-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HUbZseviG/O+HKqR0Ah/DBKWbw9m35s8mc/vMLiQNth3CEJfFkuEKYgQ9P+0w0zS 0KM7lR01xraHj5gPVXwJWg== 0000950123-02-001470.txt : 20020414 0000950123-02-001470.hdr.sgml : 20020414 ACCESSION NUMBER: 0000950123-02-001470 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20020213 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FAIRMARKET INC CENTRAL INDEX KEY: 0001053676 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 043351937 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-60729 FILM NUMBER: 02542716 BUSINESS ADDRESS: STREET 1: 500 UNICORN PARK DR CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 7813765600 MAIL ADDRESS: STREET 1: 500 UNICORN PARK DRIVE CITY: WOBURN STATE: MA ZIP: 01801 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MILLER LLOYD I III CENTRAL INDEX KEY: 0000949119 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 4650 GORDON DRIVE CITY: NAPLES STATE: FL ZIP: 33940 BUSINESS PHONE: 9412628577 SC 13D 1 y57429dsc13d.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) FAIRMARKET, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK - -------------------------------------------------------------------------------- (Title of Class of Securities) 305158107 ------------------------------------------------------ (CUSIP Number) LLOYD I. MILLER, III, 4550 GORDON DRIVE, NAPLES, FLORIDA, 34102 (TEL) 941-962-8577 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) FEBRUARY 13, 2002 ------------------------------------------------------ (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [x]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7 for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 10 pages) - ---------------- The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D CUSIP NO. 305158107 PAGE 2 OF 10 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Lloyd I. Miller, III ###-##-#### - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* PF-00** - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 2,531,052*** NUMBER OF --------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY OWNED BY 1,142,536*** EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH 2,531,052*** --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,142,536*** - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,673,588 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 12.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN-IA-OO** - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! **SEE RESPONSE TO ITEM 3, HEREIN. ***SEE RESPONSE TO ITEM 5(b), HEREIN. ORIGINAL REPORT ON SCHEDULE 13D Page 3 of 10 Item 1. Security and Issuer This statement relates to the Common Stock (the "Shares") of FairMarket, Inc. (the"Company"). The Company has its principal executive offices at 500 Unicorn Park Drive, Woburn, Mass., 01801-3341. Item 2. Identity and Background This statement is filed by Lloyd I. Miller, III (the "Reporting Person" and/or "Miller"). Miller's principal business address is 4550 Gordon Drive, Naples, Florida 34102. Miller's principal occupation is investing assets held by Miller on his own behalf and on behalf of his family. During the past five years, Miller has not been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and has not been a party to civil proceedings of a judicial or administrative body of competent jurisdiction as a result of which Miller was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. Miller is a United States citizen. Item 3. Source and Amount of Funds or Other Considerations Miller is the advisor to Trust A-4 and Trust C (the "Trusts"). Trust A-4 was created pursuant to a Declaratory Judgment, signed by the Honorable Wayne F. Wilke for the Court of Common Pleas, Probate Division, Hamilton County, Ohio, on October 27, 1992, pursuant to which Trust A was split into four separate trusts. The Trusts were created pursuant to an Amended and Restated Trust Agreement, dated September 20, 1983 (the "Trust Agreement"). The Trust Agreement is hereby attached as Exhibit 99.1. Miller was named as advisor to PNC Bank, Ohio, N.A. (formerly The Central Trust Company, N.A., Cincinnati, Ohio), the Trustee named in the Trust Agreement. Such appointment became effective on April 22, 1990, the date of death of Lloyd I. Miller, the Grantor of the Trusts. All of the Shares purchased by Miller as advisor to the Trusts were purchased by funds generated and held by the Trusts. The purchase price for the Shares in Trust A-4 was $1,381,672.14 and $844,127.81 for the Shares in Trust C. Pursuant to an Irrevocable Trust Agreement, dated December 11, 2001, attached hereto as Exhibit 99.5 (the "Irrevocable Trust Agreement"), all of the Shares Purchased in Trust C were