant to the applicable Management Unit
Subscription Agreement. Items of income, gain, loss and deduction attributable
to amounts retained by the Company pursuant to this Section 4.4(a)(2)(B) shall
be allocated among the Class E Unitholders holding unvested units in a manner,
determined in the Board’s discretion, that equitably reflects each such Class E
Unitholders share of the amounts to which such items relate. If any unvested
units are forfeited, amounts retained by the Company pursuant to this
Section 4.4(a)(2)(B) on account of such unvested units shall be distributed in
accordance with Section 4.4(a)(4)(E) (i) through (vii) below; and

(C) next, following the distributions pursuant to the immediately preceding
clauses (A) and (B) of this Section 4.4(a)(2), 100% of the remaining
Distributable Assets up to an amount when the aggregate of all such
distributions equal the Class F/G Distribution Threshold Amount shall be
distributed in accordance with Section 4.4(a)(4)(E)(i) through (vii) below.

 

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3. After the aggregate of all distributions made after the Class F/G Effective
Date equal the Class F/G Distribution Threshold Amount, then 100% of the
Distributable Assets in excess of such threshold up to an amount when the
aggregate of all such distributions equal the Class H Distribution Threshold
Amount shall be made as follows:

(A) first, 100% of such Distributable Assets shall be distributed to the Class F
Unitholders and the Class G Unitholders pro rata in accordance with each Class F
Unitholders’ and Class G Unitholders’ Unreturned Capital until each such Class F
Unitholder’s and Class G Unitholders’ Unreturned Capital has been reduced to
zero.

(B) next, an amount equal to the Class F Tier I Distribution Amount shall be
distributed to the Class F Unitholders pro rata in accordance with the number of
Class F Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class F Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement. Any amount that would otherwise be distributed to a
Class F Unitholder pursuant to this Section 4.4(a)(3)(B) but for the application
of the preceding sentence shall instead be retained by the Company and paid to
such Class F Unitholder if, as and when the unvested units to which such
retained amounts relates vests pursuant to the applicable Management Unit
Subscription Agreement. Items of income, gain, loss and deduction attributable
to amounts retained by the Company pursuant to this Section 4.4(a)(3)(B) shall
be allocated among the Class F Unitholders holding unvested units in a manner,
determined in the Board’s discretion, that equitably reflects each such Class F
Unitholders share of the amounts to which such items relate. If any unvested
units are forfeited, amounts retained by the Company pursuant to this
Section 4.4(a)(3)(B) on account of such unvested units shall be distributed
first in accordance with subparagraph (3)(D) of this Section 4.4(a), and
thereafter in accordance with Section 4.4(a)(4)(E)(i) through (vii) below. In
addition, if any Class F Units issued are no longer outstanding and owned by a
Unitholder, then any amount that otherwise would have been allocable to such
Class F Units pursuant to this Section 4.4(a)(3)(B) shall not be reallocated to
the Class G Units or the other Class F Units, but instead such amount shall be
distributed in accordance with subparagraph (3)(D) of this Section 4.4(a) and
thereafter in accordance with Section 4.4(a)(4)(E)(i) through (vii) below.

(C) next, an amount equal to the Class G Tier I Distribution Amount shall be
distributed to the Class G Unitholders pro rata in accordance with the number of
Class G Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class G Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement.

 

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Any amount that would otherwise be distributed to a Class G Unitholder pursuant
to this Section 4.4(a)(3)(C) but for the application of the preceding sentence
shall instead be retained by the Company and paid to such Class G Unitholder if,
as and when the unvested units to which such retained amounts relates vests
pursuant to the applicable Management Unit Subscription Agreement. Items of
income, gain, loss and deduction attributable to amounts retained by the Company
pursuant to this Section 4.4(a)(3)(C) shall be allocated among the Class G
Unitholders holding unvested units in a manner, determined in the Board’s
discretion, that equitably reflects each such Class G Unitholders share of the
amounts to which such items relate. If any unvested units are forfeited, amounts
retained by the Company pursuant to this Section 4.4(a)(3)(C) on account of such
unvested units shall be distributed first in accordance with subparagraph
(3)(D) of this Section 4.4(a), and thereafter in accordance with
Section 4.4(a)(4)(E)(i) through (vii) below. In addition, if any Class G Units
issued are no longer outstanding and owned by a Unitholder, then any amount that
otherwise would have been allocable to such Class G Units pursuant to this
Section 4.4(a)(3)(C) shall not be reallocated to the Class F Units or the other
Class G Units, but instead such amount shall be distributed in accordance with
subparagraph (3)(D) of this Section 4.4(a) and thereafter in accordance with
Section 4.4(a)(4)(E)(i) through (vii) below.

