EFTA01076944.pdf

EXHIBIT A NEXT MANAGEMENT, LLC AMENDED AND RESTATED OPERATING AGREEMENT Dated as of 2008 THE COMPANY INTERESTS REPRESENTED BY THIS AMENDED AND RESTATED OPERATING AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH COMPANY INTERESTS MAY NOT BE SOLD, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN. EFTA01076944  Table of Contests Pst Article I DEFINITIONS Article II ORGANIZATIONAL MATTERS 8 2.1 Formation of Company 8 2.2 Operating Agreentent 8 2.3 Name 8 2.4 Purpose 9 2.5 Principal Office; Registered Office 9 2.6 Term 9 2.7 No State-Law Partnership 9 Article III CAPITAL CONTRIBUTIONS 9 3.1 Members; Units 9 3.2 Capital Accounts 10 3.3 Negative Capital Accounts 3.4 No Withdrawal 3.5 Loans From Members 11 Article IV DISTRIBUTIONS AND ALLOCATIONS 11 4.1 Distributions 11 4.2 Allocations 14 4.3 Special Allocations 15 4.4 Tax Allocations 16 4.5 Curative Allocations 16 4.6 Indemnification and Reimbursement for Payments on Behalf of a Member 17 Article V MANAGEMENT 17 5.1 Authority of Board 17 5.2 Limits on Authority of Board 18 5.3 Actions of the Board 19 5.4 Composition 19 5.5 Proxies 20 5.6 Meetings, etc 21 5.7 Delegation of Authority .21 5.8 Limitation of Liability .22 Article VI RIGHTS AND OBLIGATIONS OF MEMBERS .23 6.1 Limitation of Liability .23 6.2 Lack of Authority .23 6.3 No Right of Partition .23 6.4 Indemnification 23 6.5 Members Right to Act 24 6.6 Conflicts of Interest. .25 007311.14 EFTA01076945  Table of Contents Page Article VII BOOKS, RECORDS, ACCOUNTING AND REPORTS .27 7.1 Records and Accounting -* 27 7.2 Fiscal Year 27 7.3 Reports ..27 7.4 Transmission of Communications .27 Article VIII TAX MATTERS 27 8.1 Preparation of Tax Returns 27 82 Tax Elections 27 8.3 Tax Controversies 28 Article IX RESTRICTIONS ON TRANSFER OF UNITS; PREEMPTIVE RIGHTS 28 9.1 Transfers of Units .28 9.2 Right of First Refusal; Participation Rights .29 9.3 Restricted Units Legend .31 9.4 Counterparts; Joinder 32 9.5 Other Transfer Restrictions 33 9.6 Ineffective Transfer 33 9.7 Transferee's Rights and Obligations 33 9.8 Transferor's Rights and Obligations 33 9.9 Indirect Transfers .34 9.10 Transfer of Equity Interests in Designated Affiliates 34 9.11 Preemptive Rights 34 Article X Additional MEMBERS .35 Article XI WITHDRAWAL AND RESIGNATION OF MEMBERS 36 Ankle XII DISSOLUTION AND LIQUIDATION 36 12.1 Dissolution 36 12.2 Liquidation and Termination 36 12.3 Deferment; Distribution in Kind 37 12.4 Cancellation of Articles 38 12.5 Reasonable Time for Winding Up 38 12.6 Return of Capital 38 12.7 Public Offering 38 12.8 Approved Sale 38 Article XIII VALUATION 40 Ankle XIV GENERAL PROVISIONS 41 14.1 Power of Attorney 41 14.2 Amendments 41 14.3 Title to Company Assets 42 14.4 Addresses and Notices 42 ii US ISAMU EFTA01076946  Table of Contents Page 14.5 Binding Effect 43 14.6 Creditors 43 14.7 Waiver 43 14.8 Counterparts 43 14.9 Applicable Law; Waiver ofJury Trial 43 14.10 Severability 44 14.11 Further Action 44 14.12 Delivery by Facsimile 44 14.13 Entire Agreement 44 14.14 Remedies 44 14.15 Descriptive Headings; Interpretation 44 ' ?• ' iii 13531111.14 EFTA01076947  NEXT MANAGEMENT, LW AMENDED AND RESTATED OPERATING AGREEMENT This AMENDED AND RESTATED OPERATING AGREEMSIT, dated as of 2008, is entered into by and among the Members. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows: ARTICLE I DEFINITIONS The following definitions shall be applied to the terms used in this Agreement for all purposes, unless otherwise clearly indicated to the contrary. "Additional Member" means a Person admitted to the Company as a Member pursuant to Article X. "Adjusted Capital Account Deficit" means with respect to any Capital Account as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero. For this purpose, such Person's Capital Account balance shall be (i) reduced for any items described in Treasury Regulation Section 1.704- l(b)(2)(10(d)(4), (5) and (6), and (ii) increased for any amount such Person is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Section .704-1(b)(2Xi)(e) (relating to partner liabilities to a partnership) or 1.704- 2(g)(1) and 1.704-2(i) (relating to minimum gain). "Affiliate" of any Person means any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question. "Agreement" means this Amended and Restated Operating Agreement of Next Management, LLC. "Articles" means the Company's articles of organization as filed with the Department of State of the State of New York. "Assienee" means a Person to whom a Member has attempted to Transfer a Company Interest, but who has not become a Substituted Member pursuant to Section 9.7(a). "Base Rate" means, on any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the "prime rate" at large U.S. money center banks. kat 1,61331.14 EFTA01076948  "Board" has the meaning set forth in Section 5.1. "Book Value" means, with respect to any Company property, the Company's adjusted basis for federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury Regulation Section 1.704-1(b)(2)(iv)(d)-(g). "Capital Account" means the capital account maintained for a Member