transferred into a grantor retained annuity trust ("MILGRAT II (G)"). Miller is named as the Trustee to MILGRAT II (G). Whereas the reporting person had shared dispositive and voting power for all Shares held by Trust C, the reporting person has sole dispositive and voting power for all Shares held by MILGRAT II (G). The Shares in Trust C were purchased at various times and at various prices. Miller is the manager of Milfam LLC, an Ohio limited liability company established pursuant to the Operating Agreement of Milfam LLC (the "Operating Agreement"), dated as of December 10, 1996. Milfam LLC is the managing general partner of (i) Milfam I, L.P., a Georgia limited partnership established pursuant to the Partnership Agreement for Milfam I, L.P. (the "Partnership Agreement"), dated December 11, 1996, and (ii) Milfam II, L.P. a Georgia limited partnership established, pursuant to the Partnership Agreement for Milfam II, L.P. (the "Milfam II Partnership Agreement"), dated December 11, 1996. All of the Shares Miller is deemed to beneficially own as the manager of the managing general partner of Milfam I, L.P. were purchased with money contributed to Milfam I, L.P. by its partners, or money generated and held by Milfam I, L.P. All of the Shares Miller is deemed to beneficially own as the manager of the managing general partner of Milfam II, L.P. were purchased with money contributed to Milfam II, L.P. by its partners, or money generated and held by Milfam II, L.P. The purchase price for the Shares Miller is deemed to beneficially own as the manager of the managing general partner of Milfam I, L.P. was $198,019.41. The purchase price for the Shares Miller is deemed to beneficially own as the manager of the managing general partner of Milfam II, L.P. was $1,167,795.61. The Operating Agreement, the Partnership Agreement and the Milfam II Partnership Agreement are hereby respectively attached as Exhibits 99.2, 99.3 and 99.4. Page 4 of 10 All of the Shares purchased by Miller on his own behalf, were purchased with personal funds generated and held by Miller. The purchase price for the Shares purchased by Miller, on his own behalf was $726,146.03. Miller is the trustee for certain generation skipping trusts (each a "GST") including Catherine Miller GST, Lloyd Crider GST and Kimberly Miller GST (collectively, the "GST's"). All of the Shares Miller is deemed to beneficially own as the trustee for the GST's were purchased with money generated and held by the GST's. The purchase price for the Shares Miller is deemed to beneficially own as trustee of Catherine Miller GST was $25,532.00, the purchase price for the Shares Miller is deemed to beneficially own as trustee of Lloyd Crider GST was $19,920.40 and the purchase price for the Shares Miller is deemed to beneficially own as trustee of Kimberly Miller GST was $19,310.92. Miller is the custodian to certain accounts created pursuant to the Florida Uniform Gift to Minors Act ("UGMA") for Alexandra Miller ("Alexandra UGMA"). All of the Shares Miller is deemed to beneficially own in the Alexandra UGMA were purchased with money held by the Alexandra UGMA. The purchase price for the Shares which Miller is deemed to beneficially own as the custodian to the Alexandra UGMA was $25,102.92. Dail Miller is Miller's wife. All of the Shares Miller is deemed to beneficially own as Dail Miller's spouse were purchased with personal funds held by Dail Miller. The purchase price for the Shares Miller is deemed to beneficially own as Dail Miller's spouse was $9,809.50. Dail Miller is the custodian for certain UGMA accounts for the benefit of Tyler Dulmage ("Tyler UGMA") and Wylie Dulmage ("Wylie UGMA" and together with Tyler UGMA, the "Dail UGMA's"). All of the Shares Miller is deemed to beneficially own in the Dail UGMA's were purchased with money held by the Dail UGMA's. The purchase price for the Shares which Miller is deemed to beneficially own as the spouse of the custodian to the Tyler UGMA was $13,137.75 and the purchase price for the Shares Miller is deemed to beneficially own as the spouse to the custodian to the Wylie UGMA was $13,135.75. Lloyd I. Miller LLC ("LLC") is a Limited Liability Company of which Miller has sole control. All of the Shares Miller is deemed to beneficially own in LLC were purchased with money which was generated and held by LLC. The purchase price for the Shares held by LLC was $19,310.92. Item 4. Purpose of the Transaction The Shares covered by this Schedule 13D were acquired for investment purposes. The Reporting Person filing this report now believes that (a) the common stock of the Company is significantly undervalued, (b) steps taken by the Company to date to enhance stockholder value have been insufficient, (c) anti-takeover