Document:

ex10_1.htm

Exhibit 10.1

 

	

 

 

H.D.D. LLC

a California Limited Liability Company

 

 

 

 

 

THIRD AMENDED AND RESTATED

OPERATING AGREEMENT

 

 

 

DATED AS OF JUNE 19, 2013

 

 

 

THE LIMITED LIABILITY COMPANY INTERESTS IN H.D.D. LLC HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS AND ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE SECURITIES LAWS OF ANY STATE AND ANY OTHER APPLICABLE SECURITIES LAWS; (II) THE TERMS AND CONDITIONS OF THIS THIRD AMENDED AND RESTATED OPERATING AGREEMENT; AND (III) ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BETWEEN THE MANAGING MEMBER AND THE APPLICABLE MEMBER. THE LIMITED LIABILITY COMPANY INTERESTS MAY NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS, THIS THIRD AMENDED AND RESTATED OPERATING AGREEMENT, AND ANY OTHER TERMS AND CONDITIONS AGREED TO IN WRITING BY THE MANAGING MEMBER AND THE APPLICABLE MEMBER. THEREFORE, PURCHASERS AND OTHER TRANSFEREES OF SUCH LIMITED LIABILITY COMPANY INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT OR ACQUISITION FOR AN INDEFINITE PERIOD OF TIME.

 

  

  

  

 

TABLE OF CONTENTS

 

	  	
PAGE

	  	  
	
ARTICLE I            

	
DEFINITIONS

	
1

	               	
Section 1.1             

	
Definitions

	
1

	  	
Section 1.2

	
Terms Generally

	
9

	
ARTICLE II

	
GENERAL PROVISIONS

	
10

	  	
Section 2.1

	
Formation

	
10

	  	
Section 2.2

	
Name

	
10

	  	
Section 2.3

	
Term

	
11

	  	
Section 2.4

	
Purpose; Powers

	
11

	  	
Section 2.5

	
Existence and Good Standing; Foreign Qualification

	
11

	  	
Section 2.6

	
Registered Office; Registered Agent; Principal Office; Other Offices

	
12

	  	
Section 2.7

	
No State Law Partnership

	
12

	  	
Section 2.8

	
Admission

	
12

	
ARTICLE III

	
CAPITALIZATION

	

13

	  	
Section 3.1

	
Units; Initial Capitalization; Schedules

	

13

	  	
Section 3.2

	
Authorization and Issuance of Additional Units

	
13

	  	
Section 3.3

	
Capital Accounts

	
14

	  	
Section 3.4

	
No Withdrawal

	
17

	  	
Section 3.5

	
Loans From Members

	
17

	  	
Section 3.6

	
No Right of Partition

	
17

	  	
Section 3.7

	
Non-Certification of Units; Legend; Units are Securities

	
17

	
ARTICLE IV

	
DISTRIBUTIONS

	
19

	  	
Section 4.1

	
Distributions

	
19

	  	
Section 4.2

	
Successors

	
19

	  	
Section 4.3

	
Tax Distributions

	

20

	  	
Section 4.4

	
Withholding

	
20

	  	
Section 4.5

	
Security Interest and Right of Set Off; Indemnification

	
20

	  	
Section 4.6

	
Certain Distributions

	

21

	  	
Section 4.7

	
Limitation

	
21

	
ARTICLE V

	
ALLOCATIONS

	
21

	  	
Section 5.1

	
Allocations for Capital Account Purposes

	
21

 

  

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TABLE OF CONTENTS

(continued)

	  	  	  	
Page

	  	  	  	  
	               	
Section 5.2             

	
Allocations for Tax Purposes

	
24

	  	
Section 5.3

	
Members’ Tax Reporting

	

26

	  	
Section 5.4

	
Certain Costs and Expenses

	

26

	
ARTICLE VI            

	
MANAGEMENT

	
26

	  	
Section 6.1

	
Managing Member; Delegation of Authority and Duties

	
26

	  	
Section 6.2

	
Officers

	
28

	  	
Section 6.3

	
Liability of Members

	
29

	  	
Section 6.4

	
Indemnification by the Company

	

30

	  	
Section 6.5

	
Investment Representations of Members

	
30

	
ARTICLE VII

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

	
30

	  	
Section 7.1

	
Member Withdrawal

	
30

	  	
Section 7.2

	
Dissolution

	
30

	  	
Section 7.3

	
Transfer by Members

	

32

	  	
Section 7.4

	
Admission or Substitution of New Members

	
32

	  	
Section 7.5

	
Additional Requirements

	
34

	  	
Section 7.6

	
Mandatory Exchange

	
34

	  	
Section 7.7

	
Bankruptcy

	
34

	
ARTICLE VIII

	
BOOKS AND RECORDS; FINANCIAL STATEMENTS AND OTHER INFORMATION; TAX MATTERS

	
34

	  	
Section 8.1

	
Books and Records

	
34

	  	
Section 8.2

	
Information

	

35

	  	
Section 8.3

	
Fiscal Year

	
35

	  	
Section 8.4

	
Certain Tax Matters

	
35

	
ARTICLE IX

	
MISCELLANEOUS

	

37

	  	
Section 9.1

	
Separate Agreements; Schedules

	

37

	  	
Section 9.2

	
Governing Law

	
37

	  	
Section 9.3

	
Successors and Assigns

	
37

	  	
Section 9.4

	
Amendments and Waivers

	
37

	  	
Section 9.5

	
Notices

	
38

	  	
Section 9.6

	
Counterparts

	
39

 

  

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TABLE OF CONTENTS

(continued)

	               	  	  	
Page

	  	  	  	  
	  	
Section 9.7             

	
Power of Attorney

	
39

	  	
Section 9.8

	
Entire Agreement

	
39

	  	
Section 9.9

	
Remedies

	
39

	  	
Section 9.10

	
Severability

	

40

	  	
Section 9.11

	
Creditors

	
40

	  	
Section 9.12

	
Waiver

	
40

	  	
Section 9.13

	
Further Action

	
40

	  	
Section 9.14

	
Delivery by Facsimile or Email

	
40

 

 

 

 

 

 

  

iii

  

 

THIRD AMENDED AND RESTATED

OPERATING AGREEMENT

OF

H.D.D. LLC

A California Limited Liability Company

 

This THIRD AMENDED AND RESTATED OPERATING AGREEMENT of H.D.D. LLC (the “Company”), dated and effective as of June 19, 2013 (this “Agreement”), is adopted, executed and agreed to, for good and valuable consideration, by and among the Members (as defined below).

 

WHEREAS, on October 23, 2007, Articles of Organization for the Company, as organized under the laws of the State of California, were filed with the California Secretary of State as file number 200729610091.

 

WHEREAS, the Company was governed by that certain Operating Agreement for H.D.D. LLC, as of October 30, 2007 (the “Original Agreement”);

 

WHEREAS, as of June 4, 2008, the Original Agreement was amended and restated in accordance with its terms (the “First Amended Agreement”);

 

WHEREAS, as of January 1, 2010, the First Amended Agreement was amended and restated in accordance with its terms (the “Second Amended Agreement”);

 

WHEREAS, the Members (as defined herein) wish to amend and restate the Second Amended Agreement in accordance with its terms and, in connection therewith, to (1) convert all outstanding limited liability company interests in the Company into LLC Units (as defined below) and (2) admit Truett-Hurst, Inc., a Delaware corporation, as sole Managing Member of the Company; and

 

WHEREAS, the parties hereto desire to enter into this Third Amended and Restated Operating Agreement of the Company.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto, each intending to be legally bound, agree that the Second Amended Agreement is hereby amended and restated in its entirety as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1             Definitions.

 

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

 

  

1

  

 

“Act” means the Beverly-Killea Limited Liability Company Act (California Corporations Code Sections 17000-17657), as it may be amended from time to time, and any successor to the Act.

 

“Additional Member” means any Person that has been admitted to the Company as a Member pursuant to Section 7.4 by virtue of having received its Membership Interest from the Company and not from any other Member or Assignee.

 

“Adjusted Capital Account” means the Capital Account maintained for each Member as of the end of each Taxable Year of the Company, (a) increased by any amounts that such Member is obligated to restore under the standards set by Treasury Regulations Section 1.704-1(b)(2)(ii)(c) (or is deemed obligated to restore under Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5)) and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such Taxable Year, are reasonably expected to be allocated to such Member in subsequent years under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulations Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions that, as of the end of such Taxable Year, are reasonably expected to be made to such Member in subsequent years in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Member’s Capital Account that are reasonably expected to occur during (or prior to) the year in which such distributions are reasonably expected to be made (other than increases as a result of a minimum gain chargeback pursuant to Section 5.1(b)(i) or Section 5.1(b)(ii)). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. The “Adjusted Capital Account” of a Member in respect of a Unit shall be the amount that such Adjusted Capital Account would be if such Unit were the only interest in the Company held by such Member from and after the date on which such Unit was first issued.

 

“Adjusted Property” means any property the Carrying Value of which has been adjusted pursuant to Section 3.3(c)(i) or Section 3.3(c)(ii).

 

“Affiliate” when used with reference to another Person means any Person (other than the Company), directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, such other Person. In addition, Affiliates of a Member shall include all its directors, managers, officers and employees in their capacities as such.

 

“Agreed Value” of any Contributed Property means the Fair Market Value of such property or other consideration at the time of contribution as determined by the Managing Member, without taking into account any liabilities to which such Contributed Property was subject at such time. The Managing Member shall use such method as it determines to be appropriate to allocate the aggregate Agreed Value of Contributed Properties contributed to the Company in a single or integrated transaction among each separate property on a basis proportional to the Fair Market Value of each Contributed Property.

 

“Agreement” has the meaning set forth in the recitals hereto.

 

“Articles of Organization” has the meaning set forth in Section 2.1.

 

  

2

  

 

“Assignee” means any Transferee to which a Member or another Assignee has Transferred all or a portion of its interest in the Company in accordance with the terms of this Agreement, but that is not admitted to the Company as a Member.

 

“Assumed Tax Rate” means, for any Taxable Year, the highest marginal effective rate of federal, state and local income tax applicable to an individual resident in Healdsburg, California (or, if higher, a corporation doing business in Healdsburg, California), taking account of any differences in rates applicable to ordinary income and capital gains and any allowable deductions in respect of such state and local taxes in computing a Member’s liability for federal income tax.

 

“Bankruptcy” means, with respect to any Person, being the subject of an order for relief under Title 11 of the United States Code, or any successor statute or other statute in any foreign jurisdiction having like import or effect.

 

“Book-Tax Disparity” means, with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in San Francisco, California are authorized or required to close.

 

“Capital Account” means the capital account maintained for a Member pursuant to Section 3.3.

 

“Capital Contribution” means any cash, cash equivalents or the Fair Market Value of other property that a Member contributes to the Company with respect to any Unit or other Equity Securities issued by the Company (net of liabilities assumed by the Company or to which such property is subject).

 

“Carrying Value” means (a) with respect to a Contributed Property, subject to the following sentence, the Agreed Value of such property reduced (but not below zero) by all depreciation, amortization and cost recovery deductions charged to the Members’ Capital Accounts in respect of such Contributed Property, and (b) with respect to any other Company property, subject to the following sentence, the adjusted basis of such property for federal income tax purposes, all as of the time of determination. The Carrying Value of any property shall be adjusted from time to time in accordance with Section 3.3(c)(i) and Section 3.3(c)(ii) and to reflect changes, additions or other adjustments to the Carrying Value for dispositions and acquisitions of Company properties, as deemed appropriate by the Managing Member.

 

“Class” means the classes into which the limited liability company interests in the Company created in accordance with Section 3.1 and Section 3.2(a) may be classified or divided from time to time by the Managing Member in its sole discretion pursuant to the provisions of this Agreement. As of the date of this Agreement the only Class is the LLC Units. Subclasses within a Class shall not be separate Classes for purposes of this Agreement. For all purposes hereunder and under the Act, only such Classes expressly established under this Agreement, including by the Managing Member in accordance with this Agreement, shall be deemed to be a Class or group of limited liability company interests in the Company. For the avoidance of doubt, to the extent that the Managing Member holds limited liability company interests of any Class, the Managing Member shall not be deemed to hold a separate Class of such interests from any other Member because it is the Managing Member.

 

  

3

  

 

“Class A Membership Interest” has the meaning set forth in the Second Amended Agreement.

 

“Class B Membership Interest” has the meaning set forth in the Second Amended Agreement.

 

“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

 

“Company” has the meaning set forth in the preamble hereto.

 

“Company Minimum Gain” has the meaning set forth for the term “partnership minimum gain” in Treasury Regulations Section 1.704-2(d).

 

“Contributed Property” means any property contributed to the Company by a Member.

 

“Control” means, when used with reference to any Person, the power to direct the management or policies of such Person, directly or indirectly, by or through stock or other equity ownership, agency or otherwise, or pursuant to or in connection with an agreement, arrangement or other understanding (written or oral); and the terms “controlling” and “controlled” shall have meanings correlative to the foregoing.

 

“Distributable Assets” means, with respect to any fiscal period, all cash receipts (including from any operating, investing and financing activities) and (if distribution thereof is determined to be necessary or desirable by the Managing Member) other assets of the Company from any and all sources, reduced by operating cash expenses, contributions of capital to Subsidiaries of the Company and payments (if any) required to be made in connection with any loan to the Company and any reserve for contingencies or escrow required, in each case, as is determined by the Managing Member in its sole discretion.

 

“Economic Risk of Loss” has the meaning set forth in Section 5.1(b)(vi).

 

“Equity Securities” means, as applicable, (i) any capital stock, limited liability company or membership interests, partnership interests, or other equity interest, (ii) any securities directly or indirectly convertible into or exchangeable for any capital stock, limited liability company or membership interests, partnership interests, or other equity interest or containing any profit participation features, (iii) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, limited liability company or membership interests, partnership interest, other equity interest or securities containing any profit participation features or to subscribe for or to purchase any securities directly or indirectly convertible into or exchangeable for any capital stock, limited liability company or membership interests, partnership interest, other equity interests or securities containing any profit participation features, (iv) any equity appreciation rights, phantom equity rights or other similar rights, or (v) any Equity Securities issued or issuable with respect to the securities referred to in clauses (i) through (iv) above in connection with a combination, recapitalization, merger, consolidation or other reorganization.

 

  

4

  

 

“Exchange Agreement” means the Exchange Agreement, dated on or about the date hereof among the Managing Member and the LLC Unitholders (as defined therein) from time to time party thereto, as it may be amended or supplemented from time to time.

 

“Fair Market Value” means (i) in reference to a particular Unit or other Equity Security issued by the Company or, as the case may be, all of the outstanding Units or other Equity Securities issued by the Company, the hypothetical amount that would be distributed with respect to such Unit(s) or Equity Security(ies), as determined pursuant to an appraisal, which appraisal shall be subject to the approval of the Managing Member, performed at the expense of the Company by (A) the Company or any of its Subsidiaries or (B) an investment bank, accounting firm or other Person of national standing having particular expertise in the valuation of businesses comparable to that of the Company selected by the Managing Member, and where such appraisal (1) determines the net equity value of the Company, and (2) assumes the distribution to the Members pursuant to Section 4.1 and ARTICLE VII of the proceeds that would hypothetically be received with respect to such Unit(s) or other Equity Security(ies) issued by the Company based on such net equity value, and (ii) in reference to assets or securities other than Units or other Equity Securities issued by the Company, the fair market value for such assets or securities as between a willing buyer and a willing seller in an arm’s length transaction occurring on the date of valuation, taking into account all relevant factors determinative of value, as is determined by the Managing Member in its sole discretion.