pursuant to Section 3.2. "Capital Contribution" means any cash, cash equivalents, promissory obligations or the Fair Market Value of other property which a Member contributes to the Company pursuant to Section 3.1. "Claxort" means Claxon, Inc., a New York corporation. "Code" means the United States Internal Revenue Code of 1986, as amended. "Comnanv" means Next Management, LLC, a New York limited liability company, established in accordance with the New York Act, as such limited liability company may be from time to time constituted, and including its successors. "Company Interest" means the interest of a Member in Profits, Losses and Distributions. Following the initial Recapitalization, all Company Interests shall be represented by Units. "Consolidated EBITDA" shall mean, for any period, the net income or loss of the Company and its Designated Affiliates for such period determined on a consolidated basis in accordance with GAAP plus (a) without duplication and to the extent deducted in determining such consolidated net income, the sum of (i) consolidated interest expense for such period, (ii) provision for taxes based on income or profits of the Company and its Affiliates, (iii) all amounts attributable to depreciation and amortization (including amortization of intangibles (including goodwill)) (excluding amortization expense attributable to a prepaid cash item that was paid in a prior period), (iv) any extraordinary, unusual or non-recurring, and in each case non-cash, charges or losses for such period (but excluding any such non-cash charge in respect of an item that increased consolidated net income in a prior period (to the extent of such increase)), (v) fees and expenses incurred during such period in connection with the transactions contemplated by the Purchase Agreement and the Prior Purchase Agreement, (vi) the amount of advisory, management or similar fees and transaction fees paid (or payable but accrued) to any member of the Golden Gate Group and (vii) the amount of the bonuses described in Section 4.1(d) hereof paid (or payable but accrued), and minus (b) without duplication and to the extent included in determining such consolidated net income, the sum of (i) any cash disbursements during such period that relate to non-cash charges or losses added to consolidated net income pursuant to clause (aXiv) or (a)(vii) of this paragraph, or accrued• fees added to consolidated net income pursuant to clause (aXvii) of this paragraph, in each case in any prior period, and (ii) any extraordinary, unusual or non recurring gains for such period, all determined on a consolidated basis in accordance with GAAP. 2 KAIE tY62.319.14 EFTA01076949  "Designated Affiliates" means each of Next Management SARI, a company formed pursuant to the laws of France, Next Milano SRL, a company formed pursuant to the laws of Italy, and Next Management London Limited, a company formed pursuant to the laws of England and Wales. "Distribution" means each distribution made by the Company to a Member, whether in cash, property or securities of the Company and whether by liquidating distribution or otherwise; provided IS none of the following shall be a Distribution: (a) any recapitalization or exchange of securities of the Company, or any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding securities, (b) any distribution made by the Company pursuant to Sections 4.1(b) or (d) hereof, (c) any fees that are required to be and are paid to any member of the Golden Gate Group, (d) the Initial Recapitalization or (e) any Excluded Tax Distribution. "election Period" has the meaning set forth in Section 9.11(c). "Equity Securities" means (i) Units or other equity interests in the Company (including other classes or groups thereof having such relative rights, powers and duties as may from time to time be established by the Board, including rights, powers and/or duties senior to existing classes and groups of Units and other equity interests in the Company), (ii) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units or other equity interests in the Company and (ii) warrants, options or other rights to purchase or otherwise acquire Units or other equity interests in the Company. "Event of Withdrawal" means the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company. "gxcess EBITDA" means, with respect to any Fiscal Year of the Company, the amount (if any) by which Consolidated EBITDA exceeds $6,000,000. "Excluded Tax Distribution" has the meaning set forth in Section 4.1(c). "Exempt Transfer" means (i) a Transfer among the members of the Golden Gate Group or any investment vehicle managed by Golden. Gate Private Equity, Inc. or to an employee or director of the Company or any of its Subsidiaries, (ii) a Transfer to any stockholder, member, or partner of any member of the Golden Gate Group (and any subsequent Transfers among such stockholders, members, or partners), or (iii) any exchange of Units with the Company; provided that this Agreement will continue to apply to the Golden Gate Units after any Transfer pursuant to