provisions adopted by the Company are detrimental to stockholders, and (d) management of the Company must take further immediate steps to enhance stockholder value. The Reporting Person has now decided that it would be in his best interest, and those of other stockholders, to attempt to influence the business strategies and operations of the Company. The Reporting Person filing this report is examining all of his options with respect to the possibility of taking actions that he believes will enhance stockholder value. Such actions could include (a) requesting a list of stockholders and information regarding the Company, (b) proposing that management pursue a financial transaction to improve stockholder value (including a merger, reorganization, asset sale or liquidation), and (c) encouraging, participating in or leading a proxy contest to change the Company's board of directors to individuals who would duly consider and, if appropriate, vote to implement the actions discussed above. Any such actions could relate to or result in one or more of the matters referenced to in paragraphs (a) through (j) of Item 4 of Schedule 13D. However, it should not be assumed that the Reporting Person will take any of the foregoing actions. The Report Person reserves the right to change plans and take any and all actions that the Reporting Person may deem appropriate to maximize the value of his investments, including, among other things, (a) purchasing or otherwise acquiring additional securities of the Company, (b) selling or otherwise disposing of any securities of the Page 5 of 10 Company owned by him, in each case in the open market or in privately negotiated transactions, or (c) formulating other plans or proposals regarding the Company or its securities to the extent deemed advisable by the Reporting Person in light of his general investment policies, market conditions, subsequent developments affecting the Company and the general business and future prospects of the Company. Item 5. Interest in Securities of the Issuer (a) Miller is deemed to beneficially own 3,673,588 Shares (12.7% of the outstanding Shares, based on 29,019,455 Shares outstanding pursuant to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001). As of the date hereof, 1,097,536 of such beneficially owned Shares are owned of record by Trust A-4; 683,759 of such beneficially owned Shares are owned of record by MILGRAT II (G); 176,253 Shares are owned of record by Milfam I, L.P.; 979,375 of such beneficially owned Shares are owned of record by Milfam II, L.P.; 617,165 of such beneficially owned Shares are owned of record by Miller directly; 21,800 of such beneficially owned Shares are owned of record by Alexandra UGMA; 21,900 of such beneficially owned Shares are owned of record by Catherine Miller GST; 9,000 of such beneficially owned Shares are owned of record by Dail Miller;15,400 of such beneficially owned Shares are owned of record by Kimberly Miller GST; 15,400 of such beneficially owned Shares are owned of record by LLC; 15,000 of such beneficially owned Shares are owned of record by Lloyd Crider GST; 10,500 of such beneficially owned Shares are owned of record by Tyler UGMA and 10,500 of such beneficially owned Shares are owned of record by Wylie UGMA. (b) Miller has or may be deemed to have shared voting power and shared dispositive power for all such shares held of record by the Trusts, Dail Miller, Lloyd Crider GST, Tyler UGMA and Wylie UGMA and sole voting power and sole dispositive power for all such shares held of record by Milfam I, L.P., Milfam II, L.P., Alexandra UGMA, Catherine Miller GST, Kimberly Miller GST, LLC, MILGRAT II(G), and Miller directly (see Item 6). (c) The following table details the purchase of shares that were effected during the past 60 days:
- -------------------------------------------------------------------------------- TRUST A-4 - -------------------------------------------------------------------------------- DATE OF TRANSACTION NUMBER OF SHARES PURCHASED PRICE PER SHARE - -------------------------------------------------------------------------------- 12/17/2001 1,300 $1.08 12/18/2001 9,300 $1.10 12/19/2001 11,900 $1.10 12/24/2001 3,000 $1.08 12/28/2001 8,600 $1.12 12/31/2001 15,580 $1.12 1/4/2002 3,768 $1.14 - --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------- LLOYD MILLER DATE OF TRANSACTION NUMBER OF SHARES PURCHASED PRICE PER SHARE - -------------------------------------------------------------------------------- 12/14/2001 2,700 $1.07 12/20/2001 4,800 $1.10 12/26/2001 9,500 $1.10 2/07/2002 2,000 $1.26 - --------------------------------------------------------------------------------
Page 6 of 10