(D) next, an amount equal to the Class E Tier II Distribution Amount shall be
distributed to the Class E Unitholders pro rata in accordance with the number of
Class E Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class E Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement. Any amount that would otherwise be distributed to a
Class E Unitholder pursuant to this Section 4.4(a)(3)(D) but for the application
of the preceding sentence shall instead be retained by the Company and paid to
such Class E Unitholder if, as and when the unvested units to which such
retained amounts relates vests pursuant to the applicable Management Unit
Subscription Agreement. Items of income, gain, loss and deduction attributable
to amounts retained by the Company pursuant to this Section 4.4(a)(3)(D) shall
be allocated among the Class E Unitholders holding unvested units in a manner,
determined in the Board’s discretion, that equitably reflects each such Class E
Unitholders share of the amounts to which such items relate. If any unvested
units are forfeited, amounts retained by the Company pursuant to this
Section 4.4(a)(3)(D) on account of such unvested units shall be distributed in
accordance with Section 4.4(a)(4)(E)(i) through (vii) below; and

(E) next, following the distributions pursuant to the immediately preceding
clauses (A), (B), (C) and (D), 100% of the remaining Distributable Assets shall
be distributed in accordance with this Section 4.4(a)(4)(E)(i) through
(vii) below.

 

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4. After the aggregate of all distributions made after the Class H Effective
Date equal the Class H Distribution Threshold Amount, then 100% of the
Distributable Assets in excess of such threshold shall be made as follows:

(A) first, 100% of such Distributable Assets shall be distributed to the Class H
Unitholders pro rata in accordance with each Class H Unitholders’ Unreturned
Capital until each such Class H Unitholder’s Unreturned Capital has been reduced
to zero.

(B) next, an amount equal to the Class H Distribution Amount shall be
distributed to the Class H Unitholders pro rata in accordance with the number of
Class H Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class H Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement. Any amount that would otherwise be distributed to a
Class H Unitholder pursuant to this Section 4.4(a)(4)(B) but for the application
of the preceding sentence shall instead be retained by the Company and paid to
such Class H Unitholder if, as and when the unvested units to which such
retained amounts relates vests pursuant to the applicable Management Unit
Subscription Agreement. Items of income, gain, loss and deduction attributable
to amounts retained by the Company pursuant to this Section 4.4(a)(4)(B) shall
be allocated among the Class H Unitholders holding unvested units in a manner,
determined in the Board’s discretion, that equitably reflects each such Class H
Unitholders share of the amounts to which such items relate. If any unvested
units are forfeited, amounts retained by the Company pursuant to this
Section 4.4(a)(4)(B) on account of such unvested units shall be distributed
first in accordance with subparagraphs (4)(C) and (D) of this Section 4.4(a),
and thereafter in accordance with Section 4.4(a)(4)(E)(i) through (vii) below.
In addition, if any Class H Units issued are no longer outstanding and owned by
a Unitholder, then any amount that otherwise would have been allocable to such
Class H Units pursuant to this Section 4.4(a)(4)(B) shall not be reallocated to
the other Class H Units, but instead such amount shall be distributed in
accordance with subparagraphs (4)(C) and (D) of this Section 4.4(a) and
thereafter in accordance with Section 4.4(a)(4)(E)(i) through (vii) below.

(C)(i) next, an amount equal to the Class F Tier II Distribution Amount shall be
distributed to the Class F Unitholders pro rata in accordance with the number of
Class F Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class F Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement.

 

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Any amount that would otherwise be distributed to a Class F Unitholder pursuant
to this Section 4.4(a)(4)(C)(i) but for the application of the preceding
sentence shall instead be retained by the Company and paid to such Class F
Unitholder if, as and when the unvested units to which such retained amounts
relates vests pursuant to the applicable Management Unit Subscription Agreement.
Items of income, gain, loss and deduction attributable to amounts retained by
the Company pursuant to this Section 4.4(a)(4)(C)(i) shall be allocated among
the Class F Unitholders holding unvested units in a manner, determined in the
Board’s discretion, that equitably reflects each such Class F Unitholders share
of the amounts to which such items relate. If any unvested units are forfeited,
amounts retained by the Company pursuant to this Section 4.4(a)(4)(C)(i) on
account of such unvested units shall be distributed first in accordance with
subparagraph (4)(D) of this Section 4.4(a), and thereafter in accordance with
Section 4.4(a)(4)(E)(i) through (vii) below. In addition, if any Class F Units
issued are no longer outstanding and owned by a Unitholder, then any amount that
otherwise would have been allocable to such Class F Units pursuant to this
Section 4.4(a)(4)(C)(i) shall not be reallocated to the Class F Units or the
other Class G Units, but instead such amount shall be distributed in accordance
with subparagraph (4)(D) of this Section 4.4(a) and thereafter in accordance
with Section 4.4(a)(4)(E)(i) through (vii) below; and