clauses (i), (ii) or (iii) above and provided that the requirements of Sections 9.1(c) are also satisfied. "Fair Market Value" means, with respect to any asset or equity interest, its fair market value determined according to Article XIII. "Family Group" means, with respect to any Person, such Person's spouse, parents, siblings and descendants (whether by birth or adoption) and any trust or other estate planning vehicle established solely for the benefit of such Person and/or such Person's spouse 3 LIE 11/44)%14 EFTA01076950 and/or such Person's descendants (by birth or adoption), parents, siblings or dependents, or any charitable trust the grantor of which is such Person and/or a member of such Person's Family Group. "Fiscal Period" means any interim accounting period withinta Taxable Year established by the Board and which is permitted or required by Code Section 706. "Fiscal Year" means the Company's annual accounting period established pursuant to Section 7.2. "GAAP" shall mean generally accepted accounting principles in the United States applied on a consistent basis. "Golden Gate Group" means Golden Gate Private Equity, Inc., its Affiliates and any of their respective managed investment funds and portfolio companies (excluding the Company and its Subsidiaries) and their twitcctive partners, members, directors, employees, stockholders, agents, any successor by operation of law (including by merger) of any such Person, and any entity that acquires all or substantially all of the assets of any such Person in a single transaction or series ofrelated transactions. "colden Gate Majority Member" means Claxon. "Golden Gate Units" means (i) any Units acquired by any member of the Golden Gate Group and (ii) any equity securities issued or issuable directly or indirectly with respect to the Units referred to in clause (i) by way of Unit dividend or Unit split or in connection with a combination of Units, recapitalization, merger, consolidation or other reorganization, or in each case, any comparable transaction. "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. "Indemnified Person" has the meaning set forth in Section 6.4(a). "Independent Third Party" means any Person who is not a member of the Golden Gate Group. "Initial Recapitalization" has the meaning set forth in Section 3.1(b). . "Insider" means any officer, director, employee, Member or other Affiliate of the Company or any individual related by marriage or adoption to any such Person or any entity in which any such Person owns any beneficial interest. "M" has the meaning set forth in Section 12.7(a). "Losses" means items of Company loss and deduction determined according to Section 3.2. 4 ME121623311A4 EFTA01076951  "Manager" has the meaning set forth in Section 5.1. "Maximum Marginal Rate" has the meaning set forth in Section 4.1(c). "Member" means each of the members named on Schedule A attached hereto and any Person admitted to the Company as a Substituted Member or Additional Metnber; provided a person shall remain a Member hereunder only so long as such Person is shown on the. Company's books and records as the holder ofone or more Units or other Company Interests. "Minimum Gain" means the partnership minimum gain determined pursuant to Treasury Regulation Section 1.704-2(d). "New York Act" means the New York Limited Liability Company Law, Chapter 34 of the New York Consolidated Laws, as it may be amended from time to time, and any successor to the New York Act. Ton-Compete Agreement" has the meaning set forth in Section 4.1(f)(0. "Other Members" means the Members that are not a members of the Golden Gate Group. "Owner" means with respect to each Person which is (i) a corporation or any similar entity, each shareholder and each Owner of such shareholder; (ii) a limited liability company or any similar entity, each member and each Owner of such member; (iii) a partnership (whether limited or general) or similar entity, each partner and each Owner of such partner; and (iv) a trust or any similar entity, each beneficiary who has the legal right (or whose spouse has the present legal right) to demand a distribution of the trust's interest and each Owner of such beneficiary or such beneficiary's spouse (whether in such beneficiary's capacity as a beneficiary, trustee or otherwise and whether by revocation or amendment of such trust or otherwise). "Participating Members" has the meaning set forth in Section 9.2(b). "Ileum" means an individual or a corporation, partnership, limited liability company, trust, unincorporated organization, association or other entity. "PBC" means Partnership Holding Corp., a New York corporation. "Pre-Closing Tax Period" has the meaning set forth in Section 4.1(b). "Pm-Closing Taxes" has the meaning set forth in Section 4.1(b). "Preemptive Holder" has the meaning set forth in Section 9.11(a). "Preemptive Rights Notice" has the meaning set forth in Section 9.11(b). "Prior Owners" means, collectively, Lorenzo Pedrini, Giorgio Santambrogio, and Paolo Roberti and Claxon Participations, S.A., a company formed pursuant to the laws of Luxembourg. 