Document:

Exhibit 10.12

 

Execution Copy

 

BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC

 

LIMITED LIABILITY COMPANY AGREEMENT

 

 

BARROW, HANLEY, MEWHINNEY & STRAUSS, LLC

LIMITED LIABILITY COMPANY AGREEMENT

 

This Limited Liability Company Agreement (this “Agreement”), effective as of January 12, 2010, is entered into by and among Old Mutual Intermediary (BHMS), LLC, a Delaware limited liability company and wholly owned, indirect subsidiary of OM(US)H (defined below) (together with its permitted successors or assigns, “Old Mutual Intermediary”) and the Persons listed in the books and records of the LLC (as defined below), each (for such period of time as it shall remain a Member hereunder) referred to (subject to Section 9 hereof) individually as a “Member” and collectively as the “Members”.

 

WHEREAS, Barrow, Hanley, Mewhinney & Strauss, LLC (the “LLC”) has been formed pursuant to the Delaware Limited Liability Company Act, as amended from time to time (the “Act”), by the filing on December 17, 2009 of a Certificate of Formation (as such Certificate may be amended from time to time, the “Certificate of Formation”) in the office of the Secretary of State of the State of Delaware;

 

WHEREAS, the LLC intends to establish the Barrow, Hanley, Mewhinney & Strauss, LLC Equity Plan (the “Equity Plan”) jointly with Old Mutual (US) Holdings Inc. (“OM(US)H”), Old Mutual Intermediary and BHMS Investment Holdings LP (the “Partnership”);

 

WHEREAS, pursuant to the Equity Plan, the LLC shall issue LLC Interests to certain employees of the LLC and, following such issuances, such employees may contribute (each, a “Contribution”) such LLC Interests to the Partnership in consideration for limited partnership interests in the Partnership (the “LP Interests”);

 

WHEREAS, following the Contributions, the employees of the LLC making the Contributions shall be Limited Partners of the Partnership, and the Partnership shall have the Percentage Interest in the LLC as set forth in this Agreement;

 

WHEREAS, following the date hereof, but prior to the effective date of the initial Contributions, the Partnership will execute a joinder to this Agreement and become a Member of the LLC; and

 

WHEREAS, capitalized terms used herein, and not otherwise defined herein, have the meanings ascribed to them in Appendix I annexed hereto, incorporated herein and made a part hereof.

 

NOW, THEREFORE, in consideration of the mutual covenants herein expressed, the parties hereto hereby agree as follows:

 

1.                                      Formation.

 

(a)                                 Formation.  The Members hereby agree that the rights, duties and liabilities of the Members shall be as provided in the Act, except as otherwise provided in this Agreement.  The

 

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existence of the LLC as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.

 

(b)                                 Certification of Formation, Etc.  The Members hereby ratify the formation of the LLC as a limited liability company under the Delaware Act, the execution of the Certificate of Formation by the signatory thereto as an “authorized person” of the LLC within the meaning of the Delaware Act, and the filing of the Certificate of Formation with the Secretary of State of the State of Delaware.  The Board of Managers is hereby authorized to execute, file and record, and to authorize any person to execute, file and record, all such other certificates and documents, including amendments to the Certificate of Formation, and to do such other acts as may be appropriate to comply with all requirements for the formation, continuation and operation of a limited liability company, the ownership of property, and the conduct of business under the Laws of the State of Delaware and any other jurisdiction in which the LLC may own property or conduct business.

 

(c)                                  Principal Office; Registered Office and Registered Agent.  The principal office of the LLC is JPMorgan Chase Tower, 2200 Ross Avenue, 31st Floor, Dallas, Texas 75201. The name and address of the registered agent of the LLC for service of process pursuant to the Act is Corporation Service Company, and the LLC’s registered office in the State of Delaware is 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.  The Board of Managers may, upon compliance with the applicable provisions of the Act, change the LLC’s principal office, its registered office or registered agent from time to time, all as determined by the Board of Managers.  The Board of Managers may establish additional places of business of the LLC, within and without the State of Delaware, as and when required by the business of the LLC and in furtherance of its purposes set forth in Section 2 hereof and may appoint agents for service of process in all other jurisdictions in which the LLC shall conduct business.

 

2.                                      Purpose.  The LLC is formed for the purpose of engaging in any lawful act or activity for which limited liability companies may be formed under the Act and engaging in any and all activities necessary, advisable, convenient or incidental thereto, including without limitation, providing investment advisory services.  The LLC shall have all the powers necessary or convenient to carry out the purposes for which it is formed, including without limitation the powers granted by the Act.  Accordingly, the LLC is vested with the power (i) to sue and be sued in its own name, (ii) to contract and be contracted with in its own name and (iii) to acquire and hold real property and personal property for the purposes for which the LLC is established and to dispose of the real property and personal property at its pleasure.

 

3.                                      Management.

 

(a)                                 Authority of Board of Managers.  Except as otherwise required by the Act or other applicable law or as otherwise provided in this Agreement, the Board of Managers shall have the authority to (i) exercise all the powers and privileges granted to a limited liability company by the Act or any other law or this Agreement, together with any powers incidental thereto, so far as such powers are necessary or convenient to the conduct, promotion or attainment of the business, trade, purposes or activities of the LLC in the State of Delaware or in any other jurisdiction in which the LLC shall conduct business and (ii) take any other action not prohibited under the Act or other applicable law or this Agreement; and, except as otherwise

 

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provided in this Agreement, no Member acting in its capacity as a Member shall have any authority, power or privilege to act on behalf of or to bind the LLC.

 

(b)                                 Designation and Removal of Managers.  The LLC shall, at this time, have four managers (each, a “Manager”); provided, however, that no person who is a Member may also serve as a Manager.  For purposes of this Agreement, the term “Board of Managers” shall mean the Managers of the LLC in the aggregate acting as the governing body of the LLC.  The Board of Managers may appoint from its members a Chairman who shall serve in such capacity until such time as a successor is elected and qualified, or until such Chairman’s earlier death, resignation or removal.  If the Board of Managers appoints a Chairman, such Chairman shall perform such duties and possess such powers as are assigned by the Board of Managers.  Subject to the proviso in the first sentence of this Section 3(b) and to the paragraph immediately following Section 3(b)(iii), the Managers of the LLC shall be designated as follows:

 

(i)                                     Two Managers (each, an “OM(US)H Manager”) shall be (x) the chief executive officer of OM(US)H or such other individual as is designated by the chief executive officer of OM(US)H, which Manager shall initially be Thomas M. Turpin and (y) Linda T. Gibson or such other individual as is designated by the chief executive officer of OM(US)H.

 

(ii)                                  Two Managers (the “Additional Managers”) shall be James P. Barrow and Joseph R. Nixon, Jr.

 

(iii)                               The initial Chairman of the Board of Managers shall be James P. Barrow.

 

Any changes in the number of Managers, any removal and replacement of any Managers and any additional Managers and the filling of any vacancies may be proposed at any time by the Board of Managers, the president or chief executive officer (or officer having responsibility commensurate with the title of chief executive officer) of the LLC (the “Chief Executive Officer of the LLC”), or by Old Mutual Intermediary.  Any such actions shall be made only by Old Mutual Intermediary in its sole discretion.  If at any time there is no Manager, the number of Managers may be determined and one or more Managers may be designated by Old Mutual Intermediary in its sole discretion.  Any Manager may resign from, retire from, abandon or otherwise terminate his, her or its status as a Manager upon prior written notice to the LLC.

 

(c)                                  Actions of Board of Managers; Proxy.

 

(i)                                     Subject to Section 3(j) hereof, all decisions or actions to be made or taken by the Board of Managers shall (i) require the “Consent of the Board of Managers,” which shall mean the affirmative vote of a majority in number of all Managers, present in person or by proxy, and shall include the affirmative vote of at least one of the OM(US)H Managers, present in person or by proxy; and (ii) be consistent with the then-current Approved Budget.  The LLC and the Board of Managers shall be subject to and operate pursuant to the Old Mutual Scheme of Authority (or any successor) as applied to the LLC (a copy of which has been delivered to the each member of the Board of Managers with the requirement that each Manager agree to maintain the confidentiality thereof), as amended from time to time in Old Mutual Intermediary’s

 

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sole discretion (which amendments shall be promptly provided to the Board of Managers from time to time) (the “Scheme of Authority”), except to the extent that the provisions of the Scheme of Authority contradict the provisions herein.  Subject to the Scheme of Authority and Section 3(j) hereof, the LLC and the Board of Managers shall have day-to-day operational independence within the Approved Budget and shall have control over the investment philosophy, investment processes and client relationships of the LLC.  The Board of Managers shall operate in accordance with the meeting procedures set forth in Appendix II annexed hereto, incorporated herein and made a part hereof.

 

(ii)                                  Any member of the Board of Managers, the Remuneration Committee, the Distribution Committee or any other committee authorized by the Board of Managers may, by a writing, grant a proxy to any other member of the Board of Managers or such committee, as the case may be, permitting such other member to vote in approval of any matter within the scope of such proxy; provided that if any of the OM(US)H Managers serves on a committee, such OM(US)H Manager may grant such proxy to any other member of the Board of Managers irrespective of whether such member serves on such committee.

 

(d)                                 Transactions with Affiliates. Subject to Sections 3(j) and 6(d) and the second sentence of Section 3(d) hereof, the Board of Managers may cause the LLC to enter into one or more agreements, leases, loans, contracts or other arrangements with respect to furnishing or receiving goods, services, debt financing or real estate with any Member, any Manager or an Affiliate thereof, and may pay compensation thereunder for such goods, services, debt financing or real estate, provided, however, that in each case the Board of Managers has determined in good faith, and the Board of Managers reasonably believed, that the terms of any such arrangements are in or not opposed to the best interests of the LLC.  Notwithstanding the foregoing and subject to Sections 3(j) and 6(d), the LLC may, without the Consent of the Board of Managers, enter into one or more agreements, leases, loans, contracts or other arrangements with respect to furnishing or receiving goods, services, debt financing or real estate with OM(US)H, or an Affiliate of OM(US)H in the ordinary course of business, provided, however, that the terms of any such arrangements are no less favorable to the LLC than the terms of such arrangements with a party that is not affiliated with any Member, Manager or an Affiliate thereof, and the LLC has provided prior written notice of such arrangement to Old Mutual Intermediary.

 

(e)                                  Power of Officers to Bind the LLC.  The Chief Executive Officer of the LLC shall have the authority to sign agreements, contracts, instruments or other documents in the name of and on behalf of the LLC, as shall be determined by the Board of Managers.  The Board of Managers may authorize any other Person to sign agreements, contracts, instruments or other documents in the name of and on behalf of the LLC, and such authority may be general or limited to specific instances.

 

(f)                                   Appointment and Removal of Officers and Other Agents.  Subject to Section 3(j) hereof, the Board of Managers may appoint one or more individuals as agents of the LLC with, in each case, such title, duties, power and authority as the Board of Managers shall determine from time to time, and such agents may be referred to as officers of the LLC; provided, however, that no such appointment by the Board of Managers by itself shall cause any Manager to cease to

 

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be a “manager” of the LLC within the meaning of the Act or this Agreement or restrict the ability of the Board of Managers to exercise the powers so delegated.  The power and authority of any agent appointed by the Board of Managers under this Section 3(f) shall not exceed the power and authority possessed by the Board of Managers under this Agreement and shall be exercised subject to all separate consent rights of Old Mutual Intermediary under this Agreement.  Unless the authority of the agent designated as the officer in question is limited in the document appointing such officer or is otherwise specified by the Board of Managers, any officer so appointed shall have the same authority to act for the LLC as a corresponding officer of a Delaware corporation would typically have to act for a Delaware corporation in the absence of a specific delegation of authority.

 

Consistent with the foregoing, the following individuals are hereby confirmed to be the current officers of the LLC holding the following titles:

 

	
Name
    	
 
    	
Title
    
	
James   P. Barrow
    	
 
    	
President,   Treasurer and Secretary
    
	
Patricia   B. Andrews
    	
 
    	
Chief   Compliance Officer
    

 

Employees with the title of “partner” shall be deemed to have officer-equivalent status. The officers of the LLC shall hold office until their successors are duly appointed or their earlier death, resignation or removal.  Any officer so appointed may be removed at any time, with or without cause, by the Consent of the Board of Managers.  Any officer may resign from his or her office upon prior written notice to the LLC.  If any office shall become vacant, a replacement officer may be appointed by the Consent of the Board of Managers.  None of the officers of the LLC need be a Manager.  Two or more offices may be held by the same person.  The remuneration of all officers of the LLC may be fixed by the Remuneration Committee.  The Board of Managers may in the future name other officers of the LLC, having powers commensurate with such title or such powers and duties as they shall determine.

 

The Chief Executive Officer of the LLC shall report directly to such person designated by Old Mutual Intermediary in its sole discretion, which shall initially be the Chief Executive Officer of OM(US)H.

 

(g)                                  Committees of the Board of Managers.  Other than any committee required to be established by the Scheme of Authority (currently the Distribution Committee and the Remuneration Committee), the Board of Managers may, in its discretion and in accordance with the Scheme of Authority, designate one or more committees, each committee to consist of one or more of the Managers or other Persons and which shall have and may exercise, except as may be otherwise limited by law, such delegable powers and authority as shall be conferred or authorized by Consent of the Board of Managers.  The power and authority of any committee designated by the Board of Managers under this Section 3(g) shall not exceed the power and authority possessed by the Board of Managers under this Agreement and shall be exercised subject to all separate consent rights of Old Mutual Intermediary under this Agreement.  Such committees shall operate in accordance with the meeting procedures set forth in Appendix II.

 

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(h)                                 Distribution and Remuneration Committees.  In accordance with Section 3(g) hereof and as required by the Scheme of Authority, the Board of Managers hereby designates a Distribution Committee and a Remuneration Committee as hereinafter provided, and delegates to such committees the powers and authority set forth below:

 

(i)                                     The Distribution Committee shall be comprised solely of one or more OM(US)H Managers or their designees.  If there is at any time no OM(US)H Manager, then the Distribution Committee shall be comprised solely of the then Chief Executive Officer of OM(US)H or any designee of the Chief Executive Officer of OM(US)H.  Initially the Distribution Committee is comprised of Chief Executive Officer of OM(US)H.  The Distribution Committee will determine the amount and timing of distributions by the LLC subject to the terms of this Agreement and applicable law and after consultation with the Board of Managers.  In its decisions, the Distribution Committee shall have regard to the distribution policy of the LLC (the “Distribution Policy”), the short-term working capital requirements of the LLC, regulatory requirements and any expenditures contemplated by the LLC’s Approved Budget; provided, however, that the Distribution Committee shall not have the authority to delay or withhold any distribution contemplated by Section 6(c) hereof.

 

(ii)                                  The Remuneration Committee shall be comprised of two or more Managers, at least one of whom shall at all times be an OM(US)H Manager or his or her designee and one of whom shall generally be Additional Managers, subject to Section 3(b).  If there is at any time no OM(US)H Manager or designee thereof, the then Chief Executive Officer of OM(US)H or any designee of the Chief Executive Officer of OM(US)H shall be one of the members of the Remuneration Committee.  Initially, the Remuneration Committee is comprised of Thomas M. Turpin, James P. Barrow and Joseph R. Nixon, Jr.  The Remuneration Committee shall be responsible for determining all compensation-related matters, including without limitation: (A) the setting of salaries, (B) the allocation of bonuses and certain other payments to employees of the LLC from time to time, (C) the allocation of any long term compensation, including LLC Interests to any employee of the LLC, (D) the division of total compensation between elements (A) and (B) and (C) for each employee and (E) all matters for which the Remuneration Committee makes determinations or exercises discretion as provided in this Agreement, the Agreement of Limited Partnership, the Equity Plan, each as amended from time to time, and any employment or consulting agreement between the LLC and a Limited Partner.  The Remuneration Committee decision-making shall be by majority vote of the members of the Remuneration Committee, provided, however, that the Chief Executive Officer of OM(US)H will review all proposed determinations and decisions and will have the power, in his capacity as Chief Executive Officer of OM(US)H (and not in his capacity as a member of the Remuneration Committee, if applicable), to require that the proposed determination be revised or decision reversed.  In such event the Remuneration Committee shall submit a new proposed determination or decision until the same is acceptable to the Chief Executive Officer of OM(US)H; provided, however, if no agreement is reached within thirty (30) days of the submission of the first revised proposed determination or decision, then the dispute will be referred to the appropriate committee of the Board of Directors of OM(US)H, currently the Business Review Committee of the Board of Directors of OM(US)H, or the Oversight Committee of

 

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OM(US)H, as determined by OM(US)H from time to time in its sole discretion.  Any decision of such committee of the Board of Directors of OM(US)H or the Oversight Committee of OM(US)H shall be final, binding and conclusive with respect to the LLC, the Board of Managers and the Members.  The Remuneration Committee shall meet at least annually and prior to the time of any Trading Window.

 

(iii)                               A designee appointed by an OM(US)H Manager pursuant to this Section 3(h) need not be a Manager of the Company.

 

(i)                                     Standard of Care for Managers.  Each Manager shall be entitled to rely, in the performance of his or her duties, on information, opinions, reports or statements, including financial statements, in each case prepared by one or more agents or employees, counsel, certified public accountants or other Persons employed by the LLC, as to matters that such Manager believes to be within such Persons’ special competence.

 

(j)                                    Actions Requiring Consent of Old Mutual Intermediary.  Notwithstanding any other provision of this Agreement, the Board of Managers covenants and agrees that it shall not take any of the following actions without the prior written consent of Old Mutual Intermediary:

 

(i)                                     amend this Agreement or the Certificate of Formation;

 

(ii)                                  incur any obligation for borrowed money, except as provided in Section 6(d) hereof;

 

(iii)                               enter into transactions with Affiliates or Related Parties of the LLC or any Member or Manager other than in the ordinary course of business, except as provided in Sections 3(d) and 6(d) hereof;

 

(iv)                              file any lawsuit by or on behalf of the LLC in any federal, state or local court;

 

(v)                                 enter into any agreement or transaction or series of related agreements or transactions out of the ordinary course of business for the sale, exchange or transfer of any assets of the LLC with a value in excess of $15,000;

 

(vi)                              issue, sell or consent to the Transfer of any LLC Interest to any Person, or permit or authorize the issuance or creation of any other direct or indirect interests, or rights to acquire any other direct or indirect interest, in the LLC except for issuances, sales or consents to the Transfers of LLC Interests to employees of the LLC in accordance with this Agreement and the Equity Plan of up to the Maximum LLC Interests, subject to all of the terms and conditions of this Agreement and the Equity Plan;

 

(vii)                           redeem any LLC Interest or loan monies to any Person, except as provided in Section 6(d) hereof;

 

(viii)                        adopt or modify the annual budget and business plan;

 

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(ix)                              pledge LLC assets as security for any obligation or otherwise encumber LLC assets;

 

(x)                                 enter into any consent decree, settlement or negotiation with a government regulatory or enforcement agency;

 

(xi)                              enter into any consent decree or settlement as a result of legal action from a private party;

 

(xii)                           assume any third-party liability or provide a guarantee outside the ordinary course of business;

 

(xiii)                        create any subsidiary, enter into an agreement of partnership or become a member of a limited liability company, a partner (general or limited) of a partnership or a limited liability limited partnership or a joint venture, or a shareholder of a corporation; become a trustee of a trust or business trust; or become a holder of equity securities of any other entity;

 

(xiv)                       merge or enter into an agreement to merge or enter into a joint venture agreement or other form of strategic alliance;

 

(xv)                          appoint officers of the LLC having the title of Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, Chief Compliance Officer, Chief Investment Officer (or, in each case, any office or officer with responsibilities commensurate with any of the foregoing titles);

 

(xvi)                       appoint, retain or terminate a firm of independent public accountants for the preparation of the LLC’s financial statements set forth in Section 14(c) hereof;

 

(xvii)                    change the nature of the LLC’s business or its overall policies;

 

(xviii)                 commence any voluntary bankruptcy, insolvency or similar proceeding with the LLC as debtor;

 

(xix)                       dissolve, liquidate or wind up the operations or any portion of the operations of the LLC;

 

(xx)                          make any tax elections;

 

(xxi)                       enter into any non-competition or other similar agreement that restricts or limits the actions of the LLC or of the Partnership;

 

(xxii)                    consummate an Event of Dissolution;

 

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(xxiii)                 enter into any transaction or series of related transactions for the lease, sale or purchase of real property; or

 

(xxiii)                 enter into any other transaction or series of related transactions out of the ordinary course of business.

 

(k)                                 Covenants regarding OFAC.  Neither the LLC, nor any Member or Manager, nor any of their respective affiliates, nor any of their respective employees, officers, directors, representatives or agents is, nor will they become, a Person with whom U.S. Persons are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such Persons.  Neither the LLC, nor any Member or Manager, nor any of their respective Affiliates, nor any of their respective employees, officers, directors, representatives or agents, has taken or will take any action that would constitute a violation of the USA Patriot Act, P.L. 107-56, 1115 Stat. 272 (2001), as amended, including without limitation the anti-money laundering provisions thereof.

 

(l)                                     Approved Budget.  Subject to Section 3(j) hereof, the Chief Executive Officer of the LLC shall be responsible for the preparation of a budget and business plan for each Fiscal Year, and shall, by the date designated by the Chief Financial Officer of OM(US)H (usually on or about September 15 of the year immediately preceding such Fiscal Year) and unless otherwise extended by the Chief Financial Officer of OM(US)H, submit such proposed budget and business plan to the Board of Managers for preliminary approval.  If approved by the Board of Managers, such proposed budget and business plan shall be submitted by the Chief Executive Officer of the LLC to OM(US)H for final approval.  If OM(US)H notifies the Chief Executive Officer of the LLC of any objection(s) to the proposed budget and business plan, the Chief Executive Officer of the LLC shall revise and resubmit such proposed budget and business plan to the Board of Managers, and, if then approved by the Board of Managers, such proposed budget and business plan shall be resubmitted by the Chief Executive Officer of the LLC to OM(US)H.  The same procedures for approval, objection, revision and resubmission shall be applicable until final approval of a proposed budget and business plan by OM(US)H; provided, however, that if such final approval is not obtained, the budget and business plan then in effect will continue.  Upon such final approval, such budget and business plan shall be the “Approved Budget” for the relevant period.  Subject to Section 3(j) hereof, not later than 30 days prior to any fiscal quarter, the Chief Executive Officer of the LLC may submit proposed changes to the then Approved Budget for such subsequent fiscal quarter as he shall deem necessary.  Such changes shall be subject to the same approval process as the initially proposed budget and to the extent finally approved by OM(US)H shall modify the previously Approved Budget, and the modified budget and business plan shall thereupon be the Approved Budget for the relevant period.

 

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(m)                             Financial Reporting.  The Chief Executive Officer of the LLC shall provide OM(US)H with regular reporting reconciling actual expenses against the LLC’s Approved Budget, in a format reasonably requested by OM(US)H.  Any changes to the previously Approved Budget, if approved by OM(US)H, shall be reflected in the next succeeding monthly report of the LLC and will be shown as variances to the initial Approved Budget.  The Chief Executive Officer of the LLC shall be responsible for delivering to OM(US)H on a monthly basis all other financial reporting regarding the LLC that is requested by OM(US)H from time to time.

 

(n)                                 Cooperation.  The officers of the LLC shall, and the Board of Managers shall cause the LLC and its employees to work cooperatively with OM(US)H to support and utilize group-wide distribution strategies, services and initiatives in each case to the extent consistent with good commercial practice, operational goals and the Approved Budget.

 

4.                                      Capital Contributions; Capital Accounts; and Liability of Members.

 

(a)                                 Capital of Members.  The Capital Contributions that each Member has made to the LLC on or before the date of this Agreement or at anytime hereafter shall be properly reflected on the books and records of the LLC.

 

(b)                                 Additional Capital.  No Member shall be obligated to contribute any additional capital to the LLC.  In the event that the Board of Managers determines that the LLC requires additional working capital, the Board of Managers may seek to obtain such additional working capital by voluntary contribution from Old Mutual Intermediary (which, if so contributed, shall be an “Additional Capital Contribution”).  Additional Capital Contributions shall be repaid in accordance with Section 6(a)(iii), except to the extent that Old Mutual Intermediary and the Board of Managers otherwise agree in writing. In the event the OMFN Payment in any calendar year should be in excess of the distributions otherwise payable to Old Mutual Intermediary under Sections 6(a)(ii) and (iv), then Old Mutual Intermediary shall make a capital contribution to the LLC in the amount of such difference (the “Loan Contribution”); provided, however, that such capital contribution shall not be deemed to be an “Additional Capital Contribution” under this Agreement.

 

(c)                                  Capital Accounts.  A separate capital account (each, a “Capital Account”) will be maintained for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).  Consistent therewith, the Capital Account of each Member will be determined and adjusted as follows:

 

(i)                                     Each Member’s Capital Account will be increased by:

 

(A)                               Any Capital Contributions consisting of cash made by such Member plus the Book Basis of any Capital Contributions consisting of property made by such Member (net of any liabilities to which such property is subject or which are assumed by the LLC);

 

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(B)                               The Member’s distributive share of Profits and other items of income or gain; and

 

(C)                               Any other increases required or permitted by Treasury Regulation Section 1.704-1(b)(2)(iv).

 

(ii)                                  Each Member’s Capital Account will be decreased by:

 

(A)                               Any distributions of cash made from the LLC to such Member plus the fair market value of any property distributed in kind to such Member (net of any liabilities to which such property is subject or which are assumed by such Member);

 

(B)                               The Member’s distributive share of Losses and other items of expense, deduction or loss; and

 

(C)                               Any other decreases required or permitted by Treasury Regulation Section 1.704-1(b)(2)(iv).

 

(iii)                               In determining the amount of any liability for purposes of subparagraphs (i) and (ii) above, there shall be taken into account Section 752(c) of the Code and any other applicable provisions of the Code and Treasury Regulations.

 

(d)                                 Admission of Additional Members; Adjustments to Old Mutual Intermediary’s Percentage Interest.  Subject to any restrictions or other applicable procedures imposed by Sections 3(j) and 8 hereof, additional members may be admitted to the LLC on such terms and conditions as may be specified by the Board of Managers (or in the case of an issuance or transfer of LLC Interests pursuant to the Equity Plan, by the Remuneration Committee), including agreeing to certain non-solicitation covenants.  Prior to admission of any employee of the LLC as a Member of the LLC or the issuance or Transfer of additional LLC Interests to an employee of the LLC that is an existing Member of the LLC, each such proposed Member shall be required to execute (i) a Subscription Agreement, (ii) if applicable, an Instrument of Transfer and/or (iii) any other agreements, documents or instruments specified by the Board of Managers or OM(US)H in their respective sole discretion.  In connection with any such admission, including any admission due to a Transfer of all or part of an LLC Interest under Section 8 hereof, the Board of Managers shall amend the books and records of the LLC to reflect the inclusion of the additional Member(s) and shall notify the other Members of such admission in writing.  Following the award of an LLC Interest pursuant to the Equity Plan (including awards to an employee who is already a Member), subject to the provisions of Section 4.4 of the Equity Plan, the Percentage Interest of Old Mutual Intermediary and corresponding number of Units shown on the books and records of the LLC shall be reduced by an amount equal to the Percentage Interest and corresponding number of Units assigned to such awarded LLC Interest.  To the extent that an LLC Interest is forfeited pursuant to the Equity Plan, subject to the provisions of Section 4.5(c) of the Equity Plan, the Percentage Interest or Old Mutual Intermediary and corresponding number of Units shall be increased by the Percentage Interest and corresponding number of Units represented by the forfeited portion of such LLC Interest.

 

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(e)                                  No Rights of Creditors.  Nothing contained herein will, or is intended to or will be deemed to, benefit any creditor of the LLC or any creditor of any Member, and no such creditor will have any rights, interests or claims hereunder, be entitled to any benefits hereunder or be entitled to require the LLC, any Manager or any Member to demand, solicit or accept any loan, advance or additional Capital Contribution for or to the LLC or to enforce any right which the LLC or any Member may have against any other Member or which any Member may have against the LLC, pursuant to this Agreement or otherwise.

 

(f)                                   Voting Rights of the Members.  Notwithstanding anything to the contrary contained in this Agreement and except as provided in Section 18(b), no Member, other than Old Mutual Intermediary (or its transferee in the event Old Mutual Intermediary transfers all of its LLC Interests pursuant to Section 8(a)), shall have the right to vote on any matter under this Agreement or the Act, including, with respect to any merger, consolidation, conversion, transfer or continuance of the LLC.

 

(g)                                  Resignations, Etc.  Upon payment of the purchase price by any purchaser to a Member who is an employee of the LLC (or a transferee of an employee of the LLC as permitted under this Agreement and the Equity Plan) in accordance with this Agreement and the Equity Plan for all LLC Interests held by such Member, such Member: (i) shall be deemed to have withdrawn from the LLC; (ii) shall cease to be a Member of the LLC; and (iii) shall no longer have any rights hereunder; provided that such Member shall continue to be bound as set forth in Section 18(g).  Upon the resignation or withdrawal from the LLC by any other Member with the prior written consent of OM(US)H in its sole discretion, such Member: (i) shall be deemed to have withdrawn from the LLC; (ii) shall cease to be a Member of the LLC; and (iii) shall no longer have any rights hereunder; provided that such Member shall continue to be bound as set forth in Section 18(g).  Except as provided in this Section 4(g), no Member may resign or withdraw from the LLC prior to the termination of the LLC pursuant to Section 13 without the prior written consent of OM(US)H in its sole discretion.

 

(h)                                 No Interest.  No interest shall accrue or be paid on any Capital Contribution made to the LLC.

 

5.                                      Return of Contributions.  No Member shall have the right to withdraw or to be repaid any capital contributed by it or to receive any other payment in respect of such Member’s LLC Interest, including without limitation as a result of the withdrawal or resignation of such Member from the LLC, except as specifically provided in Section 6 hereof.

 

6.                                      Distributions.

 

(a)                                 In General.  Subject to Sections 4(b), 6(c), 6(d), 6(e), 6(f) and 6(g) hereof, all distributions (other than distributions on liquidation of the LLC) shall be made to the Members, at such times and in such aggregate amounts as determined by the Distribution Committee, as follows:

 

(i)                                     First, to Old Mutual Intermediary in an amount equal to its Unpaid ACC Return;

 

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(ii)                                  Second, to Old Mutual Intermediary until it has received pursuant to this Section 6(a)(ii) an amount equal to the Old Mutual Intermediary Income Preference; provided that the distribution to Old Mutual Intermediary under this Section 6(a)(ii) shall be reduced by the amount of the OMFN Payment;

 

(iii)                               Third, to Old Mutual Intermediary to the extent of any Additional Capital Contributions not previously distributed to it pursuant to this Section 6(a)(iii); and

 

(iv)                              Thereafter, to the Members generally in proportion to their respective Percentage Interests and in accordance with the Distribution Policy; provided that the distribution to Old Mutual Intermediary under this Section 6(a)(iv) shall be reduced by the amount by which the OMFN Payment exceeds the Old Mutual Intermediary Preference.