(ii) next, an amount equal to the Class G Tier II Distribution Amount shall be
distributed to the Class G Unitholders pro rata in accordance with the number of
Class G Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class G Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement. Any amount that would otherwise be distributed to a
Class G Unitholder pursuant to this Section 4.4(a)(4)(C)(ii) but for the
application of the preceding sentence shall instead be retained by the Company
and paid to such Class G Unitholder if, as and when the unvested units to which
such retained amounts relates vests pursuant to the applicable Management Unit
Subscription Agreement. Items of income, gain, loss and deduction attributable
to amounts retained by the Company pursuant to this Section 4.4(a)(4)(C)(ii)
shall be allocated among the Class G Unitholders holding unvested units in a
manner, determined in the Board’s discretion, that equitably reflects each such
Class G Unitholders share of the amounts to which such items relate. If any
unvested units are forfeited, amounts retained by the Company pursuant to this
Section 4.4(a)(4)(C)(ii) on account of such unvested units shall be distributed
first in accordance with subparagraph (4)(D) of this Section 4.4(a), and
thereafter in accordance with Section 4.4(a)(4)(E)(i) through (vii) below. In
addition, if any Class G Units issued are no longer outstanding and owned by a
Unitholder, then any amount that otherwise would have been allocable to such
Class G Units pursuant to this Section 4.4(a)(4)(C)(ii) shall not be reallocated
to

 

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the Class F Units or the other Class G Units, but instead such amount shall be
distributed in accordance with subparagraph (4)(D) of this Section 4.4(a) and
thereafter in accordance with Section 4.4(a)(4)(E)(i) through (vii) below.

(D) next, an amount equal to the Class E Tier III Distribution Amount shall be
distributed to the Class E Unitholders pro rata in accordance with the number of
Class E Units held; provided, however, no distribution shall be made with
respect to that percentage of the Class E Units that have not vested in
accordance with the vesting provisions of such holder’s Management Unit
Subscription Agreement. Any amount that would otherwise be distributed to a
Class E Unitholder pursuant to this Section 4.4(a)(4)(D) but for the application
of the preceding sentence shall instead be retained by the Company and paid to
such Class E Unitholder if, as and when the unvested units to which such
retained amounts relates vests pursuant to the applicable Management Unit
Subscription Agreement. Items of income, gain, loss and deduction attributable
to amounts retained by the Company pursuant to this Section 4.4(a)(4)(D) shall
be allocated among the Class E Unitholders holding unvested units in a manner,
determined in the Board’s discretion, that equitably reflects each such Class E
Unitholders share of the amounts to which such items relate. If any unvested
units are forfeited, amounts retained by the Company pursuant to this
Section 4.4(a)(4)(D) on account of such unvested units shall be distributed in
accordance with Section 4.4(a)(4)(E)(i) through (vii) below; and

(E) next, following the distributions pursuant to the immediately preceding
clauses (A), (B), (C) and (D), 100% of the remaining Distributable Assets shall
be distributed in accordance with this Section 4.4(a)(4)(E)(i) through
(vii) below.

(i) First, 100% of the Distributable Assets shall be distributed to the
Unitholders pro rata in accordance with each such Unitholder’s Unreturned
Capital until each such Unitholder’s Unreturned Capital has been reduced to
zero;

(ii) Second, after the required distributions pursuant to subparagraph
(i) above, 100% of the Distributable Assets shall be distributed to the holders
of Class A Units and Class B Units, pro rata in accordance with the aggregate
amount of such Unitholders’ Unpaid Preferred Return until each such Unitholder’s
Unpaid Preferred Return has been reduced to zero;

(iii) Third, after the required distributions pursuant to subparagraph
(ii) above, until the First Performance Hurdle has been satisfied, 100% of the
Distributable Assets shall be distributed as follows:

(A) 92.5% to the holders of Class A Units and Class B Units, pro rata in
accordance with the number of Class A Units and Class B Units held by each such
Unitholder; and

 

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(B)(1) a percentage, equal to the product of (x) 7.5% multiplied by (y) the
Class C Fraction, to the holders of Class C Units, pro rata in accordance with
the number of Class C Units held by each such Unitholder, and (2) a percentage,
if any, equal to the product of (x) 7.5% multiplied by (y) one minus the Class C
Fraction, to the holders of Class A and Class B Units, pro rata in accordance
with the number of Class A Units and Class B Units held by each such Unitholder;

(iv) Fourth, after the required distributions pursuant to subparagraph
(iii) above and after the First Performance Hurdle has been met, 100% of the
Distributable Assets shall be distributed to the holders of Class C Units, pro
rata in accordance with the number of Class C Units held by each such
Unitholder, until the cumulative amount of distributions made to holders of
Class C Units pursuant to this Section 4.4(a)(3)(E)(iv) and
Section 4.4(a)(3)(E)(iii)(B)(1) above is equal to (1) the product of (x) 12.5%
multiplied by (y) the Class C Fraction, multiplied by (2) the cumulative
distributions made to all Unitholders pursuant to this Section 4.4(a)(3)(E)(iv)
and Section 4.4(a)(3)(E)(iii) above;

(v) Fifth, after the required distributions pursuant to subparagraph (iv) above,
until the Second Performance Hurdle has been satisfied, 100% of the
Distributable Assets shall be distributed as follows:

(A) 87.5% to the holders of Class A Units and Class B Units, pro rata in
accordance with the number of Class A Units and Class B Units held by each such
Unitholder; and

(B)(1) a percentage, equal to the product of (x) 12.5% multiplied by (y) the
Class C Fraction, to the holders of Class C Units, pro rata in accordance with
the number of Class C Units held by each such Unitholder, and (2) a percentage,
if any, equal to the product of (x) 12.5% multiplied by (y) one minus the Class
C Fraction, to the holders of Class A and Class B Units, pro rata in accordance
with the number of Class A Units and Class B Units held by each such Unitholder;