- -------------------------------------------------------------------------------- MILFAM II, L.P. DATE OF TRANSACTION NUMBER OF SHARES PURCHASED PRICE PER SHARE - -------------------------------------------------------------------------------- 12/21/2001 32,700 $1.03 - --------------------------------------------------------------------------------
(d) Persons other than the Reporting Person have the right to receive and the power to direct the receipt of dividends from, or the proceeds from, the sale of such securities. (e) Not Applicable Item 6. Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer The Trust Agreement provides: The Trustee shall not make any investments, reinvestments or changes in investments of the assets of Trust A without first consulting with and obtaining the advice of the advisor. The Trustee need not act in accordance with the advice and counsel of the advisor, but if it does so, the Trustee shall not be liable to any person for or as a result of any action or failure to act if in accordance with such advice and counsel. The Trustee need not obtain the advice and counsel of the advisor if the Trustee requests such advice and counsel in writing and if the advisor fails to reply to the Trustee within five days from the date of such request by telephone, telegram, mail or in person. The Operating Agreement provides: Page 7 of 10 While Lloyd I. Miller, III serves as manager, he shall have complete control over all of the affairs of Milfam LLC and need not seek the consent or approval of any Member with respect to any action. The Milfam I Partnership Agreement provides: The General Partner shall have the full and exclusive right to manage and control the business and affairs of Milfam I, L.P. and to make all decisions regarding the affairs of Milfam I, L.P. In the course of such management, the General Partner may acquire, encumber, hold title to, pledge, sell, release or otherwise dispose of Partnership Property and interests therein when and upon such terms as it determines to be in the best interest of the Milfam I, L.P. The General Partner shall have all of the rights, powers and obligations of a partner of a partnership without limited partners, except as otherwise provided under the Act. The Milfam II Partnership Agreement provides: The General Partner shall have the full and exclusive right to manage and control the business and affairs of Milfam II, L.P. and to make all decisions regarding the affairs of Milfam II, L.P. In the course of such management, the General Partner may acquire, encumber, hold title to, pledge, sell, release or otherwise dispose of Partnership Property and interest therein when and upon such terms as it determines to be in the best interest of the Milfam II, L.P. The General Partner shall have all of the rights, powers and obligations of a partner of a partnership without limited partners, except as otherwise provided under the Act. The Irrevocable Trust Agreement provides: The Trustee shall have the power to exercise and not exercise, as the Trustee deems reasonable, rights of ownership incident to securities that the Trustee may hold, including rights to vote, give proxies and execute consents, provided that a corporate Trustee shall exercise voting rights under any securities issued by it or its affiliate only at the written direction of the primary income beneficiary of the trust to which such securities are allocated, the guardian or custodian (but not the Grantor) to act for any beneficiary who is incapacitated or incompetent. Page 8 of 10 Item 7. Materials to be Filed as Exhibits: Exhibit Document ------- -------- 99.1 Amended and Restated Trust Agreement, dated September 20, 1983, between Lloyd I. Miller and PNC Bank, Ohio, N.A. (formerly The Central Trust Company, N.A., Cincinnati, Ohio). 99.2 Operating Agreement of Milfam LLC, dated December 10, 1996. 99.3 Milfam I, L.P. Partnership Agreement, dated December 11, 1996. 99.4 Milfam II, L.P. Partnership Agreement, dated December 11, 1996. 99.5 Irrevocable Trust Agreement, dated December 11, 2001 Page 9 of 10 After reasonable inquiry and to the best knowledge and belief of the undersigned, I certify that the information set forth in this statement is true, complete and correct. Dated: February 13, 2002 By: /s/ Lloyd I. Miller, III -------------------------------------- Lloyd I. Miller, III Page 10 of 10 EXHIBIT INDEX Exhibit Document ------- -------- EX-99.1 Amended and Restated Trust Agreement EX-99.2 Operating Agreement of Milfam LLC EX-99.3 Milfam I, L.P. Partnership Agreement EX-99.4 Milfam II, L.P. Partnership Agreement EX-99.5 Irrevocable Trust Agreement EX-99.1 3 y57429dex99-1.txt AMENDED AND RESTATED TRUST AGREEMENT EXHIBIT 99.1 AMENDED AND RESTATED TRUST AGREEMENT This instrument contains