 

Notwithstanding anything to the contrary herein, no distribution shall be made to any Member (A) if such distribution would violate Section 18-607 of the Act or other applicable law, (B) to the extent that the Distribution Committee determines in good faith that such distributions, if made, would cause the LLC (or any Affiliate of the LLC) to be or remain in default, violate or lose rights or benefits, under any material agreement with a third party or (C) to the extent that the amount of cash remaining at the LLC following such distribution would not be sufficient to satisfy working capital requirements, regulatory requirements, foreseeable claims and financial obligations of the LLC and other short-term cash needs of the LLC.

 

In the event that the cumulative distribution to Old Mutual Intermediary under Section 6(a)(ii) with regard to any calendar year (but determined without the reduction relating to the OMFN Payment described in the proviso in that Section) is less than $25 million, then all amounts that the LLC would otherwise distribute to Members other than Old Mutual Intermediary under this Agreement and the Distribution Policy thereafter shall be distributed to Old Mutual Intermediary until such time as Old Mutual Intermediary has received an amount equal to the lesser of (A) the amount of such shortfall and (B) the cumulative amount distributed to the Members other than Old Mutual Intermediary in respect of such calendar year.

 

(b)                                 Distributions upon Liquidation.  In the event of the dissolution and liquidation of the LLC pursuant to Section 13 hereof, the net cash proceeds and/or other assets of the LLC available for distribution after satisfaction of the liabilities of the LLC in accordance with Section 13(e) shall be distributed among the Members in proportion to their respective positive Capital Account balances.

 

(c)                                  Tax Distributions.  Tax distributions shall be made not less often than quarterly to each Member at the times (other than at the time of a Terminating Capital Event) necessary to provide the Members with sufficient minimum cash distributions to pay an amount equal to their quarterly estimated (and final annual) tax liabilities for all taxable periods directly related to taxable income (in excess of losses allocated to such Member for all prior periods) reportable by such Member as set forth on U.S. Schedule K-1 with respect to such Member’s interest in the LLC (including with respect to any year in which such Member sold its interest, whether during

 

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or after employment); provided, however, that each of the foregoing amounts shall be determined, in the case of a Member that is itself a pass-through entity, as if the equity owners of such Member were themselves Members of the LLC; and, provided, further, that the amount of such distributions shall be computed assuming the highest combined federal and state individual income tax rate in Texas and assuming (unless federal tax law is amended to provide otherwise) state taxes are deductible federally (such distributions, “Tax Distributions”) and shall take into account any amounts withheld and remitted to any tax authority by the LLC pursuant to any Withholding Tax Act as described in Section 7(k).  Tax Distributions shall also be made within 30 days after the receipt of a final assessment with respect to any federal or state income tax audit of the LLC’s income tax returns.  Tax Distributions shall be treated as advances of distributions that would otherwise be made in the absence of provisions of this Section 6(c), and distributions made pursuant to Section 6(a) shall be taken into account in determining the amount to be distributed pursuant hereto.  If, following the end of any Fiscal Year, the LLC determines that it has made Tax Distributions to a Member that exceed the amount of distributions that would otherwise have been made to such Member with respect to such Fiscal Year in the absence of this Section 6(c), the LLC shall be authorized to recover such excess amount by reducing future distributions to such Member; provided, however, that the LLC shall retain the right, exercisable in its discretion, to recover any unpaid portion of such excess amount directly from such Member (or former Member).  For the avoidance of doubt, it is the meaning and intention of this Section 6(c) that Tax Distributions shall fully and timely fund the federal and state income tax liability attributable to any taxable income (in excess of losses allocated to a Member for all prior periods) reportable by a Member as set forth on U.S. Schedule K-1 with respect to such Member’s LLC Interest (or, if such Member is itself a pass-through entity, the equity owners thereof), and, to the extent that Tax Distributions do not fully achieve this result, the LLC shall use reasonable efforts to accelerate or increase Tax Distributions accordingly, including, if reasonably practicable, following the occurrence of a Terminating Capital Event if the timing of the winding up and dissolution of the LLC following such Terminating Capital Event is such that income tax liability on amounts to be distributed on account thereof must be paid by the Members in the interim, and provided, however, that it shall not be deemed reasonable for the LLC to accelerate or increase Tax Distributions in the event that doing so would result in the LLC’s failing to have reasonable working capital reserves or would cause the LLC not to be in compliance with regulatory requirements, although in any such event the LLC would use reasonable efforts to borrow the funds necessary to accelerate or increase such Tax Distributions so as to fully and timely fund the federal and state income tax liabilities of the Members (or the equity owners of Members that are themselves pass-through entities).

 

(d)                                 Credit Agreements with OM(US)H.

 

(i)                                     Old Mutual Intermediary may, in its sole discretion, cause the LLC, as the lender, to enter into a revolving credit loan agreement, in a form provided by OM(US)H, with OM(US)H, as the borrower, in an amount approximately equal to the LLC’s excess cash for the Fiscal Year that is not distributed to Members pursuant to the Distribution Policy at an interest rate and on such other terms as determined by OM(US)H in its sole discretion.  Prior to the end of the Fiscal Year, the Chief Executive Officer of the LLC shall determine the LLC’s cash requirements through the end of the Fiscal Year and shall notify OM(US)H in writing of such cash requirements.

 

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(ii)                                  OM(US)H, as the lender, in its sole discretion may loan to the LLC, as the borrower, pursuant to a revolving credit loan agreement, in a form provided by OM(US)H, such amounts as may from time to time be requested by the Board of Managers and approved by OM(US)H, in OM(US)H’s sole and absolute discretion, for such purposes as may be mutually agreed by OM(US)H and the LLC, at an interest rate equal to the interest rate of the revolving credit agreement referenced in Section 6(d)(i) and on such other terms as determined by OM(US)H in its sole discretion.

 

(iii)                               The LLC has no obligation to enter into any loan agreement with any Member other than as provided in this Section 6(d).  The LLC may enter into loan agreements with OM(US)H as provided in this Section 6(d) without the consent of any Manager or Member other than Old Mutual Intermediary.

 

(e)                                  Special Distribution in Respect of LLC Interests.  If for any Fiscal Year an LLC

 

Interest has been awarded to one or more employees of the LLC pursuant to Section 4.1 of the Equity Plan, the LLC shall distribute to Old Mutual Intermediary an amount equal to the aggregate of the Participant Interest Values (as defined in the Equity Plan) of all such LLC Interests awarded for such Fiscal Year as of the dates they were awarded; provided, however that any such distribution shall be reduced, but not below zero, by the amount previously distributed to Old Mutual Intermediary under this Section 6(e) on account of the issuance of LLC Interests subsequently forfeited pursuant to Section 4.5 of the Equity Plan (and not already taken into account under this Section 6(e)), and the unapplied balance of any such previous distributions to Old Mutual Intermediary shall be carried forward to subsequent Fiscal Years for application in accordance with the terms of this Section 6(e).

 

(f)                                   LLC Interests Held During Portion of Taxable Year.  Distributions to Members pursuant to Sections 6(a) and 6(c) with respect to any period or periods shall take account of the Members’ varying LLC Interests during such period or periods in accordance with the Distribution Policy.

 

(g)                                  Special Distributions to Old Mutual Intermediary.  Upon a determination by the Remuneration Committee to pay a portion of compensation to any employee of the LLC with publicly-traded shares of Old Mutual plc (“Compensatory Property”), the LLC will distribute to Old Mutual Intermediary at issuance an amount equal to the value, as of the time of the issuance, of such employee’s shares of such Compensatory Property; provided that such distribution shall be reduced, but not below zero, by the amount previously distributed to Old Mutual Intermediary under this Section 6(g) on account of the issuance of Compensatory Property subsequently forfeited pursuant to the forfeiture provisions of the Old Mutual plc Group Share Incentive Scheme (and not already taken into account under this Section 6(g)).  For purposes of this Section 6(g), publicly-traded shares of Old Mutual plc issued pursuant to the Old Mutual Restricted Share Plan shall constitute Compensatory Property.

 

(h)                                 Distributions Upon a Change in Control.  Upon a Change in Control of the LLC (as defined in the Equity Plan as a “Change in Control of the Company”), the vested and

 

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unvested LLC Interests held directly by Participants (as defined in the Equity Plan) or by the Partnership shall be redeemed or purchased in accordance with Section 8.3 of the Equity Plan.

 

7.                                      Allocation of Profits and Losses.

 

(a)                                 Allocations of Profits.  Except as otherwise provided in Sections 7(c) and 7(d) hereof, Profits shall be allocated among the Members in the following order and priority:

 

(i)                                     Allocation of ACC Return.  First, to Old Mutual Intermediary until the excess of (A) the aggregate amount of Profits allocated to Old Mutual Intermediary pursuant to this Section 7(a)(i) for all taxable years over (B) the aggregate amount of Losses allocated to Old Mutual Intermediary pursuant to Section 7(b)(iii) hereof for all taxable years is equal to Old Mutual Intermediary’s ACC Return;

 

(ii)                                  Allocation of Old Mutual Intermediary Income Preference.  Second, to Old Mutual Intermediary until the excess of (i) the aggregate amount of Profits allocated to Old Mutual Intermediary pursuant to this Section 7(a)(ii) for all taxable years over (ii) the aggregate amount of Losses allocated to Old Mutual Intermediary pursuant to Section 7(b)(iii) hereof for all taxable years is equal to the Old Mutual Intermediary Income Preference;

 

(iii)                               Chargeback of Loss of Unreturned Additional Capital Contributions.  Third, to Old Mutual Intermediary until the excess of (i) the aggregate amount of Losses allocated to Old Mutual Intermediary pursuant to Section 7(b)(iii) for all taxable years over (ii) the aggregate amount of Profits allocated to Old Mutual Intermediary pursuant to this Section 7(a)(iii) for all taxable years equals zero;

 

(iv)                              Allocation of Profits to Continuing Members.  Fourth, to each Continuing Member until the excess of (A) the aggregate amount distributed or distributable to such Continuing Member pursuant to Section 6(a)(iv) hereof (but determined without the reduction for certain amounts relating to the OMFN Payment described in the proviso thereto) for all taxable years over (B) the aggregate amount of Profits allocated to such Continuing Member pursuant to this Section 7(a)(iv) and Section 7(a)(v) for all taxable years, minus the aggregate amount of Losses allocated to such Continuing Member pursuant to Sections 7(b)(i) and 7(b)(v) for all taxable years is zero (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Continuing Members);  and

 

(v)                                 Residual Allocations.  Thereafter, to the Continuing Members in proportion to their respective Percentage Interests.

 

(b)                                 Allocation of Losses.  Except as otherwise provided in Sections 7(c) and 7(d) hereof, Losses shall be allocated among the Members in the following order of priority:

 

(i)                                     Chargeback of Undistributed Residual Allocations.  First, to each Member until the excess of (A) the aggregate amount of Profits allocated to such Member pursuant

 

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to Sections 7(a)(iv) and 7(a)(v) for all taxable years over (B) the sum of (x) the aggregate amount of distributions made to such Member pursuant to Section 6(a)(iv) for all taxable years plus (y) the aggregate amount of Losses allocated to such Member pursuant to this Section 7(b)(i) and Section 7(b)(v) for all taxable years equals zero (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Members);

 

(ii)                                  Loss of Unreturned Additional Capital Contributions.  Second, to Old Mutual Intermediary until the excess of (A) the aggregate amount of Losses allocated to Old Mutual Intermediary pursuant to this Section 7(b)(ii) for all taxable years over (B) the aggregate amount of Profits allocated to such Member pursuant to Section 7(a)(iii) for all taxable years equals the amount of Old Mutual Intermediary’s Unreturned Additional Capital Contributions;

 

(iii)                               Loss of Undistributed Old Mutual Intermediary Income Preference.  Third, to Old Mutual Intermediary until the excess of (i) the aggregate amount of Profits allocated to Old Mutual Intermediary pursuant to Section 7(a)(ii) for all taxable years over (ii) the sum of (A) the aggregate amount of distributions made to Old Mutual Intermediary pursuant to Section 6(a)(ii) for all taxable years plus (B) the aggregate amount of Losses allocated to Old Mutual Intermediary pursuant to this Section 7(b)(iii) for all taxable years equals zero;

 

(iv)                              Chargeback of Unpaid ACC Returns.  Fourth, to Old Mutual Intermediary until the excess of (A) the aggregate amount of Profits allocated to Old Mutual Intermediary pursuant to Section 7(a)(i) for all taxable years over (B) the sum of (x) the aggregate amount of distributions made to Old Mutual Intermediary pursuant to Sections 6(a)(i) for all taxable years plus (y) the aggregate amount of Losses allocated to such Member pursuant to this Section 7(b)(iv) for all taxable years equals zero; and

 

(v)                                 Residual Loss Allocations.  Thereafter, to the Continuing Members in accordance with their Percentage Interests.

 

(c)                                  Certain Special Allocations.

 

(i)                                     Special Allocation to Noncontinuing Members.  There shall be specially allocated to each Noncontinuing Member income or gain (or if there is insufficient income or gain, items of gross income or gain) until the excess of (A) the aggregate amount distributed or distributable to such Noncontinuing Member pursuant to Section 6(a)(iv) hereof for all taxable years over (B) the aggregate amount of income and gain (or items of gross income and gain) allocated to such Noncontinuing Member pursuant to this Section 7(c)(i) and Sections 7(a)(iv) and 7(a)(v) for all taxable years, minus the aggregate amount of items of expense, deduction and loss allocated to such Noncontinuing Member pursuant to Sections 7(b)(i) and 7(b)(v) for all taxable years is zero (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Noncontinuing Members).

 

(ii)                                  Awards and Forfeitures of LLC Interests.  There shall be specially

 

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allocated to Old Mutual Intermediary any expense or deduction attributable to the award of an LLC Interest pursuant to Section 4.1 of the Equity Plan or the award of any Compensatory Property, and any income recognized by the LLC pursuant to Treasury Regulation Section 1.83-6(c) in connection with the forfeiture of any such LLC Interest or Compensatory Property.  There shall be specially allocated to the Partnership any expense or deduction attributable to the award of an LLC Interest to Eligible Employees (as defined in the Equity Plan) pursuant to Section 4.4 of the Equity Plan, and any income recognized by the LLC pursuant to Treasury Regulation Section 1.83-6(c) in connection with the forfeiture of any such LLC Interest.

 

(iii)                               Special Allocation of Certain Amortization.  There shall be specially allocated to Old Mutual Intermediary any expense or deduction attributable to the amortization of the intangible assets of Barrow, Hanley, Mewhinney & Strauss, Inc., that were transferred to the Company in the merger of Barrow, Hanley, Mewhinney & Strauss, Inc., with and into the Company.

 

(iv)                              Special Distributions to Old Mutual Intermediary.  There shall be specially allocated to Old Mutual Intermediary income or gain (or if there is insufficient income or gain, items of gross income or gain) of the LLC equal to the amount of any special distribution to Old Mutual Intermediary pursuant to Section 6(e) or Section 6(g).  Insofar as possible the items of the income or gain (or items of gross income or gain) allocated to Old Mutual Intermediary under the foregoing sentence shall have the same character as the items constituting the Performance Allocation for the period in question

 

(v)                                 Certain Deferred Tax Items.  There shall be specially allocated to Old Mutual Intermediary the amount of any item deductible for federal income tax purposes attributable to the operation of any compensatory program, including without limitation any accrued short-term incentive plan, long-term incentive plan or any voluntary deferred compensation plan, of Barrow, Hanley, Mewhinney & Strauss, Inc. through and including the date of such corporation’s merger with and into a limited liability company.

 

(vi)                              Terminating Capital Event.  Income and gain or deduction and loss from a Terminating Capital Event (or, if there is insufficient income and gain or deduction and loss, items of gross income or deduction) shall be allocated among the Members in the following order and priority:

 

(a)                                 First, to each Member other than Old Mutual Intermediary until the positive balance of such Member’s Capital Account is equal to such Member’s Participant Interest Value, and

 

(b)                                 Second, the balance to Old Mutual Intermediary.

 

(vii)                           Special Allocation in Respect of OMFN Notes.  For each calendar year, there shall be specially allocated to Old Mutual Intermediary an amount of interest expense and other costs of the LLC included in the OMFN Payment.

 

(d)                                 Regulatory Allocations.  Prior to the application, and notwithstanding the

 

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provisions, of Sections 7(a), 7(b) and 7(c) hereof, the following special allocations shall be made in the following manner:

 

(i)                                     Nonrecourse Deductions.  Notwithstanding any other provisions of this Section 7(d), Nonrecourse Deductions for any taxable year shall be allocated, to the extent permitted under Treasury Regulation Section 1.704-2, to the Members in proportion to their respective Percentage Interests.

 

(ii)                                  LLC Minimum Gain Chargeback.  Notwithstanding any other provisions of this Section 7, in the event there is a net decrease in LLC Minimum Gain during a taxable year, the Members shall be allocated items of income and gain in accordance with Treasury Regulation Section 1.704-2(f).  This Section 7(d)(ii) is intended to comply with the minimum gain chargeback requirement of Treasury Regulation Section 1.704-2(f) and shall be interpreted and applied in a manner consistent therewith.

 

(iii)                               Member Nonrecourse Debt.  Notwithstanding any other provisions of this Section 7, to the extent required by Treasury Regulation Section 1.704-2(i), any items of income, gain, deduction and loss of the LLC that are attributable to Member Nonrecourse Debt shall be allocated in accordance with the provisions of Treasury Regulation Section 1.704-2(i).

 

(iv)                              Limitation on Allocation of Recourse Losses.  No allocation of any items of loss or deduction shall be made to a Member if, as a result of such allocation, such Member would have an Adjusted Capital Account Deficit.

 

(v)                                 Qualified Income Offset.  Any Member who unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which causes or increases an Adjusted Capital Account Deficit in such Member’s Capital Account shall be allocated items of income and gain sufficient to eliminate such increase or Adjusted Capital Account Deficit caused thereby, as quickly as possible, to the extent required by such Treasury Regulation.  This Section 7(d)(v) is intended to comply with the alternate test for economic effect set forth in Treasury Regulation Section 1.704-l(b)(2)(ii)(d) and shall be interpreted and applied in a manner consistent therewith.

 

(vi)                              Distributions of Nonrecourse Liability Proceeds.  If, during a taxable year, the LLC makes a distribution to any Member that is allocable to the proceeds of any nonrecourse liability of the LLC that is allocable to an increase in LLC Minimum Gain pursuant to Treasury Regulation Section 1.704-2(h), then the LLC shall elect, to the extent permitted by Treasury Regulation Section 1.704-2(h)(3), to treat such distribution as a distribution that is not allocable to an increase in LLC Minimum Gain.

 

(vii)                           Compliance with Code Section 704(b).  The allocation provisions contained in this Section 7 are intended to comply with Code Section 704(b) and the Treasury Regulations promulgated thereunder and shall be interpreted and applied in a manner consistent therewith.

 

(e)                                  Tax Allocations.  Items of income, gain, deduction and loss for purposes of

 

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determining the Members’ Capital Accounts (that is, for “book purposes”) shall be determined in accordance with the same principles as such items are determined for reporting such items on the LLC’s federal income tax return.  All items of income, gain, deduction, loss or credit for tax purposes shall be determined in accordance with the Code and, except to the extent otherwise required by the Code, allocated to and among the Members in the same percentages in which the Members share in such items for book purposes.

 

(f)                                   Certain Allocations with Respect to Contributed Property.  In accordance with Code Section 704(c) and the Treasury Regulations thereunder, items of depreciation, amortization, gain, loss, and deduction with respect to any property contributed to the capital of the LLC shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the LLC for federal income tax purposes and its initial book value, such allocation to be made by the Distribution Committee in its sole discretion in accordance with any method permitted by the applicable Treasury Regulations.

 

(g)                                  Tax Elections.  Any elections or other decisions relating to allocations of income, gain, deduction, loss or credit hereunder or any other tax elections (including elections under Code Section 754) that must be made at the LLC level (as opposed to by the Members) shall be made (or not made) by the Distribution Committee in its sole discretion on behalf of the LLC.

 

(h)                                 LLC Interests Held During Portion of Taxable Year.  For purposes of determining the income, gain, loss, deduction or credit, or any other items allocable to any period, such items shall be determined on a daily, monthly, or other basis, as determined by the Distribution Committee including any permissible method under Code Section 706 and the Treasury Regulations thereunder.

 

(i)                                     Consistent Reporting.  The Members are aware of the income tax consequences of the allocations made by this Section 7 and hereby agree to be bound by the provisions of this Section 7 in reporting their distributive shares of LLC income and loss for income tax purposes.

 

(j)                                    Amounts Withheld with Respect to Members. The LLC is authorized to withhold from payments and distributions, or with respect to allocations to the Members, and to pay over to any federal, state, local, or foreign government, all amounts required to be so withheld pursuant to any provisions of any federal, state, local, or foreign law, and shall allocate any such amounts to the Members with respect to which such amount was withheld. All such amounts withheld shall be treated as amounts paid or distributed, as the case may be, to the Members with respect to which such amount was withheld pursuant to this Section 7(j) for all purposes under this Agreement.

 

(k)                                 Payments with Respect to Certain Nonvested LLC Interests; Taxes Withheld.  A distribution with respect to a Nonvested LLC Interest for which there has not been an effective election under Code Section 83(b), including an amount paid directly to a holder of an LP Interest and any withholding tax or other tax payable with respect to such distribution pursuant to the Code, the Treasury Regulations, or any state or local statute, regulation or ordinance requiring such payment (a “Withholding Tax Act”), shall be treated as a distribution to the Member holding such Nonvested LLC Interest for all purposes of this Agreement, consistently with the character or

 

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source of the income, profits or distributions which gave rise to such payment or withholding obligation.  The Distribution Committee shall have the authority to take all actions necessary to enable the LLC to make such payments with respect to such Nonvested LLC Interests and to comply with the provisions of any Withholding Tax Act applicable to the LLC and to carry out the provisions of this Section 7(k).  Each Member shall indemnify and hold harmless the LLC for all taxes (including interest, penalties and additions to tax) relating to amounts received by such Member from the LLC that were required to have been withheld by the LLC under applicable law.

 

8.                                      Restrictions on Transfers and Issuances of LLC Interests.

 

(a)                                 Restrictions in General.  Except as otherwise permitted under the Equity Plan or this Section 8(a), neither the Partnership nor any other Member shall Transfer to any transferee all or any portion of his, her or its LLC Interest and no transferee shall be admitted as a Member to the LLC without the prior written consent of Old Mutual Intermediary as provided in Section 3(j).  Old Mutual Intermediary and any of its successors and assigns, in its sole discretion, may Transfer all or any portion of its LLC Interest to any transferee (the “Old Mutual Transferee”) without any restriction or limitation.  Any transferee permitted under this Section 8(a) shall not be admitted as a Member unless such transferee (i) agrees in writing to be bound by all of the provisions of this Agreement, including without limitation Section 4(d) and (ii) executes any agreements, documents or instruments specified by the Board of Managers or OM(US)H.

 

(b)                                 Rescission Rights.  If a Member other than Old Mutual Intermediary Transfers his, her or its LLC Interest to the Partnership, such Member shall have the right to rescind such Transfer within three (3) business days of such Transfer by providing written notice to the Chief Executive Officer of the LLC with a copy to the OM(US)H Manager who is the Chief Executive Officer of OM(US)H.  Such Transfer shall be null and void and ineffective to Transfer such Member’s LLC Interest and such Member shall continue as a Member of the LLC and such Transfer shall have no effect on such Member’s rights or obligations as a Member hereunder.  Such Member shall not be entitled to any right, and shall not be subject to any obligation, under the limited partnership agreement of the Partnership as a result of such Transfer.

 

(c)                                  Transfers in Violation of this Agreement.  In the event of any attempted or purported Transfer in contravention of any of the provisions of this Agreement, such attempted or purported Transfer shall be null and void and ineffective to Transfer any interest in the LLC and shall not bind, or be recognized by or on the books of, the LLC, and any attempted or purported transferee in such Transfer shall not be or be treated as or deemed to be a Member for any purpose.  In the event of such attempted or purported Transfer in contravention of any of the provisions of this Agreement, then the LLC and each other Member shall, in addition to all rights and remedies at law and equity, be entitled to a decree or order restraining and enjoining such Transfer, and the offending Member shall not plead in defense thereto that there would be an adequate remedy at law; it being expressly hereby acknowledged and agreed that damages at law would be an inadequate remedy for a breach or threatened breach of the provisions set forth in this Agreement concerning any such attempted or purported Transfer.

 

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(d)                                 Court Ordered Transfers.  In the event of any Transfer which, notwithstanding having been prohibited by the terms of this Agreement, is mandated by a court of final jurisdiction, the transferee shall not be admitted as a Member of the LLC and shall have no voting or consent rights hereunder unless otherwise required by the Act.

 

(e)                                  Issuance of LLC Interests.  During the term of this Agreement and subject to Sections 3(h)(ii) and 3(j) hereof, the LLC shall not issue any LLC Interest to any employee of the LLC without the Consent of the Remuneration Committee.

 

(f)                             Certificated Interests.  (i) Ownership of LLC Interests will be evidenced by certificates.  The books reflecting the issuance and transfer of any certificates shall be kept by the LLC.  The certificates shall be consecutively numbered and shall be entered in the books of the LLC as they are issued and shall exhibit the holder’s name and the number of Units held by such holder.  The certificates shall carry a legend noting (i) the restrictions on the transfer or assignment of the LLC Interests, (ii) that each LLC Interest constitutes a “security under the Delaware UCC and Other State UCC (as defined below) and (iii) any other matters as shall be determined by the LLC in accordance with the Securities Act of 1933, as amended (the “Securities Act”), or any other federal or state securities or blue sky laws.  The LLC may determine the conditions upon which a new certificate may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed and may, in its discretion, require the owner of such certificate or its legal representative to give bond, with sufficient surety, to indemnify the LLC and any transfer agent and registrar against any and all loss or claims which may arise by reason of the issuance of a new certificate in the place of the one lost, stolen, or destroyed.  The Members agree that the certificates may be held by the Company or OM(US)H on behalf of the Recipient.

 

(ii)                                  Each LLC Interest (including each Unit) shall constitute a “security” within the meaning of, and governed by, (a) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware (the “Delaware UCC”) and (b) the corresponding provisions of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995 (each, an “Other State UCC”).  For all purposes of this Article 8 of the Delaware UCC and any Other State UCC and to the fullest extent permitted by law, the laws of the State of Delaware shall constitute the local law of the Company in the Company’s capacity as the issuer of LLC Interests.

 

(g)                                  Compliance with Securities Laws.  Notwithstanding anything to the contrary herein, the LLC shall not issue any LLC Interest, and no Member shall Transfer its LLC Interest, to the extent that such issuance or Transfer would violate the Securities Act or any other federal or state securities or blue sky laws.

 

9.                                      Certain Provisions Inapplicable to Nonvested LLC Interests.  An LLC Interest issued pursuant to the Equity Plan may be subject to vesting conditions that cause all or a portion of such LLC Interest to be classified as “substantially nonvested property” within the meaning of Treasury Regulation Section 1.83-3(b) (any such LLC Interest, or portion thereof, including an

 

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LLC Interest held by the Partnership, a “Nonvested LLC Interest”).  A holder of a Nonvested LLC Interest shall, in general, be a Member for purposes of this Agreement.  Notwithstanding the foregoing, for purposes of Sections 4(c), 6(b), 6(c) and 7, “Member” shall not include a Member to the extent that its LLC Interest is a Nonvested LLC Interest for which there has not been an effective election under Code Section 83(b), and such LLC Interest shall be disregarded for purposes of such provisions.

 

10.                               Liability.  Except as otherwise provided by the Act, the debts, obligations and liabilities of the LLC, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the LLC, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the LLC by reason of acting in such capacity.  No Member shall be required to lend any funds to the LLC.  The liability of each Member for the losses, debts and obligations of the LLC shall be limited to its Capital Contributions theretofore made to the LLC by such Member (or its predecessor in interest) which have not been previously repaid to or withdrawn by such Member (or its predecessor in interest) in accordance with the terms of this Agreement.  No Member shall have any liability to restore any negative balance in its Capital Account.

 

11.                               Priorities.  No Member shall have any rights or priority over any other Members as to contributions or as to distributions or compensation by way of income, except as specifically provided in this Agreement.

 

12.                               Entity Characterization.  It is the intention of the Members that the LLC constitute a partnership for U.S. federal income tax purposes at all times when two or more Persons (other than Persons who are not treated as separate for tax purposes) hold LLC Interests, and, to the extent permitted under applicable law, for all other income tax purposes.  The LLC shall use its reasonable best efforts to comply with all applicable laws and regulations to ensure that the LLC is treated as a partnership for U.S. federal income tax purposes at any time when two or more Persons (other than Persons who are not treated as separate for tax purposes) hold LLC Interests.

 

13.                               Term; Dissolution of the LLC.

 

(a)                                 Term.  The term of the LLC shall be perpetual, unless sooner terminated as hereinafter provided.

 

(b)                                 Events of Dissolution or Liquidation. The LLC shall be dissolved upon the first to occur of the following (each, an “Event of Dissolution”):  (i) the Consent of the Board of Managers (and the consent of Old Mutual Intermediary in accordance with Section 3(j) hereof); (ii) the dissolution, termination, winding-up or bankruptcy of OM(US)H with the consent of Old Mutual plc; (iii) the withdrawal, or other inability to act as a member of the LLC, of Old Mutual Intermediary (provided, however, that the Transfer of Old Mutual Intermediary’s LLC Interests to an Old Mutual Transferee, as set forth in Section 8(a) shall not cause an Event of Dissolution), (iv) the entry of a decree of judicial dissolution under Section 18-802 of the Act and (v) the termination of the legal existence of the last remaining member of the LLC or the occurrence of any other event that terminates the continued membership of the last remaining member of the LLC unless the LLC is continued without dissolution in a manner permitted by this Agreement

 

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or the Act.  Upon the occurrence of any event that causes the last remaining Member of the LLC to cease to be a Member of the LLC, to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such Member in the LLC, agree in writing (i) to continue the LLC and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the LLC, effective as of the occurrence of the event that terminated the continued membership of such Member in the LLC.  Following an Event of Dissolution, the Board of Managers shall proceed diligently to liquidate the assets of the LLC in a manner consistent with commercially reasonable business practices.  Neither the termination of the Equity Plan nor a Change in Control of the LLC (as defined in the Equity Plan as a “Change in Control of the Company”) shall constitute an Event of Dissolution.  Except as provided in this Section 13(b), the death, retirement, resignation, removal, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the LLC (including the bankruptcy of such Member) shall not in and of itself cause a dissolution of the LLC to occur (and the LLC, without such Member, shall continue), unless there are no remaining Members of the LLC.