(vi) Sixth, after the required distributions pursuant to subparagraph (v) above,
until the Third Performance Hurdle has been satisfied, 100% of the Distributable
Assets shall be distributed as follows:

(A) 75% to the holders of Class A Units and Class B Units, pro rata in
accordance with the number of Class A Units and Class B Units held by each such
Unitholder; and

 

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(B)(1) a percentage, equal to the product of (x) 25% multiplied by (y) the Class
C Fraction, to the holders of Class C Units, pro rata in accordance with the
number of Class C Units held by each such Unitholder, and (2) a percentage, if
any, equal to the product of (x) 25% multiplied by (y) one minus the Class C
Fraction, to the holders of Class A and Class B Units, pro rata in accordance
with the number of Class A Units and Class B Units held by each such Unitholder;
and

(vii) Seventh, after the required distributions pursuant to subparagraph
(vi) above and after the Third Performance Hurdle has been met, 100% of the
Distributable Assets shall be distributed as follows:

(A) 67.5% to the holders of Class A Units and Class B Units, pro rata in
accordance with the number of Class A Units and Class B Units held by each such
Unitholder; and

(B)(1) a percentage, equal to the product of (x) 32.5% multiplied by (y) the
Class C Fraction to the holders of Class C Units, pro rata in accordance with
the number of Class C Units held by each such Unitholder, and (2) a percentage,
if any, equal to the product of (x) 32.5% multiplied by (y) one minus the Class
C Fraction, to the holders of Class A Units and Class B Units, pro rata in
accordance with the number of Class A Units and Class B Units held by each such
Unitholder;

provided that, if the Distributable Assets being distributed consist of more
than one kind of asset, all Distributable Assets consisting of cash must be
distributed before any other kind of asset is distributed.

(b) Successors. For purposes of determining the amount of distributions under
this Section 4.4, each Unitholder shall be treated as having received amounts
received by its predecessors in respect of any of such Unitholder’s Units.

(c) Tax Distributions. Subject to the Act and to any restrictions contained in
any agreement to which the Company is bound, no later than the tenth day of each
March, June, September and December, the Company shall, to the extent of
available cash, make a tax distribution to each Unitholder in an amount equal to
the excess of (i) the product of (A) the cumulative taxable income (including
any guaranteed payments for services that are not actually received by such
Unitholder in cash) attributable to the Unitholder’s investment as reported on
the Unitholder’s Schedule K-1 allocated by the Company to the Unitholder, in
excess of the cumulative taxable loss attributable to the Unitholder’s
investment as reported on the Unitholder’s Schedule K-1 allocated by the Company
to the Unitholder and (B) the combined maximum federal, state and local marginal
income tax rate (taking into account the deductibility of state and local taxes
and adjusted appropriately to take into account the varying rates applicable to
capital gains, qualified dividend income and ordinary income) applicable to
individual residents of New York, New York, over (ii) all prior distributions
pursuant to this Section 4.4. All distributions made to a Unitholder pursuant to
this Section 4.4(c) on account of the

 

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taxable income allocated to such Unitholder shall be treated as advance
distributions under Section 4.4(a) or Section 5.2 and shall be taken into
account in determining the amount of future distributions to such Unitholder.
For purposes of determining the amount of distributions to be made to the
Unitholders pursuant to Section 4.4(a) or Section 5.2, distributions made
pursuant to this Section 4.4(c) shall be deemed made at such time as they offset
distributions being made pursuant to Section 4.4(a) or Section 5.2.

SECTION 4.5 Security Interest and Right of Set-Off. As security for any
withholding tax or other liability or obligation to which the Company may be
subject as a result of any act or status of any Unitholder, or to which the
Company may become subject with respect to the interest of any Unitholder, the
Company shall have (and each Unitholder hereby grants to the Company) a security
interest in all Distributable Assets distributable to such Unitholder to the
extent of the amount of such withholding tax or other liability or obligation.
The Company shall have a right of setoff against such distributions of
Distributable Assets in the amount of such withholding tax or other liability or
obligation, subject to the proviso in the first sentence of Section 4.3(f). The
Company may withhold distributions or portions thereof if it is required to do
so by the Code or any other provision of federal, state or local tax or other
law. Any amount withheld pursuant to the Code or any other provision of federal,
state or local tax or other law with respect to any distribution to a Unitholder
shall be treated as an amount distributed to such Unitholder for all purposes
under this Agreement.

ARTICLE V.

WITHDRAWAL; DISSOLUTION; TRANSFER OF MEMBERSHIP INTERESTS;

ADMISSION OF NEW MEMBERS

SECTION 5.1 Unitholder Withdrawal. No Unitholder shall have the power or right
to withdraw or otherwise resign or be expelled from the Company prior to the
dissolution and winding up of the Company except pursuant to a transfer
permitted under this Agreement of all of such Unitholder’s Units to an Assignee,
a Member or the Company. Notwithstanding anything to the contrary contained in
the Act, in no event shall any Unitholder be deemed to have withdrawn from the
Company or cease to be a Unitholder upon the occurrence of any of the events
specified in this Agreement, or any events similar thereto, unless the
Unitholder, after the occurrence of any such event, indicates in a written
instrument that the Unitholder has so withdrawn.