 

“First Amended Agreement” has the meaning set forth in the recitals hereto.

 

“Fiscal Year” means the fiscal year of the Company, which unless otherwise determined by the Managing Member in its sole discretion shall be each period ending on June 30.

 

“GAAP” means accounting principles generally accepted in the United States of America, consistently applied and maintained throughout the applicable periods.

 

“Good Faith” shall mean a Person having acted in good faith and in a manner such Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to a criminal proceeding, having had no reasonable cause to believe such Person’s conduct was unlawful.

 

“Governmental Entity” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including any court, in each case, having jurisdiction over the Company or any of its Subsidiaries or any of the property or other assets of the Company or any of its Subsidiaries.

 

  

5

  

 

“HSR Act” has the meaning set forth in Section 7.2(f).

 

“Indemnified Person” has the meaning set forth in Section 6.4.

 

“LLC Units” has the meaning set forth in Section 3.1.

 

“Majority in Interest of the Members” means more than 50 percent of the interests of the Members in current profits of the Company.

 

“Managing Member” means Truett-Hurst, Inc., a Delaware corporation, and any assignee to which the managing member of the Company Transfers all Units and other Equity Securities held by such managing member of the Company that is admitted to the Company as the managing member of the Company, in its capacity as the managing member of the Company.

 

“Member” means each Person listed on Annex A hereto on the date hereof (including the Managing Member) and each other Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Act. The Members shall constitute the “members” (as such term is defined in the Act) of the Company.  Any reference in this Agreement to any Member shall include such Member’s Successors in Interest to the extent such Successors in Interest have become Substituted Members in accordance with the provisions of this Agreement. Except as otherwise set forth herein or in the Act, the Members shall constitute a single Class or group of members of the Company for all purposes of the Act and this Agreement.

 

“Member Nonrecourse Debt” has the meaning set forth for the term “partner nonrecourse debt” in Treasury Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Debt Minimum Gain” has the meaning set forth in Treasury Regulations Section 1.704-2(i)(2).

 

“Member Nonrecourse Deduction” has the meaning set forth for the term “partner nonrecourse deduction” in Treasury Regulations Section 1.704-2(i)(2).

 

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

 

“Membership Interest Certificate” has the meaning set forth in Section 3.7(b)(i).

 

“Net Agreed Value” means, (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Company upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Member by the Company, the Company’s Carrying Value of such property (as adjusted pursuant to Section 3.3(c)(ii)) at the time such property is distributed, reduced by any liabilities either assumed by such Member upon such distribution or to which such property is subject at the time of distribution.

 

“Net Income” means, for any Taxable Year, the excess, if any, of the Company’s items of income and gain for such Taxable Year over the Company’s items of loss and deduction for such Taxable Year. The items included in the calculation of Net Income shall be determined in accordance with Section 3.3(b) and shall not include any items specially allocated under Section 5.1(b).

 

  

6

  

 

“Net Loss” means, for any Taxable Year, the excess, if any, of the Company’s items of loss and deduction for such Taxable Year over the Company’s items of income and gain for such Taxable Year. The items included in the calculation of Net Loss shall be determined in accordance with Section 3.3(b) and shall not include any items specially allocated under Section 5.1(b).

 

“Nonrecourse Deductions” means any and all items of loss, deduction, or expenditure (including, without limitation, any expenditure described in Section 705(a)(2)(B) of the Code) that, in accordance with the principles of Treasury Regulations Section 1.704-2(b), are attributable to a Nonrecourse Liability.

 

“Nonrecourse Liability” has the meaning set forth in Treasury Regulations Section 1.752-1(a)(2).

 

“Officer” means each Person designated as an officer of the Company pursuant to and in accordance with the provisions of Section 6.2, subject to any resolution of the Managing Member appointing such Person as an officer of the Company or relating to such appointment.

 

“Original Agreement” has the meaning set forth in the recitals hereof.

 

“Percentage Interest” means, with respect to any Member as of any date of determination, (a) the number of LLC Units held by such Member at such time dividend by (b) the number of LLC Units held by all Members at such time.

 

“Person” means an individual, a partnership (including a limited partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.

 

“Pledge” means pledge, grant a security interest in, create a lien on, assign the right to receive distributions or proceeds from, or otherwise encumber, directly or indirectly, or any act of the foregoing.

 

“Proceeding” has the meaning set forth in Section 6.4.

 

“Quarterly Estimated Tax Periods” means the two, three, and four calendar month periods with respect to which Federal quarterly estimated tax payments are made. The first such period begins on January 1 and ends on March 31. The second such period begins on April 1 and ends on May 31. The third such period begins on June 1 and ends on August 31. The fourth such period begins on September 1 and ends on December 31.

 

“Required Allocations” means (a) any limitation imposed on any allocation of Net Losses under Section 5.1(b) and (b) any allocation of an item of income, gain, loss or deduction pursuant to Section 5.1(b)(i), 5.1(b)(ii), 5.1(b)(iii), 5.1(b)(vi) or 5.1(b)(viii).

 

  

7

  

 

“Residual Gain” or “Residual Loss” means any item of gain or loss, as the case may be, of the Company recognized for federal income tax purposes resulting from a sale, exchange or other disposition of a Contributed Property or Adjusted Property, to the extent such item of gain or loss is not allocated pursuant to Section 5.2(b)(i)(A) or 5.2(b)(ii)(A), respectively, to eliminate Book-Tax Disparities.

 

“Schedule of Members” has the meaning set forth in Section 3.1(b).

 

“Second Amended Agreement” has the meaning set forth in the recitals hereto.

 

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall Control the management of any such limited liability company, partnership, association or other business entity. For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

 

“Substituted Member” means any Person that has been admitted to the Company as a Member pursuant to Section 7.4 by virtue of such Person receiving all or a portion of a Membership Interest from a Member or an Assignee and not from the Company.

 

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

 

“Tax Distribution” has the meaning set forth in Section 4.3.

 

“Tax Matters Member” has the meaning set forth in Section 8.4(d).

 

“Tax Receivable Agreement” means the Tax Receivable Agreement, dated on or about the date hereof, among the Managing Member and the LLC Unitholders (as defined in the Exchange Agreement) from time to time party thereto, as it may be amended or supplemented from time to time.

 

  

8

  

 

“Taxable Year” means the period ending on December 31, unless otherwise determined by the Managing Member in accordance with the requirements of Code Section 706 and the Treasury Regulations thereunder.

 

“Transfer” means sell, assign, convey, contribute, give, or otherwise transfer, whether directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, or any act of the foregoing, but excludes Pledge or any act of Pledging. The terms “Transferee,” “Transferor,” “Transferred,” “Transferring Member,” “Transferor Member” and other forms of the word “Transfer” shall have the correlative meanings.

 

“Treasury Regulations” means the regulations, including temporary regulations, promulgated by the United States Treasury Department under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

“Units” means the LLC Units and any other Class of limited liability company interests in the Company denominated as “Units” that is established in accordance with this Agreement, which shall constitute limited liability company interests in the Company as provided in this Agreement and under the Act, entitling the holders thereof to the relative rights, title and interests in the profits, losses, deductions and credits of the Company at any particular time as set forth in this Agreement, and any and all other benefits to which a holder thereof may be entitled as a Member as provided in this Agreement, together with the obligations of such Member to comply with all terms and provisions of this Agreement.

 

“Unrealized Gain” attributable to any item of Company property means, as of any date of determination, the excess, if any, of (a) the fair market value of such property as of such date (as determined under Section 3.3(c)) over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 3.3(c) as of such date).

 

“Unrealized Loss” attributable to any item of Company property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 3.3(c) as of such date) over (b) the fair market value of such property as of such date (as determined under Section 3.3(c)).

 

Section 1.2             Terms Generally. In this Agreement, unless otherwise specified or where the context otherwise requires:

 

(a)           the headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement;

 

(b)           words importing any gender shall include other genders;

 

(c)           words importing the singular only shall include the plural and vice versa;

 

(d)           the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation”;

 

  

9

  

 

(e)           the words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(f)            references to “Articles,” “Exhibits,” “Sections,” “Schedules” or “Annexes” shall be to Articles, Exhibits, Sections, Schedules or Annexes of or to this Agreement;

 

(g)           references to any Person include the successors and permitted assigns of such Person;

 

(h)           the use of the words “or,” “either” and “any” shall not be exclusive;

 

(i)            wherever a conflict exists between this Agreement and any other agreement among parties hereto, this Agreement shall control but solely to the extent of such conflict;

 

(j)            references to “$” or “dollars” means the lawful currency of the United States of America;

 

(k)           references to any agreement, contract or schedule, unless otherwise stated, are to such agreement, contract or schedule as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; and

 

(l)            the parties hereto have participated collectively in the negotiation and drafting of this Agreement; accordingly, in the event an ambiguity or question of intent or interpretation arises, it is the intention of the parties that this Agreement shall be construed as if drafted collectively by the parties hereto, and that no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provisions of this Agreement.

 

ARTICLE II

GENERAL PROVISIONS

 

Section 2.1             Formation. The Company was formed as a California limited liability company on October 23, 2007 by the execution and filing Articles of Organization of the Company (the “Articles of Organization”) by an authorized person under and pursuant to the Act and the execution of the Original Agreement. The Members agree to continue the Company as a limited liability company under the Act, upon the terms and subject to the conditions set forth in this Agreement. The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control.

 

Section 2.2             Name. The name of the Company is “H.D.D. LLC,” and all Company business shall be conducted in that name or in such other names that comply with applicable law as the Managing Member may select from time to time. Subject to the Act, the Managing Member may change the name of the Company.  The Managing Member may amend this Agreement to reflect such change at any time and from time to time with the consent of a Majority in Interest of the Members.  Prompt notification of any such change shall be given to all Members.

 

  

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Section 2.3             Term. The term of the Company commenced on the date the Articles of Organization were filed with the office of the California Secretary of State and shall continue in existence perpetually until termination in accordance with the provisions of Section 7.2(d) and the Act.

 

Section 2.4             Purpose; Powers.

 

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

 

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

 

Section 2.5             Existence and Good Standing; Foreign Qualification. The Managing Member may take all action which may be necessary or appropriate (i) for the continuation of the Company’s valid existence as a limited liability company under the laws of the State of California (and of each other jurisdiction in which such existence is necessary to enable the Company to conduct the business in which it is engaged) and (ii) for the maintenance, preservation and operation of the business of the Company in accordance with the provisions of this Agreement and applicable laws and regulations. The Managing Member may file or cause to be filed for recordation in the office of the appropriate authorities of the State of California, and in the proper office or offices in each other jurisdiction in which the Company is formed or qualified, such certificates (including certificates of limited liability companies and fictitious name certificates) and other documents as are required by the applicable statutes, rules or regulations of any such jurisdiction or as are required to reflect the identity of the Members and the amounts of their respective capital contributions. The Managing Member may cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Officers, with all requirements necessary to qualify the Company as a foreign limited liability company in any jurisdiction other than the State of California.

 

  

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

 

Section 2.7             No State Law Partnership.

 

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

 

(b)          So long as the Company is treated as a partnership for federal income tax purposes, to ensure that Units are not traded on an established securities market within the meaning of Treasury Regulations Section 1.7704-1(b) or readily tradable on a secondary market or the substantial equivalent thereof within the meaning of Regulations Section 1.7704-1(c), notwithstanding anything to the contrary contained herein,

 

(i)            the Company shall not participate in the establishment of any such market or the inclusion of its Units thereon, and

 

(ii)           the Company shall not recognize any Transfer made on any such market by:

 

(A)           redeeming the Transferor Member (in the case of a redemption or repurchase by the Company); or

 

(B)           admitting the Transferee as a Member or otherwise recognizing any rights of the Transferee, such as a right of the Transferee to receive Company distributions (directly or indirectly) or to acquire an interest in the capital or profits of the Company.

 

Section 2.8             Admission. The Managing Member is hereby admitted as a Member of the Company upon its execution of a counterpart signature page to this Agreement and each Member of the Company immediately prior to the effectiveness of this Agreement shall continue as a Member hereunder.

 

  

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ARTICLE III

CAPITALIZATION

 

Section 3.1             Units; Initial Capitalization; Schedules.

 

(a)            Limited Liability Company Interests. Interests in the Company shall be represented by Units, or such other Equity Securities in the Company, or such other Company securities, in each case as the Managing Member may establish in its sole discretion in accordance with the terms hereof. As of the date hereof, the Units are comprised of one Class: “LLC Units”.

 

(b)            Schedule of Units; Schedule of Members. The aggregate number of outstanding Units and the aggregate amount of cash Capital Contributions that have been made by the Members and the Fair Market Value of any property other than cash contributed by the Members with respect to the Units (including, if applicable, a description and the amount of any liability assumed by the Company or to which Contributed Property is subject) shall be set forth on a schedule maintained by the Company. The Company shall also maintain a schedule setting forth the name and address of each Member, the number of Units owned by such Member and the aggregate Capital Contributions that have been made by such Member with respect to such Member’s Units (such schedule, the “Schedule of Members”). The Schedule of Members shall be the definitive record of ownership of each Unit or other Equity Security in the Company and all relevant information with respect to each Member. The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units or other Equity Securities in the Company for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units or other Equity Securities in the Company on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Act.

 

(c)           The Class A Membership Interests and Class B Memberships Interests issued and outstanding immediately prior to the effectiveness of this Agreement are hereby converted into LLC Units and each Member owns the number of LLC Units set forth opposite the name of such Member in the Schedule of Members.

 

Section 3.2              Authorization and Issuance of Additional Units.

 

(a)           The Managing Member may issue additional LLC Units and/or establish and issue other Classes of Units, other Equity Securities in the Company or other Company securities from time to time with such rights, obligations, powers, designations, preferences and other terms, which may be different from, including senior to, any then-existing or future Classes of Units, other Equity Securities in the Company or other Company securities, as the Managing Member shall determine from time to time, in its sole discretion, without the vote or consent of any other Member or any other Person, including (i) the right of such Units, other Equity Securities in the Company or other Company securities to share in Net Income and Net Loss or items thereof; (ii) the right of such Units, other Equity Securities in the Company or other Company securities to share in Company distributions; (iii) the rights of such Units, other Equity Securities or other Company securities upon dissolution and liquidation of the Company; (iv) whether, and the terms and conditions upon which, the Company may or shall be required to 

 

  

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redeem such Units, other Equity Securities in the Company or other Company securities (including sinking fund provisions); (v) whether such Units, other Equity Securities in the Company or other Company securities are issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Units, other Equity Securities in the Company or other Company securities will be issued, evidenced by certificates or assigned or transferred; (vii) the terms and conditions of the issuance of such Units, other Equity Securities in the Company or other Company securities (including, without limitation, the amount and form of consideration, if any, to be received by the Company in respect thereof, the Managing Member being expressly authorized, in its sole discretion, to cause the Company to issue Units, other Equity Securities in the Company or other Company securities for less than Fair Market Value); and (viii) the right, if any, of the holder of such Units, other Equity Securities in the Company or other Company securities to vote on Company matters, including matters relating to the relative designations, preferences, rights, powers and duties of such Units, other Equity Securities in the Company or other Company securities, provided such voting rights are not inconsistent with the applicable provisions of the Act. The Managing Member, without the vote or consent of any other Member or any other Person, is authorized (i) to issue any Units, other Equity Securities in the Company or other Company securities of any such newly established Class or any existing Class and (ii) to amend this Agreement to reflect the creation of any such new Class, the issuance of Units, other Equity Securities in the Company or other Company securities of such Class, and the admission of any Person as a Member which has received Units or other Equity Securities of any such Class, in accordance with Sections 3.2, 7.4 and 9.4. Except as expressly provided in this Agreement to the contrary, any reference to “Units” shall include the LLC Units and any other Classes of Units that may be established in accordance with this Agreement.