 

(c)                                  Distributions upon Liquidation.  In connection with the liquidation of the LLC, the assets of the LLC shall be applied and distributed by the Distribution Committee in the following order of priority:

 

(i)                                     first, to creditors of the LLC, including Members, in the order of priority provided by law in satisfaction of the liabilities of the LLC (whether by payment or the making of reasonable provision for payment thereof), including the creation or augmentation of a reserve of cash or other assets of the LLC for contingent, conditional or unmatured liabilities in an amount, if any, determined by the Distribution Committee to be appropriate for such purposes; and

 

(ii)                                  thereafter, to the Members in accordance with the provisions of Section 6(b) hereof.

 

14.                               Financial and Accounting Matters; Confidentiality.

 

(a)                                 Books and Records.  The Board of Managers shall keep or cause to be kept complete and accurate books and records of the LLC in accordance with GAAP.  Such books and records shall be maintained at the principal business office of the LLC.  Members shall have access to documents and information of the LLC that are required to be furnished to the Members under Section 18-305 of the Act, at their reasonable request for any purpose reasonably related to their interest as a Member of the LLC and at their expense during ordinary business hours; provided that, except with respect to Old Mutual Intermediary, the Board of Managers or the LLC shall have the right to withhold any information, including the following information, for such period of time as the Board of Managers or the LLC, as applicable, determines is reasonable pursuant to Section 18-305 of the Act:

 

(i)                                     any information that the Board of Managers or the LLC, as applicable, reasonably believes to be in the nature of trade secrets;

 

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(ii)                                  any other information (A) the disclosure of which the Board of Managers or the LLC, as applicable, in good faith believes is not in the best interest of the LLC or could damage the LLC or its business or (B) that the LLC is required by law or by agreement with a third party to keep confidential; or

 

(iii)                               to the extent as may be expressly agreed pursuant to any agreement between the LLC and such Member.

 

Notwithstanding anything herein to the contrary, each Member other than Old Mutual Intermediary agrees that such Member, to the fullest extent permitted by law, (x) has no right to inspect or copy any document of the LLC containing any other Member’s Percentage Interest (or corresponding number of Units) or to be informed of the amount of any Capital Contributions or Capital Account balance of, or Percentage Interests (or corresponding number of Units) held by, any other Member, or any similar information about any employee of the LLC with respect to LLC Interests acquired in connection with the Plan and (y) waives all right under the Act or otherwise to review such portions of the books and records of the LLC as would enable such Member to determine the amount of any Capital Contributions or Capital Account balance of, or Percentage Interest (or corresponding number of Units) held by, any other Member.

 

(b)                                 Bank Accounts.  Bank accounts and/or other accounts of the LLC shall be maintained in such banking and/or other financial institution(s) as shall be selected by the Board of Managers, and withdrawals shall be made and other activity conducted on such signature or signatures as shall be designated by the Board of Managers.

 

(c)                                  Financial Information.  Any financial information prepared pursuant to this Section 14(c) shall be prepared from the books and records of the LLC, shall accurately reflect the books, records and accounts of the LLC in accordance with GAAP, and shall be complete and correct in all material respects.

 

(i)                                     Within ninety (90) days after the end of each fiscal year, the LLC shall use its best efforts to cause to be prepared a consolidated balance sheet of the LLC as of the end of such fiscal year and the related consolidated statement of operations and cash flows for the fiscal year then ended, prepared in accordance with GAAP, and, as promptly as practicable following such preparation, certified by a firm of independent public accountants of recognized national standing selected by the Board of Managers, subject to Section 3(j) hereof.

 

(ii)                                  Within ninety (90) days after the end of the second fiscal quarter of each fiscal year, the LLC shall use its best efforts to cause to be prepared a consolidated balance sheet of the LLC and the related consolidated statement of operations and cash flows, unaudited but prepared in accordance with GAAP and certified by the Chief Financial Officer of the LLC, as of the end of second fiscal quarter and for the period from the beginning of the fiscal year to the end of the second fiscal quarter.

 

(iii)                               The Board of Managers may, within ninety (90) days after the end of the first and/or third fiscal quarters, cause the LLC to use its best efforts to cause to be prepared a consolidated balance sheet of the LLC and the related consolidated statement

 

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of operations and cash flows, unaudited but in accordance with GAAP and certified by the Chief Financial Officer of the LLC, as of the end of first or third fiscal quarter and for the period from the beginning of the fiscal year to the end of the first or third fiscal quarter, in each case as applicable.

 

(iv)                              The LLC shall provide copies of the financial statements specified in Sections 14(c)(i), 14(c)(ii) and 14(c)(iii) to the Members either (A) as an exhibit to the Equity Plan Terms of Offering for the Trading Window next following the preparation of such financial statements or (B) within ten (10) business days of the preparation of such financial statements as set forth in such Sections.

 

(v)                                 The Board of Managers shall cause the officers and employees of the LLC to cooperate with the LLC’s firm of independent public accountants and the Board of Managers, officers and employees of the LLC in the preparation of the audited and unaudited financial statements of the LLC described in this Section 14(c).  The Board of Managers shall further cause the officers and employees of the LLC to cooperate with the LLC’s firm of independent public accountants and the Board of Managers, officers and employees of the LLC in any valuation of the LLC performed for any reason, including as required under the Equity Plan.

 

(d)                                 Fiscal Year.  Except as otherwise required by the Code, the fiscal year (and taxable year) of the LLC shall end on December 31 of each year (each a “Fiscal Year”).

 

(e)                                  Tax Matters Partner.  Old Mutual Intermediary shall be the “tax matters partner” of the LLC for purposes of the Code until its bankruptcy, insolvency, resignation or the designation of its successor, whichever occurs sooner.  Any subsequent “tax matters partner” shall be designated from time to time by the Board of Managers, except to the extent the Code and/or Treasury Regulations require such designation to be made in another manner.  Each Member hereby consents to such designation and agrees that upon the request of Old Mutual Intermediary it will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent.  Promptly following the written request of the tax matters partner, the LLC shall, to the fullest extent permitted by law, reimburse and indemnify the tax matters partner for all reasonable expenses, including reasonable legal and accounting fees, claims, liabilities, losses and damages incurred by the tax matters partner in connection with any administrative or judicial proceeding with respect to the tax liability of the Members.

 

(f)                                   Confidential Information.  Except as otherwise required by law or judicial order or decree or by any governmental or regulatory agency or authority, unless otherwise approved by the Board of Managers, no Person other than Old Mutual Intermediary shall use any proprietary or confidential information owned by the LLC other than for the benefit of the LLC, whether or not such Person is or remains a Member (including any Person that owns equity interests of a Member either directly or indirectly), Manager, officer, employee or other agent of the LLC.  The preceding sentence shall not, however, apply to disclosures of information that (i) is or becomes generally available to the public other than as a result of any violation of this Agreement by the disclosing Person or anyone to whom such disclosing Person transmits any

 

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information or (ii) is or becomes known or available to such disclosing Person on a non-confidential basis from a source (other than the LLC or any of its subsidiaries) that is not under any confidentiality obligation to the LLC or any of its subsidiaries with respect to that information.  Notwithstanding anything to the contrary herein, Old Mutual Intermediary (and any Person who owns equity interests of Old Mutual Intermediary either directly or indirectly) may use any proprietary or confidential information owned by the LLC for business purposes.

 

15.                               Indemnity; Other Business; Duties.

 

(a)                                 Indemnity.

 

(i)                                     Except as provided below, to the fullest extent permitted by law, the LLC shall indemnify Old Mutual Intermediary (and any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly including, but not limited to, OM(US)H, OMAM, and Old Mutual plc (including, in each case, any director, officer, manager, member, partner, employee or other agent thereof) and any Member, officer or Manager (including Members, officers and Managers who serve at the LLC’s request as directors, officers, managers, members, partners, employees or other agents of another organization or who serve at its request in any capacity including with respect to any employee benefit plan; such service is hereafter described as serving in a representative capacity) (each, a “Covered Person”) against expenses, including attorney’s fees, and against the amount of any judgment, money, decree, fine, penalty, or settlement (provided the Board of Managers deems, in its sole discretion, the settlement to have been a reasonable one), necessarily paid or incurred by such Covered Person in connection with or arising out of any claim, or any civil, administrative or criminal action, suit, or other proceeding of whatever nature brought against such Covered Person (other than an action brought by or in the right of the LLC) by reason of such Covered Person being or having been a Manager, officer or Member, serving or having served in a representative capacity, or acting or having acted, or failing to act or to have acted, pursuant to authority granted by this Agreement; provided, however, that any indemnity under this Section 15(a) shall be provided out of and only to the extent of the LLC’s assets, and no Member, officer or Manager shall have personal liability on account thereof.  Such indemnification shall apply even though at the time of such claim, action, suit or proceeding such Covered Person is no longer a Member, officer or Manager of the LLC.  The foregoing indemnification shall be conditioned, however, upon the Covered Person seeking it, at all times and from time to time, (A) fully disclosing to any Person designated by the Board of Managers all facts, events and occurrences which the Board of Managers in its sole discretion deems relevant to its decision to indemnify; and (B) fully cooperating with and assisting the LLC and its counsel in any reasonable manner with respect to protecting or pursuing the LLC’s interests in any matter relating to the subject matter of the claim, action, suit or other proceeding for which indemnification is sought.  No indemnification shall be provided for any Covered Person (1) if such Covered Person has committed fraud, gross negligence or willful misconduct as determined by the Board of Managers in its sole discretion, (2) with respect to any matter as to which the Board of Managers determines that such Covered Person (other than Old Mutual Intermediary (and any Person that owns equity interests of Old Mutual

 

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Intermediary either directly or indirectly including OMAM, OM(US)H and Old Mutual plc), the Partnership or OM(US)H Manager(s)) did not act in good faith in the reasonable belief that such Covered Person’s action was in the best interest of the LLC or, to the extent that such matter relates to service with respect to any employee benefit plan, in the best interests of the participants, or the beneficiaries of such employee benefit plan, or (3) with respect to any criminal action or proceeding, if the Board of Managers determines that such Covered Person had reasonable cause to believe that its conduct was unlawful.  In the event a Covered Person is a Manager, any decision of the Board of Managers referred to in the preceding sentence shall be made by the Consent of the Board of Managers without the vote of that Manager.

 

(ii)                                  Notwithstanding the foregoing, the LLC shall not provide indemnification for any former Manager, officer or Member who, in the judgment of the Board of Managers, was in serious or repeated breach of its duties as a Manager or Member.

 

(iii)                               Any rights of indemnification hereunder shall not be exclusive but shall be in addition to any other right which Old Mutual Intermediary, any Manager or any Member may have or obtain, and shall accrue to such Covered Person’s successors, assigns, heirs and legal representatives.

 

(iv)                              Any employee of or agent for the LLC may be indemnified in such manner as the Board of Managers determines.

 

(b)                                 Advancement of Expenses.                                                 If a Covered Person provides the Board of Managers with evidence that demonstrates to the satisfaction of the Board of Managers that such Covered Person is reasonably likely to prevail on the merits of such matter, expenses reasonably incurred in defending any claim, action, suit or proceeding of the character described in Section 15(a) may, if the Board of Managers so determines in its sole discretion, be advanced by the LLC prior to the final disposition of such claim, action, suit or proceeding upon receipt of a written undertaking by or on behalf of the recipient to repay all such advances if it is ultimately determined by the Board of Managers that such Covered Person is not entitled to indemnification pursuant to Section 15(a).

 

(c)                                  Outside Interests.  Old Mutual Intermediary (and any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly including OM(US)H, OMAM, and Old Mutual plc) may engage in and possess interests in other business ventures and investment opportunities of every kind and description, independently or with others, including serving as member, manager or partner of other limited liability companies and partnerships, whether or not such ventures or opportunities are competitive with the LLC, and the doctrine of corporate opportunity or any analogous doctrine shall not apply to Old Mutual Intermediary (or any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly, including OM(US)H, OMAM or Old Mutual plc).  If Old Mutual Intermediary (or any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly, including OM(US)H, OMAM or Old Mutual plc) acquires knowledge of a potential transaction, agreement, arrangement or other matter that may be an opportunity for the LLC, Old Mutual Intermediary (and any such Person) shall have no duty to communicate or offer such opportunity to the LLC, and shall not be liable to the LLC or to any Member for breach of any fiduciary or

 

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other duty by reason of the fact that Old Mutual Intermediary (or any such Person) pursues or acquires for, or directs such opportunity to, another Person or does not communicate such opportunity or information to the LLC.  Neither the LLC nor any Member shall have any rights in or to such independent business ventures or investment opportunities or the income or profits therefrom by virtue of this Agreement, and the pursuit of such ventures, even if competitive with the activities of the LLC, shall not be deemed wrongful, improper or the breach of any duty to the LLC or any Member existing at law, in equity or otherwise.

 

(d)                                 Reserves.  If the LLC determines that it is appropriate or necessary to do so, the LLC may establish reasonable reserves, escrow accounts or similar accounts to cover its obligations under this Section 15.

 

(e)                                  Rights Cumulative.  The right of any Covered Person to the indemnification provided herein shall be cumulative with, and in addition to, any and all rights to which such Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Covered Person’s successors, assigns, heirs and legal representatives.

 

(f)                                   Survival.  The provisions of this Section 15 shall continue to afford protection to each Covered Person regardless of whether such Covered Person remains in the position or capacity pursuant to which such Covered Person became entitled to indemnification under this Section 15 (regardless of whether a claim, action, suit or proceeding is filed or commenced while such Covered Person remains in such position or after he, she or it no longer hold such position) and regardless of any subsequent amendment to this Agreement, and no amendment to this Agreement shall reduce or restrict the extent to which these indemnification provisions apply to actions taken or omissions made prior to the date of such amendment.  In addition, any repeal or modification of any of the provisions of this Section 15 shall not adversely affect any right or protection hereunder of any Covered Person in respect of any proceeding (regardless of when such proceeding is first threatened, commenced or completed) arising out of, or related to, any act or omission occurring prior to the time of such repeal or modification.

 

(g)                                  Duties.

 

(i)                                     Notwithstanding any other provision of this Agreement or any other provision of law or equity and to the fullest extent permitted by law, the Members agree that none of Old Mutual Intermediary (and any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly, including OM(US)H, OMAM or Old Mutual plc), the Partnership or OM(US)H Manager(s) shall owe any duties (including fiduciary duties) to any Member, the Company or any other Person bound by this Agreement, other than the duties and obligations of such Member or OM(US)H Manager(s) expressly set forth in this Agreement, provided, however, that nothing in this Section 15(g) shall eliminate any implied contractual covenant of good faith and fair dealing.  To the extent that, at law or in equity, a Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any Member, the Person acting under this Agreement shall not be liable to Company or to any Member for its good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities of a Person to any Member, the Company or any other Person bound by this Agreement otherwise existing at law or

 

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in equity, are agreed by the parties hereto to replace such other duties and liabilities of the Person.

 

(ii)                                  The LLC and each of the Members expressly acknowledge that neither Old Mutual Intermediary (and any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly, including OM(US)H, OMAM, and Old Mutual plc) nor OM(US)H Manager(s) is under any obligation to consider the separate interests of any Member (including the tax consequences to any Member) in deciding whether to take, or cause the LLC to take (or decline to take), any actions, and that neither Old Mutual Intermediary (and such Person) nor OM(US)H Manager(s) shall be liable for monetary damages for losses sustained, liabilities incurred or benefits not derived by any Member in connection with such decisions.

 

16.                               Code Section 83 Safe Harbor Election.  The Board of Managers is hereby authorized and directed to cause the LLC to make an election to value any LLC Interest issued as compensation for services to the LLC or any affiliate of the LLC (a “Compensatory Interest”) at liquidation value (the “Safe Harbor Election”), as the same may be permitted pursuant to or in accordance with the finally promulgated successor rules to Proposed Treasury Regulations Section 1.83-3(l) and IRS Notice 2005-43 (collectively, the “Proposed Rules”).  Notwithstanding any provision of this Agreement, the Board of Managers shall cause the LLC to make any allocations of items of income, gain, deduction, loss or credit (including forfeiture allocations and elections as to allocation periods) necessary or appropriate to effectuate and maintain the Safe Harbor Election.  Any such Safe Harbor Election shall be binding on the LLC and on all of its Members with respect to all Transfers of Compensatory Interests while a Safe Harbor Election is in effect.  A Safe Harbor Election once made may be revoked by the Board of Managers and as permitted by the Proposed Rules or any applicable rule.  Each Member, by signing this Agreement or by accepting such Transfer, hereby agrees to comply with all requirements of the Safe Harbor Election with respect to all Compensatory Interests while the Safe Harbor Election remains effective.  The Board of Managers shall file or cause the LLC to file all returns, reports and other documentation as may be required to perfect and maintain the Safe Harbor Election with respect to Transfers of any Compensatory Interest.  The Board of Managers is hereby authorized and empowered, without further vote or action of the Members, to amend this Agreement as necessary to comply with the Proposed Rules or any applicable rule, in order to provide for a Safe Harbor Election and the ability to maintain or revoke the same, and shall have the authority to execute any such amendment by and on behalf of each Member.  Any undertakings by the Members necessary to enable or preserve a Safe Harbor Election may be reflected in such amendments and to the extent so reflected shall be binding on each Member, respectively.  Each Member agrees to cooperate with the Board of Managers to perfect and maintain any Safe Harbor Election, and to timely execute and deliver any documentation with respect thereto reasonably requested by the Board of Managers.  No Transfer of any LLC Interest shall be effective unless prior to such Transfer the transferee of such LLC Interest shall have agreed in writing to be bound by the provisions of this Section 16, in form and substance satisfactory to the Board of Managers.

 

17.                               Internal Revenue Code Section 409A.  This Agreement is intended to comply with the requirements of Code Section 409A, including any applicable requirements for exclusion from coverage by such Code Section 409A.  Consistent with this intent, this Agreement shall be

 

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construed and administered in accordance with Code Section 409A and the Treasury Regulations and other guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of this Agreement.  In the event that the Board of Managers determines that any amount payable hereunder will be taxable to any Member under Section 409A of the Code, the Treasury Regulations or other guidance, prior to payment of such amount, the Board of Managers is hereby authorized and empowered, without further vote or action of the Members, (a) to amend this Agreement (including with retroactive effect) as the Board of Managers determines necessary or appropriate to preserve the intended tax treatment of any payments provided by this Agreement, and shall have the authority to execute any such amendment by and on behalf of each Member, and/or (b) to take such other actions as the Board of Managers determines necessary or appropriate to comply with the requirements of Code Section 409A.

 

18.                               Miscellaneous.

 

(a)                                 Binding Effect.  The terms of this Agreement shall be binding upon and shall inure to the benefit of (i) the Members and their respective successors, successors-in-title, heirs and assigns and (ii) the Managers and any successors thereto designated pursuant to Section 3(b) hereof, provided, however, that this Agreement shall inure to the benefit of successors and assigns only in the event of Transfers in compliance with Section 8 hereof.  None of the provisions of this Agreement shall be for the benefit of or enforceable by any Person not a party hereto, including without limitation any creditor of the LLC (including any Member acting in its capacity as a creditor of the LLC) or any creditor of any Member.

 

(b)                                 Amendment.  No amendment of this Agreement shall be valid or binding unless such amendment is made with the consent of Old Mutual Intermediary in accordance with Section 3(j)(i) hereof.  Notwithstanding anything to the contrary contained herein, Old Mutual Intermediary may amend this Agreement at any time in its sole discretion without the consent of any Member or other Person being required.

 

(c)                                  Counterparts.  This Agreement may be executed in any number of counterparts, all of which together shall for all purposes constitute one Agreement, binding on all the Members and Managers notwithstanding that they have not signed the same counterpart.

 

(d)                                 Notices.  All notices under this Agreement shall be effective (i) when received, if delivered by hand, (ii) the following business day after having been timely sent by reputable overnight courier service for priority, next-day delivery, (iii) four (4) business days after it is sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) upon confirmation of receipt by the recipient after having been sent by fax (but on the next business day after confirmation of receipt if such receipt is after business hours at the time and place of receipt).  All such notices in order to be effective shall be in writing and shall be addressed (to the recipient’s street address or fax number, as the case may be), if to the LLC at its principal office address set forth in Section 1 hereof, to the attention of Joseph R. Nixon, Jr., phone: (214) 665-1900, fax: (214) 665-1936 (with a prior call to (214) 665-1953), and with a copy to the Chief Compliance Officer; and if to a Member at the last street address or fax number, as the case may be, of record on the LLC’s books, and copies of such notices shall also be sent to the

 

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last such address for the recipient which is known to the sender, if different from the address so specified.  Copies of such notices shall also be sent to Old Mutual Asset Management, 200 Clarendon Street, 53rd Floor, Boston, MA 02116, Attention:  Joan R. Gulinello, General Counsel, phone: (617) 369-7300, fax: (617) 369-7499.  Notice addresses may be changed at any time by notice as provided in this Section 18(e).

 

(e)                                  Interpretation.

 

(i)                                     As used herein, the singular shall include the plural, and the masculine gender shall include the feminine and neuter, and vice-versa, unless the context otherwise requires.  Any reference to any federal, state, local, or foreign statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Any reference herein to “include”, “includes”, “including” and any derivation thereof shall be interpreted to be immediately followed by “without limitation”.  Any reference to any Section or paragraph shall be deemed to refer to a Section or paragraph of this Agreement, unless the context clearly indicates otherwise.

 

(ii)                                  Notwithstanding any other provision of this Agreement or any other provision of law or equity, whenever in this Agreement Old Mutual Intermediary (or any Person that owns equity interests of Old Mutual Intermediary either directly or indirectly, including OM(US)H, OMAM or Old Mutual plc) or OM(US)H Manager(s) is permitted or required to make a decision (a) in his, her or its “sole discretion”, “absolute discretion” or “discretion” or that he, she or it deems “necessary,” “appropriate” or “advisable” or under a grant of similar authority or latitude, Old Mutual Intermediary (and such Person) and OM(US)H Manager(s) shall, to the fullest extent permitted by law be permitted to make such decision in his, her or its sole discretion (regardless of whether there is a reference to “sole discretion,” “absolute discretion” or “discretion”), and shall be entitled to consider only such interests and factors as he, she or it desires, including its own interests, and shall have no duty or obligation (fiduciary or otherwise) to give any consideration to any interest of or factors affecting the LLC or any Member, and shall not be subject to any other or different standards imposed by this Agreement or under law, rule or regulation or in equity, or (b) in its “good faith” or under another expressed standard, Old Mutual Intermediary (and such Person) and OM(US)H Manager(s) shall act under such express standard and shall not be subject to any other or different standards.

 

(f)                                   Entire Agreement.  This Agreement, including Appendix I and Appendix II attached hereto, which are hereby incorporated herein, embodies the entire agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter.

 

(g)                                  Survival of Certain Provisions.   The obligations of each Member pursuant to Sections 7(d), 7(j), 14(e) (including the designation of the tax matters partner), 14(f) and 15 shall survive the termination or expiration of this Agreement, the withdrawal of such Member and the dissolution, winding up and liquidation of the LLC.

 

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(h)                                 Waiver of Partition.  Except as may otherwise be provided by any applicable law or regulation in connection with the dissolution, winding up and liquidation of the LLC, each Member hereby irrevocably waives any and all rights that it may have to maintain an action for partition of any of the LLC’s property.

 

(i)                                     Further Actions.  Each Member shall execute and deliver such other certificates, agreements and documents, and take such other actions, as may reasonably be requested by the Board of Managers in connection with the formation of the LLC and the achievement of its purposes or to give effect to the provisions of this Agreement, in each case as are not inconsistent with the terms and provisions of this Agreement, including any documents that the Board of Managers determines to be necessary or appropriate to form, qualify or continue the LLC as a limited liability company in all jurisdictions in which the LLC conducts or plans to conduct its investment and other activities and all such agreements, certificates, tax statements and other documents as may be required to be filed by or on behalf of the LLC.

 

(j)                                    Severability.  If any provision of this Agreement is held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded, and (iii) the balance of this Agreement shall be enforceable in accordance with its terms; provided, however, that this Agreement continues to reasonably and substantially reflect the intent of the parties expressed herein taking into account the exclusion of such unenforceable provision.

 

(k)                                 Governing Law; Jurisdiction.

 

(i)                                     THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE NOTWITHSTANDING ANY CONFLICT OF LAW RULES TO THE CONTRARY. IN THE EVENT OF A CONFLICT BETWEEN ANY PROVISION OF THIS AGREEMENT AND ANY NONMANDATORY PROVISION OF THE ACT, THE PROVISION OF THIS AGREEMENT SHALL CONTROL AND TAKE PRECEDENCE.

 

(ii)                                  EACH PARTY HERETO, TO THE FULLEST EXTENT PERMITTED BY LAW, (A) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS LOCATED IN BOSTON, MASSACHUSETTS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE FORMATION, BREACH, TERMINATION OR VALIDITY THEREOF, PROVIDED, HOWEVER, THAT A MEMBER WHO IS NOT A MANAGER MAY MAINTAIN A LEGAL ACTION OR PROCEEDING IN THE COURTS OF THE STATE OF DELAWARE WITH RESPECT TO MATTERS RELATING TO THE ORGANIZATION OR INTERNAL AFFAIRS OF THE LLC (B) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH COURTS, (C) WAIVES ANY CLAIM OF INCONVENIENT FORUM OR OTHER CHALLENGE TO VENUE IN SUCH COURT, (D) AGREES NOT TO BRING ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY OTHER COURT AND (E) WAIVES ANY RIGHT IT MAY

 

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HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.  EACH PARTY HERETO AGREES, TO THE FULLEST EXTENT PERMITTED BY LAW, TO ACCEPT SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER INITIAL PLEADING MADE IN THE MANNER PROVIDED FOR THE GIVING OF NOTICES IN SECTION 18(D), PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 18(K) SHALL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE SUCH SUMMONS, COMPLAINT OR OTHER INITIAL PLEADING IN ANY OTHER MANNER PERMITTED BY LAW.

 

REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

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IN WITNESS WHEREOF, the Member has executed this Agreement as of the date first above written.

 

	
 
    	
MEMBERS:
    
	
 
    	
 
    
	
 
    	
Old   Mutual Intermediary (BHMS), LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
/s/   Thomas M. Turpin
    
	
 
    	
 
    	
Name:
    	
Thomas   M. Turpin
    
	
 
    	
 
    	
Title:
    	
President
    

 

 

APPENDIX I

 

Defined Terms

 

Capitalized terms used in this Agreement shall have the meanings specified in this Appendix I.

 

“ACC Return” means the amount accruing, from time to time, at the rate of interest announced by Bank of America, N.A. at its head office from time to time as its “Prime Rate” plus 2% per annum, compounded annually, on Old Mutual Intermediary’s Unreturned Additional Capital Contributions.

 

“Act” has the meaning set forth in the recitals to this Agreement.

 

“Additional Capital Contribution” has the meaning set forth in Section 4(b) hereof.

 

“Additional Managers” has the meaning set forth in Section 3(b)(ii) hereof.

 

“Adjusted Capital Account Deficit” means, with respect to any Member for any taxable year or other period, the deficit balance, if any, in such Member’s Capital Account as of the end of such year or other period, after giving effect to the following adjustments:

 

(a)                                 Credit to such Capital Account any amounts that such Member is obligated to restore or is deemed obligated to restore as described in the penultimate sentence of Treasury Regulation Section 1.704-2(g)(1) and in Treasury Regulation Section 1.704-2(i)(5); and

 

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

 

“Affiliate” means, with respect to a specified Person, any other Person that directly or indirectly controls, is under common control with, or is controlled by, the specified Person.  As used herein, the term “control” means the possession by a Person, directly or indirectly, of the power to direct or cause the direction of the management and policies of another Person, whether through ownership of 50% or more of the voting securities of such other Person, by contract or otherwise.

 

“Agreement” has the meaning set forth in the Preamble to this Agreement.

 

“Agreement of Limited Partnership” means the Partnership’s Agreement of Limited Partnership, effective January 12, 2010, as amended from time to time.

 

“Approved Budget” means the budget and business plan described in Section 3(l) hereof that has received final approval of OM(US)H, subject to any changes thereto as may be approved by OM(US)H in accordance with such Section 3(l).

 

“Board of Managers” has the meaning set forth in Section 3(b) hereof.

 

 

“Book Basis” means, with respect to any asset of the LLC, the asset’s adjusted basis for federal income tax purposes, except as follows:

 

(a)                                 The initial Book Basis of any asset contributed by a Member to the LLC shall be the gross fair market value of such asset, as determined in good faith by the Distribution Committee;

 

(b)                                 The Book Basis of LLC assets shall be adjusted to equal their respective gross fair market values, as determined in good faith by the Distribution Committee, as of the times permitted by Treasury Regulation Section 1.704-l(b)(2)(iv)(f)(5); provided, that the Distribution Committee reasonably determines that such adjustment is necessary to reflect the relative economic interests of the Members in the LLC;

 

(c)                                  The Book Basis of any LLC asset distributed to any Member shall be adjusted to equal the gross fair market value of such asset on the date of distribution as determined in good faith by the Distribution Committee; and

 

(d)                                 The Book Basis of LLC 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 Treasury Regulation Section 1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of “Profit” and “Loss”; provided, however, that Book Basis shall not be adjusted pursuant to this subparagraph (d) to the extent that an adjustment pursuant to subparagraph (b) is required in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (d).

 

If the Book Basis of an asset has been determined or adjusted pursuant to subparagraph (a), (b) or (d), such Book Basis shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

 

“Capital Account” has the meaning set forth in Section 4(c) hereof.

 

“Capital Contribution” means the amount of money and the fair market value of any property actually contributed to the capital of the LLC by a Member in its capacity as a Member.

 

“Certificate of Formation” has the meaning set forth in the recitals to this Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Compensatory Interest” has the meaning set forth in Section 16 hereof.

 

“Compensatory Property” has the meaning set forth in Section 6(g) hereof.

 

“Consent of the Board of Managers” has the meaning set forth in Section 3(c) hereof.

 

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“Continuing Member” means a Person that is a Member on the record date for the fourth quarter of a taxable year (as determined by the Distribution Committee).

 

“Contribution” has the meaning set forth in the recitals to this Agreement.

 

“Covered Person” has the meaning set forth in Section 15(a) hereof.

 

“Depreciation” means, for each taxable year, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such taxable year, except that if the Book Basis of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such taxable year, Depreciation shall be an amount which bears the same ratio to such beginning Book Basis as the federal income tax depreciation, amortization, or other cost recovery deduction for such taxable year bears to such beginning adjusted tax basis, in each case properly adjusted to reflect acquisitions and dispositions made during such taxable years; provided, however, that if the adjusted basis for federal income tax purposes of an asset at the beginning of such taxable year is zero, Depreciation shall be determined with reference to such beginning Book Basis using any reasonable method selected by the Distribution Committee.

 

“Distribution Policy” has the meaning set forth in Section 3(h)(i).

 

“Equity Plan” has the meaning set forth in the recitals to this Agreement.

 

“Event of Dissolution” has the meaning set forth in Section 13(b) of this Agreement.

 

“Fiscal Year” has the meaning set forth in Section 14(d) of this Agreement.