5 IMITOPLI4 EFTA01076952  "Prior Purchase Agreement" means that certain Securities Purchase Option Agreement, dated June 20, 2008, by and among Wilcor, PHC, the Company and the Prior Owners. "Profits" means items of Company income and gain determined according to Section 3.2. "Proposed Purchaser" has the meaning set forth in Section 9.2(a). "Public Sale" means any sale of equity securities of the Company (other than rights to acquire equity securities of the Company) to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act. "Purchase Agreement" means that certain Securities Purchase Agreement, dated as of October 2008, by and among Wilcor, PHC, Faith Kates, Joel Wilkenfeld, the Company and the members of the Golden Gate Group listed on the signatures pages thereto. "Regulatory Allocations" has the meaning set forth in Section 4.5. "Requisite Holders" has the meaning set forth in Section I2.8(a). "Sale Notice" has the meaning set forth in Section 9.2(b). . "Sale of the Company" means (i) any sale or transfer by the Company of all or substantially all of its assets, (ii) any consolidation, merger or reorganization of the Company with or into any other entity or entities as a result of which any Person or group other than the members of the Golden Gate Group, Wilcor, PHC, Faith Kates and Joel Wilkenfeld obtains possession of voting power (under ordinary circumstances) to elect a majority of the surviving entity's board of directors or (iii) any Approved Sale. "Securities Act" means the Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations. My reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future law. "Securities and Exchange Commission" means the United States Securities and Exchange Commission, including any governmental body or agency succeeding to the functions thereof. "Solvent Reorganization" means any solvent reorganization of the Company or any Subsidiary of the Company, including by merger, consolidation, recapitalization, transfer or sale of equity interests or assets, or contribution of assets and/or liabilities, or any liquidation, exchange of securities, conversion of entity, migration of entity, formation of new entity, or any other transaction or group of related transactions (in each case, with the Company or one of its Affiliates (which Affiliates may include an entity formed for the purpose of such Solvent Reorganization)), in which: Kit/ I2632338.14 EFTA01076953  (i) all Members that are holders of the same class or series of Units arc offered the same consideration in respect of such class or series ofUnits; (ii) the pro rata indirect economic interests of the Members in the business of the Company, relative to each other and all other holders, directly or indirectly, ofEquity Securities in the Company, are preserved; and (iii) the rights of the Members tinder this Agreement are preserved in all material respects (it being understood by way of illustration and not limitation that the relocation of a covenant or restriction from one instrument to another shall be deemed a preservation if the relocation is necessitated, by virtue of any law or regulation applicable to the Company following such Solvent Reorganization, as a result of any change in jurisdiction or form of entity in connection with the Solvent Reorganization; provided that such covenants and restrictions are• retained in instruments that are, as nearly as practicable and to the extent consistent with business and transactional objectives, equivalent to the instruments in which such restrictions or covenants were contained prior to the Solvent Reorganization). "Straddle Period" means any taxable period that includes (but does not end on) the date hereof. "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 be or control any managing director or general partner of such limited liability company, partnership, association or other business entity. For purposes hereof, references to a "Subsidiary" of the Company shall be given effect only at such times that the Company has one or more Subsidiaries, and, unless otherwise indicated, the term "Subsidiary" refers to a Subsidiary ofthe Company. "Substituted Member" means a any transferee of Units that is admitted as a Member to the Company pursuant to Section 9.7(a). "Tag-Along Notice" has the meaning set forth in Section 9.2(b). "Tax Matters Partner" has the meaning given to such term in Section 6231 of the Code. 7 RAE 1%Ttl70.1• EFTA01076954  "Taxable Year" means the Company's accounting period for federal income tax purposes determined pursuant to Section 7.2. "Transfer" has the meaning set forth in Section 9.1(a). "Transfer Date" has the meaning set forth in Section 9.7(a). "Treasury Regulations" means the income tax regulations promulgated under the Code, as amended. "ilar means a Company Interest of a Member in the Company representing a fractional part of the Company Interests of all Members; provided that any class or group of Units issued shall have the relative rights, powers and duties set forth in this Agreement and the Company Interest