 

Section 3.3              Capital Accounts.

 

(a)           The Managing Member shall maintain for each Member owning Units a separate Capital Account with respect to such Units in accordance with the rules of Treasury Regulations Section 1.704-1(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of all Capital Contributions made to the Company with respect to such Units pursuant to this Agreement and (ii) all items of Company income and gain (including, without limitation, income and gain exempt from tax) computed in accordance with Section 3.3(b) and allocated with respect to such Units pursuant to Section 5.1, and decreased by (x) the amount of cash or Net Agreed Value of all actual and deemed distributions of cash or property made with respect to such Units pursuant to this Agreement and (y) all items of Company deduction and loss computed in accordance with Section 3.3(b) and allocated with respect to such Units pursuant to Section 5.1. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event the Managing Member shall determine that it is prudent to modify the manner in which the Capital Accounts or any adjustments thereto (including, without limitation, adjustments relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company or any Members) are computed in order to comply with such Treasury Regulations, the Managing Member, without the consent of any other Person, may make such modification, notwithstanding the terms of this Agreement, provided that it is not likely to have a material effect on the amounts distributed to any Person pursuant to ARTICLE VII hereof upon the dissolution of the Company. The Managing Member, without the consent of any other Person, also shall (i) make any adjustments, notwithstanding the terms of this Agreement, that are necessary or appropriate to maintain equality among the Capital Accounts of the Members and the amount of capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications, notwithstanding the terms of this Agreement, in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b).

 

  

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(b)           For purposes of computing the amount of any item of income, gain, loss or deduction, which is to be allocated pursuant to ARTICLE V and is to be reflected in the Members’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including, without limitation, any method of depreciation, cost recovery or amortization used for that purpose), provided, that:

 

(i)            Solely for purposes of this Section 3.3, the Company shall be treated as owning directly its proportionate share (as determined by the Managing Member) of all property owned by any partnership, limited liability company, unincorporated business or other entity or arrangement that is classified as a partnership for federal income tax purposes, of which the Company is, directly or indirectly, a partner.

 

(ii)           Except as otherwise provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Company and, as to those items described in Section 705(a)(1)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss.

 

(iii)           Any income, gain or loss attributable to the taxable disposition of any Company property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Company’s Carrying Value with respect to such property as of such date.

 

(iv)           In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any Contributed Property shall be determined in the manner described in Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) as if the adjusted basis of such property on the date it was acquired by the Company were equal to the Agreed Value of such property. Upon an adjustment pursuant to Section 3.3(c) to the Carrying Value of any Adjusted Property that is subject to depreciation, cost recovery or amortization, any further deductions for such depreciation, cost recovery or amortization attributable to such property shall be determined in the manner described in Treasury Regulations Sections 1.704-1(b)(2)(iv)(g)(3) and 1.704-3(a)(6)(i) as if the adjusted basis of such property were equal to the Carrying Value of such property immediately following such adjustment; provided, however, that, if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any method that the Managing Member may adopt.

 

  

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(c)           A transferee of Units shall succeed to a pro rata portion of the Capital Account of the transferor relating to the Units so transferred.

 

(i)            In accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), on an issuance of additional Units for cash or Contributed Property and the issuance of Units as consideration for the provision of services, the Capital Account of all Members and the Carrying Value of each Company property immediately prior to such issuance shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Company property, as if such Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each such property immediately prior to such issuance and had been allocated to the Members at such time pursuant to Section 5.1 in the same manner as a corresponding item of gain or loss actually recognized during such period would have been allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and Fair Market Value of all Company assets (including, without limitation, cash or cash equivalents) immediately prior to the issuance of additional Units shall be determined by the Managing Member using such method of valuation as it may adopt; provided, however, that the Managing Member, in arriving at such valuation, must take fully into account the Fair Market Value of the Units of all Members at such time. The Managing Member shall allocate such aggregate value among the assets of the Company (in such manner as it determines) to arrive at a Fair Market Value for individual properties.

 

(ii)           In accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f), immediately prior to any actual or deemed distribution to a Member of any Company property (other than a distribution of cash that is not in redemption or retirement of a Unit), the Capital Accounts of all Members and the Carrying Value of all Company property shall be adjusted upward or downward to reflect any Unrealized Gain or Unrealized Loss attributable to such Company property, as if such Unrealized Gain or Unrealized Loss had been recognized in a sale of such property immediately prior to such distribution for an amount equal to its Fair Market Value, and had been allocated to the Members, at such time, pursuant to Section 5.1 in the same manner as a corresponding item of gain or loss actually recognized during such period would have been allocated. In determining such Unrealized Gain or Unrealized Loss, the aggregate cash amount and Fair Market Value of all Company assets (including, without limitation, cash or cash equivalents) immediately prior to a distribution shall (A) in the case of an actual distribution that is not made pursuant to ARTICLE VII or in the case of a deemed distribution, be determined and allocated in the same manner as that provided in Section 3.3(c)(i) or (B) in the case of a liquidating distribution pursuant to ARTICLE VII, be determined and allocated by the Person winding up the Company pursuant to Section 7.2(b) using such method of valuation as it may adopt.

 

  

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(iii)          The Managing Member may make the adjustments described in clause (i) above in the manner set forth therein if the Managing Member determines that such adjustments are necessary or useful to effectuate the intended economic arrangement among the Members.

 

(d)           Notwithstanding anything expressed or implied to the contrary in this Agreement, in the event the Managing Member shall determine, in its sole and absolute discretion, that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed in order to effectuate the intended economic sharing arrangement of the Members, the Managing Member may make such modification, notwithstanding any other provision hereof, without the consent of any other Person.

 

Section 3.4             No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital Contributions or Capital Account or to receive any distribution from the Company, except as expressly provided herein.

 

Section 3.5             Loans From Members. Loans by Members to the Company shall not be considered Capital Contributions. If any Member shall loan funds to the Company, then the making of such loans shall not result in any increase in the Capital Account balance of such Member. The amount of any such loans shall be a debt of the Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon which such loans are made.

 

Section 3.6             No Right of Partition. To the fullest extent permitted by law, no Member shall have the right to seek or obtain partition by court decree or operation of law of any property of the Company or any of its Subsidiaries or the right to own or use particular or individual assets of the Company or any of its Subsidiaries, or, except as expressly contemplated by this Agreement, be entitled to distributions of specific assets of the Company or any of its Subsidiaries.

 

Section 3.7             Non-Certification of Units; Legend; Units are Securities.

 

(a)           Units shall be issued in non-certificated form; provided that the Managing Member may cause the Company to issue certificates to a Member representing the Units held by such Member.

 

(b)           If the Managing Member determines that the Company shall issue certificates representing Units to any Member, the following provisions of this Section 3.7 shall apply:

 

(i)            The Company shall issue one or more certificates in the name of such Person in such form as it may approve, subject to Section 3.7(b)(ii) (a “Membership Interest Certificate”), which shall evidence the ownership of the Units represented thereby. Each such Membership Interest Certificate shall be denominated in terms of the number of Units evidenced by such Membership Interest Certificate and shall be signed by the Managing Member or an Officer on behalf of the Company.

 

  

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(ii)           Each Membership Interest Certificate shall bear a legend substantially in the following form:

 

THIS CERTIFICATE EVIDENCES A LLC UNIT REPRESENTING AN INTEREST IN H.D.D. LLC AND SHALL CONSTITUTE A “SECURITY” WITHIN THE MEANING OF, AND SHALL BE GOVERNED BY, (I) 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 CALIFORNIA, AND (II) 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.

 

THE INTERESTS IN H.D.D. LLC REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE THIRD AMENDED AND RESTATED OPERATING AGREEMENT OF H.D.D. LLC, DATED AS OF APRIL 18, 2013, BY AND AMONG EACH OF THE MEMBERS FROM TIME TO TIME PARTY THERETO, AS THE SAME MAY BE AMENDED FROM TIME TO TIME.

 

THE UNITS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR THE SECURITIES LAWS OF ANY OTHER JURISDICTION, AND MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE REQUIREMENTS OF ACT.  THE UNITS REPRESENTED BY THIS CERTIFICATE ALSO ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER CONDITIONS AND RESTRICTIONS, AS SET FORTH IN THAT CERTAIN THIRD AMENDED AND RESTATED OPERATING AGREEMENT FOR H.D.D. LLC DATED AS OF APRIL 18, 2013, AS THE SAME MAY BE AMENDED, A COPY OF WHICH WILL BE FURNISHED BY THE COMPANY, WITHOUT CHARGE, TO THE HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST THEREFOR.  SUCH RIGHTS AND RESTRICTIONS ARE BINDING ON TRANSFEREES OF THE SHARES.

 

(iii)          Each Unit shall constitute a “security” within the meaning of, and shall be governed by, (i) 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 California, and (ii) 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.

 

  

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(iv)          The Company shall issue a new Membership Interest Certificate in place of any Membership Interest Certificate previously issued if the holder of the Units represented by such Membership Interest Certificate, as reflected on the books and records of the Company:

 

(A)           makes proof by affidavit, in form and substance satisfactory to the Company, that such previously issued Membership Interest Certificate has been lost, stolen or destroyed;

 

(B)           requests the issuance of a new Membership Interest Certificate before the Company has notice that such previously issued Membership Interest Certificate has been acquired by a purchaser for value in Good Faith and without notice of an adverse claim;

 

(C)           if requested by the Company, delivers to the Company such security, in form and substance satisfactory to the Company, as the Managing Member may direct, to indemnify the Company against any claim that may be made on account of the alleged loss, destruction or theft of the previously issued Membership Interest Certificate; and

 

(D)           satisfies any other reasonable requirements imposed by the Company.

 

(v)           Upon a Member’s Transfer in accordance with the provisions of this Agreement of any or all Units represented by a Membership Interest Certificate, the Transferee of such Units shall deliver such Membership Interest Certificate, duly endorsed for Transfer by the Transferee, to the Company for cancellation, and the Company shall thereupon issue a new Membership Interest Certificate to such Transferee for the number of Units being Transferred and, if applicable, cause to be issued to such Transferring Member a new Membership Interest Certificate for the number of Units that were represented by the canceled Membership Interest Certificate and that are not being Transferred.

 

ARTICLE IV

DISTRIBUTIONS

 

Section 4.1             Distributions. Distributions shall be made to the Members, after Tax Distributions are made pursuant to Section 4.3, as and when determined by the Managing Member, in accordance with their respective Units and pro rata in respect of each Class of Units.

 

Section 4.2             Successors. For purposes of determining the amount of distributions under Section 4.1, each Member shall be treated as having made the Capital Contributions and as having received the distributions made to or received by its predecessors in respect of any of such Member’s Units.

 

  

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Section 4.3             Tax Distributions. Subject to Section 4.7 and to any restrictions contained in any agreement to which the Company is bound, no later than the tenth day following the end of each Quarterly Estimated Tax Period of each calendar year, the Company shall, to the extent of available cash and borrowings of the Company, make a distribution in cash (each, a “Tax Distribution”), pro rata in accordance with the Percentage Interests in effect with respect to such Quarterly Estimated Tax Period, in an amount equal to the excess of (i) the product of (x) the taxable income of the Company attributable to such Quarterly Estimated Tax Period and all prior Quarterly Estimated Tax Periods in such calendar year, based upon (I) the information returns filed by the Company, as amended or adjusted to date, and (II) estimated amounts, in the case of periods for which the Company has not yet filed information returns, multiplied by (y) the Assumed Tax Rate, over (ii) distributions made by the Company pursuant to this Section 4.3 with respect to such calendar year. The Managing Member shall use conventions similar to those adopted pursuant to Section 5.2(d) to determine the Percentage Interests of the Members with respect to a Quarterly Estimated Tax Period. For the avoidance of doubt, Tax Distributions shall be made only with respect to taxable income earned by the Company. For purposes of clause (i)(x) above, the taxable income of the Company shall be determined by disregarding any adjustment to the taxable income of any Member that arises under Section 743(b) of the Code and is attributable to the acquisition by such Member of an interest in the Company in a transaction described in Section 743(a) of the Code.

 

Section 4.4             Withholding.  The Company is authorized to withhold from any payment made to, or any distributive share of, a Member, any taxes required by law to be withheld, and in such event, such taxes shall be treated as if an amount equal to such withheld taxed had been paid to the Member rather than paid over to the Governmental Entity.

 

Section 4.5             Security Interest and Right of Set Off; Indemnification. If the Company is required by law to make any payment to a Governmental Entity that is specifically attributable to a Member or a Member’s status as such (including federal withholding taxes, state or local personal property taxes and state or local unincorporated business taxes), then such Member shall indemnify the Company or its Successor in Interest in full for the entire amount paid (including interest, penalties and reasonable related expenses). A Member’s obligation to indemnify the Company or its Successor in Interest under this Section 4.5 shall survive the dissolution, winding up and termination of the Company. The Company and its Successor in Interest may pursue and enforce all rights and remedies it may have against each Member under this Section 4.5, including instituting a lawsuit to collect such indemnification, with interest calculated at a rate equal to 10 percent (but not in excess of the highest rate per annum permitted by law). As security for any such indemnification obligation or any other liability or obligation to which the Company may be subject as a result of any act or status of any Member, or to which the Company may become subject with respect to the interest of any Member in the Company, the Company shall have (and each Member hereby grants to the Company) a security interest in all Distributable Assets distributable to such Member to the extent of the amount of such liability or obligation. Whenever the Company is to pay any sum to any Member or any Affiliate or related Person thereof pursuant to the terms of this Agreement, any amounts that such Member or such Affiliate or related Person owes to the Company, whether pursuant to this Section 4.5 or under any promissory note issued to the Company as partial payment for any Units of the Company may be deducted from that sum before payment; provided, however, that no deduction pursuant to this sentence shall be made with respect to any Tax Distribution except on account of any amounts owed by such Member or such Affiliate or related Person which (i) are due and owing pursuant to the indemnification obligation provided for in this Section 4.5 or (ii) are past due or as to which the obligor is otherwise in default.

 

  

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Section 4.6             Certain Distributions. For purposes of this ARTICLE IV, a distribution to a Member of property (other than cash) shall be treated as a Tax Distribution pursuant to Section 4.3 (rather than as, for example, a distribution pursuant to Section 4.1) in an amount equal to the hypothetical amount of tax that the Member would pay, at the Assumed Tax Rate, if (i) such property were not treated as a distribution of money pursuant to Section 731(c)(2) of the Code (to the extent that Section 731(c)(2) otherwise applies) and (ii) the Member sold the property immediately after receiving such distribution.

 

Section 4.7             Limitation. Notwithstanding any other provision of this Agreement, the Company, and the Managing Member on behalf of the Company, shall not be required to make a distribution if such distribution to any Member or Assignee would violate the Act or other applicable law.

 

ARTICLE V

ALLOCATIONS

 

Section 5.1             Allocations for Capital Account Purposes. i) Except as otherwise provided in this Agreement, Net Income and Net Losses (and, to the extent necessary, individual items of income, gain or loss or deduction of the Company) shall be allocated in a manner such that the Capital Account of each Member after giving effect to the Special Allocations set forth in Section 5.1(b) is, as nearly as possible, equal (proportionately) to (i) the distributions that would be made pursuant to Section 7.2 if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their Carrying Value, all Company liabilities were satisfied (limited with respect to each non-recourse liability to the Carrying Value of the assets securing such liability) and the net assets of the Company were distributed to the Members pursuant to this Agreement, minus (ii) such Member’s share of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain, computed immediately prior to the hypothetical sale of assets.