 

“GAAP” means “US generally accepted accounting principles” with the exception of not applying the provisions of FASB Interpretation Nos. 46 and 46R “Consolidation of Variable Interest Entities” and EITF issue No. 04-5 “Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” that could result in the LLC consolidating additional entities that are accounted for using the equity or cost method of accounting.  The LLC should continue to apply in its’ special purpose financial statements, the accounting guidance specific to consolidations under US generally accepted accounting principles that existed prior to FIN46, FIN46R and EITF 04-05.

 

“Limited Partner” has the meaning given in the Agreement of Limited Partnership of the Partnership.

 

“LLC” has the meaning set forth in the recitals to this Agreement.

 

“LLC Interest” means a “limited liability company interest” in the LLC within the meaning of Section 18-101(8) of the Act, together with all voting or consent rights (if any) and any other rights appertaining to such limited liability company interest under this Agreement.  In accordance with Section 4(f), all LLC Interests held by a Person other than Old Mutual

 

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Intermediary (or any Person that owns equity interests in Old Mutual Intermediary either directly or indirectly) shall have no voting or consent rights hereunder or under the Act except as expressly provided in this Agreement.  References in this Agreement to vested LLC Interests and unvested LLC Interests shall be interpreted in accordance with the Equity Plan.  LLC Interests shall be represented in the form of Units.

 

“LLC Minimum Gain” means “partner minimum gain” as defined in Treasury Regulation Section 1.704-2(d).

 

“LP Interest” has the meaning set forth in the recitals to this Agreement.  LP Interests shall be represented in the form of Units of the Partnership.

 

“Loss” means, for each taxable year or other period, an amount equal to the excess of (a) the LLC’s items of loss and deduction for such year or other period (other than those items specially allocated pursuant to Sections 7(d)(i) through 7(d)(vi) of this Agreement over (b) the LLC’s items of income and gain for such year or other period (other than those items specially allocated pursuant to Sections 7(d)(i) through 7(d)(vi) of this Agreement, determined in accordance with Code Section 703(a) (including all items of income, gain, loss and deduction required to be stated separately under Code Section 703(a)(1)), with the following adjustments:

 

(a)                                  Any income of the LLC that is exempt from federal income tax, and not otherwise taken into account in computing Loss, will be considered an item of income;

 

(b)                                  Gain resulting from any disposition of any LLC asset with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such asset, notwithstanding that the adjusted tax basis of such asset may differ from its Book Basis;

 

(c)                                   Any increase to Capital Accounts as a result of any adjustment to the Book Basis of LLC assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of income;

 

(d)                                 Any expenditures of the LLC described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Loss, will be considered an item of deduction;

 

(e)                                  Loss resulting from any disposition of any LLC asset with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such asset, notwithstanding that the adjusted tax basis of such asset may differ from its Book Basis;

 

(f)                                   In lieu of depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there will be taken into account the Depreciation for the taxable year or other period as determined hereunder;

 

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(g)                                  Any decrease to Capital Accounts as a result of any adjustment to the Book Basis of LLC assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of loss; and

 

(h)                                 Any increase or decrease to Capital Accounts to take into account the amount of any unrealized gain or loss with respect to distributed property as described in Treasury Regulation Section 1.704-1(b)(2)(iv)(e)(1) shall constitute an item of gain or loss, as applicable.

 

“Manager” has the meaning set forth in Section 3(b) hereof.

 

“Maximum LLC Interests” means an aggregate percentage equity interest in the LLC equal to 24.9% or such other aggregate percentage equity interest in the LLC that the Participants (as defined in the Equity Plan) as a group are permitted by Old Mutual Intermediary to own from time to time.

 

“Member” and “Members” have the respective meanings set forth in the Preamble to this Agreement.

 

“Member Nonrecourse Debt” means “partner nonrecourse debt” as defined in Treasury Regulation Section 1.704-2(b)(4).

 

“Noncontinuing Member” means a Person that was a Member during the taxable year but is not a Member on the record date for the fourth quarter of such taxable year (as determined by the Distribution Committee).

 

“Nonrecourse Deductions” has the meaning set forth in Treasury Regulation Section 1.704-2(b)(1).

 

“Nonvested LLC Interest” has the meaning set forth in Section 9 hereof.

 

“OFAC” has the meaning set forth in Section 3(k) hereof.

 

“Old Mutual plc” means Old Mutual plc, a public limited company, domiciled in England and Wales with a registration number of 3591559.

 

“Old Mutual Transferee” has the meaning set forth in Section 8(a).

 

“Old Mutual Intermediary” has the meaning set forth in the Preamble to this Agreement.

 

“Old Mutual Intermediary Income Preference” shall mean (a) with respect to a distribution in respect of a calendar quarter ending on March 31, June 30 or September 30, $7 million and (b) with respect to a distribution in respect of a calendar quarter ending on December 31, the excess of $25 million over the aggregate amount previously distributed to Old Mutual Intermediary in respect of the calendar year ending on such December 31 pursuant to Section 6(a)(ii).

 

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“OMAM” means Old Mutual Asset Managers (US), LLC, a Delaware limited liability company.

 

“OMFN Notes” collectively means, (a) the Non-Negotiable Promissory Note between Barrow, Hanley, Mewhinney & Strauss, Inc. and Fidelity and Guaranty Life Insurance Company, dated as of December 15, 2005 and due December 31, 2013, (b) the Non-Negotiable Promissory Note between Barrow, Hanley, Mewhinney & Strauss, Inc. and Fidelity and Guaranty Life Insurance Company dated as of December 18, 2006 and due December 17, 2014, (c) the Non-Negotiable Promissory Note between Barrow, Hanley, Mewhinney & Strauss, Inc. and OM Financial Life Insurance Company dated as of December 22, 2008 and due December 22, 2015 and (d) Non-Negotiable Promissory Note between Barrow, Hanley, Mewhinney & Strauss, Inc. and OM Financial Life Insurance Company (“OMFLIC”) dated as of December 18, 2009 and due December 18, 2016 and any future notes between the LLC and OMFLIC in payment of or with respect to the principal amount due and payable on any of the then existing OMFN Notes (i.e. the payment of principal due is made by the issuance of a new note).

 

“OMFN Payment” means, the aggregate amount of principal and interest due and payable in such year under the then outstanding OMFN Notes, but not including any interest with respect to the OMFN Notes that would otherwise accrue on the OMFN Notes as compounded at the rate set forth in the OMFN Notes (the late payment interest charge); provided, however that such amount shall be reduced to the extent that a new OMFN Note is made by the LLC that year with OMFLIC in payment of or with respect to the principal amount due and payable on any of the then existing OMFN Notes (i.e. the payment of principal due is made by the issuance of a new note).

 

“OM(US)H” has the meaning set forth in the Recitals to this Agreement.

 

“OM(US)H Manager” has the meaning set forth in Section 3(b)(i) hereof.

 

“Partnership” has the meaning set forth in the recitals to this Agreement.

 

“Participant Interest Value” has the meaning set forth in the Equity Plan.

 

“Percentage Interests” means the respective percentage LLC Interest that the Members hold in the LLC as set forth on the books and records of the LLC (as such books and records may be amended from time to time).  Percentage Interests shall be calculated, with respect to any Member, by dividing (a) the number of Units such Member holds by (b) the number of total outstanding Units at the time of calculation.

 

“Person” means any natural person or any general partnership, limited partnership, limited liability partnership, limited liability limited partnership, corporation, limited liability company, joint venture, trust, business trust, cooperative, association, joint-stock company, unincorporated association, sole proprietorship, government or governmental agency or authority or other entity, including the heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so admits.

 

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“Profit” means, for each taxable year or other period, an amount equal to the excess of (a) the LLC’s items of income and gain for such year or other period (other than those items specially allocated pursuant to Sections 7(c) and 7(d) of this Agreement) over (b) the LLC’s items of deduction and loss for such year or other period (other than those items specially allocated pursuant to Sections 7(c) and 7(d) of this Agreement), determined in accordance with Code Section 703(a) (including all items of income, gain, loss and deduction required to be stated separately under Code Section 703(a)(1)), with the following adjustments:

 

(a)                                  Any income of the LLC that is exempt from federal income tax, and not otherwise taken into account in computing Profit, will be considered an item of income;

 

(b)                                  Gain resulting from any disposition of any LLC asset with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such asset, notwithstanding that the adjusted tax basis of such asset may differ from its Book Basis;

 

(c)                                   Any increase to Capital Accounts as a result of any adjustment to the Book Basis of LLC assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of income;

 

(d)                                 Any expenditures of the LLC described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures under Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profit, will be considered an item of deduction;

 

(e)                                  Loss resulting from any disposition of any LLC asset with respect to which gain or loss is recognized for federal income tax purposes will be computed by reference to the Book Basis of such asset, notwithstanding that the adjusted tax basis of such asset may differ from its Book Basis;

 

(f)                                   In lieu of depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there will be taken into account the Depreciation for the taxable year or other period as determined hereunder;

 

(g)                                  Any decrease to Capital Accounts as a result of any adjustment to the Book Basis of LLC assets pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall constitute an item of loss; and

 

(h)                                 Any increase or decrease to Capital Accounts to take into account the amount of any unrealized gain or loss with respect to distributed property as described in Treasury Regulation Section 1.704-1(b)(2)(iv)(e)(1) shall constitute an item of gain or loss, as applicable.

 

The amounts of the LLC’s items of income, gain, deduction and loss available to be specially allocated pursuant to Sections 7(c) and 7(d) of this Agreement shall be determined by applying rules analogous to those set forth in paragraphs (a) through (h) above.

 

7

 

“Proposed Rules” has the meaning set forth in Section 16 hereof.

 

“Safe Harbor Election” has the meaning set forth in Section 16 hereof.

 

“Scheme of Authority” has the meaning set forth in Section 3(c) hereof.

 

“Securities Act” has the meaning set forth in Section 8(f) hereof.

 

“Tax Distribution” has the meaning set forth in Section 6(c) hereof.

 

“Terminating Capital Event” means a merger or dissolution of the LLC or a sale of all or substantially all of its assets, excluding a merger with, or sale to, OM(US)H or an Affiliate of OM(US)H.

 

“Transfer” (and corresponding grammatical variations thereof) means, when used as a noun, any disposition of all or any portion of an LLC Interest, for value or otherwise, including without limitation any sale, gift, bequest, assignment, pledge or encumbrance, and whether effected by contract, by operation of law or otherwise.  “Transfer” (and corresponding grammatical variations thereof) when used as a verb, shall have a correlative meaning.

 

“Treasury Regulations” means any applicable regulations under the Code.

 

“Unit” means a unit of measurement used to allocate Profits and Losses and distributions of the LLC among the Members in accordance with this Agreement and the Distribution Policy.  There shall be an unlimited number of authorized Units, which shall only be issued in accordance with the terms of the Equity Plan and this Agreement.

 

“Unpaid ACC Return” means, at a particular time of determination, the excess of (a) the amount of Old Mutual Intermediary’s ACC Return over (b) the aggregate amount of distributions made to Old Mutual Intermediary pursuant to Section 6(a)(i) of this Agreement.

 

“Unreturned Additional Capital Contribution” means the excess of (a) the amount of Old Mutual Intermediary’s Additional Capital Contributions over (b) the aggregate amount of distributions made to Old Mutual Intermediary pursuant to Section 6(a)(iii) hereof.

 

“Withholding Tax Act” has the meaning set forth in Section 7(j) hereof.

 

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APPENDIX II

 

Meeting Procedures

 

1.                                                Meetings.  Meetings of the Board of Managers may be held at any time and at any place within or without the State of Delaware fixed by resolution of the Board of Managers or upon the call of the Chief Executive Officer of the LLC, a majority of the Managers, or an OM(US)H Manager.

 

2.                                                Notice.  Notice of any meeting not held at a time fixed by a resolution of the Board of Managers shall be given to a Manager by U.S. mail, overnight delivery, facsimile (in each case with a copy provided by electronic mail) or electronic mail at least 48 hours (and in no event less than one business day) before the meeting addressed to such Manager at such Manager’s usual or last known business or residence address or facsimile, or by telephone or by delivery in person at least 24 hours before the meeting.  Notice of a meeting need not be given to any Manager if a written waiver of notice, executed by such Manager before or after the meeting, is filed with the records of the meeting, or to any Manager who attends the meeting without protesting prior thereto or at its commencement the lack of notice to such Manager.  Notice of a meeting shall state the time and place of the meeting.  Neither notice of a meeting nor a waiver of a notice need specify the purposes of the meeting.

 

3.                                                  Quorum.  Except as may be otherwise provided by law or by this Agreement, at any meeting of the Board of Managers a majority of the Managers present in person or by proxy then in office shall constitute a quorum; provided, however, that at least one of the OM(US)H Managers is present in person or by proxy and provided, further, that, subject to Section 3(j) of this Agreement, the Board of Managers shall take no action without the Consent of the Board of Managers.  Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice.

 

4.                                                Action Without a Meeting.  Subject to Section 3(j) of this Agreement, any action required or permitted to be taken at any meeting of the Board of Managers may be taken without a meeting if the number of Managers (including at least one of the OM(US)H Managers) required to take such action consents thereto in writing, and such writing or writings are filed with the records of the meetings of the Board of Managers.  Such consent shall be treated for all purposes as the act of the Board of Managers.

 

5.                                                Participation in Meetings by Telephone and Video.  Managers may participate in a meeting of the Board of Managers by means of conference telephone, video conference or similar communications equipment by means of which all Persons participating in the meeting can hear each other or by any other means permitted by law.  Such participation shall constitute presence in person at such meeting.

 

6.                                                Compensation.  No member of the Board of Managers shall be paid compensation or fees for such Manager’s services as Manager, but each Manager shall be reimbursed by the LLC for such Manager’s reasonable expenses incurred in the performance of such Manager’s

 

 

duties as Manager as the Board of Managers from time to time may determine by the Consent of the Board of Managers.  Nothing contained in this Section 6 shall be construed to preclude any Manager from serving the LLC in any other capacity and receiving reasonable compensation therefor.

 

7.                                                Committees.  Subject to Section 3(h) of this Agreement, the Board of Managers shall have the power at any time to discharge any member of, change the membership of, fill vacancies in, or designate one or more Persons as alternate members of, any committee of the Board of Managers, except with respect to any OM(US)H Manager (or his or her designee) serving on any such committee.  Each committee shall keep regular minutes and report to the Board of Managers when required.  Subject to Section 3(h) of this Agreement and except as the Board of Managers may otherwise determine, any such committee shall make, alter and repeal rules of procedure for the conduct of its business consistent with this Agreement.  Each such committee shall meet where, when and as provided by such rules or by resolution of the Board of Managers.  Except as the Board of Managers may otherwise determine, a majority of the Persons then constituting the membership of any such committee, present in person or by proxy, shall constitute a quorum for the transaction of business, except that when a committee shall have only one member or only the OM(US)H Manager(s), then one member, present in person or by proxy, shall constitute a quorum; provided, however, that, if one or more OM(US)H Managers or his or her designee is a member of such committee, at least one of the OM(US)H Managers or its designee is present, in person or by proxy, (or, if there is at any time no OM(US)H Manager or designee, the Chief Executive Officer of OM(US)H is present, in person or by proxy).  Subject to Section 3(h) of this Agreement, when there is a quorum at any meeting of any such committee, a majority of those present, in person or by proxy, and voting shall be requisite and sufficient to effect any action, or to decide any question or measure presented to the meeting; provided that if a committee’s membership consists only of the OM(US)H Manager(s) or his or her designee, either Manager or designee shall be requisite and sufficient to effect any action, or to decide any question or measure presented at the meeting.  Subject to Section 3(h) of this Agreement, any action required or permitted to be taken at any meeting of any such committee may be taken without a meeting if the number of members of such committee (including if one or more OM(US)H Managers or his or her designee is a member of such committee, at least OM(US)H Manager or its designee) is required to take such action consents thereto in writing, and such writing or writings are filed with the records of the meetings of such committee.  Such consent shall be treated for all purposes as the act of such committee.

 

8.                                                Proxies.  Any member of the Board of Managers or committee thereof may, by a writing, grant a proxy to any other member of the Board of Managers or such committee, as the case may be, permitting such other member to vote in approval of any matter within the scope of such proxy; provided that if only an OM(US)H Manager serves on a committee, such OM(US)H Manager may grant such proxy to any other member of the Board of Managers irrespective of whether such member serves on such committee.

 

2Exhibit 10.13

 

Execution Copy

	
 
    	
 
    	
 
    

 

FIFTH AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

ACADIAN ASSET MANAGEMENT LLC

 

Dated as of August 14, 2014

	
 
    	
 
    	
 
    

 

 

FIFTH AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT, dated as of August 14, 2014, of ACADIAN ASSET MANAGEMENT LLC, a Delaware limited liability company (the “Company”), between Old Mutual Asset Managers (US) LLC or its successors or assigns (“OMAM”) and the Acadian KELP LP (the “KELP”) (each a “Member” and collectively the “Members”).  Capitalized terms used herein are defined in Article XII.

 

W I T N E S S E T H:

 

WHEREAS, the Company has previously been formed as a limited liability company pursuant to the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq., as amended from time to time (the “Act”);

 

WHEREAS, the Members entered into the Limited Liability Company Agreement, first dated as of November 7, 2007, and amended and restated as of December 31, 2007 (the “Original Agreement”);

 

WHEREAS, the Original Agreement was amended and restated by the Second Amended and Restated Limited Liability Company Agreement dated as of July 21, 2010 (the “Second Agreement”); and further amended by the Third Amended and Restated Limited Liability Company Agreement dated as of April 1, 2011 (the “Third Agreement”) and the Fourth Amended and Restated Limited Liability Company Agreement dated as of April 13, 2012 (the “Fourth Agreement”);

 

WHEREAS, the Members wish to amend and restate the Fourth Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Members hereby continue the Company without dissolution, amend and restate the Fourth Agreement in its entirety, effective as of 11:59 p.m. on the date hereof, and agree as follows:

 

ARTICLE I.

 

FORMATION

 

Section 1.1.                                       Continuation.  The Members hereby agree to continue the Company as a limited liability company under and pursuant to the terms of the Act and agree that the rights, duties and liabilities of the Members shall be as provided in the Act, except as otherwise provided in this Agreement.  The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.

 

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Section 1.2.                                       Company Name.  The name of the Company is “Acadian Asset Management LLC”.

 

Section 1.3.                                       The Certificate of Formation, Etc.  Each of the Certificate of Formation and the two Certificates of Correction thereto were executed, delivered and filed with the Secretary of State by an “authorized person” of the Company within the meaning of the Act, which execution, delivery and filing are hereby authorized, ratified and approved in all respects.  The Board is hereby authorized to execute, file and record, and to authorize any person to execute, file and record, all such other certificates and documents, including amendments to the Certificate of Formation, and to do such other acts as may be appropriate to comply with all requirements for the formation, continuation and operation of a limited liability company, the ownership of property, and the conduct of business under the Laws of the State of Delaware and any other jurisdiction in which the Company may own property or conduct business.

 

Section 1.4.                                       Purpose.  The purposes of the Company are (a) to provide asset management services to clients and (b) to engage in any other lawful activities for which limited liability companies may be organized under the Act.

 

Section 1.5.                                       Powers.  Subject to the other provisions of this Agreement, the Company shall be and hereby is authorized and empowered to do or cause to be done any and all acts determined by the Board and the Committees to be necessary, advisable, convenient or incidental in furtherance of the purposes of the Company, without any further act, approval or vote of any Person, including any Member.  Accordingly, the Company is vested with the power (i) to sue and be sued in its own name, (ii) to contract and be contracted with by its own name, and (iii) to acquire and hold real property and personal property for the purposes for which the Company is established and to dispose of the real property or personal property at its pleasure.

 

Section 1.6.                                       Office; Registered Office.  The Company shall have its principal place of business at 260 Franklin Street, Boston, Massachusetts 02110.  The Company may maintain such other office or offices at such location or locations within or without the State of Delaware in the United States as the Board may from time to time select.  The Board shall give prompt written notice of any change in its principal place of business to the Members.  The address of the registered office of the Company in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Delaware 19808.

 

Section 1.7.                                       Registered Agent.  The name and address of the registered agent of the Company for service of process on the Company in the State of Delaware is Corporation Service Company, 2711 Centerville Road, Suite 400, Delaware 19808.

 

Section 1.8.                                       Members and Membership Interests.  Each Member shall have the Percentage Class A Interests and Percentage Class B Interests as set forth on in

 

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the books and records of the Company, entitling such Member to economic and other rights set forth in this Agreement.

 

(a)                                 Class A Interests.  Members who hold Class A Interests shall have an income preference and a liquidation preference as set forth in Sections 3.1(e)(ii) and 3.1(f)(i), respectively.  Except as otherwise required by the Act, holders of Class A Interests are entitled to vote or consent on all matters in which action is or may be taken by the Members of the Company, in proportion to their Percentage Class A Interests.

 

(b)                                 Class B Interests.  Except as otherwise provided in the Certificate of Formation or this Agreement, Class B Interests shall have no voting or consent rights for any matter in which action is or may be taken by the Members of the Company.

 

ARTICLE II.

 

CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

 

Section 2.1.                                       Initial Capital Contributions.  OMAM made an initial Capital Contribution to the Company on December 31, 2007 of $1,250,000,000, plus (a) the amount of Segregated Client Mandated Capital as of such date ($32,000,000) and (b) the Excess Working Capital Amount.

 

Section 2.2.                                       Additional Capital Contributions.  In the sole discretion of the Board, the Board may offer the Members the opportunity to make additional Capital Contributions to the Company in proportion to their respective Percentage Class B Interest, such offer to be made at least thirty (30) days prior to the date on which such offer must be accepted or rejected and at least forty-five (45) days prior to the date on which such additional Capital Contribution is due.  To the extent that either OMAM or the KELP makes an additional Capital Contribution in excess of its pro rata share, such excess amount (a “Non Pro Rata Additional Capital Contribution”) shall be added to such Member’s ACC Balance.  Any additional Capital Contributions made by any Member shall be properly reflected on the books and records of the Company.  Non Pro Rata Additional Capital Contributions shall be repaid in accordance with Section 3.1(f)(iii).

 

Section 2.3.                                       Capital Accounts.

 

(a)                                 In accordance with Treasury Regulations Section 1.704-1(b)(2)(iv), a separate capital account (a “Capital Account”) shall be established and maintained for each Member.  The initial Capital Account balance of OMAM on December 31, 2007 was the sum of the Initial OMAM Capital Account Amount, plus (a) the Segregated Client Mandated Capital as of such date ($32,000,000), and (b) the Excess Working Capital Amount; and the initial Capital Account balance of the KELP on December 31, 2007 was $0.  As of the date hereof, the Excess Working Capital Amount has been paid to OMAM.

 

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(b)                                 As of the close of business of each Accounting Period, each Member’s Capital Account (i) shall be increased by (A) the amount of Capital Contributions made by such Member during such Accounting Period, (B) the cumulative amount of Net Profit (and items of income and gain) allocated to such Member pursuant to this Agreement and (C) the amount of any liabilities of the Company that have been assumed by such Member or that are secured by any Company property distributed to such Member and (ii) shall be decreased by (x) the cumulative amount of Net Loss (and items of deduction and loss) allocated to such Member pursuant to this Agreement, (y) the amount of any cash and the Asset Value of any Company asset distributed to such Member during such Accounting Period, and (z) the amount of any liabilities of such Member that are assumed by the Company or that are secured by any property contributed by such Member to the Company.

 

(c)                                  Each Member’s Capital Account shall be increased or decreased by items of net income and net loss allocated to such Member pursuant to Section 4.3.

 

(d)                                 Each Member’s Capital Account shall be adjusted for other increases and decreases that are required to be made to Capital Accounts pursuant to Section 704(b) of the Code and Treasury Regulation Section 1.704-1(b)(2)(iv).

 

(e)                                  It is the intention of the Members that the Capital Accounts of the Company be maintained in accordance with the provisions of Section 704(b) of the Code and the Regulations thereunder, and that this Agreement be interpreted consistently therewith, so that the allocations of items of income, gain, loss, deduction and credit provided herein will be given effect for federal income tax purposes.

 

Section 2.4.                                       Withdrawals or Loans.

 

(a) A Member shall not be entitled to withdraw any part of such Member’s Capital Account or to receive any distributions from the Company except as provided in Articles IV and X, provided that OMAM shall be entitled to withdraw at any time any Segregated Client Mandated Amount then held by the Company with the consent of both the Board of Managers and the Executive Committee; nor shall a Member be entitled to make any loan or Capital Contribution to the Company other than as expressly provided herein or as otherwise agreed by the Board.  No loan made to the Company by any Member shall constitute a Capital Contribution to the Company for any purpose.

 

(b)                                 Subject to the obligations of the Company to make distributions strictly in accordance with Article III, OMAM shall have the right to borrow cash from the Company for a period not to exceed 120 days, at an interest rate that is no less than Old Mutual’s then-current short term borrowing rate, pursuant to a revolving credit loan agreement in a form agreed upon by OMAM and the Company, provided that (i) the aggregate amount that may be borrowed at any time shall not exceed OMAM’s share of the Company’s undistributed earnings for the four-month period ending on the last day of the calendar month preceding the month in which the borrowing occurs and (ii) in the

 

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event that the Company, as determined by the Board, shall require the use of any cash borrowed by OMAM, the Company shall request in writing that OMAM repay such borrowed amount and OMAM shall repay such borrowed amount within seven (7) Business Days of receipt of such request, subject to satisfaction of any United Kingdom regulatory requirements and/or Financial Services Authority approval that may be necessary.

 

(c)                                  OMAM, as the lender, in its sole discretion may loan the Company, as the borrower, pursuant to a revolving credit loan agreement in a form provided by OMAM, such amounts as may from time to time be requested by the Board of Managers and approved by OMAM, in OMAM’s sole and absolute discretion, for such purposes as may be mutually agreed by OMAM and the Company, at the interest rate referenced in Section 2.4(b) and on such other terms as determined by OMAM in its sole discretion.

 

(d)                                 The Company has no obligation to enter into any loan agreement with any Member other than as provided in this Section 2.4.  The Company may enter into loan agreements with OMAM as provided in this Section 2.4 without the consent of any Manager or Member other than OMAM.

 

Section 2.5.                                       Negative Capital Accounts.  No Member shall be required to make up a negative balance in such Member’s Capital Account.

 

Section 2.6.                                       No Interest.  Except as provided herein, no Member shall be entitled to receive any interest on any Capital Account balance, including, without limitation, any Capital Contribution by such Member.

 

ARTICLE III.

 

DISTRIBUTIONS

 

Section 3.1.                                       Distributions.  Subject to Article X, which shall govern distributions upon the dissolution of the Company, and Sections 3.2, 3.3 and 3.4, beginning on January 1, 2008, distributions of cash and any other property shall be made at such times and in such amounts as the Distribution Committee shall determine within forty-five (45) days following the end of each calendar quarter, following consultation with the Board and in accordance with Section 6.2(c), provided that, subject to Section 3.4:

 

(a)                                 The distributions with respect to a calendar quarter shall be made promptly, and in any event within ten (10) Business Days, following the time of determination by the Distribution Committee;

 

(b)                                 The aggregate amount distributed pursuant to this Section 3.1 in respect of the first, second and third calendar quarters shall be equal to (or, with the

 

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approval of the Board of Managers, equal to an amount in excess of) 75% of Distributable Income during such quarter;

 

(c)                                  The aggregate amount distributed pursuant to this Section 3.1 in respect of the fourth calendar quarter of a calendar year shall be no less than the excess of (i) 100% of Distributable Income during the first, second, third and fourth quarters of such year over (ii) the sum of the aggregate distributions pursuant to this Section 3.1 in respect of the first, second and third calendar quarters of such year;

 

(d)                                 In addition to the amounts distributable pursuant to Section 3.1(b) and (c), in the event that the amount distributable pursuant to this Section 3.1 for a previous quarter was reduced as a result of Section 3.4 (due to, for example, the need to satisfy the Working Capital Requirements), and, at the time of a quarterly distribution, the Distribution Committee determines that the Company has sufficient cash with which to make an additional distribution, then the amount to be distributed in respect of such quarter shall be increased by an amount determined by the Distribution Committee not to exceed the cumulative amount previously withheld from distribution;

 

(e)                                  Subject to Sections 3.1(a) through (d), Section 3.1(f) and Section 3.5, the aggregate amount distributed in respect of any calendar quarter shall be distributed to the Members as follows:

 

(i)                                                                                     First, to the Members, in proportion to and to the extent of their current and accrued but unpaid ACC Income Preference Amount;

 

(ii)                                                                                  Second, to OMAM until it has received, pursuant to this Section 3.1(e)(ii), (A) the Class A Quarterly Income Preference with respect to each calendar quarter ending on March 31, June 30 or September 30 and (B) with respect to a calendar quarter ending on December 31 of any calendar year, the excess of the Class A Annual Income Preference over the aggregate amount previously distributed to OMAM pursuant to Section 3.1(e)(ii)(A) in respect of such calendar year; and

 

(iii)                                                                               Thereafter, with respect to such quarter, one hundred percent (100%) to the Members in proportion to their respective Percentage Class B Interest.

 

In the event that the cumulative distribution to OMAM pursuant to Section 3.1(e)(ii) in any calendar year is less than the Class A Annual Income Preference for such year, the KELP shall promptly return to the Company for distribution to OMAM, no later than fifteen Business Days following the KELP’s receipt of its final distribution in respect of such year, an amount (the “Restoration Amount”) equal to the lesser of (A) the amount of such shortfall and (B) the cumulative amount distributed to the KELP in respect of such calendar year pursuant to Section 3.1(e)(iii).  In the event the KELP fails timely to return

 

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the Restoration Amount, all amounts that the Company would otherwise distribute to the KELP under this Agreement shall be distributed to OMAM until OMAM has received an aggregate amount of distributions under this sentence equal to the Restoration Amount; in addition, the KELP Partners shall be severally liable to OMAM for the Restoration Amount, with each KELP Partner’s liability being in proportion to, and to the extent of their shares of, distributions received by them from the KELP.  OMAM may enforce its rights against the KELP Partners in its sole discretion, without regard to its right to receive distributions otherwise payable to the KELP.  However, OMAM’s aggregate recovery under this paragraph shall not exceed the Restoration Amount.