SECTION 5.2 Dissolution.

(a) Events. The Company shall be dissolved and its affairs shall be wound up on
the first to occur of the following:

(i) the unanimous vote of the Management Committee;

(ii)(a) the written consent of the Members holding a majority of the outstanding
Class A Units, and (b) the written consent of the Members holding a majority of
the outstanding Class B Units;

 

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(iii) the entry of a decree of judicial dissolution of the Company under
Section 18-802 of the Act;

(iv) upon consummation of a Sale of the Company (as defined in the
Securityholders Agreement), upon consummation of a Public Offering (as defined
in the Securityholders Agreement) or upon consummation of a merger or
consolidation pursuant to which the Company is not the surviving entity, each
with the consent of a majority of the Management Committee; and

(v) upon the liquidation, dissolution or winding up of the Company or Holdings.

Except as provided in this Agreement, the death, retirement, resignation,
expulsion, incapacity, bankruptcy or dissolution of a Member, or the occurrence
of any other event that terminates the continued membership of a Member in the
Company, shall not cause a dissolution of the Company, and the Company shall
continue in existence subject to the terms and conditions of this Agreement.

(b) Actions Upon Dissolution. When the Company is dissolved, the business and
property of the Company shall be wound up and liquidated by the Management
Committee or, in the event of the unavailability of the Management Committee,
such Member or other liquidating trustee as shall be named by the Management
Committee.

(c) Priority. Within 120 calendar days after the effective date of dissolution
of the Company, whether by expiration of its full term or otherwise, the assets
of the Company shall be distributed in the following manner and order:

(i) All debts and obligations of the Company, if any, shall first be paid,
discharged or provided for by adequate reserves; and

(ii) The balance shall be distributed to the Unitholders in accordance with
Section 4.4.

(d) Cancellation of Certificate. On completion of the distribution of Company
assets as provided herein, the Company is terminated, and shall file a
certificate of cancellation with the Secretary of State of the State of
Delaware, cancel any other filings made and take such other actions as may be
necessary to terminate the Company.

SECTION 5.3 Transfer by Unitholders. Subject to the Securityholders Agreement
and this Agreement, a Unitholder may transfer or assign all or part of its
interest as a Unitholder in the Company to any Person that agrees in writing to
assume the responsibility of a Unitholder. Any Member who shall assign any Units
in the Company shall cease to be a Member of the Company with respect to such
Units and shall no longer have any rights or privileges of a Member with respect
to such Units. Any Member or Assignee who acquires in any manner whatsoever any
Units, irrespective of whether such Person has accepted and adopted in writing
the terms and provisions of this Agreement, shall be deemed by the acceptance of
the

 

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benefits of the acquisition thereof to have agreed to be subject to and bound by
all of the terms and conditions of this Agreement that any predecessor in such
Units or other interest in the Company was subject to or by which such
predecessor was bound. No Member shall cease to be a Member upon the collateral
assignment of, or the pledging or granting of a security interest in, its entire
interest in the Company.

SECTION 5.4 Admission or Substitution of New Members.

(a) Admission. The Management Committee shall have the right, subject to
Section 5.3, to admit as a Substitute Member or an Additional Member, any Person
who acquires an interest in the Company, or any part thereof, from a Member or
from the Company; provided that, the Management Committee shall admit as a
Substitute Member, subject to Section 5.4(b), any transferee who acquires an
interest in the Company pursuant to an Exempt Transfer (as such term is defined
in the Securityholders Agreement). Concurrently with the admission of a
Substitute Member or an Additional Member, the Management Committee shall
forthwith cause any necessary papers to be filed and recorded and notice to be
given wherever and to the extent required showing the substitution of a
transferee as a Substitute Member in place of the transferring Member, or the
admission of an Additional Member, all at the expense, including payment of any
professional and filing fees incurred, of the Substitute Member or the
Additional Member.

(b) Conditions. The admission of any Person as a Substitute or Additional Member
shall be conditioned upon (i) such Person’s written acceptance and adoption of
all the terms and provisions of this Agreement, either by (X) execution and
delivery of a counterpart signature page to this Agreement countersigned by a
Representative on behalf of the Company or (Y) any other writing evidencing the
intent of such Person to become a Substitute Member or Additional Member and
such writing is accepted by the Management Committee on behalf of the Company
and (ii) (at the request of the Management Committee) such Person’s execution
and delivery of a counterpart to the Securityholders Agreement.

SECTION 5.5 Compliance with Law. Notwithstanding any provision hereof to the
contrary, no sale or other disposition of an interest in the Company may be made
except in compliance with all federal, state and other applicable laws,
including federal and state securities laws. Nothing in this Section 5.5 shall
be construed to limit or otherwise affect any of the provisions of the
Securityholders Agreement or the Management Unit Subscription Agreements, and to
the extent any such provisions apply, they are then to be construed as being
incorporated in this Agreement and made a part hereof.