 

(b)           Special Allocations. Notwithstanding any other provision of this Section 5.1, the following special allocations shall be made for such taxable period:

 

(i)            Company Minimum Gain Chargeback. Notwithstanding any other provision of this Section 5.1, if there is a net decrease in Company Minimum Gain during any Company taxable period, each Member shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulations Sections 1.704-2(f)(6), 1.704-2(g)(2) and 1.704-2(j)(2)(i), or any successor provision. For purposes of this Section 5.1(b), each Member’s Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(b) with respect to such taxable period (other than an allocation pursuant to Section 5.1(b)(iii) and Section 5.1(b)(vi)). This Section 5.1(b)(i) is intended to comply with the Company Minimum Gain chargeback requirement in Treasury Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.

 

  

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(ii)           Chargeback of Member Nonrecourse Debt Minimum Gain. Notwithstanding the other provisions of this Section 5.1 (other than Section 5.1(b)(i)), except as provided in Treasury Regulations Section 1.704-2(i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any Company taxable period, any Member with a share of Member Nonrecourse Debt Minimum Gain at the beginning of such taxable period shall be allocated items of Company income and gain for such period (and, if necessary, subsequent periods) in the manner and amounts provided in Treasury Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2)(ii), or any successor provisions. For purposes of this Section 5.1(b), each Member’s Adjusted Capital Account balance shall be determined, and the allocation of income and gain required hereunder shall be effected, prior to the application of any other allocations pursuant to this Section 5.1(b), other than Section 5.1(b)(i) and other than an allocation pursuant to Section 5.1(b)(v) and (b)(vi), with respect to such taxable period. This Section 5.1(b)(ii) is intended to comply with the chargeback of items of income and gain requirement in Treasury Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith.

 

(iii)          Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Treasury Regulations 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 promulgated under Section 704(b) of the Code, the deficit balance, if any, in its Adjusted Capital Account created by such adjustments, allocations or distributions as quickly as possible, unless such deficit balance is otherwise eliminated pursuant to Section 5.1(b)(i) or (ii). This Section 5.1(b)(iii) is intended to qualify and be construed as a “qualified income offset” within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

(iv)          Gross Income Allocations. In the event any Member has a deficit balance in its Capital Account at the end of any Company taxable period in excess of the sum of (A) the amount such Member is required to restore pursuant to the provisions of this Agreement and (B) the amount such Member is deemed obligated to restore pursuant to Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5), such Member shall be specially allocated items of Company gross income and gain in the amount of such excess as quickly as possible; provided, that an allocation pursuant to this Section 5.1(b)(iv) shall be made only if and to the extent that such Member would have a deficit balance in its Capital Account as adjusted after all other allocations provided for in this Section 5.1 have been tentatively made as if this Section 5.1(b)(iv) were not in this Agreement.

 

  

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(v)            Nonrecourse Deductions. Nonrecourse Deductions for any taxable period shall be allocated to the Members in accordance with their respective Percentage Interests. If the Managing Member determines that the Company’s Nonrecourse Deductions should be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, the Managing Member is authorized, upon notice to the other Members, to revise the prescribed ratio to the numerically closest ratio that does satisfy such requirements.

 

(vi)           Member Nonrecourse Deductions. Member Nonrecourse Deductions for any taxable period shall be allocated 100% to the Member that bears the “Economic Risk of Loss” (as defined in the Treasury Regulations) with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i). If more than one Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, such Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such Economic Risk of Loss.

 

(vii)          Nonrecourse Liabilities. Nonrecourse Liabilities of the Company described in Treasury Regulations Section 1.752-3(a)(3) shall be allocated among the Members in the manner chosen by the Managing Member and consistent with such Section of the Treasury Regulations.

 

(viii)         Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the 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 item of gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Section of the Treasury Regulations.

 

(ix)           Curative Allocation.

 

(1)           The Required Allocations are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Required Allocations shall be offset either with other Required Allocations or with special allocations of other items of Company income, gain, loss or deduction pursuant to this Section 5.1(b)(ix)(1). Therefore, notwithstanding any other provision of this ARTICLE V (other than the Required Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Required Allocations were not part of this Agreement and all Company items were allocated pursuant to the economic agreement among the Members.

 

  

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(2)           The Managing Member shall, with respect to each taxable period, (1) apply the provisions of Section 5.1(b)(ix)(1) in whatever order is most likely to minimize the economic distortions that might otherwise result from the Required Allocations, and (2) divide all allocations pursuant to Section 5.1(b)(ix)(1) among the Members in a manner that is likely to minimize such economic distortions.

 

(x)            Deficit Capital Accounts. No Member shall be required to pay to the Company, to any other Member or to any third party any deficit balance which may exist from time to time in the Member’s Capital Account.

 

Section 5.2              Allocations for Tax Purposes.

 

(a)           The income, gains, losses and deductions of the Company shall be allocated for federal, state and local income tax purposes among the Members in accordance with the allocation of such income, gains, losses and deductions among the Members for purposes of computing their Capital Accounts; except that if any such allocation is not permitted by the Code or other applicable law, then the Company’s subsequent income, gains, losses and deductions for tax purposes shall be allocated among the Members so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

 

(b)           In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or an Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Members as follows:

 

(i)            (A) In the case of a Contributed Property, such items attributable thereto shall be allocated among the Members in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and (B) any item of Residual Gain or Residual Loss attributable to a Contributed Property shall be allocated among the Members in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 5.1.

 

(ii)           (A) In the case of an Adjusted Property, such items shall (1) first, be allocated among the Members in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property and the allocations thereof pursuant to Section 3.3(c)(i) or Section 3.3(c)(ii), and (2) second, in the event such property was originally a Contributed Property, be allocated among the Members in a manner consistent with Section 5.2(b)(i)(A); and (B) any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Members in the same manner as its correlative item of “book” gain or loss is allocated pursuant to Section 5.1.

 

  

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(iii)          In order to eliminate Book-Tax Disparities, the Managing Member may cause the Company to use any method described in Treasury Regulations Section 1.704-3.

 

(c)          For the proper administration of the Company and for the preservation of uniformity of the Units (or any Class or Classes thereof), the Managing Member shall (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions; (ii) make special allocations for federal income tax purposes of income (including, without limitation, gross income) or deductions; (iii) without the consent of any other Person being required, amend the provisions of this Agreement as appropriate (x) to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of the Code or (y) otherwise to preserve or achieve uniformity of the Units (or any Class or Classes thereof); and (iv) adopt and employ such methods for (A) the maintenance of capital accounts for book and tax purposes, (B) the determination and allocation of adjustments under Sections 704(c), 734 and 743 of the Code, (C) the determination and allocation of taxable income, tax loss and items thereof under this Agreement and pursuant to the Code, (D) the determination of the identities and tax classification of Members, (E) the provision of tax information and reports to the Members, (F) the adoption of reasonable conventions and methods for the valuation of assets and the determination of tax basis, (G) the allocation of asset values and tax basis, (H) the adoption and maintenance of accounting methods, (I) the recognition of the Transfer of Units and (J) tax compliance and other tax-related requirements, including without limitation, the use of computer software, as it determines in its sole discretion are necessary and appropriate to execute the provisions of this Agreement and to comply with federal, state and local tax law, and to achieve uniformity of Units within a Class. The Managing Member may adopt such conventions, make such allocations and make such amendments to this Agreement as provided in this Section 5.2(c) only if such conventions, allocations or amendments would not have a material adverse effect on the Members, the holders of any Class or Classes of Units issued and outstanding or the Company, and if such allocations are consistent with the principles of Section 704 of the Code.

 

(d)          For purposes of determining the items of Company income, gain, loss, deduction, or credit allocable to any Member with respect to any period, such items shall be determined on a daily, monthly, or other basis, as determined by the Managing Member using any permissible method under Code Section 706 and the Treasury Regulations promulgated thereunder.

 

(e)          Tax credits, tax credit recapture and any items related thereto shall be allocated to the Members according to their interests in such items as reasonably determined by the Managing Member taking into account the principles of Treasury Regulations Sections 1.704-1(b)(4)(ii) and 1.704-1T(b)(4)(xi).

 

(f)           Allocations pursuant to this Section 5.2 are solely for the purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Income, Loss, distributions or other Company items pursuant to any provision of this Agreement.

 

  

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Section 5.3             Members’ Tax Reporting. The Members acknowledge and are aware of the income tax consequences of the allocations made pursuant to this ARTICLE V and, except as may otherwise be required by applicable law or regulatory requirements, hereby agree to be bound by the provisions of this ARTICLE V in reporting their shares of Company income, gain, loss, deduction and credit for federal, state and local income tax purposes.

 

Section 5.4             Certain Costs and Expenses. The Company shall (i) pay, or cause to be paid, all costs, fees, operating expenses and other expenses of the Company (including the costs, fees and expenses of attorneys, accountants or other professionals and the compensation of all personnel providing services to the Company) incurred in pursuing and conducting, or otherwise related to, the activities of the Company, and (ii) in the sole discretion of the Managing Member, bear and/or reimburse the Managing Member for any costs, fees or expenses incurred by it in connection with serving as the Managing Member. To the extent that the Managing Member determines in its sole discretion that such expenses are related to the business and affairs of the Managing Member that are conducted through the Company and/or its subsidiaries (including expenses that relate to the business and affairs of the Company and/or its subsidiaries and that also relate to other activities of the Managing Member), the Managing Member may cause the Company to pay or bear all expenses of the Managing Member, including, without suggesting any limitation of any kind, costs of securities offerings not borne directly by Members, board of directors compensation and meeting costs, cost of periodic reports to its stockholders, litigation costs and damages arising from litigation, accounting and legal costs and franchise taxes, provided that the Company shall not pay or bear any income tax obligations of the Managing Member.

 

ARTICLE VI

MANAGEMENT

 

Section 6.1             Managing Member; Delegation of Authority and Duties.

 

(a)           Authority of Managing Member. The business, property and affairs of the Company shall be managed under the sole, absolute and exclusive direction of the Managing Member, which may from time to time delegate authority to Officers or to others to act on behalf of the Company. Without limiting the foregoing provisions of this Section 6.1(a), but subject to any approval of the Members required by the Act, the Managing Member shall have the sole power to manage or cause the management of the Company, including, without limitation, the power and authority to effectuate the sale, lease, Transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including, but not limited to, the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company).

 

  

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(b)           Other Members. No Member who is not also a Managing Member, in his or her or its capacity as such, shall participate in or have any control over the business of the Company. Except as expressly provided herein, the Units, other Equity Securities in the Company, or the fact of a Member’s admission as a member of the Company do not confer any rights upon the Members to participate in the management of the affairs of the Company. Except as expressly provided herein or as required by the Act, no Member who is not also a Managing Member shall have any right to vote on any matter involving the Company, including with respect to any  conversion of the Company, or any other matter that a Member might otherwise have the ability to vote or consent with respect to under the Act, at law, in equity or otherwise. The conduct, Control and management of the Company shall be vested exclusively in the Managing Member. In all matters relating to or arising out of the conduct of the operation of the Company, the decision of the Managing Member shall be the decision of the Company.  Except as required law, or expressly provided in Section 6.1 or by separate agreement with the Company, no Member who is not also a Managing Member (and acting in such capacity) shall take any part in the management or control of the operation or business of the Company in its capacity as a Member, nor shall any Member who is not also a Managing Member (and acting in such capacity) have any right, authority or power to act for or on behalf of or bind the Company in his or her or its capacity as a Member in any respect or assume any obligation or responsibility of the Company or of any other Member.

 

(c)           Delegation by Managing Member. The Company may employ one or more Members from time to time, and such Members, in their capacity as employees or agents of the Company (and not, for clarity, in their capacity as Members of the Company), may take part in the control and management of the business of the Company to the extent such authority and power to act for or on behalf of the Company has been delegated to them by the Managing Member. To the fullest extent permitted by law, the Managing Member shall have the power and authority to delegate to one or more other Persons the Managing Member’s rights and powers to manage and control the business and affairs of the Company, including to delegate to agents and employees of a Member or the Company (including Officers), and to delegate by a management agreement or another agreement with, or otherwise to, other Persons. The Managing Member may authorize any Person (including any Member or Officer) to enter into and perform any document on behalf of the Company.

 

(d)           Devotion of Time and Competing Activities.  The Managing Member is not obligated to devote all of its time or business efforts to the affairs of the Company.  The Managing Member shall devote whatever time, effort, and skill as it deems appropriate in its discretion for the operation of the Company.  The Managing Member and its Affiliates may engage or invest in, independently or with others, any business activity or company of any type or description.  Neither the Company nor any Member shall have any right in or to such other ventures or activities, or to the income or proceeds derived therefrom.  The Managing Member shall not be obligated to present any investment opportunity or prospective economic advantage to the Company, even if the opportunity is of the character that, if presented to the Company, could be taken by the Company.  The Managing Member shall have the right to hold any investment opportunity or prospective economic advantage for its own account or to recommend such opportunity to Persons other than the Company.  The Members hereby waive any and all rights and claims which they may otherwise have against the Managing Member and its Affiliates as a result of such activities.

 

(e)           Limitation of Liability.  The Managing Member shall not be liable to the Company or any Member for any action taken or any failure to act, unless the act or omission constituted gross negligence, reckless conduct or intentional misconduct.

 

  

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(f)            Duties of Managing Member.  The parties hereby agree that the Managing Member’s only duty of care to the Company and the Members is to refrain from engaging in grossly negligent or reckless conduct or intentional misconduct.  To the extent that, at law or in equity, the Managing Member has duties (including fiduciary duties) and liabilities relating thereto to the Company, the Members or to another Person who is a party to or otherwise bound by this Agreement, the Managing Member acting under this Agreement will not be liable to the Company, to any such other Member or to any such other Person who is a party to or otherwise bound by this Agreement, for its Good Faith reliance on the provisions of this Agreement.  To the extent that the provisions of this Agreement restrict or modify the duties (including fiduciary duties) and liabilities related thereto of the Managing Member otherwise existing at law, in equity or otherwise, it is agreed by the parties hereto that such restricted and modified duties and liabilities shall govern and replace the duties and liabilities of the Managing Member otherwise existing at law, in equity or otherwise.  The Managing Member may consult with legal counsel, accountants and financial or other advisors and any act or omission suffered or taken by the Managing Member on behalf of the Company or in furtherance of the interests of the Company in Good Faith in reliance upon and in accordance with the advice of such counsel, accountants or financial or other advisors will be full justification for any such act or omission, and the Managing Member will be fully protected in so acting or omitting to act so long as such counsel or accountants or financial or other advisors were selected with reasonable care.  The parties hereto agree that nothing contained in this Section 6.2(f) shall eliminate the implied contractual covenant of good faith and fair dealing.  Notwithstanding any other provision of this Agreement or otherwise applicable provision of law or equity, whenever in this Agreement the Managing Member is permitted or required to make a decision (i) in its “sole discretion” or “discretion” or under a grant of similar authority or latitude, the Managing Member shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall, to the fullest extent permitted by applicable law, have no duty or obligation to give any consideration to any interest of or factors affecting the Company or the other Members, or (ii) in its Good Faith or under another expressed standard, the Managing Member shall act under such express standard and shall not be subject to any other or different standards.

 

Section 6.2             Officers.