represented by such class or group of Units shall be determined in accordance with such relative rights, powers and duties. "Unitholder" means a holder ofUnits. "Wilcor" means The Wilcor Group, Inc., a New York corporation. ARTICLE II ORGANIZATIONAL MATTERS 2.1 Formation of Company. The Company was formed on October 25, 2004 pursuant to the provisions of the New York Act. 2.2 Operating Agreement The Members hereby execute this Agreement for the purpose of establishing the affairs of the Company and the conduct of its business in accordance with the provisions of the New York Act. The Members hereby agree that during the term of the Company set forth in Section 2.6 the rights and obligations of the Members with respect to the Company will be determined in accordance with the terms and conditions of this Agreement and the New York Act. On any matter upon which this Agreement is silent, the New York Act shall control. No provision of this Agreement shall be in violation of the New York Act and to the extent any provision of this Agreement is in violation of the New York Act, such provision shall be void and of no effect to the extent of such violation without affecting the validity of the other provisions of this Agreement; provided, however, that where the New York Act provides that a provision of the New York Act shall apply "except as provided in the operating agreement" or words of similar effect, the provisions of this Agreement shall in each instance control. 2.3 Name. The name of the Company shall be "Next Management, LLC". The Board in its sole discretion may change the name of the Company at any time and from time to time. Notification of any such change shall be given to all of the Members. The Company's business may be conducted under its name and/or any other name or names deemed advisable by the Board. 8 Kai I202.ULt4 EFTA01076955  2.4 Purpose. The purpose and business of the Company shall be any business which may lawfully be conducted by a limited liability company formed pursuant to the New York Act. 2.5 Principal Office; Registered Office. The principal office 9f the Company shall be at 15 Watts Street, New York, New York, 10013, or such other place as the Board may from time to time designate. The Company may maintain offices at such other place or places as the Board deems advisable. Notification of any such change shall be given to all of the Members. 2.6 Term. The term of the Company commenced upon the filing of the Articles in accordance with the New York Act and shall continue in existence until termination and dissolution thereof in accordance with the provisionS of Article XII. 27 No State-Law Partnership. The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this Section 2,7, and neither this Agreement nor any other document entered into by the Company or any Member relating to the subject matter hereof shall be construed to suggest otherwise. The Members intend that the Company shall be treated as a partnership fur federal and, if applicable, state or local income tax purposes, and that each Member 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. ARTICLEIII CAPITAL CONTRIBUTIONS 3.1 Members; Units. (a) The Members of the Company and the Company Interests of each Member (expressed as a percentage of the total Company Interests outstanding) as of the date of the execution of this Agreement are set forth on Schedule A attached hereto. (b) Immediately following the closing of the transactions contemplated by the Purchase Agreement, the Company shall issue to each of the Members set forth on Schedule A their pro rata portion (in proportion to the percentage of Company Interests held by each Member) of an aggregate of 100,000 Units in exchange for the Company Interests set forth on Schedule A (the "Initial Recapitalization"). The amount of the Capital Contribution made with respect to each Unit shall be deemed to be $380.95. Following the Initial Recapitalization, all Company Interests shall be represented by Units. (c) The Members of the Company and the Units to be held by each Member following the Initial Recapitalization are set forth on Schedule A attached hereto. The Board shall cause Schedule A to be updated from time to time to reflect any Transfers of Units permitted hereunder, the issuance of additional Units pursuant to the authority of the Board under Section 5.1 and the admission of Substituted Members and Additional Members. 9 Kat lialkltla EFTA01076956  (d) All Units issued hereunder shall be uncertificated unless otherwise determined by the Board. (e) Each Member who is issued Units by the Company pursuant to the authority of the Board pursuant to Section 5.1 shall make the Capital Contributions sto the Company determined by the Board pursuant to the authority of the Board pursuant to Section 5.1 in exchange for such Units. (f) No Member shall be required to make any additional Capital Contributions to the Company, except as otherwise agreed between the Company and such Member. 