ARTICLE VI.

REPORTS TO MEMBERS; TAX MATTERS

SECTION 6.1 Books of Account. Appropriate books of account shall be kept by the
Management Committee, in accordance with generally accepted accounting
principles, at the principal place of business of the Company, and each Member
shall have access to all books, records and accounts of the Company and the
right to make copies thereof for any purpose reasonably related to the Member’s
interest as a member of the Company, in each case, under such conditions and
restrictions as the Management Committee may reasonably prescribe.

 

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SECTION 6.2 Reports.

(a) Financial Statements. As promptly as practicable after the close of each
fiscal year of the Company, the Management Committee shall cause an examination
of the financial statements of the Company as of the end of each such fiscal
year to be made in accordance with generally accepted auditing standards as in
effect on the date thereof, by a firm of certified public accountants selected
by the Management Committee. Within 60 days after the close of each fiscal year,
a copy of the financial statements of the Company, including the report of such
certified public accountants, shall be furnished to each Unitholder and shall
include, as of the end of such fiscal year:

(i) a statement prepared by the Company setting forth the balance of each
Unitholder’s Capital Account and the amount of that Unitholder’s allocable share
of the Company’s items of Net Income or Net Loss and deduction, capital gain and
loss or credit for such year for each of its Economic Interests; and

(ii) a balance sheet, a statement of income and expense and a statement of
changes in cash flows of the Company for that fiscal year.

In addition, the Unitholders shall be supplied with all other Company
information necessary to enable each Unitholder to prepare its federal, state,
and local income tax returns, which information shall include a Schedule K-1.

(b) Determinations. All determinations, valuations and other matters of judgment
required to be made for accounting purposes under this Agreement shall be made
by the Management Committee and shall be conclusive and binding on all
Unitholders, their Successors in Interest and any other Person, and to the
fullest extent permitted by law, no such Person shall have the right to an
accounting or an appraisal of the assets of the Company or any successor
thereto; provided, however, that with respect to determinations or valuations
related to any determination of which performance hurdle applies with respect to
any Company assets distributed in kind, if the holders of a majority of the
Class B Units disagree in good faith with the Management Committee’s
determination, then such holders through a single representative shall promptly
notify the Company in writing of such disagreement, in which event an
independent appraiser, accountant or investment banking firm (the “Arbiter”)
selected by mutual agreement of such holders and the Management Committee shall
make a determination of the Gross Asset Value of the Company assets distributed
in kind or other disputed item thereof solely by (i) reviewing a single written
presentation timely made by each of the Company and the representative of such
holders setting forth their respective resolutions of the dispute and the bases
therefor and (ii) accepting either such holders’ or the Company’s proposed
resolution of the dispute. Promptly following the Company’s receipt of such
holders’ written notice of disagreement, the Company shall make available to
such holders all data (including reports of employees and outside advisors)
relied upon by the Management Committee in making its determination. Such
holders’ and the Company’s

 

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written presentations must be submitted to the Arbiter within 30 days of the
Arbiter’s engagement. The Arbiter shall notify the representative of such
holders and the Company of its decision within 40 days of its engagement. The
party whose proposed resolution is not accepted shall pay all of the Arbiter’s
fees and expenses, which in the case of the holders shall be limited only to
those holders challenging the Management Committee determination. If such
holders’ proposed resolution is accepted, the Company also shall pay all of such
holders’ reasonable out-of-pocket fees and expenses (including reasonable fees
and expenses of counsel and one appraiser, accountant or investment banking
firm) incurred in connection with the arbitration. Each of the Company and such
holders agrees to execute, if requested by the Arbiter, a reasonable engagement
letter with the Arbiter.

SECTION 6.3 Fiscal Year. The fiscal year of the Company shall end on
December 31st of each calendar year unless otherwise determined by the
Management Committee in accordance with Section 706 of the Code.

SECTION 6.4 Certain Tax Matters.

(a) Preparation of Returns. The Management Committee shall cause to be prepared
all federal, state and local tax returns of the Company for each year for which
such returns are required to be filed and shall cause such returns to be timely
filed. The Management Committee shall determine the appropriate treatment of
each item of income, gain, loss, deduction and credit of the Company and the
accounting methods and conventions under the tax laws of the United States, the
several states and other relevant jurisdictions as to the treatment of any such
item or any other method or procedure related to the preparation of such tax
returns. The Management Committee may cause the Company to make or refrain from
making any and all elections permitted by such tax laws. Each Unitholder agrees
that it shall not, except as otherwise required by applicable law or regulatory
requirements, (i) treat, on its individual income tax returns, any item of
income, gain, loss, deduction or credit relating to its interest in the Company
in a manner inconsistent with the treatment of such item by the Company as
reflected on the Form K-1 or other information statement furnished by the
Company to such Unitholder for use in preparing its income tax returns or
(ii) file any claim for refund relating to any such item based on, or which
would result in, such inconsistent treatment. In respect of an income tax audit
of any tax return of the Company, the filing of any amended return or claim for
refund in connection with any item of income, gain, loss, deduction or credit
reflected on any tax return of the Company, or any administrative or judicial
proceedings arising out of or in connection with any such audit, amended return,
claim for refund or denial of such claim, (A) the Tax Matters Member (as defined
below) shall be authorized to act for, and its decision shall be final and
binding upon, the Company and all Unitholders except to the extent a Unitholder
shall properly elect to be excluded from such proceeding pursuant to the Code,
(B) all expenses incurred by the Tax Matters Member in connection therewith
(including attorneys’, accountants’ and other experts’ fees and disbursements)
shall be expenses of, and payable by, the Company, (C) no Unitholder shall have
the right to (1) participate in the audit of any Company tax return, (2) file
any amended return or claim for refund in connection with any item of income,
gain, loss, deduction or credit (other than items which are not partnership
items within the