 

(a)           Designation and Appointment. The Managing Member may, from time to time, employ and retain Persons as may be necessary or appropriate for the conduct of the Company’s business, including employees, agents and other Persons (any of whom may be a Member) who may be designated as Officers of the Company, with such titles as and to the extent authorized by the Managing Member. Any number of offices may be held by the same Person. In its discretion, the Managing Member may choose not to fill any office for any period as it may deem advisable. Officers need not be residents of the State of California or Members. Any Officers so designated shall have such authority and perform such duties as the Managing Member may from time to time delegate to them. The Managing Member may assign titles to particular Officers. Each Officer shall hold office until his successor shall be duly designated and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. The salaries or other compensation, if any, of the Officers of the Company shall be fixed from time to time by the Managing Member. Designation of an Officer shall not of itself create any employment or, except as provided in Section 6.4, contractual rights.

 

  

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(b)           Resignation and Removal. Any Officer may resign as such at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the Managing Member. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. All employees, agents and Officers shall be subject to the supervision and direction of the Managing Member and may be removed, with or without cause, from such office by the Managing Member and the authority, duties or responsibilities of any employee, agent or Officer of the Company may be suspended by or altered the Managing Member from time to time, in each case in the sole discretion of the Managing Member.

 

(c)           Duties of Officers. The Officers, in the performance of their duties as such, shall owe to the Company duties of loyalty and due care of the type owed by officers of a California corporation pursuant to the laws of the state of California.

 

Section 6.3             Liability of Members.

 

(a)           No Personal Liability. Except as otherwise required by applicable law and as expressly set forth in this Agreement, no Member shall have any personal liability whatsoever in such Person’s capacity as a Member, whether to the Company, to any of the other Members, to the creditors of the Company or to any other third party, for the debts, liabilities, commitments or any other obligations of the Company or for any losses of the Company. Except as otherwise required by the Act, each Member shall be liable only to make such Member’s Capital Contribution to the Company, if applicable, and the other payments provided for expressly herein.

 

(b)           Return of Distributions. In accordance with the Act and the laws of the State of California, a Member may, under certain circumstances, be required to return amounts previously distributed to such Member. It is the intent of the Members that no distribution to any Member pursuant to ARTICLE IV shall be deemed a return of money or other property paid or distributed in violation of the Act. The payment of any such money or distribution of any such property to a Member shall be deemed to be a compromise within the meaning of Section 17201(b) of the Act, and, to the fullest extent permitted by law, any Member receiving any such money or property shall not be required to return any such money or property to the Company or any other Person. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member is obligated to make any such payment, such obligation shall be the obligation of such Member and not of any other Member.

 

  

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Section 6.4             Indemnification by the Company. Subject to the limitations and conditions provided in this Section 6.4, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or arbitrative (each, a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that he, she or it, or a Person of which he, she or it is the legal representative, is or was a Managing Member or an Officer (each, an “Indemnified Person”), in each case, shall be indemnified by the Company to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment) against all judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including reasonable attorneys’ fees and expenses) actually incurred by such Indemnified Person in connection with such Proceeding, appeal, inquiry or investigation, if such Indemnified Person acted in Good Faith. Reasonable expenses incurred by an Indemnified Person who was, is or is threatened to be made a named defendant or respondent in a Proceeding shall be paid by the Company in advance of the final disposition of the Proceeding upon receipt of an undertaking by or on behalf of such Person to repay such amount if it shall ultimately be determined that he, she or it is not entitled to be indemnified by the Company. Indemnification under this Section 6.4 shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Section 6.4 shall be deemed contract rights, and no amendment, modification or repeal of this Section 6.4 shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings, appeals, inquiries or investigations arising prior to any amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Section 6.4 could involve indemnification for negligence or under theories of strict liability. Notwithstanding the foregoing, no Indemnified Person shall be entitled to any indemnity or advancement of expenses in connection with any Proceeding brought (i) by such Indemnified Person against the Company (other than to enforce the rights of such Indemnified Person pursuant to this Section 6.4), any Member or any Officer, or (ii) by or in the right of the Company, without the prior written consent of the Managing Member.

 

Section 6.5             Investment Representations of Members. Each Member hereby represents, warrants and acknowledges to the Company that: (a) such Member has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Company and is making an informed investment decision with respect thereto; (b) such Member is acquiring interests in the Company for investment only and not with a view to, or for resale in connection with, any distribution to the public or public offering thereof; and (c) the execution, delivery and performance of this Agreement have been duly authorized by such Member.

 

ARTICLE VII

WITHDRAWAL; DISSOLUTION; TRANSFER OF MEMBERSHIP INTERESTS;

ADMISSION OF NEW MEMBERS

 

Section 7.1             Member Withdrawal. No Member shall have the power or right to withdraw or otherwise resign or be expelled from the Company prior to the dissolution and winding up of the Company except pursuant to a Transfer permitted under this Agreement.

 

Section 7.2             Dissolution.

 

(a)            Events. The Company shall be dissolved and its affairs shall be wound up on the first to occur of (i) the determination of the Managing Member, (ii) by the vote of a Majority in Interest of the Members, (iii) the entry of a decree of judicial dissolution of the Company under Section 17351 of the Act or (iv) the termination of the legal existence of the last remaining Member or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the Company is continued without dissolution in a manner permitted by the Act. In the event of a dissolution pursuant to clause (i) or (ii) of the immediately preceding sentence, the relative economic rights of each Class of Units immediately prior to such dissolution shall be preserved to the greatest extent practicable with respect to distributions made to Members pursuant to Section 7.2(c) below in connection with the winding up of the Company, taking into consideration tax and other legal constraints that may adversely affect one or more parties hereto and subject to compliance with applicable laws and regulations, unless, with respect to any Class of Units, holders of not less than 90% of the Units of such Class consent in writing to a treatment other than as described above.

 

  

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

 

(c)           Priority. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to this Section 7.2 to minimize any losses otherwise attendant upon such winding up. Upon dissolution of the Company, the assets of the Company shall be applied in the following manner and order of priority: (i) to creditors, including Members who are creditors, to the extent otherwise permitted by law, in satisfaction of liabilities of the Company (including all contingent, conditional or unmatured claims), whether by payment or the making of reasonable provision for payment thereof; and (ii) the balance shall be distributed to the Members in accordance with their respective Units and pro rata in respect of each Class of Units.

 

(d)           Cancellation of Articles of Organization. The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts liabilities and obligations of the Company, shall have been distributed to the Members in the manner provided for in this Agreement and (ii) the Articles of Organization shall have been canceled in the manner required by the Act.

 

(e)           Return of Capital.  The Members shall look solely to the assets of the Company for the return of their Capital Contributions or returns thereon, if any.  The liquidators of the Company and the Managing Member shall not be personally liable for the return of Capital Contributions or any portion thereof to the Members (it being understood that any such return shall be made solely from Company assets).  If the assets remaining after the payment or discharge of the debts and liabilities of the Company are insufficient to return the Members’ Capital Contributions or returns thereon, the Members shall have no recourse against the Managing Member or any other liquidators of the Company.

 

(f)            Hart Scott Rodino. Notwithstanding any other provision in this Agreement, in the event the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), is applicable to any Member by reason of the fact that any assets of the Company will be distributed to such Member in connection with the dissolution of the Company, the distribution of any assets of the Company shall not be consummated until such time as the applicable waiting periods (and extensions thereof) under the HSR Act have expired or otherwise been terminated with respect to each such Member.

 

  

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Section 7.3             Transfer by Members. No Member may Transfer or Pledge all or any portion of its Units or other interests or rights in the Company except with the written consent of the Managing Member in its sole discretion, provided, however, that, subject to the provisions of Section 7.4(c) (other than the provisions of Section 7.4(c)(v) to the extent that such provisions relate to the delivery of legal and/or tax opinions), without the consent of the Managing Member, a Member may, at any time, Transfer any of such Member’s Units pursuant to the Exchange Agreement. In addition, to the extent that the Managing Member determines in Good Faith that a proposed Transfer would not violate Section 7.4(c) below, then the Managing Member will not unreasonably withhold its consent to a Transfer (i) in the case of any Member who is a natural Person, (A) upon the death of such Member pursuant to applicable laws of descent and distribution or (B) to or among such Person’s spouse and descendants (whether natural or adopted) and any trust, partnership, limited liability company or similar vehicle established solely for the benefit of (or the sole members or partners of which are) such Person, such Person’s spouse and/or descendants or (ii) to and among wholly owned Subsidiaries of any Member, provided, however, that if any such wholly owned Subsidiary will subsequently cease to be wholly owned by such Member, the Units so Transferred must first be Transferred back to the original Member or another permitted Transferee of such original Member.  For the avoidance of doubt, it shall not be unreasonable for the Managing Member to impose reasonable restrictions on the number of Persons to whom a Member may make Transfers pursuant to clauses (i) and (ii) of the preceding sentence, which restrictions need not be uniform among holders of interests in the Company. Any purported Transfer or Pledge of all or a portion of a Member’s Units or other interests in the Company not complying with this Section 7.3 shall be void and shall not create any obligation on the part of the Company or the other Members to recognize that Transfer or Pledge or to deal with the Person to which the Transfer or Pledge purportedly was made.

 

Section 7.4             Admission or Substitution of New Members.

 

(a)           Admission. Without the consent of any other Person, the Managing Member shall have the right to admit as a Substituted Member or an Additional Member, any Person who acquires an interest in the Company, or any part thereof, from a Member or from the Company. Concurrently with the admission of a Substituted Member or an Additional Member, the Managing Member shall forthwith (i) amend the Schedule of Members to reflect the name and address of such Substituted Member or Additional Member and to eliminate or modify, as applicable, the name and address of the Transferring Member with regard to the Transferred Units and (ii) cause any necessary papers to be filed and recorded and notice to be given wherever and to the extent required showing the substitution of a Transferee as a Substituted Member in place of the Transferring Member, or the admission of an Additional Member, in each case, at the expense, including payment of any professional and filing fees incurred, of such Substituted Member or Additional Member, unless otherwise determined by the Managing Member; provided that such expenses shall not be payable with respect to a Substituted Member or Additional Member that is or is to become an employee of the Company or any of its Subsidiaries, where the issuance or Transfer of an interest in the Company to such Person is in connection with their provision of services to the Company or any of its Subsidiaries.

 

  

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(b)           Conditions and Limitations. The admission of any Person as a Substituted Member or an Additional Member shall be conditioned upon (i) such Person’s written acceptance and adoption of all the terms and provisions of this Agreement, either by (A) execution and delivery of a counterpart signature page to this Agreement countersigned by the Managing Member on behalf of the Company or (B) any other writing evidencing the intent of such Person to become a Substituted Member or an Additional Member and such writing is accepted by the Managing Member on behalf of the Company.

 

(c)           Prohibited Transfers. Notwithstanding any contrary provision in this Agreement, in no event may any Transfer of a Unit or other interest in the Company be made by any Member or Assignee if:

 

(i)            such Transfer is made to any Person who lacks the legal right, power or capacity to own such Unit or other interest in the Company;

 

(ii)           such Transfer would pose a material risk that the Company would be a “publicly traded partnership” as defined in Section 7704 of the Code;

 

(iii)          such Transfer would require the registration of such transferred Unit or other interest in the Company or of any Class of Unit or other interest in the Company pursuant to any applicable United States federal or state securities laws (including, without limitation, the Securities Act or the Exchange Act) or other non-U.S. securities laws (including Canadian provincial or territorial securities laws) or would constitute a non-exempt distribution pursuant to applicable provincial or state securities laws;

 

(iv)           such Transfer would cause any portion of the assets of the Company to become “plan assets” of any “benefit plan investor” within the meaning of regulations issued by the U.S. Department of Labor at Section 2510.3-101 of Part 2510 of Chapter XXV, Title 29 of the Code of Federal Regulations as modified by Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended from time to time; or

 

(v)            to the extent requested by the Managing Member, the Company does not receive such legal and/or tax opinions and written instruments (including, without limitation, copies of any instruments of Transfer and such Assignee’s consent to be bound by this Agreement as an Assignee) that are in a form satisfactory to the Managing Member, as determined in the Managing Member’s sole discretion.

 

In addition, notwithstanding any contrary provision in this Agreement, to the extent the Managing Member shall determine that interests in the Company do not meet the requirements of Treasury Regulation section 1.7704-1(h), the Managing Member may impose such restrictions on the Transfer of Units or other interests in the Company as the Managing Member may determine to be necessary or advisable so that the Company is not treated as a publicly traded partnership taxable as a corporation under Section 7704 of the Code.

 

Any Transfer in violation of Section 7.3 or this Section 7.4(c) shall be null and void ab initio and of no effect.

 

  

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(d)           Effect of Transfer to Substituted Member. Following the Transfer of any Unit or other interest in the Company that is permitted under Sections 7.3 and 7.4, the Transferee of such Unit or other interest in the Company shall be treated as having made all of the Capital Contributions in respect of, and received all of the distributions received in respect of, such Unit or other interest in the Company, shall succeed to the Capital Account balance associated with such Unit or other interest in the Company, shall receive allocations and distributions under ARTICLE IV and ARTICLE V in respect of such Unit or other interest in the Company and otherwise shall become a Substituted Member entitled to all the rights of a Member with respect to such Unit or other interest in the Company.

 

Section 7.5             Additional Requirements. Notwithstanding any contrary provision in this Agreement, for the avoidance of doubt, the Managing Member may impose such vesting requirements, forfeiture provisions, Transfer restrictions, minimum retained ownership requirements or other similar provisions with respect to any interests in the Company that are outstanding as of the date of this Agreement or are created hereafter, with the written consent of the holder of such interests in the Company. Such requirements, provisions and restrictions need not be uniform among holders of interests in the Company and may be waived or released by the Managing Member in its sole discretion with respect to all or a portion of the interests in the Company owned by any one or more Members or Assignees at any time and from time to time, and such actions or omissions by the Managing Member shall not constitute the breach of this Agreement or of any duty hereunder or otherwise existing at law, in equity or otherwise.

 

Section 7.6             Mandatory Exchange. The Managing Member may, with the consent of those Members (other than the Managing Member) holding not less than 75% of the LLC Units (excluding any LLC Units held by the Managing Member) require all Members holding LLC Units to exchange all such Units held by them pursuant to the Exchange Agreement.

 

Section 7.7             Bankruptcy. Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution.

 

ARTICLE VIII

BOOKS AND RECORDS; FINANCIAL STATEMENTS AND OTHER INFORMATION;

TAX MATTERS

 

Section 8.1             Books and Records. The Company shall keep at its principal executive office (i) correct and complete books and records of account (which, in the case of financial records, shall be kept in accordance with GAAP), (ii) minutes of the proceedings of meetings of the Members (if any, being understood that meetings of the Members are not required), (iii) a current list of the directors and officers of the Company and its Subsidiaries and their respective residence addresses, and (iv) a record containing the names and addresses of all Members, the total number of Units held by each Member, and the dates when they respectively became the owners of record thereof. Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time. Except as expressly set forth in this Agreement and as required by Section 17106 of the Act, no Member shall have the right to obtain information from the Company.

 

  

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Section 8.2             Information.

 

(a)           The Members shall be supplied with all other Company information necessary to enable each Member to prepare its federal, state, and local income tax returns. The Company shall send or cause to be sent to each member within ninety (90) days after the end of each Taxable Year such information as is necessary to complete the Member’s federal and state income tax or information returns.

 

(b)           All determinations, valuations and other matters of judgment required to be made for ordinary course accounting purposes under this Agreement shall be made by the Managing Member and shall be conclusive and binding on all Members, their Successors in Interest and any other Person who is a party to or otherwise bound by this Agreement, and to the fullest extent permitted by law or as otherwise provided in this Agreement, no such Person shall have the right to an accounting or an appraisal of the assets of the Company or any successor thereto.