 

(f)                                   Distributions of Sales Proceeds on the Occurrence of a Liquidity Event.  Subject to Article X, which shall govern distributions upon the dissolution of the Company and Section 8.3(c), upon the occurrence of a Liquidity Event (x) that, for U.S. federal income tax purposes, is treated as a sale by the Company of its assets or (y) that is treated as a sale by the Members of their Interests, the Company shall distribute the proceeds of any such sale or, in the case of sale of Interests, the Board of Managers shall cause the proceeds of any such sale to be distributed, as applicable, to the Members as follows:

 

(i)                                                                                     First, to OMAM until OMAM has received pursuant to this Section 3.1(f)(i) an amount equal to the Initial OMAM Capital Account Amount, provided that (A) such amount shall be reduced by the amount of any Excess Class A Income Preference distributed to OMAM under Section 3.1(e)(ii) for the calendar year in which the Liquidity Event occurred, (B) such amount shall be increased by the amount of any Segregated Client Mandated Amount then held by the Company, and (C) such amount shall be increased by the amount of any Excess Working Capital Amount to the extent collected or realized and not withdrawn by OMAM pursuant to Section 2.4(a);

 

(ii)                                                                                  Second, to the KELP in an amount equal to $116 million;

 

(iii)                                                                               Third, to each Member that has made a Non Pro Rata Additional Capital Contribution until such Member has received pursuant to this Section 3.1(f)(iii) an amount equal to the sum of its Unreturned Non Pro Rata Additional Capital Contributions and its Unpaid ACC Income Preference Amount (in proportion to the ratios determined by dividing the amount of such Unreturned Non Pro Rata Additional Capital Contribution and Unpaid ACC Income Preference Amount for such Member by the aggregate of such amounts with respect to all Members); and

 

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(iv)                                                                              Thereafter, to the Members in proportion with their respective Percentage Class B Interest.

 

Notwithstanding anything to the contrary contained in the Agreement, from and after the occurrence of such a Liquidity Event, until such proceeds are distributed in full to the Members, the Company shall not make any distributions to any Person other than in accordance with this Section 3.1(f).  For the avoidance of doubt, if the Company sells assets or equity in one period in connection with a Liquidity Event, then sells the remainder of its assets or equity in connection with such Liquidity Event in a later period, the proceeds from the initial sale shall be distributed pursuant to Section 3.1(f) and the amounts thus distributed shall be credited against amounts otherwise distributable pursuant to Section 3.1(f)(i)-(iv) in connection with such Liquidity Event.

 

Section 3.2.                                       Tax Distributions.  Notwithstanding Section 3.1 but subject to Sections 3.3 and 3.4(a), the Company shall make distributions to the Members in amounts intended to enable the Members (or any Person whose tax liability is determined by reference to the income of a Member) to discharge their United States federal, state and local income tax liabilities arising from the allocations made pursuant to Section 4.1.  The amount distributable pursuant to this Section 3.2 shall be determined by the Distribution Committee in good faith, based on the Assumed Income Tax Rate and the amounts allocated to the Members, and otherwise based on such assumptions as the Distribution Committee determines to be appropriate.  To the extent that a Member previously has received a distribution pursuant to Section 3.1 during any taxable year, such distribution shall (without duplication) reduce the amount, if any, otherwise distributable to such Member pursuant to this Section 3.2 in respect of such taxable year.  The amount distributable to any Member pursuant to Section 3.1 shall be reduced by the amount distributed to such Member pursuant to this Section 3.2.

 

Section 3.3.                                       Withholding; Tax Indemnification.  The Distribution Committee is authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to any federal, state, local or other governmental authority any amounts required to be so withheld pursuant to the Code or other applicable provisions of any federal, state or local Law.  All amounts withheld pursuant to the Code or any provision of any state or local tax with respect to any payment, distribution or allocation to the Company or its Members shall be treated as amounts distributed to the Members pursuant to this Article III for all purposes under this Agreement.   Each Member shall indemnify and hold harmless the Company for all taxes (including interest, penalties and additions to tax) relating to amounts received by such Member from the Company that were required to have been withheld by the Company under applicable Law.

 

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Section 3.4.                                       Overriding Provision.

 

(a)                                 Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to any Member if such distribution would violate Section 18-607 of the Act or other applicable Law.

 

(b)                                 Notwithstanding any provision to the contrary contained in this Agreement other than Section 3.2, the Company shall not make any distribution to any Member if, as determined the Distribution Committee, in the good faith exercise of its business judgment, the amount of cash remaining at the Company following such distribution or withdrawal would not be sufficient to satisfy Working Capital Requirements, regulatory requirements or payments by the Company in connection with puts, calls or redemptions pursuant to Section 8.3.

 

Section 3.5.                                       Special Distributions to OMAM.  Upon a determination by the Remuneration Committee to pay a portion of compensation to any employee of the Company with publicly-traded shares of Old Mutual (“Compensatory Property”), the Company will distribute to OMAM at vesting an amount equal to the value, as of the time of the vesting of such employee’s shares, of such Compensatory Property, as determined by OMAM and the Executive Committee.  For purposes of this Section 3.5, publicly-traded shares of Old Mutual issued pursuant to the Old Mutual Restricted Share Plan shall constitute Compensatory Property.

 

ARTICLE IV.

 

ALLOCATIONS

 

Section 4.1.                                       Allocations of Net Profit and Net Loss.

 

(a)                                 Net Loss.  After giving effect to the special allocations under Sections 4.2, 4.3 and 4.4, Net Loss shall be allocated among the Members in the following order and priority:

 

(i)                                                                                     Chargeback of Undistributed Residual Allocations.  First, to each Member until the excess of (i) the aggregate amount of Profits allocated to such Member pursuant to Section 4.1(b)(iv) for all taxable years over (ii) the sum of (A) the aggregate amount of distributions made to such Member pursuant to 3.1(e)(iii) for all taxable years plus (B) the aggregate amount of Losses allocated to such Member pursuant to this Section 4.1(a)(i) for all taxable years equals zero (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Members);

 

(ii)                                                                                  Loss of Unreturned Additional Capital Contributions.  Second, to each Member that has made a Non Pro Rata

 

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Capital Contribution until the excess of (i) the aggregate amount of Losses allocated to such Member pursuant to this Section 4.1(a)(ii) for all taxable years over (ii) the aggregate amount of Profits allocated to such Member pursuant to Section 4.1(b)(iii) for all taxable years equals the amount of such Member’s Unreturned Non Pro Rata Additional Capital Contributions (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Members);

 

(iii)                                                                               Loss of Undistributed Class A Income Preference.  Third, for taxable years 2008 through 2010 to OMAM until the excess of (i) the aggregate amount of Profits allocated to OMAM pursuant to Section 4.1(b)(ii) for such taxable years over (ii) the sum of (A) the aggregate amount of distributions made to OMAM pursuant to 3.1(e)(ii) for such taxable years plus (B) the aggregate amount of Losses allocated to such OMAM pursuant to this Section 4.1(a)(iii) for such taxable years equals zero;

 

(iv)                                                                              Chargeback of Unpaid ACC Income Preference Amount.  Fourth, to each Member that has made a Non Pro Rata Additional Capital Contribution until the excess of (i) the aggregate amount of Profits allocated to such Member pursuant to Section 4.1(b)(i) for all taxable years over (ii) the sum of (A) the aggregate amount of distributions made to such Member pursuant to Section 3.1(e)(i) for all taxable years plus (B) the aggregate amount of Losses allocated to such Member pursuant to this Section 4.1(a)(iv) for all taxable years equals zero (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Members); and

 

(v)                                                                                 Residual Loss Allocations.  Fifth, to the Members in proportion to their positive Capital Account balances until such balances are reduced to zero and thereafter in proportion to their Percentage Class B Interest.

 

(b)                                               Net Profit.  After giving effect to the special allocations under Sections 4.2, 4.3 and 4.4, Net Profit shall be allocated among the Members in the following order and priority:

 

(i)                                                                                     Allocation of ACC Income Preference.  First, to each Member that has made a Non Pro Rata Additional Capital Contribution until the excess of (i) the aggregate amount of Profits allocated to such Member pursuant to this Section 4.1(b)(i) for all taxable years over (ii) the aggregate amount of Losses allocated to such Member pursuant to Section 4.1(a)(iv) hereof for all taxable years is equal to such Member’s ACC 

 

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Income Preference Amount (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Members);

 

(ii)                                                                                  Allocation of Class A Income Preference.  Second, for taxable years 2008 through 2010, to OMAM until the excess of (i) the aggregate amount of Profits allocated to OMAM pursuant to this Section 4.1(b)(ii) for such taxable years over (ii) the aggregate amount of Losses allocated to OMAM pursuant to Section 4.1(a)(iii) hereof for such taxable years is equal to the aggregate amount of the distributions made to OMAM pursuant to Section 3.1(e)(ii) for such taxable years;

 

(iii)                                                                               Chargeback of Loss of Unreturned Additional Capital Contributions.  Third, to each Member that has made a Non Pro Rata Additional Capital Contribution until the excess of (i) the aggregate amount of Losses allocated to such Member pursuant to Section 4.1(a)(ii) for all taxable years over (ii) the aggregate amount of Profits allocated to such Member pursuant to this Section 4.1(b)(iii) for all taxable years equals zero (in proportion to the ratios determined by dividing the amount of such excess by the aggregate amount of such excesses with respect to all Members); and

 

(iv)                                                                              Residual Profit Allocations.  Thereafter, to the Members in proportion to their respective Distributable Income Percentage.

 

Section 4.2.                                       Allocations of Book Income and Loss.  In connection with adjustments of Asset Value, solely for book purposes, net income (or items thereof) and net loss (or items thereof) shall be allocated to the Members in such amounts and in such proportions as will cause the Capital Account of each Member as of immediately before any Liquidity Event to be equal to the amount required to be distributed to each such Member pursuant to Section 3.1(f).

 

Section 4.3.                                       Regulatory and Special Allocations.  The following special allocations shall be made in the following order and prior to any allocations of Net Profit or Net Loss pursuant to Section 4.1:

 

(a)                                 Minimum Gain Chargeback.  Notwithstanding any other provision of this Article IV and except as otherwise provided in Treasury Regulation Section 1.704-2(f), if there is a net decrease in “partnership minimum gain” (within the meaning of Treasury Regulations Section 1.704-2(b)(2) and 1.704-2(d)) during any Accounting Period of the Company, each Member shall be specially allocated items of Company income and gain for such Accounting Period (and, if necessary, subsequent Accounting Periods) in an amount equal to such Member’s share of the net decrease in partnership minimum gain, as determined under Treasury Regulations Section 1.704-2(g).  

 

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Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.  The items to be so allocated shall be determined in accordance with Treasury Regulation Sections 1.704-2(f) and (j).  This Section 4.3(a) is intended to comply with the minimum gain chargeback requirement in such Treasury Regulation Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(b)                                 Partner Minimum Gain Chargeback.   Notwithstanding any other provision of this Article IV, if there is a net decrease in “partner nonrecourse debt minimum gain (within the meaning of Treasury Regulations Section 1.704-2(i)) attributable to a “partner nonrecourse debt” (within the meaning of Treasury Regulations Section 1.704-2(b)(4)), then, each Member who has a share of the partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt, determined in accordance with Treasury Regulation Section 1.704-2(i), shall be specially allocated items of Company income and gain for such Accounting Period (and, if necessary, subsequent Accounting Periods) in an amount equal to such Member’s share of the net decrease in partner nonrecourse debt minimum gain attributable to such partner nonrecourse debt, determined in accordance with Treasury Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto.  The items to be allocated shall be determined in accordance with Treasury Regulations Sections 1.704-2(i)(4) and (j)(2).  This Section 4.3(b) is intended to comply with the partner minimum gain chargeback requirement in Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(c)                                  Qualified Income Offset.  In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, any deficit balance in such Member’s Capital Account (after giving effect to the adjustments set forth in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)) (an “adjusted capital account deficit”) as quickly as possible, provided that an allocation pursuant to this Section 4.3(c) shall be made only if and to the extent that such Member would have an adjusted capital account deficit after all other allocations provided for in this Section 4.3 have been tentatively made as if this Section 4.3(c) were not in the Agreement.

 

(d)                                 Nonrecourse Deductions.  Any “nonrecourse deductions” (within the meaning of Treasury Regulations Section 1.704-2(b)) for any Accounting Period shall be specially allocated among the Members in proportion to their respective Percentage Class B Interest.

 

(e)                                  Partner Nonrecourse Deductions.  Any “partner nonrecourse deductions” (within the meaning of Treasury Regulations Section 1.704-2(i)) for any 

 

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Accounting Period of the Company shall be allocated to the Member who bears the economic risk of loss with respect to the “partner nonrecourse debt” to which such partner nonrecourse deductions are attributable, in accordance with Treasury Regulation Section 1.704-2(i)(1).

 

(f)                                   Section 754 Adjustment.  To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Section 743(b) is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of such Member’s interest in the Company, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event that Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distribution was made in the event that Treasury Regulation Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

(g)                                  Curative Allocations.  Any special allocations of items of income,  gain, loss or deduction pursuant to this Section 4.3 shall be taken into account in computing subsequent allocations pursuant to this Agreement, so that the net amount of any item so allocated and all other items allocated to each Member pursuant to this Agreement shall be equal, to the extent possible, to the net amount that would have been allocated to each Member pursuant to the provisions of this Agreement if such special allocations had not occurred.

 

(h)                                 Special Allocation to OMAM.  There shall be specially allocated to OMAM the amount of any item deductible for federal tax purposes attributable to (i) the operation of the stock appreciation rights program, voluntary deferral plan, long-term incentive program or short-term incentive program of Acadian Asset Management, Inc., through and including the date of such corporation’s merger with and into the Company; or (ii) any severance, termination or similar payment that OM(US)H is required to make to any employee or consultant of the Company pursuant to any employment or consulting agreement to which the Company is a party.

 

Section 4.4.                                       Tax Allocations; Sections 704(c).

 

(a)                                 Except as otherwise provided for in this Section 4.4, each item of income, gain, loss deduction and credit shall be allocated among the Members in the same manner for U.S. federal income tax purposes as the correlative item of book income, gain, loss, deduction and credit is allocated pursuant to this Article IV.

 

(b)                                 In addition, in accordance with Section 704(c) of the Code and the Treasury Regulations thereunder, items of income, gain, loss, deduction and credit with respect to property contributed to the Company shall, solely for U.S. federal income tax 

 

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purposes, be allocated so as to take account of any variation between the adjusted tax basis of property at the time of contribution to the Company for U.S. federal income tax purposes and its initial Asset Value at the time of contribution using an allocation method permitted by the Treasury Regulations as determined by the tax matters partner.

 

(c)                                  In the event that the Asset Value of any company asset is adjusted in accordance with this Agreement, subsequent allocations of items of income, gain, loss, deductions and credits with respect to such asset shall take account of any variation between the adjusted tax basis of such asset for U.S. federal income tax purposes and its adjusted Asset Value in a manner consistent with the principles of Section 704(c) and the Treasury Regulations promulgated thereunder.

 

(d)                                 Allocations pursuant to this Section 4.4 are solely for purposes of U.S. federal, state and local income taxes, and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Profit, Net Loss or other items of income, gain, loss, deduction or credit, or distributions, pursuant to any provision of this Agreement.

 

Section 4.5.                                       Advances on Member’s Distributive Shares of Net Profit.  The Company shall be authorized to make advances or drawings against a Member’s distributive share of Net Profit in accordance with Treasury Regulation Section 1.731-1(a)(ii).

 

Section 4.6.                                       Transfer or Assignment.  In the case of a transfer, assignment or issuance of an Interest, or purposes of determining the Net Profit, Net Loss book income, book loss or other items allocable to any Accounting Period, Net Profit, Net Loss, book income, book loss and such other items shall be determined on a daily, monthly or other basis as determined by the tax matters partner, subject to the approval of the Executive Committee, such approval not to be unreasonably withheld or delayed, using any permissible method under Section 706 of the Code and the Treasury Regulations thereunder.

 

ARTICLE V.

 

MEMBERS

 

Section 5.1.                                       Limited Liability.  Except as otherwise provided by the Act or herein, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a member or manager of the Company.  No Member shall be required to lend any funds to the Company.  The liability of each Member for the debts, obligations and liabilities of the Company shall be limited to its 

 

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Capital Contributions theretofore made to the Company by such Member (or its predecessor in interest) that have not been previously repaid to or withdrawn by such Member (or its predecessor in interest) in accordance with the terms of this Agreement.

 

Section 5.2.                                       Certificates.  Ownership of Interests will be evidenced by certificates.  The books reflecting the issuance of any certificates shall be kept by the Company.  The certificates shall be consecutively numbered and shall be entered in the books of the Company as they are issued and shall exhibit the holder’s name and the percentage ownership represented by the Interests.  The certificates shall carry a legend noting the restrictions on the transfer or assignment of the Interests and any other matters as shall be determined by the Company in accordance with the Securities Act of 1933, as amended (the “Securities Act”), or any other federal or state securities or blue sky Laws.  The Company may determine the conditions upon which a new certificate may be issued in place of a certificate which is alleged to have been lost, stolen or destroyed and may, in its discretion, require the owner of such certificate or its legal representative to give bond, with sufficient surety, to indemnify the Company and any transfer agent and registrar against any and all loss or claims which may arise by reason of the issuance of a new certificate in the place of the one lost, stolen, or destroyed.

 

ARTICLE VI.

 

BOARD; COMMITTEES; OFFICERS; ACTIONS
 REQUIRING CONSENT OF BOARD

 

Section 6.1.                                       Board.

 

(a)                                 Power and Authority.  Except as set forth in this Article VI and the other provisions of this Agreement or as otherwise required by the Act or other applicable Law, the management, control and operation of and the determination of policy with respect to the Company and its management and other activities shall be vested in a Board of Managers (the “Board” or the “Board of Managers”) (acting directly or through its duly appointed agents), which is hereby authorized and empowered on behalf and in the name of the Company and in its own name, if necessary or appropriate, but subject to the other provisions of this Agreement, to carry out any and all of the purposes of the Company and to perform all acts and enter into and perform all contracts and other undertakings that it may deem necessary, advisable, convenient or incidental thereto.  The Board of Managers shall be comprised of not more than thirteen (13) members (each, a “Manager”), of whom not more than nine (9) Managers shall be voting Managers.  No Person who is a Member may also serve as a Manager.  Any Manager may resign from the Board upon prior written notice to the Board.

 

(b)                                 OMAM Managers.  No more than five (5) Managers (the “OMAM Managers”) shall be appointed, and may be removed for any reason or for no reason, by 

 

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OMAM in its sole discretion.  All OMAM Managers are voting Managers.  Any vacancy created by the removal or resignation of an OMAM Manager shall be filled only by OMAM.  Each OMAM Manager shall be entitled to vote on any matter properly brought before the Board.

 

(c)                                  KELP Voting Managers; KELP Advisory Managers.  (i)  Four (4) officers of the Company (the “KELP Voting Managers”) shall be appointed as Managers in accordance with procedures as set forth in this Section 6.1(c)(i). The KELP Voting Managers shall consist of the individuals holding the following titles at the Company: Chief Executive Officer, Chief Investment Officer, Head of Global Marketing & Client Service and Chief Operating Officer.   At such time that a KELP Voting Manager shall cease to be an employee of the Company or shall cease to hold the relevant title with the Company for any reason, such KELP Voting Manager shall automatically cease to be a KELP Voting Manager without any further action required to be taken.  A KELP Voting Manager may not be removed by any Member except as set forth herein.  Any vacancy created by the resignation or automatic removal of a KELP Voting Manager shall be filled with the officer appointed to hold the relevant title with the Company, provided, however that, the Chief Executive Officer of the Company (or, in the event there is no Chief Executive Officer, a majority of the remaining KELP Voting Managers) may appoint a KELP Partner to be an interim KELP Voting Manager until the relevant position with the Company is filled by the Board. Any interim KELP Voting Manager shall have the same rights as the other KELP Voting Managers; provided, however, that such interim KELP Voting Manager shall be replaced as a KELP Voting Manager immediately upon the appointment of an officer to the relevant title with the Company.  Each KELP Voting Manager shall be entitled to vote on any matter properly brought before the Board.

 

(ii)                                                                                  No more than four (4) natural persons who are employees of the Company (and are not consultants to the Company) (the “KELP Advisory Managers”) shall be appointed in accordance with procedures set forth in this Section 6.1(c)(ii).  At such time that a KELP Advisory Manager shall cease to be an employee of the Company for any reason, such KELP Advisory Manager shall automatically cease to be a KELP Advisory Manager without any further action required to be taken.  A KELP Advisory Manager may be removed at any time, for any reason or for no reason, by the KELP in its sole discretion.  No KELP Advisory Managers shall be entitled to vote on any matter brought before the Board.  Each KELP Advisory Manager shall serve until such KELP Advisory Manager resigns, is automatically removed or is removed by the KELP.  Any vacancy created by the removal, resignation or automatic removal of a KELP Advisory Manager shall be filled by a Majority in Interest of the KELP Partners, provided that each KELP Advisory Manager shall hold a position with the Company of Senior Vice President (or any position senior to a Senior Vice President).  The names of the current KELP Advisory 

 

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Members shall be kept with the records of the Company and shall be provided to OM(US) upon request.

 

(d)                                 Approval Requirements.  Subject to Section 6.7 hereof, the Board shall take actions with the approval of a majority of the voting Managers (that is, with the approval of at least five (5) voting Managers), in person or by proxy, (the “Consent of the Board of Managers”), provided that until December 31, 2022 (except as provided otherwise in this Section 6.1(d)), the Board may only take action with the approval of at least seven (7) out of nine (9) voting Managers with respect to:

 

(i)                                                                                     The admission of a Member;

 

(ii)                                                                                  Any material reduction in benefits or base salaries provided to employees of the Company;

 

(iii)                                                                               Any change to the Bonus Plan;

 

(iv)                                                                              Any determination that the FMV Multiple shall be less than six (6) (which determination shall always require approval of at least seven (7) of nine (9) voting Managers and shall not be subject to the fifteen (15) year limitation set forth above in this Section 6.1(d));

 

(v)                                                                                 Any material change to the policies implemented prior to and on December 31, 2007 with respect to allocations of “overhead” or other parent company expenses to the Company and its predecessor, provided that such change is not done for the principal purpose of diminishing the value of the Class B Interest in the Company held by the KELP, in which case such material change shall not be permitted at any time or with any approval;

 

(vi)                                                                              Any material change to the policies or method of calculating pre-bonus, pre-tax profits of the Company;

 

(vii)                                                                           Any acquisition by the Company of another business, or any merger or business combination of another business into the Company;

 

(viii)                                                                        The right of setoff set forth in Section 8.3(a);

 

(ix)                                                                              The appointment of a Chairman who is not a KELP Voting Manager; and

 

(x)                                                                                 The determinations of the Board of Managers with respect to the denial of indemnification set forth in Sections 7.1(a) and 7.1(b).

 

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(e)                                  Actions of the Board.  All decisions or actions of the Board shall be consistent with the then-current Approved Budget, provided that the Board and/or the Company may exceed budgeted expenses in respect of all or any portion of a calendar year ending on March 31, June 30, September 30 or December 31 so long as the Company is reasonably expected to achieve the profit forecast in respect of such period.  The Board shall review revised financial forecasts at all quarterly meetings and shall modify the then-current Approved Budget as appropriate based on such financial forecasts.  The Members agree that the Company and the Board of Managers shall be subject to and operate pursuant to the current Old Mutual Scheme of Authority as applied to the Company on September 1, 2013 (a copy of which is attached hereto as Attachment 1) (the “Scheme of Authority”) to the extent the Scheme of Authority does not conflict with the provisions of this Agreement.  The Members acknowledge and agree that OMAM or OM(US)H may from time to time amend or modify the Scheme of Authority, in the sole discretion of OMAM or OM(US)H, provided that such amended Scheme of Authority shall only apply to the Company to the extent the amended or modified provisions are (i) not inconsistent with the provisions of this Agreement or (ii) necessary to comply with changes in the law and regulation applicable to the Company.  OMAM or OM(US)H shall provide any such amendment or modification to the Board of Managers.  The Board of Managers shall operate in accordance with the meeting procedures set forth in Section 6.3.

 

Section 6.2.                                       Committees.  The Company shall establish an executive committee (the “Executive Committee”), a remuneration committee (the “Remuneration Committee”) and a distribution committee (the “Distribution Committee”) and any other committee that is required under the Scheme of Authority (as the same may be amended in accordance with Section 6.1(e)) (collectively, the “Standing Committees”), in the manner and with such power and authority as is as set forth below in this Section 6.2.  The Board may also establish such other committees with such other powers and authority as the Board shall determine, provided that such delegation of authority shall not infringe on, or otherwise diminish, the power and authority of any Standing Committee.  The power and authority of any committee established by the Board of Managers under this Section 6.2 shall not exceed the power and authority possessed by the Board of Managers under this Agreement and shall be exercised subject to all separate consent rights of OMAM and OM(US)H and supermajority consent rights of the Board of Managers under this Agreement.  Such committees shall operate in accordance with the meeting procedures set forth in Section 6.3.

 

(a)                                 Executive Committee.  Each of the KELP Voting Managers and each the KELP Advisory Managers shall, together, constitute the Executive Committee.  Each member of the Executive Committee shall be a voting member of the Committee.  Subject to the Scheme of Authority (as the same may be amended in accordance with Section 6.1(e)) and Section 6.7 hereof, the Executive Committee shall have control over (i) the day-to-day operations of the business of the Company, subject to operating within the Approved Budget (as the same may be varied in accordance with Section 6.1(e)), such control to include the right and power, on behalf of the Company without any further 

 

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consent of the Members being required (A) to perform all normal business functions, and otherwise operate and manage the business and affairs of the Company in accordance with and as limited by this Agreement, (B) to employ and dismiss from employment any and all employees, agents, attorneys and consultants of the Company and (C) to enter into contracts and other agreements with respect to the provision of investment management services and the conduct of the Company’s business generally and (ii) the investment philosophy, investment processes and relationships with investment advisory clients of the Company.  For the avoidance of doubt, the Board of Managers also has the right and power to dismiss from employment any and all employees, agents, attorneys and consultants of the Company.

 

(b)                                 Remuneration Committee.

 

(i)                                                                                     The Remuneration Committee shall be comprised of:  (i) the Chief Executive Officer of the Company, (ii) three (3) KELP Voting Managers or KELP Advisory Managers who shall be appointed and may be removed, for any reason or no reason, by a majority vote of the KELP Voting Managers and the KELP Advisory Managers, provided that any such removal from or appointment to the Remuneration Committee shall be subject to approval by OMAM in its sole discretion, and (iii) one (1) OMAM Manager who shall be appointed and may be removed, for any reason or no reason, by OMAM in its sole discretion.  The Remuneration Committee shall meet at least twice a year during or prior to the time of each of the Trading Windows in such year.

 

(ii)                                                                                  The Remuneration Committee shall make all decisions with respect to the following matters:

 

(A) compensation of Company employees, including, without limitation,

 

(1) the allocation among Company employees of the bonus pool from the Bonus Plan;

 

(2) changes to base salaries or employee benefits and

 

(3) approval of the portion of bonuses of Company employees who do not hold Interests indirectly through the KELP;

 

(B) allocation of KELP interests offered by the KELP among Eligible Employees and offered by any Limited Partner to any Eligible Employee who is a consultant to the Company, for each Trading Window (including over multiple Trading Windows)

 

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consistent with the Succession Plan adopted by the Executive Committee;

 

(C) designation of Eligible Employees who may purchase KELP interests from the KELP or from any other Person for each Trading Window (including over multiple Trading Windows) consistent with the Succession Plan adopted by the Executive Committee and, consistent with the KELP Agreement, a prioritization of such Eligible Employees and Employed Limited Partners for each such Trading Window (for each such Trading Window, a “Priority Buyer List”);

 

(D) establishment and modification of the maximum ownership of KELP interests for each Eligible Employee based on the maximum Interests in the Company that may be held indirectly by each such Eligible Employee (it being agreed that the Remuneration Committee shall consider the Succession Plan in establishing and modifying such maximum ownership percentages and, in computing maximum ownership percentages, interests in the KELP that have been redeemed shall be deemed to be outstanding for purposes of maximum ownership limits so long as those interests are made available for reissuance during each subsequent Trading Window pursuant to Section 8.6 of the KELP Agreement or the Bonus Plan);

 

(E) waiver of any requirement of purchases or sales of KELP interests;

 

(F) re-offers of Interests to the extent set forth in Section 8.6 of the KELP Agreement;

 

(G) determinations to utilize the working capital of the Company to redeem or purchase Interests pursuant to Article VIII or to sell Interests and thereby augment working capital, pursuant to Section 8.4(d), in each case, after receipt of the recommendation made by the Executive Committee, and

 

(H) all matters for which the Remuneration Committee makes determinations or exercises discretion as provided in this Agreement, the KELP Agreement and any employment or consulting agreement between the Company and a KELP Partner.

 

(iii)                                                                               The chief executive officer of OM(US)H, in his or her capacity as chief executive officer of OM(US)H, shall have the right to veto, modify and reapportion any decision made by the Remuneration 

 

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Committee, provided that (A) the chief executive officer of OM(US)H shall not be permitted to exercise such veto to reject, modify or reapportion the proposed allocations from the Bonus Plan recommended by the Remuneration Committee with respect to any employee of the Company with total annual compensation in excess of $250,000 if such veto, modification or reapportionment would result in the allocation to such employee to be reduced by more than 33% from the allocation initially recommended by the Remuneration Committee provided, however, that should  the Remuneration Committee recommend that any such employee be allocated 15% or more of the total bonus pool from the Bonus Plan, the chief executive officer of OM(US)H shall maintain such right to veto, modify and reapportion the Remuneration Committee decision with respect to such employee and (B) the chief executive officer of OM(US)H shall not have the right to veto, modify or reapportion any bonus allocation approved by the Remuneration Committee with respect to any employee whose total annual compensation is equal to or less than $250,000.

 

(c)                                  Distribution Committee.  The Distribution Committee shall be comprised of:  (i) two (2) OMAM Managers who shall be appointed and may be removed, for any reason or no reason, by OMAM in its sole discretion, and (ii) one (1) member who shall be the Chief Executive Officer of the Company.  The Distribution Committee will determine the amount and timing of distributions by the Company subject to the terms of this Agreement and applicable Law and after consultation with the Board of Managers.  In its decisions, the Distribution Committee shall have regard to (i) the Distribution Policy of the Company, (ii) the Working Capital Requirements, (iii) regulatory requirements, (iv) expenditures contemplated by the Approved Budget and (v) payments by the Company in connection with puts, calls or redemptions pursuant to Section 8.3, provided that the Distribution Committee shall not have the authority to delay or withhold any distribution required by Section 3.2 hereof.

 

Section 6.3.                                       Procedures.

 

(a)                                 Except as otherwise provided by this Agreement, the Board and each Committee (i) shall approve matters by a majority of the voting Managers of the Board or such Committee, as the case may be, (ii) may act by approval granted either at a meeting of the Board or Committee, as applicable, or by a writing executed by a sufficient number of Managers or such Committee, as the case may be, to approve such action, and such writing is filed with the records of the Board or Committee, as applicable, and (iii) shall act in accordance with such other rules and procedures as may be approved by a majority of the voting Managers of the Board or such Committee, as applicable, consistent with the provisions of this Agreement.

 

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(b)                                 Any Board or Committee member may, by a writing, grant a proxy to any other member of the Board or such Committee, as the case may be, permitting such other member to vote in approval of any matter within the scope of such proxy.