 

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meaning of Section 6231(a)(4) of the Code or which cease to be partnership items
under Section 6231(b) of the Code) reflected on any tax return of the Company,
(3) participate in any administrative or judicial proceedings conducted by the
Company or the Tax Matters Member arising out of or in connection with any such
audit, amended return, claim for refund or denial of such claim, or (4) appeal,
challenge or otherwise protest any adverse findings in any such audit conducted
by the Company or the Tax Matters Member or with respect to any such amended
return or claim for refund filed by the Company or the Tax Matters Member or in
any such administrative or judicial proceedings conducted by the Company or the
Tax Matters Member and (D) the Tax Matters Member shall keep the Unitholders
reasonably apprised of the status of any such proceeding. Notwithstanding the
previous sentence, if a petition for a readjustment to any partnership item
included in a final partnership administrative adjustment is filed with a
District Court or the Court of Claims and the IRS has elected to assess income
tax against a Member with respect to that final partnership administrative
adjustments (rather than suspending assessments until the District Court or
Court of Claims proceedings become final), such Member shall be permitted to
file a claim for refund within such period of time to avoid application of any
statute of limitation provisions which would otherwise prevent the Member from
having any claim based on the final outcome of that review.

(b) Tax Matters Member. The Company and each Member hereby designate Thomas H.
Lee Equity Fund V, L.P. as the “tax matters partner” for purposes of
Section 6231(a)(7) of the Code (the “Tax Matters Member”).

(c) Certain Filings. Upon the sale of Company assets or a liquidation of the
Company, Unitholders shall provide the Management Committee with certain tax
filings as reasonably requested by the Management Committee and required under
applicable law.

ARTICLE VII.

MISCELLANEOUS

SECTION 7.1 Schedules. Without in any way limiting the provisions of
Section 6.2, a Representative may from time to time execute on behalf of the
Company and deliver to the Unitholders schedules which set forth the then
current Capital Account balances of each Unitholder and any other matters deemed
appropriate by the Management Committee or required by applicable law. Such
schedules shall be for information purposes only and shall not be deemed to be
part of this Agreement for any purpose whatsoever.

SECTION 7.2 Governing Law. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE, EXCLUDING ANY
CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION. In the event
of a direct conflict between the provisions of this Agreement and any provision
of the Certificate or any mandatory provision of the Act, the applicable
provision of the Certificate or the Act shall control. If any provision of this
Agreement or the application thereof to any Person or circumstance is held
invalid or

 

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unenforceable to any extent, the remainder of this Agreement and the application
of that provision to other Persons or circumstances is not affected thereby and
that provision shall be enforced to the greatest extent permitted by law.

SECTION 7.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective Successors
in Interest; provided that no Person claiming by, through or under a Member
(whether as such Member’s Successor in Interest or otherwise), as distinct from
such Member itself, shall have any rights as, or in respect to, a Member
(including the right to approve or vote on any matter or to notice thereof).

SECTION 7.4 Confidentiality. By executing this Agreement, for three years from
the receipt thereof, each Member expressly agrees to maintain the
confidentiality of, and not to disclose to any Person other than the Company,
another Member or a Person designated by the Company or any of their respective
financial planners, accountants, attorneys or other advisors, any information
relating to the business, financial structure, financial position or financial
results, clients or affairs of the Company that shall not be generally known to
the public, except as otherwise required by law or by any regulatory or
self-regulatory organization having jurisdiction and except in the case of any
Member who is employed by any entity controlled by the Company in the ordinary
course of its duties. Notwithstanding anything to the contrary set forth herein
or in any other agreement to which the parties hereto are parties or by which
they are bound, the obligations of confidentiality contained herein and therein,
as they relate to an investment in Membership Interests (the “Transaction”),
shall not apply to the tax structure or tax treatment of the Transaction, and
each party hereto (and any employee, representative, or agent of any party
hereto) may disclose to any and all persons, without limitation of any kind, the
tax structure and tax treatment of the Transaction and all materials of any kind
(including opinions or other tax analysis) that are provided to such party
relating to such tax treatment and tax structure; provided, however, that such
disclosure shall not include the name (or other identifying information not
relevant to the tax structure or tax treatment) of any person and shall not
include information for which nondisclosure is reasonably necessary in order to
comply with applicable securities laws.