 

Section 8.3              Fiscal Year. The Fiscal Year of the Company shall end on or as close to June 30 of each calendar year unless otherwise determined by the Managing Member in its sole discretion.

 

Section 8.4              Certain Tax Matters.

 

(a)           Preparation of Returns. The Managing Member shall cause to be prepared all federal, state and local tax returns of the Company for each Taxable Year for which such returns are required to be filed and shall cause such returns to be timely filed. The Managing Member shall determine the appropriate treatment of each item of income, gain, loss, deduction and credit of the Company and the accounting methods and conventions under the tax laws of the United States of America, the several states and other relevant jurisdictions as to the treatment of any such item or any other method or procedure related to the preparation of such tax returns. Except as specifically provided otherwise in this Agreement, the Managing Member may cause the Company to make or refrain from making any and all elections permitted by such tax laws. As promptly as practicable after the end of each Taxable Year, the Managing Member shall cause the Company to provide to each Member a Schedule K-1 for such Taxable Year. Additionally, the Managing Member shall cause the Company to provide to each Member, to the extent commercially reasonable and available to the Company without undue cost, any information reasonably required by the Member to prepare, or in connection with an audit of, such Member’s income tax returns.

 

(b)           Consistent Treatment. Each Member agrees that it shall not, except as otherwise required by applicable law or regulatory requirements, (i) treat, on its individual income tax returns, any item of income, gain, loss, deduction or credit relating to its interest in the Company in a manner inconsistent with the treatment of such item by the Company as reflected on the Form K-1 or other information statement furnished by the Company to such Member for use in preparing its income tax returns or (ii) file any claim for refund relating to any such item based on, or which would result in, such inconsistent treatment.

 

  

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(c)           Duties of the Tax Matters Member. In respect of an income tax audit of any tax return of the Company, the filing of any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit reflected on any tax return of the Company, or any administrative or judicial proceedings arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim, (A) the Managing Member shall direct the Tax Matters Member to act for, and such action shall be final and binding upon, the Company and all Members except to the extent a Member shall properly elect to be excluded from such proceeding pursuant to the Code, (B) all expenses incurred by the Tax Matters Member in connection therewith (including attorneys’, accountants’ and other experts’ fees and disbursements) shall be expenses of, and payable by, the Company, (C) no Member shall have the right to (1) participate in the audit of any Company tax return, (2) file any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit (other than items which are not partnership items within the meaning of Code Section 6231(a)(4) or which cease to be partnership items under Code Section 6231(b)) reflected on any tax return of the Company, (3) participate in any administrative or judicial proceedings conducted by the Company or the Tax Matters Member arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim, or (4) appeal, challenge or otherwise protest any adverse findings in any such audit conducted by the Company or the Tax Matters Member or with respect to any such amended return or claim for refund filed by the Company or the Tax Matters Member or in any such administrative or judicial proceedings conducted by the Company or the Tax Matters Member and (D) the Tax Matters Member shall keep the Members reasonably apprised of the status of any such proceeding. Notwithstanding the previous sentence, if a petition for a readjustment to any partnership item included in a final partnership administrative adjustment is filed with a District Court or the Court of Claims and the IRS has elected to assess income tax against a Member with respect to that final partnership administrative adjustment (rather than suspending assessments until the District Court or Court of Claims proceedings become final), such Member shall be permitted to file a claim for refund within such period of time as to avoid application of any statute of limitations which would otherwise prevent the Member from having any claim based on the final outcome of that review.

 

(d)           Tax Matters Member. The Company and each Member hereby designate the Managing Member as the “tax matters partner” for purposes of Code Section 6231(a)(7) (the “Tax Matters Member”).

 

(e)           Certain Filings. Upon the Transfer of an interest in the Company (within the meaning of the Code), a sale of Company assets or a liquidation of the Company, the Members shall provide the Managing Member with information and shall make tax filings as reasonably requested by the Managing Member and required under applicable law.

 

(f)            Section 754 Election. The Managing Member shall cause the Company to make and to maintain and keep in effect at all times, in accordance with Sections 734, 743 and 754 of the Code and applicable Treasury Regulations and comparable state law provisions, an election to adjust basis in the event (i) any LLC Unit is Transferred in accordance with this Agreement or the Exchange Agreement or (ii) any Company property is distributed to any Member.

 

  

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ARTICLE IX

MISCELLANEOUS

 

Section 9.1             Separate Agreements; Schedules. Notwithstanding any other provision of this Agreement, including Section 9.4, or of any subscription agreement between the Company and any Member, the Managing Member may, or may cause the Company to, without the approval of any other Member or other Person, enter into separate agreements with individual Members with respect to any matter, which have the effect of establishing rights under, or altering, supplementing or amending the terms of, this Agreement or any such subscription agreement. The parties hereto agree that any terms contained in any such separate agreement shall govern with respect to such Member(s) party thereto notwithstanding the provisions of this Agreement. The Managing Member may from time to time execute and deliver to the Members schedules which set forth information contained in the books and records of the Company and any other matters deemed appropriate by the Managing Member. Such schedules shall be for information purposes only and shall not be deemed to be part of this Agreement for any purpose whatsoever.

 

Section 9.2             Governing Law. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA, EXCLUDING ANY CONFLICT OF LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.

 

Section 9.3             Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective Successors in Interest; provided that no Person claiming by, through or under a Member (whether as such Member’s Successor in Interest or otherwise), as distinct from such Member itself, shall have any rights as, or in respect to, a Member (including the right to approve or vote on any matter or to notice thereof).

 

Section 9.4             Amendments and Waivers. This Agreement may be amended, supplemented, waived or modified by the written consent of the Managing Member in its sole discretion without the approval of any other Member or other Person; provided that except as otherwise provided herein (including, without limitation, in Section 3.2(a)), no amendment may materially and adversely affect the rights of a holder of Units, as such, other than on a pro rata basis with other holders of Units of the same Class without the consent of such holder (or, if there is more than one such holder that is so affected, without the consent of a majority of such affected holders in accordance with their holdings of Units), provided further, however, that notwithstanding the foregoing, the Managing Member may, without the written consent of any other Member or any other Person, amend, supplement, waive or modify any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect: (1) any amendment, supplement, waiver or modification that the Managing Member determines to be necessary or appropriate in connection with the creation, authorization or issuance of any Class of Units or other Equity Securities in the Company or other Company securities in accordance with this Agreement; (2) the admission, substitution, withdrawal or removal of Members in accordance with this Agreement; (3) a change in the name of the Company, the location of the principal place of business of the Company, the registered agent of the Company or the registered office of the Company; 

 

  

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(4) any amendment, supplement, waiver or modification that the Managing Member determines in its sole discretion to be necessary or appropriate to address changes in U.S. federal income tax regulations, legislation or interpretation; or (5) a change in the Fiscal Year or Taxable Year of the Company and any other changes that the Managing Member determines to be necessary or appropriate as a result of a change in the Fiscal Year or Taxable Year of the Company, including a change in the dates on which distributions are to be made by the Company; provided further, that the books and records of the Company shall be deemed amended from time to time to reflect the admission of a new Member, the withdrawal or resignation of a Member, the adjustment of the Units or other interests in the Company resulting from any issuance, Transfer or other disposition of Units or other interests in the Company, in each case that is made in accordance with the provisions hereof. If an amendment has been approved in accordance with this agreement, such amendment shall be adopted and effective with respect to all Members. Upon obtaining such approvals as may be required by this Agreement, and without further action or execution on the part of any other Member or other Person, any amendment to this Agreement may be implemented and reflected in a writing executed solely by the Managing Member and the other Members shall be deemed a party to and bound by such amendment. Notwithstanding the foregoing, the Articles of Organization may only be amended by a vote of a Majority in Interest of the Members.

 

Notwithstanding the foregoing, in addition to any other consent that may be required, any amendment of this Agreement that requires a holder of LLC Units on the date hereof to make a Capital Contribution (including as a condition to maintaining any rights necessary to permit such holders to exercise their rights under the Exchange Agreement) shall require the consent of such holder of LLC Units.

 

No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delay beyond a period of time specified herein) shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 9.5              Notices. Whenever notice is required or permitted by this Agreement to be given, such notice shall be in writing and shall be given to any Member at such Member’s address or facsimile number shown in the Company’s books and records, or, if given to the Company, at the following address:

 

H.D.D. LLC

P.O. Box 1532

Healdsburg, CA 95448

Attention: Chief Executive Officer

 

with a copy (which shall not constitute notice to the Company) to:

 

Morrison & Foerster LLP

1290 Avenue of the Americas

New York, New York 10104

Attention: Anna T. Pinedo

Facsimile: (212) 468-7900

 

  

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Each proper notice shall be effective upon any of the following: (a) personal delivery to the recipient, (b) when sent by facsimile to the recipient (with confirmation of receipt), (c) one Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid) or (d) three Business Days after being deposited in the mails (first class or airmail postage prepaid).

 

Section 9.6             Counterparts. This Agreement may be executed simultaneously in two or more separate counterparts, any one of which need not contain the signatures of more than one party, but each of which shall be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.

 

Section 9.7             Power of Attorney. Each Member hereby irrevocably appoints the Managing Member as such Member’s true and lawful representative and attorney in fact, each acting alone, in such Member’s name, place and stead, (a) to make, execute, sign and file all instruments, documents and certificates which, from time to time, may be required to set forth any amendment to this Agreement or which may be required by this Agreement or by the laws of the United States of America, the State of California or any other state in which the Company shall determine to do business, or any political subdivision or agency thereof and (b) to execute, implement and continue the valid and subsisting existence of the Company or to qualify and continue the Company as a foreign limited liability company in all jurisdictions in which the Company may conduct business. Such power of attorney is coupled with an interest and shall survive and continue in full force and effect notwithstanding the subsequent withdrawal from the Company of any Member for any reason and shall survive and shall not be affected by the disability, incapacity, Bankruptcy or dissolution of such Member. No power of attorney granted in this Agreement shall revoke any previously granted power of attorney.

 

Section 9.8             Entire Agreement. This Agreement, the Exchange Agreement, the Tax Receivable Agreement and the other documents and agreements referred to herein or entered into concurrently herewith embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein; provided that such other agreements and documents shall not be deemed to be a part of, a modification of or an amendment to this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter, including the Original Agreement, the First Amended Agreement and the Second Amended Agreement.

 

Section 9.9             Remedies. Each Member shall have all rights and remedies set forth in this Agreement and all rights and remedies that such Person has been granted at any time under any other agreement or contract and all of the rights that such Person has under any applicable law. Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security) to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by applicable law.

 

  

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Section 9.10           Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

Section 9.11           Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Affiliates, and no creditor who makes a loan to the Company or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Company in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in Company profits, losses, distributions, capital or property other than as a secured creditor.

 

Section 9.12           Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

 

Section 9.13           Further Action. The parties agree to execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 9.14           Delivery by Facsimile or Email. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or email with scan or facsimile attachment, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or email as a defense to the formation or enforceability of a contract, and each such party forever waives any such defense.

 

  

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IN WITNESS WHEREOF, the parties have executed this Third Amended and Restated Operating Agreement.

 

	  	
MANAGING MEMBER:

	  
	  	  	  	  
	  	  	
TRUETT-HURST, INC.

	  
	  	  	  	  	  
	  	  	
By: 

	/s/ Phillip L. Hurst	  
	  	  	
Name:  

	Phillip L. Hurst	  
	  	  	
Title:

	Chief Executive Officer and Chairman	  
	  	  	  	  	  
	  	
OTHER MEMBERS:

	  
	  	  	  	  	  
	  	  	/s/ Mark De Meulenaere	  
	  	  	
Mark De Meulenaere

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
/s/ Forrester R. Hambrecht

	  
	  	  	
Forrester R. Hambrecht

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
/s/ Barrie Graham

	  
	  	  	
Barrie Graham

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
/s/ Virginia Marie Lambrix

	  
	  	  	

Virginia Marie Lambrix

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
THE HURST FAMILY REVOCABLE TRUST dated August 1, 2004

	  
	  	  	  	  	  
	  	  	
By:

	
/s/ Phillip L. Hurst

	  
	  	  	  	
Phillip L. Hurst, Co-Trustee

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
By:

	 
/s/ Sylvia M. Hurst

	  
	  	  	  	
Sylvia M. Hurst, Co-Trustee

	  

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

  

 

  

 

	  	  	
HAMBRECHT WINE GROUP, L.P.,

  a California limited partnership

	  
	  	  	  	  	  
	  	  	
By:

	
HAMBRECHT WINE MANAGEMENT INC., a California corporation

	  
	  	  	
Its:

	
General Partner

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
By:

	
/s/ William R. Hambrecht

	  
	  	  	  	
William R. Hambrecht, Chairman

	  
	  	  	  	  	  
	  	  	  	  	  
	  	  	
THE DOLAN 2005 FAMILY TRUST U/T/D dated August 24, 2005

	  
	  	  	  	  
	  	  	  	  
	  	  	
By:

	
/s/ Heath E. Dolan

	  
	  	  	  	
Heath E. Dolan, Trustee

	  
	  	  	  	  	  
	  	  	  	  
	  	  	
THE DOLAN 2003 FAMILY TRUST U/T/A dated June 5, 2003

	  
	  	  	  	  
	  	  	  	  
	  	  	
By:

	
/s/ Paul E. Dolan, III

	  
	  	  	  	
Paul E. Dolan, III, Trustee

	  
	  	  	  	  
	  	  	  	  
	  	  	
THE CARROLL-OBREMSKEY FAMILY REVOCABLE TRUST DATED APRIL 5, 1996

	  
	  	  	  	  
	  	  	  	  
	  	  	
By:

	
/s/ Daniel A. Carroll

	  
	  	  	  	
Daniel A. Carroll, Trustee

	  
	  	  	  	  
	  	  	  	  
	  	  	
By:

	
/s/ Stasia A. Obremskey

	  
	  	  	  	
Stasia A. Obremskey, Trustee

	  

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

  

 

  

 

	  	  	
/s/ Anna-Marie E. Schweizer

	  
	  	  	
Anna-Marie E. Schweizer

	  

  

 

  

ANNEX A

MEMBERS

 

 

Truett-Hurst, Inc.

 

The Hurst Family Revocable Trust dated August 1, 2004

 

Hambrecht Wine Group, L.P.

 

The Dolan 2005 Family Trust u/t/d dated August 24, 2005

 

The Dolan 2003 Family Trust u/t/a dated June 5, 2003

 

The Carroll-Obremskey Family Revocable Trust dated April 5, 1996

 

Mark De Meulenaere

 

Forrester R. Hambrecht

 

Barrie Graham

 

Anna-Marie E. Schweizer

 

Virginia Marie Lambrixex10_2.htm

Exhibit 10.2

 

EXCHANGE AGREEMENT

 

EXCHANGE AGREEMENT (this “Agreement”), dated as of June 19, 2013, by and between Truett-Hurst, Inc., a Delaware corporation (the “Corporation”), and the holders of LLC Units (as defined herein) from time to time party hereto.

 

WHEREAS, the parties hereto are party to the Third Amended and Restated Operating Agreement, dated as of the date hereof;

 

WHEREAS, the parties hereto desire to provide for the exchange from time to time of LLC Units for shares of Class A Common Stock (as defined herein), on the terms and subject to the conditions set forth herein;

 

NOW, THEREFORE, in consideration of the mutual covenants and undertakings contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

SECTION 1.1         Definitions

 

The following definitions shall be for all purposes, unless otherwise clearly indicated to the contrary, applied to the terms used in this Agreement.