 

(c)                                  The Board shall have a Chairman who shall serve in such capacity until such time as a successor is elected and qualified or until such Chairman’s earlier death, resignation or removal as Chairman.  The Board shall have the right to replace and appoint the Chairman from the members of the Board who shall be a KELP Voting Manager, except as set forth in Section 6.1(d).  The Chairman shall preside at all meetings of the Board at which he or she shall be present and shall perform such other duties and exercise such powers as may from time to time be prescribed by the Board (in the case of a Chairman who is  not a KELP Voting Member, to the extent not inconsistent with his status).  The Chairman shall also set the agenda for any meetings of the Board and shall have an opportunity to review any materials distributed to the Board in connection with meetings of the Board.

 

(d)                                 Regular meetings of the Board of Managers shall be held at such times and places within or without the State of Delaware fixed by resolution of the Board of Managers, and shall be held not less frequently than quarterly.  The Chief Executive Officer of the Company, the Chairman, a majority of the Managers or any OMAM Manager may convene a special meeting of the Board.

 

Notice of any special meeting of the Board or of any change in the time or place of a regularly scheduled meeting, which shall state the time and place of the meeting, shall be given to all Managers by U.S. mail, overnight delivery or facsimile (in each case with a copy provided by e-mail) or by e-mail, at least 48 hours (and in no event less than one (1) Business Day) before such meeting, addressed to such Manager at such Manager’s usual or last known business or residence mailing address, facsimile, or business e-mail address, as applicable, or by telephone or delivery in person, in each case with a copy provided by e-mail to such Manager at such Manager’s usual or last known business e-mail address, at least 24 hours before the meeting; provided that notice of a meeting need not be given to any Manager who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Manager.

 

A majority of the Managers present, whether or not a quorum is present, may adjourn any meeting to another time and place.  If the meeting is adjourned for more than twenty-four (24) hours, notice of any adjournment to another time or place shall be given prior to the time of the adjourned meeting to the Managers who were not present at the time of the adjournment.  Managers may participate in a meeting through use of conference telephone, video conference or similar communications equipment, so long as all Managers participating in such meeting can hear one another or by any other 

 

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means permitted by Law.  Participation in a meeting pursuant to this paragraph constitutes presence in person at such meeting.

 

(e)                                  Except as may be otherwise provided by Law or by this Agreement, at any meeting of the Board of Managers, a majority of the Managers then in office, present in person or by proxy, shall constitute a quorum, provided that, subject to Section 6.1(d) and Section 6.7, the Board shall take no action without the Consent of the Board of Managers.

 

(f)                                   No Manager shall be paid compensation or fees for such Manager’s services as Manager, but each Manager shall be reimbursed by the Company for such Manager’s reasonable expenses incurred in the performance of such Manager’s duties as Manager as the Board of Managers from time to time may determine by the Consent of the Board of Managers.  Nothing contained in this Section 6.3(f) shall be construed to preclude any Manager from serving the Company in any other capacity and receiving reasonable compensation therefor.

 

(g)                                  Each Committee shall meet where, when and as provided by such rules or by resolution of the Board of Managers, provided that the Remuneration Committee shall not meet before the fifteenth day following receipt by the chief executive officer of OM(US)H of compensation recommendations from Company management.  Except as the Board of Managers may otherwise determine, a majority of the voting members of the Committee then constituting the membership of any such committee shall constitute a quorum for the transaction of business and in the case of the Remuneration Committee, the OMAM Manager who is a member of the Remuneration Committee (or such member’s proxy) must participate in such meeting.

 

Section 6.4.                                       Officers.

 

(a)                                 Appointment and Term of Office.   Subject to Section 6.7 hereof, officers of the Company (“Officers”) shall be appointed from time to time by the Executive Committee in its sole discretion, and each such officer shall hold office until a successor is appointed or until such officer’s earlier death, resignation or removal in the manner hereinafter provided.  Each Officer shall have such authority and shall perform such duties as may be provided in this Agreement or as the Executive Committee may from time to time prescribe.  No such appointment by the Executive Committee by itself shall cause any member of such committee to cease to be a “manager” of the Company within the meaning of the Act or this Agreement or restrict the ability of such committee to exercise the powers so delegated.  The power and authority of any Officer appointed by the Executive Committee under this Section 6.4 shall not exceed the power and authority possessed by such committee under this Agreement and shall be exercised subject to all separate consent rights of OMAM and OM(US)H under this Agreement.  Unless the authority of the Officer designated as the officer in question is limited in the document appointing such Officer or is otherwise specified by the Executive Committee, any Officer 

 

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so appointed shall have the same authority to act for the Company as a corresponding officer of a Delaware corporation would customarily have to act for a Delaware corporation in the absence of a specific delegation of authority.  Any two or more offices may be held by the same person.  The remuneration of all Officers shall be fixed by the Remuneration Committee.

 

Consistent with the foregoing, the individuals set forth on Exhibit 6.4(a) are hereby confirmed to be the officers of the Company holding the titles set forth opposite their names.

 

The Chief Executive Officer of the Company shall report directly to the chief executive officer of OM(US)H.

 

(b)                                 Resignation and Removal.  Any Officer may resign at any time by giving oral or written notice to the appropriate person: in the case of the Chief Executive Officer, such  notice must be given to the Chairman of the Board or the chief executive officer of OM(US)H, and for all other Officers, such notice must be given to, at the Officer’s election, the Chief Executive Officer, the Secretary, the Director of Human Resources of the Company or to the Officer’s immediate manager and such resignation shall take effect after the giving of such notice at the time specified therein or, if the time when it shall become effective shall not be specified therein, when accepted by action of the Executive Committee.  Except as aforesaid, the acceptance of such resignation shall not be necessary to make it effective.  All Officers shall be subject to removal at any time by the Board, for any reason or for no reason.  If any office shall become vacant, a replacement Officer shall be appointed by the Executive Committee, subject to Section 6.7.

 

(c)                                  Secretary.  The Secretary shall keep the records of all meetings and written actions of Members, the Board and the Committees and shall be the custodian of all contracts, deeds, documents and all other indicia of title to properties owned by the Company and of its other company records and in general shall perform all duties and have all powers incident to the office of the secretary of a corporation organized under the Delaware General Corporation Law and shall perform such other duties and exercise such other powers as may from time to time be prescribed by the Board.  The duties of the Secretary may be performed by one or more employees or agents of the Company to be appointed by the Secretary with the consent of the Board.

 

(d)                                 Agreements.  All KELP Partners and any others determined by the Executive Committee, shall be required to execute and be subject to customary non-solicitation, confidentiality and invention assignment agreements, as well as other customary agreements as determined by the Executive Committee in consultation with the Company’s Director of Human Resources.

 

Section 6.5.                                       “Managers”; Power to Bind the Company.  Each voting member of the Board shall be a “manager” of the Company as such term is used in the Act.  

 

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The Chief Executive Officer and the other officers of the Company shall have the authority to sign agreements, contracts, instruments or other documents in the name of and on behalf of the Company, as shall be determined by the Executive Committee.  The Executive Committee may authorize any other Person to sign agreements, contracts, instruments or other documents in the name of and on behalf of the Company, and such authority may be general or limited to specific instances.  Except with respect to OMAM in its capacity as tax matters partner, no Member or Manager acting individually in its capacity as a Member or Manager shall have any authority, power or privilege to act on behalf of or to bind the Company.

 

Section 6.6.                                       Standard of Care for Managers; Liability of Covered Persons.

 

(a)                                 General.  Each Manager shall perform his or her duties hereunder in good faith and in a manner reasonably believed to be in or not contrary to the best interests of the Company.  No Covered Person shall be liable to the Company or any Member for any act or omission, including any mistake of fact or error in judgment, taken, suffered or made by such Covered Person in good faith and in the reasonable belief that such act or omission is in or is not contrary to the best interests of the Company and is within the scope of authority granted to such Covered Person by this Agreement, provided that such act or omission does not constitute Disabling Conduct.  No Member shall be liable to the Company or any Member for any action taken by any other Member.

 

(b)                                 Reliance.  A Covered Person shall incur no liability in acting in good faith upon any signature or writing believed by such Covered Person to be genuine, may rely on a certificate signed by an executive officer of any Person in order to ascertain any fact with respect to such Person or within such Person’s knowledge, and may rely on an opinion of counsel selected by such Covered Person with respect to legal matters, except to the extent that such belief, reliance or selection constituted Disabling Conduct.  Each Covered Person may act directly or through such Covered Person’s agents or attorneys.  Each Covered Person may consult with counsel, appraisers, engineers, accountants and other skilled Persons selected by such Covered Person, and shall not be liable for anything done, suffered or omitted in reasonable reliance upon the advice of any of such Persons, except to the extent that such selection or reliance constituted Disabling Conduct.  No Covered Person shall be liable to the Company or any Member for any error of judgment made in good faith by an officer or employee of such Covered Person, provided that such error does not constitute Disabling Conduct of such Covered Person.

 

Section 6.7.                                       Actions Requiring Consent of the Board of Managers.  Notwithstanding any other provision of this Agreement, the following actions on behalf of the Company shall require the Consent of the Board of Managers:

 

(a)                                                                      amending this Agreement, subject to Section 13.6, or the Certificate of Formation;

 

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(b)                                                                      incurring any obligation for borrowed money, except as provided in Section 2.4(b) hereof;

 

(c)                                                                       entering into transactions with Affiliates or Related Parties of the Company or any Member or Manager other than in the ordinary course of business on arm’s length terms, except as provided in Section 2.4(b) hereof;

 

(d)                                                                      filing any lawsuit by or on behalf of the Company in any federal, state or local court;

 

(e)                                                                       entering into any agreement or transaction or series of related agreements or transactions out of the ordinary course of business for the sale, exchange or transfer of any assets of the Company with a value in excess of $50,000;

 

(f)                                                                        issuing, selling or consenting to the Transfer of any Interest to any Person or permitting or authorizing the issuance or creation of any other direct or indirect interests, or rights to acquire any other direct or indirect interest, in the Company, other than as set forth in Article VIII;

 

(g)                                                                       redeeming any Interest or loaning monies to any Person, except as provided in Section 2.4(b) hereof;

 

(h)                                                                      adopting or modifying the annual budget and business plan;

 

(i)                                                                          pledging Company assets as security for any obligation or otherwise encumbering Company assets;

 

(j)                                                                         entering into any consent decree, settlement or negotiation with a government regulatory or enforcement agency;

 

(k)                                                                      entering into any consent decree or settlement as a result of legal action from a private party;

 

(l)                                                                          assuming any third-party liability or providing a guarantee outside the ordinary course of business;

 

(m)                                                                  creating any subsidiary, entering into an agreement of partnership or becoming a member of a limited liability company, a partner (general or limited) of a partnership or a limited liability limited partnership or a joint venture, or a shareholder of a corporation; becoming a trustee of a trust or business trust; or becoming a holder of equity securities of any other entity;

 

(n)                                                                      merging or entering into an agreement to merge or enter into a joint venture agreement or other form of strategic alliance;

 

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(o)                                                                      appointing officers of the Company having the title of President or Executive Vice President or a “C”-level title, including Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Compliance Officer, Chief Investment Officer or Chief Sales and Marketing Officer (or, in each case, any office or officer with responsibilities commensurate with any of the foregoing titles);

 

(p)                                                                      appointing, retaining or terminating a firm of independent public accountants for the preparation of the Company’s financial statements set forth in Section 9.5 hereof;

 

(q)                                                                      changing the nature of the Company’s business or its overall policies;

 

(r)                                                                         commencing any voluntary bankruptcy, insolvency or similar proceeding with the Company as debtor;

 

(s)                                                                        dissolving, liquidating or winding up the operations or any portion of the operations of the Company;

 

(t)                                                                         making any tax elections;

 

(u)                                                                      entering into any non-competition or other similar agreement that restricts or limits the actions of the Company;

 

(v)                                                                      entering into any other transaction or series of related transactions out of the ordinary course of business; or

 

(w)                                                                     consummating a Liquidity Event.

 

Section 6.8.                                       Covenants Regarding OFAC.  Neither the Company, nor any Member or Manager, nor any of their respective Affiliates, nor any of their respective employees, officers, directors, representatives or agents is, nor will they become, a Person with whom U.S. Persons are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List) or under any statute, executive order (including the September 24, 2001 Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not engage in any dealings or transactions or be otherwise associated with such Persons.  Neither the Company, nor any Member or Manager, nor any of their respective Affiliates, nor any of their respective employees, officers, directors, representatives or agents, has taken or will take any action that would constitute a violation of the USA Patriot Act, P.L. 107-56, 1115 Stat. 272 (2001), as amended, including without limitation the anti-money laundering provisions thereof.

 

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Section 6.9.                                       Approved Budget.  Subject to Section 6.7 hereof, the Chief Executive Officer of the Company shall be responsible for the preparation of a budget and business plan for each Fiscal Year, and shall, by the date designated by the Chief Financial Officer of OM(US)H (usually on or about September 15 and in any event no later than September 15 of the year immediately preceding such Fiscal Year) and unless otherwise extended by the Chief Financial Officer of OM(US)H, submit such proposed budget and business plan to the Board of Managers for preliminary approval.  If approved by the Board of Managers, such proposed budget and business plan shall be submitted by the Chief Executive Officer of the Company or his designee to OM(US)H for final approval.  Such proposed budget and business plan shall become final and binding upon approval of such proposed budget and business plan by Old Mutual unless OM(US)H objects within 90 days of receipt of such proposed budget and plan, provided that such budget and business plan shall become final and binding prior to the end of such 90 day period if OM(US)H expressly consents prior to the end of such 90 day period.  If OM(US)H notifies the Chief Executive Officer of the Company of any objection(s) to the proposed budget and business plan within such period, the Chief Executive Officer of the Company shall revise and resubmit such proposed budget and business plan to the Board of Managers, and, if then approved by the Board of Managers, such proposed budget and business plan shall be resubmitted by the Chief Executive Officer of the Company to OM(US)H.  The same procedures for approval, objection, revision and resubmission shall be applicable until final approval of a proposed budget and business plan by OM(US)H, provided that if such final approval is not obtained, the budget and business plan then in effect will continue. Upon such final approval or expiry of the review period set forth in this Section, such budget and business plan shall be the “Approved Budget” for the relevant period.  Subject to Section 6.7 hereof, not later than 30 days prior to any fiscal quarter, the Chief Executive Officer of the Company may submit proposed changes to the then Approved Budget for such subsequent fiscal quarter as he or she shall deem necessary.  Such changes shall be subject to the same approval process as the initially proposed budget and to the extent finally approved by OM(US)H shall modify the previously Approved Budget, and the modified budget and business plan shall thereupon be the Approved Budget for the relevant period.

 

Section 6.10.                                Succession Planning.

 

On or before September 30,  2011, the Executive Committee shall submit to the Board of Managers for review and approval, a succession plan (the “Succession Plan”) that has previously been submitted to and found appropriate by, the chief executive officer of OM(US)H, in his sole discretion.  The documentation related to any Succession Plan will include: (i) identification of key and critical positions, (ii) definitive designation of successors for such key and critical positions for four (4) periods (contingency, immediate, 1-3 years and 3 or more years) and (iii) an articulation of specific development plans for each named successor with clear linkage to the Company’s overall performance management process and career development communications. Following the resignation, termination, death or disability of any employee holding a key and critical position with 

 

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the Company, the Executive Committee will  provide a revised Succession Plan proposal for that position to the chief executive officer of OM(US)H and to the Board of Managers for consideration at their  next meeting. Annually, the Executive Committee shall review the current Succession Plan with the Board of Managers for their approval.

 

Section 6.11.                                Shared Services.  The Chief Executive Officer of OM(US)H will designate authorized individuals to explore with the Chief Executive Officer of the Company or his or her designee(s) opportunities for the Company to utilize more fully the shared services offered by OM(US)H to its affiliated firms, particularly in the areas of information technology and payroll, in an effort to reduce operating costs of the Company.

 

ARTICLE VII.

 

INDEMNIFICATION

 

Section 7.1.                                       Indemnity.  (a)  General.  Except as provided in this Section 7.1, the Company shall indemnify OMAM, OM(US)H, Old Mutual and any Member or Manager (including Members and Managers who serve at the Company’s request as directors, officers, managers, members, partners, employees or other agents of another organization or who serve at its request in any capacity including with respect to any employee benefit plan; such service is hereafter described as serving in a representative capacity) (each, a “Indemnified Person”) against expenses, including attorney’s fees, and against the amount of any judgment, money, decree, fine, penalty, or settlement, necessarily paid or incurred by such Indemnified Person in connection with or arising out of any claim, or any civil or criminal action, suit, or other proceeding of whatever nature brought against such Indemnified Person (other than an action brought by or in the right of the Company) by reason of such Indemnified Person being or having been a Manager or Member, serving or having served in a representative capacity, or acting or having acted, or failing to act or to have acted, pursuant to authority granted by this Agreement, provided that any indemnity under this Section 7.1 shall be provided out of and only to the extent of the Company’s assets, and no Member or Manager shall have personal liability on account thereof.  The foregoing indemnification shall be conditioned, however, upon the Indemnified Person seeking it, at all times and from time to time, fully cooperating with and assisting the Company and its counsel in any reasonable manner with respect to protecting or pursuing the Company’s interests in any matter relating to the subject matter of the claim, action, suit or other proceeding for which indemnification is sought.  No indemnification shall be provided for any Indemnified Person (1) if such Indemnified Person has committed fraud, gross negligence or willful misconduct as reasonably determined by the Board of Managers, (2) with respect to any matter as to which the Board of Managers determines that such Indemnified Person did not act in good faith in the reasonable belief that such Indemnified Person’s action was in the best interest

 

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of the Company or, to the extent that such matter relates to service with respect to any employee benefit plan, in the best interests of the participants, or the beneficiaries of such employee benefit plan, or (3) with respect to any criminal action or proceeding, if such Indemnified Person had reasonable cause to believe that its conduct was unlawful.  In the event an Indemnified Person is a Manager, any decision of the Board of Managers referred to in the preceding sentence shall be made by the Board of Managers without the vote of that Manager.  Notwithstanding the foregoing, the Company shall not provide indemnification for any former Manager or Member who, in the reasonable judgment of the Board of Managers, was in serious or repeated breach of its duties as a Manager or Member.  Any employee of or agent for the Company may be indemnified in such manner as the Board of Managers determines.

 

(b)                                 Expenses.  If an Indemnified Person provides the Board of Managers with evidence that demonstrates to the reasonable satisfaction of the Board of Managers that such Indemnified Person is reasonably likely to prevail on the merits of such matter, expenses reasonably incurred in defending any claim, action, suit or proceeding of the character described in Section 7.1(a) shall be advanced by the Company prior to the final disposition of such claim, action, suit or proceeding upon receipt of a written undertaking by or on behalf of the recipient to repay all such advances if it is ultimately determined that such Indemnified Person is not entitled to indemnification pursuant to Section 7.1(a).

 

(c)                                  Outside Interests.  OMAM and any of its Affiliates except the Company may engage in and possess interests in other business ventures and investment opportunities (unconnected with the Company) of every kind and description, independently or with others, including without limitation serving as member, manager or partner of other limited liability companies and partnerships.  The Company shall not have any rights in or to such independent business ventures or investment opportunities or the income or profits therefrom by virtue of this Agreement.

 

(d)                                 Survival of Protection.  The provisions of this Section 7.1 shall continue to afford protection to each Indemnified Person regardless of whether such Indemnified Person remains in the position or capacity pursuant to which such Indemnified Person became entitled to indemnification under this Section 7.1 and regardless of any subsequent amendment to this Agreement, and no amendment to this Agreement shall reduce or restrict the extent to which these indemnification provisions apply to actions taken or omissions made prior to the date of such amendment.

 

(e)                                  Rights Cumulative.  The right of any Indemnified Person to the indemnification provided herein shall be cumulative with, and in addition to, any and all rights to which such Indemnified Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to such Indemnified Person’s successors, assigns, heirs and legal representatives.

 

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ARTICLE VIII.

 

TRANSFERS OF INTERESTS; 
 ADDITIONAL MEMBERS; RESIGNATIONS

 

Section 8.1.                                       Transfers.  (a)  General.  Subject to this Article VIII, (i) except with the prior written consent of OM(US)H in its sole discretion (which consent may be subject to the requirement that the transferee shall have received a copy of the Company’s most recent audited financial statements and such other information as determined by the Remuneration Committee no later than five (5) Business Days prior to such Transfer), no Member other than OMAM may directly or indirectly Transfer all or any portion of such Member’s Interest or any rights therein, and (ii) OMAM and any of its successors and assigns, in its sole discretion, may directly or indirectly Transfer all or any portion of its Interest or any rights therein to any transferee without any restriction or limitation.

 

(b)                                 Restrictions.  Subject to Section 6.1(d)(i), no transferee of an Interest shall be admitted as a Member (i) without the prior written consent of OM(US)H in its sole discretion and (ii) unless such transferee first executes a counterpart of the signature page of this Agreement and/or any other agreements, documents or instruments specified by the Board or OM(US)H.  Upon obtaining such consent and upon the execution of such signature page and/or such other agreements, documents and instruments, such transferee shall be admitted as a Member and shall have all of the rights and powers and be subject to the restrictions and liabilities of a Member hereunder.  Any such admission shall be deemed effective as of simultaneous with the applicable Transfer.

 

(c)                                  Admissions.  In connection with any admission of a new Member, the Board shall revise the books and records of the Company to reflect the inclusion of the additional Member and shall notify the other Members of such admission in writing.

 

(d)                                 Rights to Pledge.  Notwithstanding the foregoing provisions of this Section 8.1, the KELP may pledge all or any portion of its Class B Interest in the Company to a lender in connection with any financing or borrowing by the KELP permitted under the KELP Agreement, which financing or borrowing is made for the KELP’s purchase of KELP Points or Class B Interests, provided that if any such lender (or its assignee) becomes a Member or otherwise obtains economic rights with respect to such Interest, (i) such lender (or its assignee) shall have no voting rights with respect to such Class B Interest and (ii) the Company shall have the right to redeem at any time at a price equal to the Class B Valuation as measured for the most recent Valuation Period multiplied by the percentage of such Class B Interests held by such lender (or its assignee).  The Company’s right to redeem such Class B Interest shall be exercised by written notice from the Company to such lender (or its assignee) and may be given at any time following such lender (or such assignee) taking ownership of such Class B Interest.  Effective upon 

 

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the Company’s redemption of such Class B Interest, such lender (or its assignee) shall no longer own such Class B Interest for purposes of this Agreement.

 

(e)                                  Transfers in Violation of this Agreement.  In the event of any attempted or purported Transfer in contravention of any of the provisions in this Agreement, such attempted or purported Transfer shall be null and void and ineffective to Transfer any Interest in the Company and shall not bind, or be recognized by or on the books of, the Company, and any attempted or purported transferee in such Transfer shall not be or be treated as or deemed to be a Member for any purpose.  In the event of such attempted or purported Transfer in contravention of any of the provisions of this Agreement, then the Company and each other Member shall, in addition to all rights and remedies at law and equity, be entitled to a decree or order restraining and enjoining such Transfer, and the offending Member shall not plead in defense thereto that there would be an adequate remedy at law; it being expressly hereby acknowledged and agreed that damages at law would be an inadequate remedy for a breach or threatened breach of the provisions set forth in this Agreement concerning any such attempted or purported Transfer.

 

(f)                                   Court Ordered Transfers.  In the event of any Transfer which, notwithstanding having been prohibited by the terms of this Agreement, is mandated by a court of final jurisdiction, the transferee shall have no voting or consent rights hereunder unless otherwise required by the Act.

 

(g)                                  Issuance of Class B Interests.  During the term of this Agreement and subject to Sections 6.2(b), 6.7 and 8.4(d) hereof, the Company shall not issue any Class B Interests to (i) any Person, including to an employee of the Company either directly, or indirectly through the KELP, without the prior written consent of the Remuneration Committee or (ii) to OM(US)H or any Affiliate of OM(US)H without the prior written consent of the KELP.

 

(h)                                 Compliance with Securities Laws.  Notwithstanding anything to the contrary herein, the Company shall not issue any Interest, and no Member shall Transfer its Interest, to the extent that such issuance or Transfer would violate the Securities Act or any other federal or state securities or blue sky Laws.

 

(i)                                     Bonus Plan.  Any purchase or redemption of Interests by the Company under Article VIII shall be subject to Section 3(g) of the Bonus Plan, which permits the Company to use its working capital to fund any such purchase or redemption and to be made whole for the amount of working capital so used by a reduction of the amount from the Bonus Pool (as defined in the Bonus Plan) but only to the extent the Company grants the Interests during a Trading Window and does not receive cash payment from the KELP in connection with the reissue of the purchased or redeemed Interest to the KELP and the KELP’s sale of the corresponding interest in the KELP pursuant to Section 8.4(d).

 

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Section 8.2.                                       Resignations, Etc.  No Member may resign or withdraw from the Company prior to the termination of the Company pursuant to Article X without the prior written consent of the OM(US)H in its sole discretion.

 

Section 8.3.                                       Put, Call and Redemption Rights — Termination of Employment.  In the event that a KELP Partner is no longer employed by the Company, the following provisions will apply:

 

(a)                                                                                 Termination for Cause; Termination of Consulting Arrangement.  If such KELP Partner is terminated by the Company for Cause or if such KELP Partner’s consulting arrangement with the Company is terminated, the Company shall have the right to redeem from the KELP all or any portion of the percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP owned by such KELP Partner (the “For Cause Interest” and the “For Cause KELP Interest”) immediately or at any time thereafter; provided, that the Company’s exercise of its rights pursuant to this Section is subject to the Buyback Limitation.

 

Promptly after (and, in any event, within three Business Days following the date of) the redemption of the For Cause Interest, the KELP shall use the proceeds received from the Company for the Company’s redemption of the For Cause Interest and shall redeem such KELP Partner’s For Cause KELP Interest.  The Company shall exercise its right of redemption by providing written notice of such redemption from the Company to the KELP and such KELP Partner at any time following such termination.  Upon the Board’s approval, the Company shall have the right to specify in its notice that the purchase of such For Cause Interest shall be made as follows (or over such shorter period as the Company may specify): (a) one third of such For Cause Interest shall be purchased on the last day of the next Trading Window following such notice that is the first Trading Window in a calendar year, (b) one third of such interest shall be purchased on the first anniversary of the date of such initial purchase and (c) one third of such interest shall be purchased on the second anniversary of such initial purchase, provided that such purchases shall be made on the same schedule as has been specified for the redemption of the For Cause KELP Interest pursuant to Section 8.4(a) of the KELP Agreement.

 

The purchase price for any For Cause Interest shall be equal to:

 

(i)  with respect to a KELP Partner whose employment has been terminated for Cause in the Lock Up Period, zero;

 

(ii)  with respect to a KELP Partner whose employment has been terminated for Cause and such termination did not occur in the Lock Up Period, the Discount Valuation as measured for the Trading Window in which any such purchase shall occur (or, in the case of a redemption not during a Trading Window, as measured based on the most recent Valuation Period) multiplied by the percentage the For Cause Interest being purchased represents of the Class B Interest on such date of purchase,

 

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(iii)  with respect to a KELP Partner whose consulting arrangement with the Company has been terminated in the Lock Up Period and such KELP Partner either breached such consulting arrangement or terminated such consulting arrangement, zero;

 

(iv)  with respect to a KELP Partner whose consulting arrangement with the Company has been terminated, such termination did not occur in the Lock Up Period and such KELP Partner either breached such consulting arrangement or terminated such consulting arrangement, the Discount Valuation as measured for the Trading Window in which such purchase shall occur (or, in the case of a redemption not during a Trading Window, as measured based on the most recent Valuation Period) multiplied by the percentage the For Cause Interest being purchased represents of the Class B Interest on such date of purchase;

 

(v)  with respect to a KELP Partner whose consulting arrangement with the Company has been terminated, whether or not such termination occurred in the Lock Up Period and such KELP Partner did not breach such consulting arrangement and did not terminate such consulting arrangement, the FMV Valuation as measured for the Trading Window in which such purchase shall occur (or, in the case of a redemption not during a Trading Window, as measured based on the most recent Valuation Period) multiplied by the percentage the For Cause Interest being purchased represents of the Class B Interest on such date of purchase and

 

provided that with respect to all payments by the Company pursuant to this Section 8.3(a), upon the approval of the Board pursuant to Section 6.1(d)(viii), the Company shall have the right of setoff for any amounts (the “Offset Amounts”) owed by the KELP Partner for any reason to the Company, including all damages, including without limitation, economic losses and reputational harm, incurred by the Company or any of its members, managers, partners, shareholders, trustees, beneficiaries, officers, directors, employees or other agents as a result of such KELP Partner’s actions or inactions set forth in paragraphs (i) through (v) of the definition of Cause.  For the avoidance of doubt, a KELP Partner whose consulting arrangement with the Company is terminated is subject to this Section 8.3(a) and is not subject to Section 8.3(b), Section 8.3(c) or Section 8.3(d).  With respect to clauses (i) and (iii) above, (a) all of such KELP Partner’s KELP Points shall be deemed forfeited by such KELP Partner to the KELP and redeemed from such KELP Partner by the KELP for no consideration pursuant to Section 8.4(a) of the KELP Agreement and (b) the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by such KELP Partner shall be deemed forfeited by the KELP to the Company and redeemed from the KELP by the Company for no consideration.

 

(b)                                                                                 Other Termination by KELP Voting Managers.  If (i) such KELP Partner’s employment was terminated by the Company without Cause or, with respect to a 

 

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KELP Partner who is subject to an employment agreement with the Company, such KELP Partner terminated his or her employment with the Company for Good Reason and the Board of Managers (excluding any KELP Voting Manager who is also such KELP Partner) did not mandate either such termination or the taking of the actions that constituted such Good Reason, or, if the Board of Managers mandated either such termination or the taking of the actions that constituted such Good Reason, it did so with the affirmative vote of a majority of the KELP Voting Managers, and (ii) all of the KELP Points owned by such KELP Partner have not been purchased pursuant to Section 8.4(b)(ii) of the KELP Agreement, the Company shall have the right to purchase from the KELP a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by such KELP Partner in the current or any subsequent Trading Window in which the KELP can purchase such KELP Interest pursuant to Section 8.4(b)(ii) of the KELP Agreement and the Company shall be permitted to use such Interests for grants of Interests at the next or any subsequent Trading Window and provided that the Company’s exercise of its rights pursuant to this Section is subject to the Buyback Limitation.  If all of the KELP Points owned by such KELP Partner have not been purchased prior to the Covenant Termination Date pursuant to Section 8.4(b)(ii) of the KELP Agreement or by the Company pursuant to Section 8.3(b)(ii) above, OMAM shall have the right to purchase from the KELP a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by such KELP Partner in the current or any subsequent Trading Window in which the KELP can purchase such KELP Points pursuant to Section 8.4(b)(ii) of the KELP Agreement.  Promptly after (and, in any event, within three Business Days following the date of) the purchase of such Interest by the Company or OMAM, the KELP shall use the proceeds received from the Company or OMAM, as applicable, for its purchase of such Interest and shall redeem such KELP Partner’s KELP Points.  The Company shall exercise its right to purchase such Interest by providing written notice from the Company to the KELP and such KELP Partner.  OMAM shall exercise its right to purchase such Interest by providing written notice from OMAM to the Company, the KELP and such KELP Partner at any time following the Covenant Termination Date.  The purchase price for such Interest shall be equal to the FMV Valuation as measured for the Trading Window in which such purchase shall occur multiplied by the percentage of the KELP then owned by such KELP Partner.