SECTION 7.5 Amendments. The Management Committee may, to the fullest extent
allowable under Delaware law, amend or modify this Agreement; provided that, if
an amendment or modification adversely affects any class of Members, such class
of Members must approve such amendment or modification; provided further that,
the Management Committee may amend this Agreement without the consent of any
class of Members in order to provide for the issuance of any Company units in
accordance with Section 2.9 hereof and the terms of the Management Unit
Subscription Agreements and to make any such other amendments as it deems
necessary or desirable to reflect such additional issuances provided that, no
such amendment shall adversely affect the relationship among the Class A Units,
Class B Units, Class C Units, Class E Units, Class F Units, Class G Units and
Class H Units as set forth herein; provided further that no amendment shall be
effective if such amendment results in Units held by a Member being redesignated
to a different class of Unit than the class of which it is then included,
without such Member’s consent.

 

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SECTION 7.6 Notices. Whenever notice is required or permitted by this Agreement
to be given, such notice shall be in writing and shall be given to any
Unitholder at its address or telecopy number shown in the Company’s books and
records, or, if given to the Company, at the following address:

c/o Thomas H. Lee Partners, L.P.

75 State Street

Boston, MA 02109

Attention: Anthony DiNovi

Attention: Kent Weldon

Attention: Joshua Bresler

Telecopy: (617) 227-3514

with a copy to:

Weil, Gotshal & Manges LLP

100 Federal Street

Boston, MA 02110

Attention: James Westra, Esq.

Attention: Marilyn French

Telecopy: (617) 772-8333

Each proper notice shall be effective upon any of the following: (i) personal
delivery to the recipient, (ii) when telecopied to the recipient (with hard copy
sent to the recipient by reputable overnight courier service that same day or
the next business day (charges prepaid)), (iii) one business day after being
sent to the recipient by reputable overnight courier service (charges prepaid)
or (iv) two business days after being deposited in the mails (first class or
airmail postage prepaid).

SECTION 7.7 Counterparts. This Agreement may be executed in any number of
counterparts (including by means of telecopied signature pages), all of which
together shall constitute a single instrument.

SECTION 7.8 Power of Attorney. Each Member hereby irrevocably appoints each
Representative as such Member’s true and lawful representative and
attorney-in-fact, each acting alone, in such Member’s name, place and stead,
(i) to make, execute, sign and file all instruments, documents and certificates
which, from time to time, may be required to set forth any amendment to this
Agreement or which may be required by this Agreement or by the laws of the
United States of America, the State of Delaware or any other state in which the
Company shall determine to do business, or any political subdivision or agency
thereof and (ii) to execute, implement and continue the valid and subsisting
existence of the Company or to qualify and continue the Company as a foreign
limited liability company in all jurisdictions in which the Company may conduct
business. The chief executive officer, as representative and attorney-in-fact,
however, shall not have any rights, powers or authority to amend or modify this
Agreement when acting in such capacity, except as expressly provided herein.
Such power of attorney is coupled with an interest and shall survive and
continue in full force and effect notwithstanding the subsequent withdrawal from
the Company of any Member for any reason and shall survive and shall not be
affected by the disability or incapacity of such Member.

 

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SECTION 7.9 Entire Agreement; Interpretation. This Agreement amends, restates
and supersedes in its entirety the Original Agreement. This Agreement and the
other documents and agreements referred to herein or entered into concurrently
herewith embody the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein; provided that, such other
agreements and documents shall not be deemed to be a part of, a modification of
or an amendment to this Agreement. There are no restrictions, promises,
representations, warranties, covenants or undertakings, other than those
expressly set forth or referred to herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter. Unless otherwise expressly set forth in this Agreement, references to
“as of the date of this Agreement” refer to November 20, 2003 and not this Third
Amended and Restated Limited Liability Company Agreement.

SECTION 7.10 Section Titles. Section titles and headings are for descriptive
purposes only and shall not control or alter the meaning of this Agreement as
set forth in the text hereof.

 

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated
Limited Liability Company Agreement as of the day and year first above written.

 

MICHAEL FOODS INVESTORS, LLC By:  

 

  Name:   Title: MEMBERS: THOMAS H. LEE EQUITY FUND V, L.P. By:   THL Equity
Advisors V, LLC, its general partners By:   Thomas H. Lee Partners, L.P., its
sole member By:   Thomas H. Lee Advisors LLC, its general partner By:  

 

  Name:   Title: Managing Director THOMAS H. LEE PARALLEL FUND V, L.P. By:   THL
Equity Advisors V, LLC, its general partner By:   Thomas H. Lee Partners, L.P.,
its sole member By:   Thomas H. Lee Advisors LLC, its general partner By:  

 

  Name:   Title: Managing Director

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COUNTERPART SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

 

THOMAS H. LEE CAYMAN FUND V, L.P. By:   THL Equity Advisors V, LLC, its general
partner By:   Thomas H. Lee Partners, L.P., its sole member By:   Thomas H. Lee
Advisors LLC, its general partner By:  

 

  Name:   Title: Managing Director

--------------------------------------------------------------------------------

COUNTERPART SIGNATURE PAGE TO THIRD AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

 

 

Gregg A. Ostrander

 

John D. Reedy