3.2 Capital Accounts. (a) The Company shall maintain a separate Capital Account for each Member according to the rules of Treasury Regulation Section 1.704-1(bX2)(iv). For this purpose, the Company may (in the discretion of the Board), upon the occurrence of the events specified in Treasury Regulation Section 1.704-1(b)(2XivXf), increase or decrease the Capital Accounts in accordance with the rules of such regulation and Treasury Regulation Section 1.704- 1(b)(2)(iv)(g) to reflect a revaluation ofCompany property. (b) For purposes of computing the amount of any item of Company income, gain, loss or deduction to be allocated pursuant to Article IV and to be reflected in the 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 any method of depreciation, cost recovery or amortization used for this purpose); provided that: (i) The computation of all items of income, gain, loss and deduction shall include those items described in Code Section 705(a)(0(B) or Code Section 705(aX2XB) and Treasury Regulation Section 1.704-1(b)(2XivXi), without regard to the fact that such items are not includable in gross income or are not deductible for federal income tax purposes. (ii) If the Book Value of any Company property is adjusted pursuant to Treasury Regulation Section I .704-1(bX2XivXe) or (0, the amount of such adjustment shall be taken into account as gain or loss from therdisposition of such property. (iii) Items of income, gain, loss or deduction attributable to the disposition of Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the Book Value of such property. (iv) Items of depreciation, amortization and other cost recovery deductions with respect to Company property having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the property's Book Value in accordance with Treasury Regulation Section 1.704-1(b)(2XivX&)- (v) To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required, pursuant to Treasury Regulation Section 1.704-1(bX2)(ivXm), to be taken into account in 10 1202$11.14 EFTA01076957  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). 3.3 Negative Capital Accounts. No Member shall be required to pay to any other Member or the Company any deficit or negative balance which may exist from time to time in such Member's Capital Account (including upon and after dissolution of the Company). 3.4 No Withdrawal. No Member shall be entitled to withdraw any part of such Member's Capital Contribution or Capital Account or to receive any distribution from the Company, except as expressly provided herein. 3.5 Loans From Members. Loans by Members to the Company shall not be considered Capital Contributions. If any Member shall advance funds to the Company in excess of the amounts required hereunder to be contributed by such Member to the capital of the Company, the making of such advances shall not result in any increase in the amount of the Capital Account of such Member. The amount of any such advances 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 advances are made. ARTICLE IV DISTRIBUTIONS AND ALLOCATIONS 4.1 Distributions. The Company shall make distributions to its Members as specified in this Section 4.1. (a) [Intentionally Deleted.] (b) To the extent that the Company has not indemnified Claxon, within five business days after written demand therefor, for any Damages (as such term is defined in the Prior Purchase Agreement) described in Section 12.2(iii), (iv) or (v) or Section 13.1(c) of the Prior Purchase Agreement (including any Pm-Closing Taxes), the Company shall make a cash distribution to Claxon in an amount equal to the amount of any such Damages. "Pre Closing Taxes" shall have the meaning ascribed thereto in the Prior Purchase Agreement as in effect as of the date hereof, including any Pm Closing Taxes with respect to the Redemption Plan set forth in Section 7.1 of the Prior Purchase Agreement. No distribution shall be made under Sections 4.1(4 (e) or (f) until all amounts required to be distributed to Claxon pursuant to this Section 4.1(b) have been paid in (c) The Company shall, subject to (i) any restrictions contained in the financing agreements to which the Company or any of its Subsidiaries is a party and (ii) having available cash (after setting aside appropriate reserves), distribute to each Member within 75 days after the close of each Taxable Year (or at such earlier times and in such amounts as to enable such Member to pay estimated income tax liabilities) cash in an amount equal to the product of (A) the Maximum Marginal Rate (as defined below) and (B) the excess of the cumulative taxable income, if any, for such Taxable Year allocated to such Member pursuant to Section 4.4 over the cumulative taxable losses for all prior Taxable Years allocated to such Member pursuant to II KU 1263Z131,14 EFTA01076958 Section 4.4 to the extent that such losses are available to be carried forward to offset such taxable income (or would have been available if they had not been previously used to offset other taxable income, including income from sources other than the Company) and to the extent that such taxable losses have not previously been used to offset taxable