 

Other Termination by OMAM.  If (i) such KELP Partner’s employment was terminated by the Company without Cause or, with respect to a KELP Partner who is subject to an employment agreement with the Company, such KELP Partner terminated his or her employment with the Company for Good Reason and the Board of Managers (excluding any KELP Voting Manager who is also such KELP Partner) mandated either such termination or the taking of the actions that constituted such Good Reason, without the affirmative vote of a majority of the KELP Voting Managers, and (ii) such KELP Partner exercises his or her right to require the KELP to redeem all or a portion of his or her KELP Points pursuant to Section 8.4(b)(i)(A) of the KELP Agreement, the KELP shall have the right to require OMAM to purchase from the KELP a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP being redeemed by 

 

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such KELP Partner in the Trading Window during which such KELP Partner has exercised his or her right under Section 8.4(b)(i)(A) of the KELP Agreement.

 

Promptly after (and, in any event, within three Business Days following the date of) the purchase of such Interest, the KELP shall use the proceeds received from OMAM from the purchase of such Interest to redeem the KELP Points being put to the KELP by such KELP Partner.  The KELP shall exercise its right to require OMAM to purchase such Interest by providing written notice from the KELP to the Company and OMAM no later than three (3) Business Days following such KELP Partner having exercised such right and during the same Trading Window as that Trading Window during which such KELP Partner has exercised his or her right under Section 8.4(b)(i)(A) of the KELP Agreement.

 

If all of the KELP Points owned by such KELP Partner have not been put by the KELP Partner prior to the Covenant Termination Date pursuant to Section 8.4(b)(i)(A) of the KELP Agreement, or called by the KELP pursuant to 8.4(b)(i)(B) of the KELP Agreement after the Covenant Termination Date, the Company shall have the right to purchase from the KELP a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by such KELP Partner in the current or any subsequent Trading Window in which the KELP can purchase such KELP Points pursuant to Section 8.4(b)(i)(B) of the KELP Agreement and the Company shall be permitted to use such Interests for grants of Interests at the next or any subsequent Trading Window, provided that the Company’s exercise of its rights pursuant to this Section is subject to the Buyback Limitation. The purchase price for such Interest acquired under this Section 8.3(c) shall be equal to the most recent FMV Valuation as measured for the Trading Window in which such purchase shall occur multiplied by the percentage of the KELP being redeemed by such KELP Partner.

 

In the event that a Liquidity Event occurs prior to the first anniversary of the date of any redemption pursuant this Section 8.3(c) and such KELP Partner’s KELP Points have not been reissued to another KELP Partner (as determined pursuant to Section 8.4(b)(i)(A) of the KELP Agreement) or by the Company pursuant to Section 8.1(i) , the Company shall pay the KELP, which in turn shall pay such KELP Partner, from the proceeds of such Liquidity Event, prior to any payment to any other Person pursuant to Section 3.1(f), the amount equal to the product of (A) the percentage of the KELP that was redeemed by such KELP Partner pursuant to Section 8.4(b)(i)(A) of the KELP Agreement and (B) the excess of (y) the amount the KELP would have received pursuant to Section 3.1(f) had a corresponding redemption pursuant to this Section 8.3(c) not occurred over (z) the amount that is being distributed to the KELP pursuant to Section 3.1(f) in respect of such Liquidity Event (the “Employee Make-Whole Amount”).  Promptly after, and in no event later than one Business Day after the date of, the Company’s payment to the KELP of the Employee Make-Whole Amount, the KELP shall pay such KELP Partner the Employee Mark-Whole Amount.

 

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(c)                                                                                  Termination by KELP Partner Without Good Reason.

 

(i)                                     If during the Lock Up Period, such KELP Partner terminated his or her employment with the Company voluntarily other than, in the case of a KELP Partner who is subject to an employment agreement with the Company, for Good Reason, and not due to death, Disability, or retirement in accordance with the Succession Plan, (a) all of such KELP Partner’s KELP Points shall be deemed forfeited by such KELP Partner to the KELP and redeemed from such KELP Partner by the KELP for no consideration pursuant to Section 8.4(c)(i) of the KELP Agreement and (b) the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by such KELP Partner (the “Forfeited Interests”) shall be deemed forfeited by the KELP to the Company and redeemed from the KELP by the Company for no consideration.  The Company shall be permitted to use the Forfeited Interests for grants of Interests at the next or any subsequent Trading Window.

 

(ii)                                  If (a) during the Lock Up Period, such KELP Partner terminated his or her employment with the Company due to death, Disability or retirement in accordance with the Succession Plan or (b) after the Lock Up Period, such KELP Partner terminated his or her employment with the Company due to death, Disability, retirement or voluntary departure by such KELP Partner without Good Reason, then in the case of each of clause (a) and (b), to the extent the KELP has not exercised its right to purchase such KELP Partner’s KELP Points pursuant to Section 8.4(c)(ii) of the KELP Agreement, the Company shall have the right to purchase from the KELP a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by such KELP Partner in the current or any subsequent Trading Window in which the KELP can purchase such KELP Points pursuant to Section 8.4(c) of the KELP Agreement,  and the Company shall be permitted to use such Interests for grants of Interests at the next or any subsequent Trading Window, provided that the Company’s exercise of its rights pursuant to this Section is subject to the Buyback Limitation; and provided further that if the Company exercises its rights pursuant to this Section, the KELP may vitiate such request by fully exercising its rights pursuant to Section 8.4(c) of the KELP Agreement to purchase all of such KELP Points.  Promptly after (and, in any event, within three Business Days following the date of) the purchase of such Interest, the KELP shall use the proceeds received from the Company for its purchase of such Interest to redeem such KELP Partner’s KELP Points.  The Company shall exercise its right to purchase such Interest by providing written notice from the Company to the KELP and such KELP Partner at any time following such termination.  The purchase price for such Interest shall be equal to the most recent FMV Valuation as measured for the Trading Window in which such purchase shall occur multiplied by the percentage of the KELP then owned by such KELP Partner

 

(d)                                                                                 Termination of Voting Rights.  Notwithstanding anything to the contrary in this Agreement or the KELP Agreement, at such time as a KELP Partner is no longer employed by the Company for whatsoever reason or no reason, such KELP Partner shall automatically cease to have any voting, approval or consent rights in the KELP that such KELP Partner may otherwise have had.

 

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Section 8.4.                                       Put, Call and Redemption Rights — Other.

 

(a)                                 No Put Rights.  The KELP shall have no right to require the Company to purchase all or any portion of the Interest held by the KELP; provided, however, that the KELP shall have the right to require the Company to purchase from the KELP a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP then owned by the KELP Partner who elects to Transfer his or her applicable KELP Points in the Company pursuant to Section 8.3 of the KELP Agreement, and the Company shall be permitted to use such Interests for grants of Interests at the next or any subsequent Trading Window, provided that the Company’s obligation pursuant to this Section is subject to the Buyback Limitation.  Promptly after (and, in any event, within three Business Days following the date of) the purchase of such Interest, the KELP shall use the proceeds received from the Company for its purchase of such Interest to redeem such KELP Partner’s KELP Points.  The KELP shall exercise its right to require the Company to purchase such Interest by providing written notice from the KELP to the Company and such KELP Partner within 10 days following the KELP’s receipt of written notice from such KELP Partner pursuant to Section 8.3 of the KELP Agreement.  The purchase price for such Interest shall be equal to the purchase price determined pursuant to Section 8.3 of the KELP Agreement.  Upon the Board’s approval, the Company shall have the right to instruct the KELP in writing that the purchase of such KELP Points shall be made as follows (or over such shorter period as the Company may specify): (i) one third of the payment for such Interest shall be made on the last day of the next Trading Window following the Transfer Window (as defined in Section 8.3 of the KELP Agreement), (ii) one third of the payment for such Interest shall be made on the first anniversary of the date of such initial payment and (iii) one third of the payment for such Interest shall be purchased on the second anniversary of such initial payment.  For the avoidance of doubt, nothing in this Section 8.4(a) shall be deemed to increase the 4% per Trading Window limitation on the put rights of KELP Partners under Section 8.3 of the KELP Agreement).

 

(b)                                 Purchases from Pledgees.  If, as a result of any pledge by a KELP Partner permitted to be made pursuant to Section 8.5 of the KELP Agreement, a lender (or an assignee thereof) becomes a KELP Partner or otherwise holds economic rights in respect of the KELP and the KELP has not exercised its right to purchase such lender’s (or assignee’s) Interest pursuant to Section 8.5 of the KELP Agreement, OMAM shall have the right to purchase for cash a percentage of the KELP’s Interest in the Company corresponding to the percentage of the KELP owned or held by such lender (or such assignee) in the current or any subsequent Trading Window in which the KELP can have purchase such KELP Points pursuant to Section 8.5 of the KELP Agreement.  Promptly after (and, in any event, within three Business Days following the date of) the purchase of such Interest, OMAM’s purchase of such Interest, the KELP shall use the proceeds received from OMAM for its purchase of such Interest and shall redeem such lender’s (or such assignee’s) KELP Points.  OMAM shall exercise its right to purchase such Interest by providing written notice from OMAM to the KELP, the lender and the Company, at 

 

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any time following such lender (or such assignee) becoming a KELP Partner or holding such rights.  The purchase price for such Interest shall be equal to the most recent FMV Valuation as measured for the Trading Window in which such purchase shall occur multiplied by the percentage of the KELP then owned or held by such lender (or such assignee).

 

(c)                                  Closings.  The closing of any purchase and/or redemption permitted or required by Section 8.3 or Section 8.4 shall take place at such time and place as shall be designated by the Company (in the case of Section 8.3(a)) or OMAM (in the case of Section 8.3(b), (c) and (d)), provided that all parties to such purchase and/or redemption shall be provided at least five (5) Business Days’ advance notice of the closing, provided further that, except as provided in Section 8.3(a), such closing shall occur no later than the last Business Day of the fiscal quarter in which the notice of any such purchase or redemption is given.  All payments shall be by wire transfer pursuant to instructions to be provided by the payment recipient no later than two (2) Business Days prior to the closing, or by such other methods as may be agreed by the payor and payee.

 

(d)                                 Re-Offers.  To the (i) extent the Company redeems Class B Interests or (ii)  OMAM holds Class B Interests in excess of 71.43% of the Class B Interests, in the case of (i) or (ii), as a result of the exercise of their respective rights under Sections 8.3 and 8.4, the Company or OMAM, as the case may be, shall have the right to cause the KELP to offer corresponding interests in the KELP to eligible offerees based upon the FMV Valuation at such time during a Trading Window and, upon receipt of payment from such offeree to the KELP and upon receipt of payment from the KELP to OMAM or the Company, as applicable, transferring (in the case of OMAM) or reissuing (in the case of the Company), corresponding Interests to the KELP, unless, in the case of Interests held by the Company, the Company has determined to use such Interests for grants of Interests at the next or any subsequent Trading Window.  Notwithstanding anything in this Agreement to the contrary, following the receipt of a Required Sale Notice in respect of any Liquidity Event, the KELP shall have the right to re-acquire any such Interests from the Company or OMAM at a price equal to the percentage interest represented by such Interests multiplied by the FMV Valuation for the current (if such notice occurs during a Trading Window) or most-recently ended Trading Window.

 

(e)                                  Repurchase of Interests Acquired at the Discount Valuation.  Notwithstanding anything contained in this Agreement to the contrary, in the event the KELP repurchases from the Company at the FMV Valuation Class B Interests that were acquired by the Company at the Discount Valuation (or no consideration), the difference between the price paid by the Company at the Discount Valuation (or no consideration) and the price paid by the KELP at the FMV Valuation shall be included in Distributable Income for the period in which such repurchase occurs.

 

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Section 8.5.                                       Mandatory Sale; Right of First Refusal.

 

(a)                                 If at any time the Board desires to cause all Members to Transfer all (or any pro rata share) of their respective Interests to any potential transferee (or transferees) in connection with a proposed Liquidity Event (other than clause (c) of the definition of “Liquidity Event”) (the “Proposed Mandatory Sale”), the Board, subject to Sections 6.1(d), 6.1(e) and 6.7, as applicable, and the KELP’s right of first refusal set forth in Section 8.5(c) below, shall have the right to require that all Members Transfer all (or such pro rata share of) their respective Interests to such transferee (or transferees) on substantially the same terms and conditions as the Proposed Mandatory Sale.  The Board shall provide written notice to the KELP Voting Managers and KELP Advisory Managers within five (5) days of the execution of any confidentiality agreement related to any transaction that would reasonably be expected to lead to and was entered into for the purpose (whether or not the sole purpose) of pursuing a Liquidity Event.  The Members agree to execute a similar confidentiality agreement, if necessary, in order to participate in the due diligence or other discussions that may lead to a Liquidity Event, provided that, pursuant to the terms of such similar confidentiality agreement, (i) the KELP shall be permitted to provide confidential information to its professional advisors (including investment bankers, lawyers and accountants) on customary terms and to financing sources (including private equity firms and lenders) in order to permit the KELP to raise equity and/or debt financing in connection with the exercise of its rights under this Section 8.5 and (ii) the KELP shall be permitted to disclose the existence and potential terms of a proposed transaction to the KELP Voting Managers or KELP Advisory Managers to the extent that the KELP, in good faith, determines that such disclosure is appropriate or desirable.  The KELP shall, and shall cause any Person to whom the KELP has provided such confidential information to, promptly return to the Company and/or destroy all such confidential information no later than five (5) Business Days after the Board notifies the KELP that negotiations or discussions with such proposed transferee related to such transaction have ended.  The KELP shall not thereafter use any such confidential information except as permitted under this Agreement, and shall cause any Person to whom the KELP has provided such confidential information not to thereafter use any such confidential information.

 

(b)                                 The Board shall provide written notice to the Members (the “Required Sale Notice”) of a Proposed Mandatory Sale or a transaction described in clause (a) or (b) of the definition of Liquidity Event (a “Proposed ROFR Sale”) no later than fifteen (15) days after the Board and OMAM have approved the term sheet for such Proposed ROFR Sale.  The Required Sale Notice shall identify such potential transferee (or transferees), all material terms of the sale and the expected date of closing.

 

(c)                                  Until December 31, 2022, the KELP shall have the right to purchase all (or such pro rata share) of the Interests or other assets offered by OMAM or the Company to such transferee on the same terms and conditions as OMAM or the Company has agreed with such transferee.  The KELP shall exercise its right by providing written notice, which shall be irrevocable (the “KELP ROFR Notice”), to the Board no more than thirty (30) days after the Board and OMAM have approved the definitive

 

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agreement for such Proposed ROFR Sale.  The closing of such Transfer to the KELP shall take place on the day specified in the KELP ROFR Notice, which shall be no later than three (3) Business Days following the satisfaction of any material conditions required by the Transfer described in the Required Sale Notice, including any financing condition or condition relating to client consent.  Following payment by the KELP to OMAM or the Company, as applicable, of the consideration payable in connection with such Transfer, the Interest (or such pro rata share) of OMAM (or assets of the Company, if applicable) shall be deemed transferred to the KELP.  If the KELP fails to provide the KELP ROFR Notice prior to the expiration of the 30-day period, the KELP shall forfeit its right to purchase any of the Interests or assets offered by OMAM or the Company to such transferee.

 

(d)                                 Subject to and in accordance with this Section 8.5, upon the closing of any Transfer by one or more Members of all (or such pro rata share) of their respective Interests as described in a Required Sale Notice and in connection with a Proposed Mandatory Sale, such transferee (or transferees) shall pay to each Member the consideration payable to such Member in connection with the Proposed Mandatory Sale of all (or such pro rata share) of the Interests of the Company to such transferee (or transferees) and the Interest (or such pro rata share) of all such Members shall be deemed Transferred to such transferee (or transferees).  In the event of any Transfer pursuant to this Section 8.5, all of the Proceeds of such Transfer shall be distributed at, or following, the closing of such Transfer to the Members in accordance with Section 3.1(f).

 

ARTICLE IX.

 

BOOKS; ACCOUNTING; TAX ELECTIONS; REPORTS

 

Section 9.1.                                       Books and Records.  The Board shall keep, or cause to be kept, complete and accurate books and records of account of the Company.  The books of the Company shall be maintained in accordance with generally accepted accounting principles consistently applied, and shall at all times be maintained or made available at the principal business office of the Company.  A current list of the full name and last known business address of each Member, a copy of the Certificate of Formation, including all certificates of amendment thereto, copies of the Company’s federal, state and local income tax returns and reports, if any, for the six most recent years, copies of this Agreement and of any financial statements of the Company for the three most recent years and all other records required to be maintained pursuant to the Act, shall be maintained at the principal business office of the Company.  The books and records of the Company shall be audited as of the end of each Fiscal Year by such nationally or regionally-recognized accounting firm as shall be selected by the Board, subject to Section 6.7.

 

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Section 9.2.                                       Reports.  Each Member shall have the right, at all reasonable times but in any event only during usual business hours and upon reasonable notice, to audit, examine and make copies of or extracts from the information and records of the Company described in Section 18-305(a) of the Act for any purpose reasonably related to such Member’s Interest.  Such right may be exercised through any agent or employee of such Member designated by such Member or by a certified public accountant designated by such Member.  A Member shall bear all expenses incurred in any investigation made for such Member’s account pursuant to this Section 9.2 or Section 18-305 of the Act.

 

Section 9.3.                                       Filings of Returns and Other Writings; Tax Matters Partner.  (a)  The Board shall cause the preparation and timely filing of all Company tax returns and shall, on behalf of the Company, timely file all other writings required by any governmental authority having jurisdiction to require such filing.

 

(b)                                 The Board shall timely provide, or cause to be provided, to each person who at any time during a Fiscal Year was a Member with an annual statement (including a copy of Schedule K-1 to Internal Revenue Service Form 1065) indicating such Member’s share of the Company’s income, loss, gain, expense and other items relevant for Federal income tax purposes.

 

(c)                                  The “tax matters partner,” as defined in Section 6231(a)(7) of the Code, shall be OMAM.  Each Member hereby consents to such designation and agrees that upon the request of OMAM it will execute, certify, acknowledge, deliver, swear to, file and record at the appropriate public offices such documents as may be necessary or appropriate to evidence such consent.

 

(d)                                 Promptly following the written request of the tax matters partner, the Company shall, to the fullest extent permitted by Law, reimburse and indemnify the tax matters partner for all reasonable expenses, including reasonable legal and accounting fees, claims, liabilities, losses and damages incurred by the tax matters partner in connection with any administrative or judicial proceeding with respect to the tax liability of the Members.

 

(e)                                  The provisions of this Section 9.3 shall survive the termination of the Company or the termination of any Member’s Interest in the Company and shall remain binding on the Members for as long a period of time as is necessary to resolve with the Internal Revenue Service any and all matters regarding the federal income taxation of the Company or the Members.

 

Section 9.4.                                       Banking.  All funds of the Company may be deposited in such bank, brokerage or money market accounts as shall be established by the Board.  Withdrawals from and checks drawn on any such account shall be made upon such signature or signatures as the Board may designate.

 

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Section 9.5.                                       Financial Information.  (a)  Any financial information prepared pursuant to this Section 9.5 shall be prepared from the books and records of the Company in accordance with generally accepted accounting principles, shall accurately reflect the books, records and accounts of the Company, and shall be complete and correct in all material respects.

 

(b)                                 Within ninety (90) days after the end of each Fiscal Year, the Board of Managers shall cause to be prepared a consolidated balance sheet of the Company as of the end of such fiscal year and the related consolidated statement of operations and cash flows for the Fiscal Year then ended, prepared in accordance with generally accepted accounting principles and certified by a firm of independent public accountants of recognized national standing selected by the Board of Managers, subject to Section 6.7 hereof, in each case with comparative statements for the prior Fiscal Year.

 

(c)                                  Within forty-five (45) days after the end of the second fiscal quarter of each Fiscal Year, the Board of Managers shall cause to be prepared a consolidated balance sheet of the Company and the related consolidated statement of operations and cash flows, unaudited but prepared in accordance with generally accepted accounting principles and certified by the Chief Financial Officer of the Company, as of the end of second fiscal quarter and for the period from the beginning of the Fiscal Year to the end of the second fiscal quarter, in each case with comparative statements for the comparable period in the prior Fiscal Year.

 

(d)                                 The Chief Executive Officer of the Company shall provide OM(US)H with regular financial reporting, reconciling actual expenses against the Company’s Approved Budget, in a format reasonably requested by OM(US)H.  Any changes to the previously Approved Budget, if approved by OM(US)H, shall be reflected in the next succeeding monthly report of the Company and will be shown as variances to the initial Approved Budget.  The Chief Executive Officer of the Company shall be responsible for delivering to OM(US)H on a monthly basis all other financial reporting regarding the Company that is requested by OM(US)H from time to time.

 

(e)                                  The Board of Managers shall, and shall cause the Officers and employees of the Company to, cooperate with the Company’s firm of independent public accountants, the Board of Managers, Officers and employees of the Company and any authorized agent of the Company in (i) the preparation of the audited and unaudited financial statements of the Company described in this Section 9.5 and (ii) any valuation of the Company performed for any reason.  The Board of Managers shall, and shall cause the Officers and employees of the Company to, comply with any legal or regulatory requirements related to the Company’s affiliation with Old Mutual, including reconciliation between U.S. generally accepted accounting principles and International Financial Accounting Standards.

 

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Section 9.6.                                       Confidential Information.  Except as otherwise required by Law or judicial order or decree or by any governmental or regulatory agency or authority, unless otherwise approved by the Board of Managers, no Person shall use any proprietary or confidential information of the Company other than for the benefit of the Company, whether or not such Person is or remains a Member, Manager, Affiliate of a Member or Manager, officer, employee or other agent of the Company (for the avoidance of doubt, the direct and indirect owners of OMAM may use such information to the extent required by accounting requirements, law or judicial order or decree or by any governmental or regulatory agency or authority or listing authority having jurisdiction over such direct or indirect owner).  The preceding sentence shall not, however, apply to disclosures of information that (i) is or becomes generally available to the public other than as a result of any violation of this Agreement by the disclosing Person or anyone to whom such disclosing Person transmits any information, (ii) is or becomes known or available to such disclosing Person on a non-confidential basis from a source (other than the Company or any of its subsidiaries) that is not under any confidentiality obligation to the Company or any of its subsidiaries with respect to that information, or (iii) that such disclosing Person demonstrates by clear and convincing evidence was independently developed by such disclosing Person.

 

ARTICLE X.

 

TERM; TERMINATION

 

Section 10.1.                                Term.  The term of the Company shall be perpetual, unless sooner terminated as hereinafter provided.

 

Section 10.2.                                Events of Dissolution.  (a)  The Company shall be dissolved and the affairs of the Company wound up in accordance with the Act upon the first to occur of the following events (each, an “Event of Dissolution”):

 

(i)                                                                                     the Consent of the Board of Managers (in accordance with Section 6.7 hereof);

 

(ii)                                                                                  the withdrawal, or other inability to act as a member of the Company, of OMAM, or the dissolution, termination, winding-up or bankruptcy of OM(US)H;

 

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

 

(iv)                                                                              the termination of the legal existence of the last remaining member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining member

 

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of the Company in the Company unless the Company is continued without dissolution in a manner permitted by this Agreement or the Act.

 

Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company, to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of such member in the Company.

 

Following the foregoing event, the Board of Managers shall proceed diligently to liquidate the assets of the Company in a manner consistent with commercially reasonable business practices.  A Change in Control of the Company shall not constitute an Event of Dissolution.  Except as provided in Section 10.2(a)(ii), the death, retirement, resignation, removal, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company (including the bankruptcy of such Member) shall not in and of itself cause a dissolution of the Company to occur (and the Company, without such Member, shall continue), unless there are no remaining Members of the Company.

 

(b)                                 Dissolution of the Company shall be effective on the day on which the event occurs giving rise to the dissolution, but the Company shall not terminate until the assets of the Company shall have been distributed as provided herein and a certificate of cancellation of the Certificate of Formation has been filed with the Secretary of State.

 

Section 10.3.                                Application of Assets.  In connection with the liquidation of the Company, the assets of the Company shall be applied and distributed by the Distribution Committee in the following order of priority:

 

(a)                                 first, to creditors of the Company, including Members, in the order of priority provided by Law, and the creation or augmentation of a reserve of cash or other assets of the Company for contingent liabilities in an amount, if any, determined by the Distribution Committee to be appropriate for such purposes; and

 

(b)                                 thereafter, to the Members in accordance with the provisions of Section 3.1(f) hereof.

 

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ARTICLE XI.

 

ADDITIONAL TAX AND OTHER REQUIREMENTS

 

Section 11.1.                                Priorities.  No Member shall have any rights or priority over any other Members as to contributions or as to distributions or compensation by way of income, except as specifically provided in this Agreement.

 

Section 11.2.                                Entity Characterization.  It is the intention of the Members that the Company constitute a partnership for U.S. federal income tax purposes and, to the extent permitted under applicable Law, all other income tax purposes.  The Company shall use its reasonable best efforts to comply with all applicable Laws and regulations to ensure that the Company is treated as a partnership for U.S. federal income tax purposes.

 

Section 11.3.                                Internal Revenue Code Section 409A.  This Agreement is intended to comply with the requirements of Code Section 409A, including any applicable requirements for exclusion from coverage by such Code Section 409A.  Consistent with this intent, this Agreement shall be construed and administered in accordance with Code Section 409A and the Treasury Regulations and other guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the effective date of this Agreement.  In the event that the Board of Managers determines that any amount payable hereunder will be taxable to any Member under Section 409A of the Code, the Treasury Regulations or other guidance, prior to payment of such amount, the Board of Managers is hereby authorized and empowered, without further vote or action of the Members, (a) to amend this Agreement (including with retroactive effect) as the Board of Managers determines necessary or appropriate to preserve the intended tax treatment of any payments provided by this Agreement, and shall have the authority to execute any such amendment by and on behalf of each Member, and/or (b) to take such other actions as the Board of Managers determines necessary or appropriate to comply with the requirements of Code Section 409A.

 

ARTICLE XII.

 

DEFINITIONS

 

Any capitalized term used in this Agreement without definition shall have the meaning set forth below.

 

“ACC Balance” shall mean, with respect to a Member, the cumulative amount of all Non-Pro Rata Additional Capital Contributions made by such Member pursuant to Section 2.2.

 

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“ACC Income Preference Amount” shall mean, with respect to a Member, an amount sufficient to provide such Member a cumulative internal rate of return equal to the Prime Rate per annum plus 2% in respect of such Member’s ACC Balance from time to time, taking into account the date and amount of each addition to such ACC Balance and the date and amount of each prior distribution made pursuant to Section 3.1(e)(i) in respect of such ACC Balance.

 

“Accounting Period” shall mean, for the first period, the period commencing on the date of formation of the Company and ending on the next Adjustment Date.  All succeeding Accounting Periods shall commence on the day after an Adjustment Date and end on the next Adjustment Date.

 

“Act” shall have the meaning set forth in the recitals to this Agreement.

 

“Adjustment Date” shall mean (a) the last day of each Fiscal Year, (b) the date of any Liquidity Event or (c) any other day determined by the Board appropriate for an interim closing of the Company’s books.

 

“Affiliate” shall mean, with respect to any specified Person, any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.  For the purposes of this definition, the term “control” and its corollaries means (a) the direct or indirect ownership of 50% or more of the equity interests (or interests convertible within sixty (60) days into or otherwise exchangeable within sixty (60) days for equity interests) in a Person or (b) the possession of the direct or indirect right to vote 50% or more of the voting securities or elect 50% or more of the board of directors or other governing body of a Person (whether by securities ownership, contract or otherwise).  For the avoidance of doubt, for purposes of this Agreement, the KELP and the General Partner shall not be an Affiliate of OMAM, OM(US)H or Old Mutual.

 

“Agreement” shall mean this Fifth Amended and Restated Limited Liability Company Agreement, as it may be amended, restated or supplemented from time to time as herein provided.

 

“Approved Budget” shall have the meaning set forth in Section 6.9.

 

“Asset Value” means with respect to any asset of the Company, the asset’s adjusted tax basis for U.S. federal income tax purposes, except as follows: (i) the initial Asset Value of any asset contributed by a Member to the Company shall be its gross fair market value on the date of contribution as agreed to by the Company and such Member; (ii) the Asset Values of all Company assets will be adjusted to equal to their respective gross fair market values, with any gain or loss resulting from such adjustment taken into account, solely for book purposes, as net income or net loss (or items thereof) for purposes of Section 3.1(f), as of the date of (A) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital

 

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Contribution or in exchange for services, (B) the distribution by the Company of property as consideration for all or a portion of a Member’s interest in the Company, (C) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g), (D) a Liquidity Event and (D) such other time as determined by the Board; provided, however, that adjustments pursuant to clauses (ii)(A) and (ii)(B) shall be made only if such adjustments are necessary or appropriate to reflect the relative economic interests of the Members of the Company, (iii) the Asset Value of any Company asset distributed to any Member shall be adjusted to equal its gross fair market value as of the date of such distribution, unreduced by any liability secured by such asset; and (iv) the Asset Value of Company assets will be increased or decreased to reflect any adjustment to the adjusted basis of the assets under Sections 734(b) or 743(b), but only to the extent that the adjustment is taken into account in determining Capital Accounts under applicable Treasury Regulations provided, however, that Asset Values shall not be adjusted pursuant to this clause (iv) to the extent an adjustment pursuant to clause (ii) is made in connection with a transaction that would otherwise result in an adjustment pursuant to this clause (iv).  If the Asset Value of an asset of the Company has been determined or adjusted pursuant to this definition (other than clause (iii)), such Asset Value shall thereafter be adjusted by Depreciation taken into account with respect to such asset for purposes of computing Net Profits and Net Losses.

 

“Assumed Income Tax Rate” shall mean the highest effective marginal combined federal, state and local income tax rate for a Fiscal Year prescribed for any individual or corporation resident in Boston, Massachusetts (taking into account the deductibility of state and local income taxes for federal income tax purposes).

 

“Board” or “Board of Managers” shall have the meaning set forth in Section 6.1(a).

 

“Bonus Plan” shall mean the annual bonus plan dated as of April 1, 2011.

 

“Business Day” shall mean any day other than (a) Saturday and Sunday and (b) any other day on which banks located in Boston, Massachusetts are required or authorized by Law to remain closed.

 

“Buyback Limitation” shall mean that the Company (including for purposes of this definition purchases by the KELP of Interests) may not purchase more than 8% of the then outstanding Interests during any calendar year and may not purchase any Interests if such purchase could result in the Company not satisfying its Working Capital Requirements; provided, that the foregoing limitations may be waived or modified by the Consent of the Board of Managers.

 

“Capital Account” shall have the meaning set forth in Section 2.3.

 

“Capital Contribution” shall mean, with respect to a Member, the contribution to the capital of the Company by such Member.