 

A “Change in Control” shall be deemed to have occurred if or upon:

 

(i)            the stockholders of the Corporation approve the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the Corporation’s assets (determined on a consolidated basis) to any person or group (as such term is used in Section 13(d)(3) of the Exchange Act, other than to any wholly owned subsidiary of the Corporation;

 

(ii)           the stockholders of the Corporation approve a merger or consolidation of the Corporation with any other person, other than a merger or consolidation which would result in the Voting Securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 50.1% of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation;

 

(iii)          the stockholders of the Corporation approve the adoption of a plan the consummation of which would result in the liquidation or dissolution of the Corporation;

 

(iv)          the acquisition, directly or indirectly, by any person or group (as such term is used in Section 13(d)(3) of the Exchange Act) (other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation; or (b) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation ((a) and (b) collectively are referred to herein as “Exempt Persons”)) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50.01% of the aggregate voting power of the Voting Securities of the Corporation;

 

  

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(v)            during any 12-month period, individuals who at the beginning of such period composed the Board of Directors of the Corporation (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Corporation was approved by a vote of 66 2/3% of the directors of the Corporation then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of the Corporation then in office; or

 

(vi)           the Corporation (or a directly or indirectly wholly owned subsidiary thereof) ceases to be the sole Managing Member of HDD.

 

“Change in Control Event” means any of the following (i) the commencement of, or the first public announcement of the intent to commence, any transaction, including, without limitation, a tender or exchange offer by any person or entity (other than any Exempt Person), the consummation of which would result in a Change in Control; (ii) the commencement of, or the first public announcement of the intent to commence, any proxy solicitation by any person or entity subject to Rule 14a-12(c) under the Exchange Act, the consummation of which would result in a Change in Control; (iii) the Corporation, HDD or any affiliate thereof entering into an agreement with any person or entity which, if consummated, would result in a Change in Control; or (iv) the adoption by the Board of Directors of the Corporation of resolutions authorizing any transaction or event which, if consummated, would result in a Change in Control.

 

“Class A Common Stock” means the Class A common stock, par value $0.001 per share, of the Corporation.

 

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

 

“Corporation” means Truett-Hurst, Inc., a Delaware corporation, and any successor thereto.

 

“Exchange” has the meaning set forth in Section 2.1(a) of this Agreement.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange Rate” means the number of shares of Class A Common Stock for which an LLC Unit is entitled to be Exchanged. On the date of this Agreement, the Exchange Rate shall be 1 for 1, subject to adjustment pursuant to Section 2.2 of this Agreement.

 

“HDD” means H.D.D. LLC, a California limited liability company, and any successor thereto.

 

  

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“HDD Operating Agreement” means the Third Amended and Restated Operating Agreement of HDD, dated on or about the date hereof, as such agreement may be amended from time to time.

 

“IPO” has the meaning set forth in Section 2.1(a)(i) of this Agreement.

 

“LLC Unit” means (i) each LLC Unit (as such term is defined in the HDD Operating Agreement) issued as of the date hereof and (ii) each LLC Unit or other interest in HDD that may be issued by HDD in the future that is designated by the Corporation as an “LLC Unit.”

 

“LLC Unitholder” means each holder of one or more LLC Units that may from time to time be a party to this Agreement.

 

“Permitted Transferee” has the meaning given to such term in Section 3.1 of this Agreement.

 

“Takeover Law” has the meaning given to such term in Section 3.1 of this agreement.

 

“Voting Securities” shall mean any securities of the Corporation which are entitled to vote generally in matters submitted for a vote of the Corporation’s stockholders or generally in the election of the Corporation’s board of directors.

 

ARTICLE II

 

SECTION 2.1         Exchange of LLC Units for Class A Common Stock.

 

(a)           (i)           Subject to Section 2.1(a)(ii) and Section 2.1(f) hereof, from and after the date of the closing of the initial public offering and sale of Class A Common Stock (as contemplated by the Corporation’s Registration Statement on Form S-1 (File No. 333-187167)) (the “IPO”), each LLC Unitholder shall be entitled at any time and from time to time, upon the terms and subject to the conditions hereof, to surrender LLC Units in exchange for the delivery by the Corporation of (x) a number of shares of Class A Common Stock that is equal to the product of the number of LLC Units surrendered multiplied by the Exchange Rate (such exchange, an “Exchange”), provided that any such Exchange is for a minimum of the lesser of 1,000 LLC Units or all of the LLC Units held by such LLC Unitholder or (y) if the Corporation so elects, an amount of cash calculated in accordance with Section 2.1(f) hereof.

 

(ii)           Notwithstanding anything to the contrary herein, upon the occurrence of any Change in Control Event, each LLC Unitholder shall be entitled, upon the terms and subject to the conditions hereof, to elect to Exchange LLC Units for shares of Class A Common Stock, or cash at the election of the Corporation; provided, that any such Exchange pursuant to this sentence shall be effective immediately prior to the consummation of the Change in Control (and, for the avoidance of doubt, shall not be effective if such Change of Control is not consummated); and provided further, that any such election pursuant to this Section 2.1(a)(ii) may be withdrawn by the LLC Unitholder who submitted such election by providing written notice to the Corporation not less than four business days prior to the consummation of the Change in Control.

 

  

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(b)           An LLC Unitholder shall exercise its right to Exchange LLC Units as set forth in Section 2.1(a) above by delivering to the Corporation a written election of exchange in respect of the LLC Units to be Exchanged substantially in the form of Exhibit A hereto, duly executed by such holder or such holder’s duly authorized attorney, in each case delivered during normal business hours at the principal executive offices of the Corporation.  Should the Exchange be satisfied in shares of Class A Common Stock, subject to Section 2.1(a)(ii), as promptly as practicable following the delivery of such a written election of exchange, and in any event within three business days, the Corporation shall deliver or cause to be delivered at the offices of the then-acting registrar and transfer agent of the Class A Common Stock or, if there is no then-acting registrar and transfer agent of the Class A Common Stock, at the principal executive offices of the Corporation, the number of shares of Class A Common Stock deliverable upon such Exchange, registered in the name of the relevant Exchanging LLC Unitholder; to the extent the Class A Common Stock is settled through the facilities of The Depository Trust Company, the Company will, subject to Section 2.1(c) below, upon the written instruction of an Exchanging Unitholder, use its reasonable best efforts to deliver the shares of Class A Common Stock deliverable to such Exchanging Unitholder, through the facilities of The Depository Trust Company, to the account of the participant of The Depository Trust Company designated by such Exchanging Holder.

 

(c)           The Corporation and each Exchanging LLC Unitholder shall bear their own expenses in connection with the consummation of any Exchange, whether or not any such Exchange is ultimately consummated, except that the Corporation shall bear any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, any Exchange; provided, however, that if any shares of Class A Common Stock are to be delivered in a name other than that of the LLC Unitholder that requested the Exchange, then such LLC Unitholder and/or the person in whose name such shares are to be delivered shall pay to the Corporation the amount of any transfer taxes, stamp taxes or duties, or other similar taxes in connection with, or arising by reason of, such Exchange or shall establish to the reasonable satisfaction of the Corporation that such tax has been paid or is not payable.

 

(d)           The Corporation covenants and agrees that, prior to taking or causing to be taken any action that would cause interests in HDD to not meet the requirements of Treasury Regulation section 1.7704-1(h), including, without limitation, issuing any LLC Units in a transaction required to be registered with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, it will provide at least 15 business days’ advance written notice describing the proposed action in reasonable detail to the LLC Unitholders and provide each LLC Unitholder with the opportunity to effect an Exchange of all such LLC Unitholder’s LLC Units in accordance with the terms of this Agreement; provided, however, that in no event will the Corporation take or cause to be taken any action that would cause interests in HDD to not meet the requirements of Treasury Regulation section 1.7704-1(h) prior to the first anniversary of the closing of the IPO. Provided that the notice and opportunity to Exchange contemplated by the previous sentence has been provided to the LLC Unitholders, then, notwithstanding anything to the contrary herein, if the Board of Directors of the Corporation, after consultation with its outside legal counsel and tax advisor, shall determine in good faith that interests in HDD do not meet the requirements of Treasury Regulation section 1.7704-1(h), the Corporation may impose such restrictions on Exchange as the Corporation may reasonably determine to be necessary or advisable so that HDD is not treated as a “publicly traded partnership” under Section 7704 of the Code.

 

  

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(e)           For the avoidance of doubt, and notwithstanding anything to the contrary herein, an LLC Unitholder shall not be entitled to Exchange LLC Units to the extent the Corporation reasonably determines in good faith that such Exchange (i) would be prohibited by law or regulation or (ii) would not be permitted under any other agreement with the Corporation or its subsidiaries to which such LLC Unitholder is then subject (including, without limitation, the HDD Operating Agreement) or any written policies of the Corporation relating to insider trading then applicable to such LLC Unitholder. For avoidance of doubt, no Exchange shall be deemed to be prohibited by any law or regulation pertaining to the registration of securities if such securities have been so registered or if any exemption from such registration requirements is reasonably available.

 

(f)           If the Corporation elects to satisfy an Exchange in cash, then an Exchanging LLC Unitholder may receive cash in lieu of shares of Class A Common Stock in exchange for LLC Units surrendered in accordance with Section 2.1(a), in an amount equal to the Market Value of the shares of Class A Common Stock that such Exchanging LLC Unitholder would have received absent such an election by the Corporation.  For the purposes of this Section 2.1(f), the “Market Value” as of a particular date shall be determined as follows: (i) if, at the time of the Exchange, the LLC Units are convertible for shares of Class A Common Stock (or the securities of any successor company to the Corporation) that trade on a national securities exchange, the Market Value shall be the average of the closing sale prices over the ten (10) trading days ending one (1) day prior to the date of the Exchange; (ii) if, at the time of the Exchange, the LLC Units are convertible for Class A Common Stock (or the securities of any successor company to the Corporation) that trade over-the-counter, the Market Value shall be the average of the closing bid or sale prices (whichever is applicable) over the ten (10) day period ending three (3) days prior to the date of the Exchange; and (iii) if the LLC Units are not convertible for securities of the Corporation, or any other entity the securities of which are listed or traded on an established securities market, then the Market Value shall be the fair market value thereof, as determined in good faith by the Board of Directors of the Corporation.  If the the Exchanging LLC Unitholder does not receive notice of the Corporation’s cash election substantially in the form of Exhibit B within five (5) business days of the Corporation’s receipt of such Exchanging LLC Unitholder’s election of exchange, the Corporation shall forfeit the right to satisfy such Exchange in cash.

 

  

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SECTION 2.2        Adjustment.

 

(a)           The Exchange Rate shall be adjusted accordingly if there is: (a) any subdivision (by any unit split, unit distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse unit split, reclassification, reorganization, recapitalization or otherwise) of the LLC Units that is not accompanied by an identical subdivision or combination of the Class A Common Stock; or (b) any subdivision (by any stock split, stock dividend or distribution, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse stock split, reclassification, reorganization, recapitalization or otherwise) of the Class A Common Stock that is not accompanied by an identical subdivision or combination of the LLC Units. If there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock are converted or changed into another security, securities or other property, then upon any subsequent Exchange, an exchanging LLC Unitholder shall be entitled to receive the amount of such security, securities or other property that such exchanging LLC Unitholder would have received if such Exchange had occurred immediately prior to the effective date of such reclassification, reorganization, recapitalization or other similar transaction, taking into account any adjustment as a result of any subdivision (by any split, distribution or dividend, reclassification, reorganization, recapitalization or otherwise) or combination (by reverse split, reclassification, recapitalization or otherwise) of such security, securities or other property that occurs after the effective time of such reclassification, reorganization, recapitalization or other similar transaction.  For the avoidance of doubt, if there is any reclassification, reorganization, recapitalization or other similar transaction in which the Class A Common Stock are converted or changed into another security, securities or other property, this Section 2.2 shall continue to be applicable, mutatis mutandis, with respect to such security or other property. This Agreement shall apply to the LLC Units held by the LLC Unitholders and their Permitted Transferees as of the date hereof, as well as any LLC Units hereafter acquired by an LLC Unitholder and his or her or its Permitted Transferees. This Agreement shall apply to, mutatis mutandis, and all references to “LLC Units” shall be deemed to include, any security, securities or other property of HDD which may be issued in respect of, in exchange for or in substitution of LLC Units by reason of any distribution or dividend, split, reverse split, combination, reclassification, reorganization, recapitalization, merger, exchange (other than an Exchange) or other transaction.

 

SECTION 2.3        Class A Common Stock to be Issued.

 

(a)           If the Corporation does not elect to satisfy an Exchange in cash pursuant to Section 2.1(f), the Corporation covenants and agrees to deliver shares of Class A Common Stock that have been registered under the Securities Act with respect to any Exchange to the extent that a registration statement is effective and available for such shares.  In the event that any Exchange in accordance with this Agreement is to be effected at a time when any required registration has not become effective or otherwise is unavailable, upon the request and with the reasonable cooperation of the LLC Unitholder requesting such Exchange, the Corporation shall use its reasonable best efforts to promptly facilitate such Exchange pursuant to any reasonably available exemption from such registration requirements. The Corporation shall use its reasonable best efforts to list the Class A Common Stock required to be delivered upon exchange prior to such delivery upon each national securities exchange or inter-dealer quotation system upon which the outstanding Class A Common Stock may be listed or traded at the time of such delivery. Nothing contained herein shall be construed to preclude the Corporation or HDD from satisfying their obligations in respect of the exchange of the LLC Units by delivery of Class A Common Stock which are held in the treasury of the Corporation or HDD or any of their subsidiaries.

 

(b)           The Corporation shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon an Exchange, such number of shares of Class A Common Stock as shall be deliverable upon any such Exchange; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Exchange by delivery of purchased shares of Class A Common Stock (which may or may not be held in the treasury of the Corporation or any subsidiary thereof).

 

  

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(c)           Prior to the date of this Agreement, the Corporation has taken all such steps as may be required to cause to qualify for exemption under Rule 16b-3(d) or (e), as applicable, under the Exchange Act, and be exempt for purposes of Section 16(b) under the Exchange Act, any acquisitions or dispositions of equity securities of the Corporation (including derivative securities with respect thereto) and any securities which may be deemed to be equity securities or derivative securities of the Corporation for such purposes that result from the transactions contemplated by this Agreement, by each director or officer of the Corporation who may reasonably be expected to be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to the Corporation upon the registration of any class of equity security of the Corporation pursuant to Section 12 of the Exchange Act (with the authorizing resolutions specifying the name of each such officer or director whose acquisition or disposition of securities is to be exempted and the number of securities that may be acquired and disposed of by each such person pursuant to this Agreement).

 

(d)           If any Takeover Law or other similar law or regulation becomes or is deemed to become applicable to this Agreement or any of the transactions contemplated hereby, the Corporation shall use its reasonable best efforts to render such law or regulation inapplicable to all of the foregoing.

 

(e)           The Corporation covenants that all Class A Common Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable and not subject to any preemptive right of stockholders of the Corporation or to any right of first refusal or other right in favor of any person or entity.