income that would have otherwise caused Distributions to be made under this• Section 4.1(c). Any Distribution to a Member pursuant to this Section 4.1(c) shall be treated as an advance Distribution under Section 4.1(e), and shall be offset against subsequent Distributions that such Member would otherwise be entitled to receive pursuant to Section 4.1(e); provided, however, that to the extent any distribution to a Member pursuant to this Section 4.1(c) is attributable to income allocated to a Member as a result of any distribution made to such Member pursuant to Section 4.1(b) or pursuant to this proviso (an "Excluded Tax Distribution"), such Excluded Tax Distribution shall not be treated as an advance Distribution under Section 4.1(e) or be treated as a Distribution for any other purpose under this Agreement. The "Maximum Marginal Rate" means the maximum marginal federal, state and local income tax rate (taking into account the dedudtibility of state and local income taxes for federal income tax purposes) applicable to the Member (or its partners or stockholders, if applicable) with the highest marginal income tax rate of any Member for the Taxable Year in question, as determined by the Board in its sole discretion. No distribution shall be made under Sections 4.1(d), (e) or (0 until the entire amount of distributions required to be made under this Section 4.1(c) have been paid in full. (d) Subject to (i) Sections 4.1(b) and (c), (ii) any restrictions contained in the financing agreements to which the Company or any of its Subsidiaries is a party, and (iii) having available cash (after setting aside appropriate reserves), the Company shall make monthly cash distributions (with an annual true-up of such distributions to reflect final annual results promptly following the completion of the Company's audited financial statements for each Fiscal Year of the Company) to the following Members in the following amounts: (i) so long as Wilcor remains a Member, a distribution to Wilcor equal to 5% of the operating income of the Company and its Affiliates, determined on a consolidated basis; (ii) so long as PI-IC remains a Member, a distribution to PIIC equal to 5% of the operating income of the Company and its Affiliates, determined on a consolidated basis; and (iii) so long as any member of the Golden Gate Group remains a Member, a distribution to the holders of the Golden Gate Units (allocated among them based on the number of Units held by each member of the Golden Gate Group) equal to 8% of the operating income of the Company and its Affiliates, determined on a consolidated basis. No distribution shall be made under Sections 4.1(e) or (0 until the entire amount of the distributions required to be made under this Section 4.1(d) have been paid in full. (e) Subject to (i) Sections 4.1(b), (c) and (d), (ii) any restrictions contained in the financing agreements to which the Company or any of its Subsidiaries is a party, (iii) having available cash (after setting aside appropriate reserves) and (iv) the restrictions set forth in Section 5.2, the Board shall (and may, in the discretion of Board, elect to make other 12 ICU MMUS N EFTA01076959  Distributions) make monthly Distributions (with quarterly and annual true-ups of such distributions to reflect final quarterly and annual results promptly following the completion of the Company's quarterly and audited financial statements for each fiscal quarter and Fiscal Year, respectively, of the Company) under this Section 4.1(e) equal to 65% of the undistributed net profits of the Company (taking into account all other distributions previously mad; or required to be made under this Section 4.1), trued up to an 80% level on a quarterly basis, with the remaining 20% of the undistributed net profits distributed following completion of the relevant Fiscal Year as part of the annual true-up described above. Subject to Section 4.1(O, each Distribution made pursuant to this Section 4.1(e) shall be made to the Unitholders (in proportion to the number ofUnits held by each Unitholder). (0 Notwithstanding the foregoing provisions of Section 4.1(e), the amount actually distributed to each Member in connection with any Distribution made pursuant to Section 4.1(e) shall be subject to adjustment as set forth in this Section 4.1(f). For the purposes of this Section 4.1(f), a Fiscal Year will not be deemed to be completed until the audited` financial statements of the Company for such Fiscal Year have been completed. (i) If, as of the date of any Distribution pursuant to Section 4.1(e), the aggregate (cumulative) amount of the Excess EBITDA for each completed Fiscal Year of the Company subsequent to the date of this Agreernell is less than (x) the aggregate amount paid to the Prior Owners by the Company pursuant to that certain Non-Compete Agreement, dated as of the date hereof (the “thm-Cornriete Aareemenfl, by and among the Company, the Designated Affiliates and the Prior Owners, minus'(y) the aggregate amount by which prior Distributions to the Members have been reduced pursuant to this