 

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“Cause” shall mean (a) with respect to a KELP Partner who is subject to an employment agreement with the Company, “Cause” as defined in such agreement; and (b) with respect to any other KELP Partner, (i) participation in conduct constituting a violation of any federal or state law applicable to the securities industry, larceny, embezzlement, conversion or any other act involving the misappropriation of the Company’s funds in the course of employment or participation in any illegal conduct that causes material damage to the reputation of the Company, (ii) the willful refusal to follow reasonable and lawful directions from the Executive Committee or the Board of Managers, (iii) conviction of a felony or any final adjudication of commission of fraud against the Company, (iv) commission of any act of gross negligence or intentional misconduct in the performance or non-performance of such KELP Partner’s duties as an employee of the Company, including but not limited to a failure to disclose any conflict of interest that constitutes such gross negligence or intentional misconduct, or (v) a material breach by such KELP Partner of any agreement with the Company, or a willful violation of any Company policy; provided that if such breach is curable (including, by way of example, a misappropriation of funds), “Cause” shall mean such KELP Partner’s failure to cure such breach within forty-five (45) days’ after prior written notice of breach by the Board of Managers or the Chief Executive Officer of the Company of the breach.

 

“Certificate of Formation” shall mean the Certificate of Formation of Limited Liability Company of the Company as provided for pursuant to the Act, as originally filed with the office of the Secretary of State, as amended and restated from time to time as herein provided.

 

“Class A Annual Income Preference” shall mean an amount, as agreed by the Members from time to time, to be distributed to the Class A Member as set forth in Section 3.1(e)(ii).

 

“Class A Quarterly Income Preference” shall mean an amount, as agreed by the Members from time to time, to be distributed to the Class A Member as set forth in Section 3.1(e)(ii).

 

“Class A Interest” shall mean an Interest designated as Class A Interest.

 

“Class B Interest” shall mean an Interest designated as Class B Interest.

 

“Class B Valuation” shall mean, at any point in time, an amount equal to the product of (i) the FMV Multiple and (ii) the excess of Distributable Income for the most recent Valuation Period over the Class B Valuation Hurdle.

 

“Class B Valuation Hurdle” shall mean an appropriate amount as determined by the Members from time to time to reflect an accurate Class B Valuation.

 

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“Code” shall mean the Internal Revenue Code of 1986, as amended and any successor act thereto, and, to the extent applicable, any Treasury Regulations promulgated thereunder.

 

“Committee” shall mean the Executive Committee, the Remuneration Committee, the Distribution Committee and such other committees as may be established by the Board.

 

“Company” shall have the meaning specified in the preamble to this Agreement.

 

“Compensatory Property” shall have the meaning set forth in Section 3.5.

 

“Consent of the Board of Managers” shall have the meaning set forth in Section 6.1(d).

 

“Covenant Termination Date” shall have the meaning set forth in the KELP Agreement.

 

“Covered Person” shall mean (a) any Member or (b) any partner, equity holder, member, officer or director of a Member and (c) any natural person that is a member of the Board, a member of a Committee or an Officer.

 

“Depreciation” shall mean, for each Accounting Period, an amount equal to the depreciation, amortization and other cost recovery deductions allowable with respect to an asset for such Accounting Period, except that if the Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such Accounting Period, Depreciation shall be the amount which bears the same ratio to such beginning Asset Value as the federal income tax depreciation, amortization and other cost recovery deductions for such Accounting Period bears to such beginning adjusted basis; provided, however, that if the adjusted basis for federal income tax purposes of an asset as of the beginning of such Accounting Period is zero, Depreciation shall be determined with reference to such beginning Asset Value using any reasonable method selected by the Board.

 

“Disabling Conduct” shall mean, with respect to any Covered Person, fraud, willful misfeasance, conviction of a felony, a willful violation of Law having a material adverse effect on the Company, gross negligence or reckless disregard of duties in the conduct of such Person’s office or a material violation of this Agreement that, if curable, is not cured within 30 days after a written notice describing such violation has been given to such Covered Person.

 

“Discount Valuation” shall mean, at any point in time, 60% of the FMV Valuation at such time.

 

51

 

“Dispute” shall have the meaning set forth in Section 7.1(f).

 

“Distributable Income” shall mean, with respect to any period, the net income of the Company during such period determined in accordance with U.S. generally accepted accounting principles, consistently with past practice of the Company, but excluding (by adding back) amortization of intangibles, non-cash compensation expenses (except expenses attributable to non-cash compensatory awards of publicly-traded shares of Old Mutual), non-cash extraordinary items and non-cash non-recurring items (for the avoidance of doubt “non-cash non-recurring items” includes any non-cash charge or non-cash expense attributable to the issuance of Interests to the KELP), provided that (a) for purposes of determining the Class B Valuation, Distributable Income shall also exclude (by adding back) extraordinary and non-recurring items of all types (whether cash or non-cash), (b) for purposes of making distributions pursuant to Section 3.1 (but not for purposes of determining the Class B Valuation), Distributable Income shall be increased to the extent required pursuant to Section 8.4(e) and (c) any severance, termination or similar payment that OM(US)H is required to make to any employee or consultant of the Company pursuant to any employment or consulting agreement to which the Company is a party shall not be treated as a payment by or obligation of the Company for purposes of determining Distributable Income.

 

“Distributable Income Percentage” shall mean, with respect to each Member for an Accounting Period, the quotient expressed as a percentage determined by dividing the amount of Distributable Income distributable to such Member for such Accounting Period pursuant to Sections 3.1(e)(ii) and (iii) by the total Distributable Income distributable to all Members pursuant to such Sections for such Accounting Period.

 

“Distribution Committee” shall have the meaning set forth in Section 6.2.

 

“Distribution Policy” shall mean the policy of the Company with respect to distributions to Members, as reflected in Section 3.1.

 

“Effective Date” shall mean the date of the initial filing of the Certificate of Formation with the Secretary of State.

 

“Eligible Employee” shall have the meaning set forth in the KELP Agreement.

 

“Employed Limited Partner” shall have the meaning set forth in the KELP Agreement.

 

“Employee Make-Whole Amount” shall have the meaning set forth in Section 8.3(c).

 

“Event of Dissolution” shall have the meaning set forth in Section 10.2(a).

 

52

 

“Excess Class A Income Preference” shall mean, for purposes of Section 3.1(f)(i), the excess of the amount distributed to OMAM under Section 3.1(e)(ii) for the calendar year in which a Liquidity Event occurred over the Class A Annual Income Preference for such calendar year (such Class A Annual Income Preference to be pro rated to include only the portion of the calendar year preceding the Liquidity Event).

 

“Excess Working Capital Amount” shall mean the excess of working capital (determined in accordance with GAAP) as of December 31, 2007 over $12.5 million, which has been paid to OMAM.

 

“Executive Committee” shall have the meaning set forth in Section 6.2.

 

“Fiscal Year” shall mean the period beginning the Effective Date and ending the following December 31 and thereafter shall mean the annual period beginning each January 1 and ending the following December 31, except as otherwise required by the Code.

 

“FMV Multiple” shall mean six (6) unless such multiple has been adjusted in accordance with this Agreement.

 

“FMV Valuation” shall mean, at any point in time, the sum of (a) the KELP Income Percentage at such time multiplied by the Class B Valuation at such time and (b) the capital account balance of the KELP at such time, excluding all additions to such capital account balance attributable to capital contributions by the KELP.  The FMV Valuation shall be reviewed by the Board of Managers annually.

 

“For Cause Interest” shall have the meaning set forth in Section 8.3(a).

 

“For Cause KELP Interest” shall have the meaning set forth in Section 8.3(a).

 

“General Partner” shall have the meaning set forth in the KELP Agreement.

 

“Good Reason” shall mean, with respect to any KELP Partner who is subject to an employment agreement with the Company, “Good Reason” as defined in such agreement.

 

“Governmental Entity” shall mean any court, arbitrational tribunal, administrative agency or commission or other governmental or regulatory authority or agency.

 

“Indemnified Person” shall have the meaning set forth in Section 7.1(a).

 

“Initial OMAM Capital Account Amount” shall mean $1,250,000,000.

 

53

 

“Interest” shall mean the membership interest of a Member in the Company, designated as Class A Interest or Class B Interest, having the rights, powers and duties set forth in this Agreement, including any interest in and to the Net Profit and Net Loss of the Company and such Member’s right to receive distributions of the Company’s assets pursuant to this Agreement.

 

“IPO Transaction” shall mean a transaction in which a Person that beneficially owns, directly or indirectly, a majority of the Interests of the Company places its shares on a listed exchange as part of an initial public offering, provided that clause (c) of the definition of Liquidity Event shall not constitute an IPO Transaction.

 

“KELP” shall have the meaning set forth in the preamble hereto.

 

“KELP Advisory Managers” shall have the meaning set forth in Section 6.1(c)(ii).

 

“KELP Agreement” means the limited partnership agreement of the KELP, as amended and/or restated from time to time.

 

“KELP Income Percentage” shall mean a fraction (expressed as a percentage) the numerator of which is the Percentage Class B Interest held by the KELP and the denominator of which is the Percentage Class B Interest held by all Members.

 

“KELP Partner” shall mean a Person holding a partnership interest in the KELP.

 

“KELP Points” shall have the meaning set forth in the KELP Agreement.

 

“KELP ROFR Notice” shall have the meaning set forth in Section 8.5(c).

 

“KELP Voting Managers” shall have the meaning set forth in Section 6.1(c)(i).

 

“Law” or “Laws” shall mean any federal, state, local or foreign law, statute, ordinance, common law, or any rule, regulation, standard, judgment, order, writ, injunction, decree, arbitration award, agency requirement, license, or published policy or interpretation of any Governmental Entity.

 

“Liquidity Event” shall mean the consummation of (a) a sale of the Company or all or substantially all of the assets of the Company to a bona fide third party purchaser for value that is not affiliated with Old Mutual in a transaction or a series of related transactions; (b) a merger, consolidation, conversion or recapitalization of the Company, provided that any such merger, consolidation, conversion or recapitalization results in Old Mutual owning, directly or indirectly, less than 50% of the equity interests of the Company; or (c) an initial public offering of the equity interests of the Company (or

 

54

 

its successor) where a majority of the equity interests of the Company (or its successor) are placed on a listed exchange.

 

“Lock Up Period” shall mean the period commencing April 1, 2011 and ending on and including March 31, 2013.

 

“Majority in Interest of the KELP Partners” shall mean the approval of partners of the KELP holding a majority of the limited partner interests of the KELP, excluding consultants to the Company.

 

“Manager” shall have the meaning set forth in Section 6.1(a).

 

“Members” shall have the meaning set forth in the preamble to this Agreement.

 

“Net Profit” or “Net Loss” means, for any Accounting Period, an amount equal to the Company’s taxable income or taxable loss for such period, determined in accordance with Section 703 of the Code (for this purpose, all items of income, gain, loss and deduction required to be separately stated pursuant to Section 703(a)(1) of the Code shall be included in taxable income or loss), with the following adjustments (without duplication): (i) any income that is exempt from federal income tax and not otherwise taken into account in computing Net Profit or Net Loss shall be added to taxable income or loss; (ii) any expenditures of the Company described in Section 705(a)(2)(B) or that are treated as Section 705(a)(2)(B) of the Code expenditures pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net Profit or Net Loss, shall be subtracted from such taxable income or loss; (iii) gain or loss resulting from the disposition of an asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Asset Value of the property disposed of, notwithstanding that the adjusted tax basis differs from its Asset Value; (iv) in lieu of depreciation, amortization and other cost recovery deductions taken into account in computing taxable income or loss, there shall be taken into account Depreciation with respect to each asset of the Company for each such Accounting Period computed in accordance with the definition of Depreciation; and (v) to the extent an adjustment to the adjusted basis of a Company asset pursuant to Section 743(b) or 734(b) is required pursuant to applicable Treasury Regulations to be taken into account in determining Capital Accounts as a result of a distribution other than in complete liquidation of a Member’s interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Asset Value of an asset) or an item of loss (if the adjustment decreases the value of an asset) from the disposition of such asset, and shall be taken into account for purposes of computing Net Profit and Net Loss.  Notwithstanding any other provision of this Agreement to the contrary, any items specially allocated pursuant to Section 4.3  shall not be considered in determining Net Profit or Net Loss.

 

55

 

“Non Pro Rata Additional Capital Contribution” shall have the meaning set forth in Section 2.2 hereto.

 

“OFAC” shall have the meaning set forth in Section 6.8.

 

“Officer” shall have the meaning set forth in Section 6.4(a).

 

“Offset Amounts” shall have the meaning set forth in Section 8.3(a).

 

“Old Mutual” shall mean Old Mutual plc, a public limited company, domiciled in England and Wales with a registration number of 3591559.

 

“OMAM” shall have the meaning set forth in the preamble hereto.

 

“OMAM Managers” shall have the meaning set forth Section 6.1(b).

 

“OM(US)H” shall mean Old Mutual (U.S.) Holdings Inc., a Delaware corporation.

 

“Percentage Class A Interest” shall mean, with respect to each Member, the percentage Class A Interest held by such Member.

 

“Percentage Class B Interest” shall mean, with respect to each Member, the percentage Class B Interest held by such Member.

 

“Person” shall mean any individual or entity, including a corporation, partnership, association, limited liability company, limited liability partnership, joint-stock company, trust, unincorporated association, sole proprietorship, government or governmental agency or authority.

 

“Priority Buyer List” shall have the meaning set forth in Section 6.2(b)(ii).

 

“Prime Rate” shall mean a rate per annum equal, at the time of determination, to the highest “prime rate” then published in the “Money Rates” section of the Wall Street Journal, Eastern edition, or in such successor publication as shall be acceptable to the Distribution Committee.

 

“Proceeds” shall mean the total amount of consideration received by the Company (or the Members) with respect to a Liquidity Event less the amount of any transaction expenses of the Company incurred with respect to such Liquidity Event (including, without limitation, any legal, accounting, investment banking or appraisal fees).

 

“Proposed Mandatory Sale” shall have the meaning set forth in Section 8.5(a).

 

56

 

“Proposed ROFR Sale” shall have the meaning set forth in Section 8.5(b).

 

“Remuneration Committee” shall have the meaning set forth in Section 6.2.

 

“Required Sale Notice” shall have the meaning set forth in Section 8.5(b).

 

“Scheme of Authority” shall have the meaning set forth in Section 6.1(e).

 

“Secretary of State” shall mean the Secretary of State of the State of Delaware.

 

“Securities Act” shall have the meaning set forth Section 5.2.

 

“Segregated Client Mandated Capital” shall mean the amount of capital held by the Company, in excess of Working Capital Requirements, regulatory requirements or other short-term cash needs of the Company, solely to satisfy capital requirements of one or more clients of the Company.

 

“Standing Committee” shall have the meaning set forth in Section 6.2.

 

“Succession Plan” shall have the meaning set forth in Section 6.10.

 

“Trading Window” shall have the meaning set forth in the KELP Agreement.

 

“Transfer” shall mean any sale, transfer, assignment, conveyance, gift, bequest, pledge, mortgage, encumbrance, hypothecation or other disposition, or the act of so doing, as the context requires.

 

“Treasury Regulations” shall mean the federal income tax regulations, including any temporary or proposed regulations, promulgated under the Code, as such Treasury Regulations may be amended from time to time (it being understood that all references herein to specific sections of the Treasury Regulations shall be deemed also to refer to any corresponding provisions of succeeding Treasury Regulations).

 

“Unpaid ACC Income Preference Amount” shall mean, at a particular time of determination, the excess of: (a) the amount of a Member’s ACC Income Preference Amount over (b) the aggregate amount of distributions made to such Member pursuant to Section 3.1(e)(i).

 

“Unreturned Non Pro Rata Additional Capital Contribution” shall mean, at a particular time of determination, the excess of: (a) the amount of a Member’s Non Pro Rata Additional Capital Contribution over (b) the aggregate amount of any Non Pro Rata Additional Capital Contributions previously returned to such Member.

 

57

 

“Valuation Period” shall mean, at any point in time, the twelve month period ending as of either December 31st or June 30th, whichever is more recent.

 

“Working Capital Requirements” shall mean, with respect to any time, the requirement that the Company have an amount of cash at such time equal to six weeks of the Company’s operating expenses, as reasonably determined by the Distribution Committee, that may be applied to the working capital requirements of the Company (determined in light of expenditures contemplated by the Approved Budget), provided that such amount shall exclude cash held by the Company to meet regulatory requirements (if any).

 

ARTICLE XIII.

 

MISCELLANEOUS

 

Section 13.1.                                Notices.  Except as otherwise provided in this Agreement, any and all notices or other communications required or permitted under this Agreement shall be deemed duly given to any party (i) when delivered personally, (ii) when delivered, if sent by Federal Express or another nationally recognized overnight carrier, (iii) three days after sent by U.S. first class mail and (iv) when sent if sent by fax or email, provided that a copy is also sent that day by Federal Express or another nationally recognized overnight carrier.  All such notices in order to be effective shall be in writing and shall be addressed (to the recipient’s street address or fax number, as the case may be), if to the Company at its principal office address set forth in Section 1 hereof, to the attention of the Chief Executive Officer, phone: (617) 850-3516, fax: (617) 850-3616, and if to a Member at the last street address or fax number, as the case may be, of record on the Company’s books, and copies of such notices shall also be sent to the last such address for the recipient which is known to the sender, if different from the address so specified.  Copies of such notices shall also be sent to Old Mutual Asset Management, 200 Clarendon Street, 53rd Floor, Boston, MA 02116, Attention:  General Counsel, phone: (617) 369-7300, fax: (617) 369-7499.  Notice addresses may be changed at any time by notice as provided in this Section 13.1.

 

Section 13.2.                                Binding Provisions.  The terms of this Agreement shall be binding upon and shall inure to the benefit of (i) the Members and their respective successors, heirs and assigns and (ii) the Managers and any successors thereto designated pursuant to Section 6.1 hereof, provided that this Agreement shall inure to the benefit of successors and assigns only in the event of Transfers in compliance with Article VIII hereof.  None of the provisions of this Agreement shall be for the benefit of or enforceable by any Person not a party hereto, including any creditor of the Company (including any Member acting in its capacity as a creditor of the Company) or any creditor of any Member.

 

58

 

Section 13.3.                                Applicable Law; Submission to Jurisdiction.

 

(a)                                                   THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE NOTWITHSTANDING ANY CONFLICT OF LAW RULES TO THE CONTRARY. IN THE EVENT OF A CONFLICT BETWEEN ANY PROVISION OF THIS AGREEMENT AND ANY NONMANDATORY PROVISION OF THE ACT, THE PROVISION OF THIS AGREEMENT SHALL CONTROL AND TAKE PRECEDENCE.

 

(b)                                                   Except as otherwise provided in Section 7.1(f) herein, each party hereto (a) submits to the exclusive jurisdiction of the federal and state courts located in Wilmington, Delaware in any action or proceeding arising out of or relating to this Agreement or the formation, breach, termination or validity thereof, (b) agrees that all claims in respect of such action or proceeding may be heard and determined in such courts, (c) waives any claim of inconvenient forum or other challenge to venue in such court, (d) agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court and (e) waives any right it may have to a trial by jury with respect to any action or proceeding arising out of or relating to this Agreement.  Each party hereto agrees to accept service of any summons, complaint or other initial pleading made in the manner provided for the giving of notices in Section 13.1, provided that nothing in this Section 13.3 shall affect the right of any party hereto to serve such summons, complaint or other initial pleading in any other manner permitted by Law.

 

Section 13.4.                                Severability of Provisions.  If any provision of this Agreement is held to be unenforceable under applicable Law, the parties agree to renegotiate such provision in good faith.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of this Agreement shall be interpreted as if such provision were so excluded, and (iii) the balance of this Agreement shall be enforceable in accordance with its terms provided that this Agreement continues to reasonably and substantially reflect the intent of the parties expressed herein taking into account the exclusion of such unenforceable provision.

 

Section 13.5.                                Titles.  Section titles are for descriptive purposes only and shall not control or alter the meaning of this Agreement as set forth in the text.

 

Section 13.6.                                Amendments.  No amendment of this Agreement shall be valid or binding unless such amendment is made with the written consent of OM(US)H and the KELP, except as set forth in Section 8.7.  In the event that, due to a change in law or regulation applicable to the Company, the KELP, OMAM, OM(US)H or Old Mutual it becomes necessary to amend or modify this Agreement to avoid the Company, the KELP, OMAM, OM(US)H or Old Mutual from violating such law or regulation, OM(US)H and

 

59

 

the KELP shall cooperate reasonably with each other in amending or modifying this Agreement in a manner that avoids such violation, provided that, in meeting its obligations under this sentence, OM(US)H and the KELP shall seek to minimize, to the extent reasonably practicable, any material adverse changes to the rights and obligations of the Members under this Agreement.

 

Section 13.7.                                Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement.

 

Section 13.8.                                Further Actions.  Each Member shall execute and deliver such other certificates, agreements and documents, and take such other actions, as may reasonably be requested by the Board in connection with the formation of the Company and the achievement of its purposes or to give effect to the provisions of this Agreement, in each case as are not inconsistent with the terms and provisions of this Agreement, including any documents that the Board determines to be necessary or appropriate to form, qualify or continue the Company as a limited liability company in all jurisdictions in which the Company conducts or plans to conduct its investment and other activities and all such agreements, certificates, tax statements and other documents as may be required to be filed by or on behalf of the Company.

 

Section 13.9.                                Survival of Certain Provisions.  The obligations of each Member pursuant to Sections 3.3, 4.3, 9.3 and Article VII shall survive the termination or expiration of this Agreement and the dissolution, winding up and liquidation of the Company.

 

Section 13.10.                         Waiver of Partition.  Except as may otherwise be provided by Law in connection with the dissolution, winding up and liquidation of the Company, each Member hereby irrevocably waives any and all rights that it may have to maintain an action for partition of any of the Company’s property.

 

Section 13.11.                         Entire Agreement.  This Agreement, including any agreements referenced herein and the Certificate of Formation, which are hereby incorporated herein, constitutes the entire agreement between the parties hereto with respect to the transactions contemplated herein, and supersedes all prior understandings or agreements between the parties.

 

Section 13.12.                         Interpretation.  As used herein, the singular shall include the plural, and the masculine gender shall include the feminine and neuter, and vice-versa, unless the context otherwise requires.  Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  Any reference herein to “include”, “includes”, “including” and any derivation thereof shall be interpreted to be immediately followed by “without limitation”.  Any reference to any Section or paragraph shall be deemed to refer to a Section or paragraph of this Agreement, unless the context clearly

 

60

 

indicates otherwise.  Except as otherwise provided herein, whenever this Agreement refers to an employee of or consultant to the Company, such reference shall be deemed to include any person that is an employee of or consultant to a subsidiary of the Company, provided that no consultant to the Company or any subsidiary of the Company shall have voting rights under this Agreement or the KELP Agreement.  Except as otherwise provided herein, whenever this Agreement refers to the termination of employment of an employee, such reference shall be deemed to include the termination of a consulting arrangement with a consultant.

 

[Remainder of page intentionally left blank.]

 

61

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

 

	
 
    	
OLD MUTUAL ASSET MANAGERS (US) LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
Old Mutual (U.S.) Holdings Inc.,
    
	
 
    	
 
    	
its Sole Member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Peter L. Bain
    
	
 
    	
 
    	
Peter L. Bain
    
	
 
    	
 
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ACADIAN KELP LP
    
	
 
    	
By:
    	
Acadian KELP GP LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

 

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the date first above written.

 

	
 
    	
OLD MUTUAL ASSET MANAGERS (US) LLC
    
	
 
    	
 
    
	
 
    	
By:
    	
Old Mutual (U.S.) Holdings Inc.,
    
	
 
    	
 
    	
its Sole Member
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Peter L. Bain
    
	
 
    	
 
    	
Chief Executive Officer
    
	
 
    	
 
    	
 
    
	
 
    	
 
    
	
 
    	
ACADIAN KELP LP
    
	
 
    	
By:
    	
Acadian KELP GP LLC
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
/s/   Mark J. Minichiello
    
	
 
    	
 
    	
Name: Mark J. Minichiello
    
	
 
    	
 
    	
Title: Secretary
    

 

 

Table of Contents

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I.
    	
 
    
	
 
    	
 
    
	
FORMATION
    	
 
    
	
 
    	
 
    	
 
    
	
Section 1.1.
    	
Continuation
    	
2
    
	
Section 1.2.
    	
Company Name
    	
3
    
	
Section 1.3.
    	
The Certificate of Formation, Etc.
    	
3
    
	
Section 1.4.
    	
Purpose
    	
3
    
	
Section 1.5.
    	
Powers
    	
3
    
	
Section 1.6.
    	
Office; Registered Office
    	
3
    
	
Section 1.7.
    	
Registered Agent
    	
3
    
	
Section 1.8.
    	
Members and Membership Interests
    	
3
    
	
 
    	
 
    	
 
    
	
ARTICLE II.
    	
 
    
	
 
    	
 
    
	
CAPITAL   CONTRIBUTIONS; CAPITAL ACCOUNTS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 2.1.
    	
Initial Capital Contributions
    	
4
    
	
Section 2.2.
    	
Additional Capital Contributions
    	
4
    
	
Section 2.3.
    	
Capital Accounts
    	
4
    
	
Section 2.4.
    	
Withdrawals or Loans
    	
5
    
	
Section 2.5.
    	
Negative Capital Accounts
    	
6
    
	
Section 2.6.
    	
No Interest
    	
6
    
	
 
    	
 
    	
 
    
	
ARTICLE III.
    	
 
    
	
 
    	
 
    
	
DISTRIBUTIONS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 3.1.
    	
Distributions
    	
6
    
	
Section 3.2.
    	
Tax Distributions
    	
9
    
	
Section 3.3.
    	
Withholding; Tax Indemnification
    	
9
    
	
Section 3.4.
    	
Overriding Provision
    	
9
    
	
Section 3.5.
    	
Special Distributions to OMAM
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE IV.
    	
 
    
	
 
    	
 
    
	
ALLOCATIONS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 4.1.
    	
Allocations of Net Profit and Net Loss
    	
10
    
	
Section 4.2.
    	
Allocations of Book Income and Loss
    	
12
    
	
Section 4.3.
    	
Regulatory and Special Allocations
    	
12
    
	
Section 4.4.
    	
Tax Allocations; Sections 704(c)
    	
14
    
	
Section 4.5.
    	
Advances on Member’s Distributive Shares of Net Profit
    	
15
    

 

2

 

	
Section 4.6.
    	
Transfer or Assignment
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE V.
    	
 
    
	
 
    	
 
    
	
MEMBERS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 5.1.
    	
Limited Liability
    	
15
    
	
Section 5.2.
    	
Certificates
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE VI.
    	
 
    
	
 
    	
 
    
	
BOARD;   COMMITTEES; OFFICERS; ACTIONS REQUIRING CONSENT OF BOARD
    	
 
    
	
 
    	
 
    	
 
    
	
Section 6.1.
    	
Board
    	
16
    
	
Section 6.2.
    	
Committees
    	
19
    
	
Section 6.3.
    	
Procedures
    	
22
    
	
Section 6.4.
    	
Officers
    	
24
    
	
Section 6.5.
    	
“Managers”; Power to Bind the Company
    	
25
    
	
Section 6.6.
    	
Standard of Care for Managers; Liability of Covered   Persons
    	
26
    
	
Section 6.7.
    	
Actions Requiring Consent of the Board of Managers
    	
26
    
	
Section 6.8.
    	
Covenants Regarding OFAC
    	
28
    
	
Section 6.9.
    	
Approved Budget
    	
29
    
	
Section 6.10.
    	
Succession Planning
    	
29
    
	
Section 6.11.
    	
Shared Services
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE VII.
    	
 
    
	
 
    	
 
    
	
INDEMNIFICATION
    	
 
    
	
 
    	
 
    	
 
    
	
Section 7.1.
    	
Indemnity
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII.
    	
 
    
	
 
    	
 
    
	
TRANSFERS   OF INTERESTS;
    	
 
    
	
ADDITIONAL   MEMBERS; RESIGNATIONS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 8.1.
    	
Transfers
    	
32
    
	
Section 8.2.
    	
Resignations, Etc.
    	
34
    
	
Section 8.3.
    	
Put, Call and Redemption Rights — Termination of   Employment
    	
34
    
	
Section 8.4.
    	
Put, Call and Redemption Rights — Other
    	
39
    
	
Section 8.5.
    	
Mandatory Sale; Right of First Refusal
    	
40
    
	
 
    	
 
    	
 
    
	
ARTICLE IX.
    	
 
    
	
 
    	
 
    
	
BOOKS;   ACCOUNTING; TAX ELECTIONS; REPORTS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 9.1.
    	
Books and Records
    	
42
    
	
Section 9.2.
    	
Reports
    	
43
    

 

3

 

	
Section 9.3.
    	
Filings of Returns and Other Writings; Tax Matters   Partner
    	
43
    
	
Section 9.4.
    	
Banking
    	
43
    
	
Section 9.5.
    	
Financial Information
    	
44
    
	
Section 9.6.
    	
Confidential Information
    	
45
    
	
 
    	
 
    	
 
    
	
ARTICLE X.
    	
 
    
	
 
    	
 
    
	
TERM;   TERMINATION
    	
 
    
	
 
    	
 
    	
 
    
	
Section 10.1.
    	
Term
    	
45
    
	
Section 10.2.
    	
Events of Dissolution
    	
45
    
	
Section 10.3.
    	
Application of Assets
    	
46
    
	
 
    	
 
    	
 
    
	
ARTICLE XI.
    	
 
    
	
 
    	
 
    
	
ADDITIONAL   TAX AND OTHER REQUIREMENTS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 11.1.
    	
Priorities
    	
47
    
	
Section 11.2.
    	
Entity Characterization
    	
47
    
	
Section 11.3.
    	
Internal Revenue Code Section 409A
    	
47
    
	
 
    	
 
    	
 
    
	
ARTICLE XII.
    	
 
    
	
 
    	
 
    
	
DEFINITIONS
    	
 
    
	
 
    	
 
    
	
ARTICLE XIII.
    	
 
    
	
 
    	
 
    
	
MISCELLANEOUS
    	
 
    
	
 
    	
 
    	
 
    
	
Section 13.1.
    	
Notices
    	
58
    
	
Section 13.2.
    	
Binding Provisions
    	
58
    
	
Section 13.3.
    	
Applicable Law; Submission to Jurisdiction
    	
59
    
	
Section 13.4.
    	
Severability of Provisions
    	
59
    
	
Section 13.5.
    	
Titles
    	
59
    
	
Section 13.6.
    	
Amendments
    	
59
    
	
Section 13.7.
    	
Counterparts
    	
60
    
	
Section 13.8.
    	
Further Actions
    	
60
    
	
Section 13.9.
    	
Survival of Certain Provisions
    	
60
    
	
Section 13.10.
    	
Waiver of Partition
    	
60
    
	
Section 13.11.
    	
Entire Agreement
    	
60
    
	
Section 13.12.
    	
Interpretation
    	
60
    

 

4

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