 

ARTICLE III

 

SECTION 3.1        Representations and Warranties of the Corporation. The Corporation represents and warrants that (i) it is a corporation duly incorporated and is existing in good standing under the laws of the State of Delaware, (ii) it has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby and to issue the Class A Common Stock in accordance with the terms hereof, (iii) the execution and delivery of this Agreement by the Corporation and the consummation by it of the transactions contemplated hereby (including without limitation, the issuance of the Class A Common Stock) have been duly authorized by all necessary corporate action on the part of the Corporation, including but not limited to all actions necessary to ensure that the acquisition of shares Class A Common Stock pursuant to the transactions contemplated hereby, to the fullest extent of the Corporation’s Board of Directors’ power and authority and to the extent permitted by law, shall not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations” of any jurisdiction that may purport to be applicable to this Agreement or the transactions contemplated hereby (collectively, “Takeover Laws”), (iv) this Agreement constitutes a legal, valid and binding obligation of the Corporation enforceable against the Corporation in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by the Corporation and the consummation by the Corporation of the transactions contemplated hereby will not (A) result in a violation of the Certificate of Incorporation of the Corporation or the Bylaws of the Corporation or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Corporation is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Corporation or by which any property or asset of the Corporation is bound or affected, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not reasonably be expected to have a material adverse effect on the Corporation or its business, financial condition or results of operations.

 

  

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SECTION 3.2        Representations and Warranties of the LLC Unitholders. Each LLC Unitholder, severally and not jointly, represents and warrants that (i) if it is not a natural person, that it is duly incorporated or formed and, to the extent such concept exists in its jurisdiction of organization, is in good standing under the laws of such jurisdiction, (ii) it has all requisite legal capacity and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby, (iii) if it is not a natural person, the execution and delivery of this Agreement by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or other entity action on the part of such LLC Unitholder, (iv) this Agreement constitutes a legal, valid and binding obligation of such LLC Unitholder enforceable against it in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally, and (v) the execution, delivery and performance of this Agreement by such LLC Unitholder and the consummation by such LLC Unitholder of the transactions contemplated hereby will not (A) if it is not a natural person, result in a violation of the Certificate of Incorporation and Bylaws or other organizational documents of such LLC Unitholder or (B) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such LLC Unitholder is a party, or (C) result in a violation of any law, rule, regulation, order, judgment or decree applicable such LLC Unitholder, except with respect to clauses (B) or (C) for any conflicts, defaults, accelerations, terminations, cancellations or violations, that would not in any material respect result in the unenforceability against such LLC Unitholder of this Agreement.

 

ARTICLE IV

 

SECTION 4.1         Additional LLC Unitholders. To the extent an LLC Unitholder validly transfers any or all of such holder’s LLC Units to another person in a transaction in accordance with, and not in contravention of, the HDD Operating Agreement, then such transferee (each, a “Permitted Transferee”) shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit C hereto, whereupon such Permitted Transferee shall become an LLC Unitholder hereunder. To the extent HDD issues LLC Units in the future, then the holder of such LLC Units shall have the right to execute and deliver a joinder to this Agreement, substantially in the form of Exhibit C hereto, whereupon such holder shall become an LLC Unitholder hereunder.

 

  

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SECTION 4.2         Addresses and Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax, by electronic mail (delivery receipt requested) or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be as specified in a notice given in accordance with this Section 3.2):

 

(a)           If to the Corporation, to:

 

P.O. Box 1532

 

Healdsburg, CA 95448

 

Attention: Chief Financial Officer

 

Fax: (707) 431-4402

 

Electronic Mail: james@truetthurst.com

 

With a copy to:

 

Anna T. Pinedo, Esq.

Morrison & Foerster LLP

1290 Avenue of the Americas

New York, NY 10104

Fax: (212) 468-7900

Electronic Mail: apinedo@mofo.com

(b)          If to any LLC Unitholder, to the address and other contact information set forth in the records of HDD from time to time.

 

SECTION 4.3         Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking action as may be necessary or appropriate to achieve the purposes of this Agreement.

 

SECTION 4.4         Binding Effect. This Agreement shall be binding upon and inure to the benefit of all of the parties and, to the extent permitted by this Agreement, their successors, executors, administrators, heirs, legal representatives and assigns.

 

SECTION 4.5         Severability. If any term or other provision of this Agreement is held to be invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions is not affected in any manner materially adverse to any party. Upon a determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

 

  

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SECTION 4.6         Amendment. The provisions of this Agreement may be amended only by the affirmative vote or written consent of each of (i) the Corporation and (ii) LLC Unitholders holding at least two thirds of the then outstanding LLC Units (excluding LLC Units held by the Corporation); provided that except as otherwise provided herein (including, without limitation, in Section 2.1(d)), no amendment may materially and adversely affect the rights of an LLC Unitholder, as such, other than on a pro rata basis with other LLC Unitholders without the consent of such LLC Unitholder (or, if there is more than one such LLC Unitholder that is so affected, without the consent of a majority of such affected LLC Unitholder in accordance with their holdings of LLC Units).

 

SECTION 4.7         Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute waiver of any such breach of any other covenant, duty, agreement or condition.

 

SECTION 4.8         Submission to Jurisdiction; Waiver of Jury Trial.

 

(a)           Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce.  If the parties to the dispute fail to agree on the selection of an arbitrator within thirty (30) days of the receipt of the request for arbitration, the International Chamber of Commerce shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)           Notwithstanding the provisions of paragraph (a), the parties hereto may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), each party hereto (i) expressly consents to the application of paragraph (c) of this Section 4.8 to any such action or proceeding and (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate.

 

(c)           (i)           EACH PARTY HERETO IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 4.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

 

  

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(ii)         The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 4.8 and such parties agree not to plead or claim the same.

 

SECTION 4.9         Counterparts. This Agreement may be executed and delivered (including by facsimile transmission or by e-mail delivery of a “.pdf” format data file) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed and delivered shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Copies of executed counterparts transmitted by telecopy, by e-mail delivery of a “.pdf” format data file or other electronic transmission service shall be considered original executed counterparts for purposes of this Section 4.9.

 

SECTION 4.10       Tax Treatment. This Agreement shall be treated as part of the partnership agreement of HDD as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations promulgated thereunder.

 

SECTION 4.11       Specific Performance. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to specific performance of the terms and provisions hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

SECTION 4.12       Independent Nature of LLC Unitholders’ Rights and Obligations. The obligations of each LLC Unitholder hereunder are several and not joint with the obligations of any other LLC Unitholder, and no LLC Unitholder shall be responsible in any way for the performance of the obligations of any other LLC Unitholder under hereunder.  The decision of each LLC Unitholder to enter into to this Agreement has been made by such LLC Unitholder independently of any other LLC Unitholder.  Nothing contained herein, and no action taken by any LLC Unitholder pursuant hereto, shall be deemed to constitute the LLC Unitholders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the LLC Unitholders are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated hereby and the Corporation acknowledges that the LLC Unitholders are not acting in concert or as a group, and the Corporation will not assert any such claim, with respect to such obligations or the transactions contemplated hereby.

 

SECTION 4.13       Applicable Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York.

 

[Signature page follows]

 

  

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered, all as of the date first set forth above.

   

	 	
TRUETT-HURST, INC.

	 
	 	 	 	 
	 	 	 	 
	 	
By: 

	/s/ Phillip L. Hurst	 
	 	 	Name: 	Phillip L. Hurst	 
	 	 	Title: 	Chief Executive Officer 	 
	 	 	 	 
	 	LLC UNITHOLDERS	 

 

 

	 	 	 
	
 

	/s/ Mark De Meulenaere	 
	 	Mark De Meulenaere	 

 

 

	 	 	 
	
 

	/s/ Forrester R. Hambrecht	 
	 	Forrester R. Hambrecht	 

 

 

	 	 	 
	
 

	/s/ Barrie Graham	 
	 	
Barrie Graham

	 

 

 

	 	 	 
	
 

	/s/ Virginia Marie Lambrix	 
	 	
Virginia Marie Lambrix

	 

 

 

 

	 	THE HURST FAMILY REVOCABLE TRUST dated August 1, 2004	 
	 	 	 	 
	
 

	By:	/s/ Phillip L. Hurst	 
	 	 	
Phillip L. Hurst, Co-Trustee

	 

 

 

	 	 	 	 
	
 

	By:	/s/ Sylvia M. Hurst	 
	 	 	
Sylvia M. Hurst, Co-Trustee

	 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

[Signature page to Exchange Agreement]

  

  

 

	 	
HAMBRECHT WINE GROUP, L.P.,

  a California limited partnership

 

	 	By:       	HAMBRECHT WINE MANAGEMENT INC., a California corporation
	 	Its:       	
General Partner

 

	 	 	 	 
	
 

	By:	/s/ William R. Hambrecht	 
	 	 	William R. Hambrecht, Chairman	 

 

	 	
THE DOLAN 2005 FAMILY TRUST U/T/D dated August 24, 2005

 

	 	 	 	 
	
 

	By:	
/s/ Heath E. Dolan

	 
	 	 	
Heath E. Dolan, Trustee

	 

 

	 	
THE DOLAN 2003 FAMILY TRUST U/T/A dated June 5, 2003

 

	 	 	 	 
	
 

	By:	
/s/ Paul E. Dolan, III

	 
	 	 	
Paul E. Dolan, III, Trustee

	 

	 	
THE CARROLL-OBREMSKEY FAMILY REVOCABLE TRUST DATED APRIL 5, 1996

 

 

	 	 	 	 
	
 

	By:	
/s/ Daniel A. Carroll

	 
	 	 	
Daniel A. Carroll, Trustee

	 

 

	 	 	 	 
	
 

	By:	
/s/ Stasia A. Obremskey

	 
	 	 	
Stasia A. Obremskey, Trustee

	 

 

[SIGNATURES CONTINUE ON FOLLOWING PAGE]

 

[Signature page to Exchange Notice]

  

  

 

	
 

	/s/ Anna-Marie E. Schweizer	 
	 	
Anna-Marie E. Schweizer

	 

 

 

 

 

 

 

[Signature page to Exchange Notice]

  

  

 

EXHIBIT A

 

FORM OF

ELECTION OF EXCHANGE

 

Truett-Hurst, Inc.

P.O. Box 1532

Healdsburg, CA 95448

Attention: Chief Financial Officer

 

Reference is hereby made to the Exchange Agreement, dated as of June 19, 2013 (the “Exchange Agreement”), by and between Truett-Hurst, Inc., a Delaware corporation, and the holders of LLC Units (as defined herein) from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

 

The undersigned LLC Unitholder hereby transfers to the Corporation the number of LLC Units set forth below in Exchange for shares of Class A Common Stock or cash, pursuant to Section 2.1(f) of the Exchange Agreement.  If the Exchange is for Class A Common Stock, such shares are to be issued in the name set forth below, as set forth in the Exchange Agreement.

 

	
Legal Name of LLC Unitholder:

	  
	 	 
	
Address:

	  
	 	 
	
Number of LLC Units to be Exchanged:

	  

 

The undersigned hereby represents and warrants that (i) the undersigned has full legal capacity to execute and deliver this Election of Exchange and to perform the undersigned’s obligations hereunder; (ii) this Election of Exchange has been duly executed and delivered by the undersigned and is the legal, valid and binding obligation of the undersigned enforceable against it in accordance with the terms thereof or hereof, as the case may be, subject to applicable bankruptcy, insolvency and similar laws affecting creditors’ rights generally and the availability of equitable remedies; (iii) the LLC Units subject to this Election of Exchange are being transferred to the Corporation free and clear of any pledge, lien, security interest, encumbrance, equities or claim; and (iv) no consent, approval, authorization, order, registration or qualification of any third party or with any court or governmental agency or body having jurisdiction over the undersigned or the LLC Units subject to this Election of Exchange is required to be obtained by the undersigned for the transfer of such LLC Units to the Corporation.

 

The undersigned hereby irrevocably constitutes and appoints any officer of the Corporation as the attorney of the undersigned, with full power of substitution and resubstitution in the premises, to do any and all things and to take any and all actions that may be necessary to transfer to the Corporation the LLC Units subject to this Election of Exchange and to deliver to the undersigned the shares of Class A Common Stock to be delivered in Exchange therefor.

 

A-1

  

  

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Election of Exchange to be executed and delivered by the undersigned or by its duly authorized attorney.

 

	  	  	  
	  	
Name of LLC Unitholder

	  
	  	  	  
	  	  	  	  
	  	
By:

	  	  
	  	  	  	  
	  	
Printed Name:

	  	  
	  	  	  	  
	  	
Capacity:

	  	  
	 	 	 	 
	 	 	 	 
	  	
Dated:

	  	  

 

 

 

 

 

 

[Signature page to Exchange Notice]

  

  

 

EXHIBIT B

 

FORM OF

CASH ELECTION NOTICE

 

[Exchanging LLC Unitholder]

[Address]

 

 

Reference is hereby made to the Exchange Agreement, dated as of June 19, 2013 (the “Exchange Agreement”), by and between Truett-Hurst, Inc., a Delaware corporation (the “Corporation”), and the holders of LLC Units (as defined therein) from time to time party thereto. Capitalized terms used but not defined herein shall have the meanings given to them in the Exchange Agreement.

 

The Corporation received an Election of Exchange from the below LLC Unitholder on [  ], 20[  ].  Pursuant to Section 2.1(f) of the Exchange Agreement, the Corporation has elected to satisfy the Exchange in cash in lieu of Class A Common Stock.

 

	
Legal Name of LLC Unitholder:

	  
	 	 
	
Number of LLC Units to be Exchanged:

	  
	 	 
	
Market Value per LLC Unit:

	
$

	 	 
	
Aggregate Market Value:

	
$

 

[Remainder of page left blank]

 

B-1

  

  

 

IN WITNESS WHEREOF the undersigned, by authority duly given, has caused this Cash Election Notice to be executed and delivered by the undersigned or by its duly authorized attorney.

 

	 	
TRUETT-HURST, INC.

	 
	 	 	 	 
	 	
By: 

	 	 
	 	 	
Name:

	 
	 	 	
Title:

	 
	 	 	 	 
	 	
Dated:

	 	 

 

 

 

 

 

 

B-2

  

  

 

EXHIBIT C

 

FORM OF

JOINDER AGREEMENT

 

This Joinder Agreement (“Joinder Agreement”) is a joinder to the Exchange Agreement, dated as of June 19, 2013 (the “Agreement”), by and between Truett-Hurst, Inc., a Delaware corporation (the “Corporation”), and each of the LLC Unitholders from time to time party thereto. Capitalized terms used but not defined in this Joinder Agreement shall have their meanings given to them in the Agreement. This Joinder Agreement shall be governed by, and construed in accordance with, the law of the State of New York. In the event of any conflict between this Joinder Agreement and the Agreement, the terms of this Joinder Agreement shall control.

 

The undersigned hereby joins and enters into the Agreement having acquired LLC Units in HDD. By signing and returning this Joinder Agreement to the Corporation, the undersigned (i) accepts and agrees to be bound by and subject to all of the terms and conditions of and agreements of an LLC Unitholder contained in the Agreement, with all attendant rights, duties and obligations of an LLC Unitholder thereunder and (ii) makes each of the representations and warranties of an LLC Unitholder set forth in Section 3.2 of the Agreement as fully as if such representations and warranties were set forth herein. The parties to the Agreement shall treat the execution and delivery hereof by the undersigned as the execution and delivery of the Agreement by the undersigned and, upon receipt of this Joinder Agreement by the Corporation, the signature of the undersigned set forth below shall constitute a counterpart signature to the signature page of the Agreement.

 

	Name:	 	 
	 	 	 
	Dated:	 	 

 

	
Address for Notices:

	 	With copies to:
	
 

	 	 	 
	
 

	 	 	 
	
 

	 	 	 
	
  

Attention:

	 	 	 

 

 

 

 

 

 C-1

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