all of the terms of an Amended and Restated Trust Agreement made on September 20, 1983, by Lloyd I. Miller (the "Grantor"), and The Central Trust Company, N.A., Cincinnati, Ohio (the "Trustee"). The Grantor originally entered into a Trust Agreement with the Trustee on September 19, 1980. The Grantor reserved the right to amend the Agreement and now desires to exercise such right by restating its provisions. Therefore, the Agreement is hereby amended and restated in its entirety to read as follows: SECTION 1 TRUST PROPERTY 1.1 The Trustee acknowledges that at the time of execution of this Agreement, the Trustee is holding property which has previously been delivered to the Trustee. The Trustee agrees to continue to hold such property in accordance with the terms set forth in this Agreement. 1.2 The Trustee agrees that the Grantor, the Grantor's attorney-in-fact or any other person, firm or corporation may from time to time add other property to the trust estate. The Trustee agrees to accept and hold any such additional property, provided that the Trustee may lawfully do so and provided that it is of the character normally acceptable by trustees generally, whether such property is conveyed or delivered to the Trustee or whether it is devised or bequeathed to the Trustee by will. SECTION 2 RIGHTS RETAINED BY GRANTOR 2.1 The Grantor may revoke this Agreement or, from time to time, amend its terms. Any revocation or amendment shall be effective upon receipt by the Trustee of a writing executed by the Grantor. 2.2 The Grantor may withdraw from time to time, upon prior written notice to the Trustee, any or all of the property which constitutes the trust estate. 2.3 The Grantor may sell, assign or hypothecate any policies of insurance which may from time to time be part of the trust estate, exercise any option or privilege granted by any of such policies, borrow any sum in accordance with the provisions of any of such policies and receive all payments, dividends, surrender values, benefits or privileges of any kind which may be available under any of such policies. 2.4 The Grantor reserves the right, so long as the Grantor is not incompetent or incapacitated, to approve any investments, reinvestments or changes in investments which the Trustee may from time to time recommend. If, however, the Trustee notifies the Grantor in writing of the Trustee's recommendation for investments, reinvestments or changes in investments and the Grantor fails to reply to the Trustee within five days from the date of such notice, either by telephone, telegram, mail or in person, the Trustee may proceed to make any investments, reinvestments or changes in investments about which the Trustee has notified the Grantor. SECTION 3 DISTRIBUTIONS DURING LIFE OF GRANTOR 3.1 If, at any time during the life of the Grantor, the trust estate includes any income producing assets, the Trustee shall pay the net income to the Grantor at least quarter-annually, or in such other manner as directed by the Grantor in writing. 3.2 During any time when the Grantor is incapacitated or incompetent, the Trustee shall have full power, in the Trustee's sole discretion, to use the net income and principal of the trust for the support, maintenance and medical care of the Grantor and the Grantor's wife, Catherine C. Miller. Any net income not currently used for such purposes shall be accumulated and added to principal. SECTION 4 DISTRIBUTIONS UPON DEATH OF GRANTOR 4.1 Upon the death of the Grantor, the trust estate, including all amounts of undistributed income (even though accrued or accumulated by the Trustee prior to the Grantor's death), any part of the Grantor's estate as may be distributed to the Trustee and all other property which is or becomes part of the trust estate, shall be held and distributed as herein provided. 4.2 Upon demand in writing by the Executor or Administrator of the Grantor's estate, the Trustee shall pay to such Executor or Administrator an amount equal to all, or such part as is demanded, of the following: the Grantor's debts; expenses of the Grantor's last illness; funeral and burial expenses; expenses of administering the Grantor's estate; and bequests under the Grantors' will. If no Executor or Administrator is acting, the Trustee may pay directly any of the above-described amounts. Such amounts shall not be paid from assets which are excluded from the Grantor's gross estate for Federal estate tax purposes. 4.3 If the Grantor's wife, Catherine C. Miller, survives him, the Trustee shall divide the trust assets which remain after deducting amounts otherwise paid or set apart to be paid as provided in Section 4.2 ("the residue of the trust estate") into four parts designated Trust A, Trust B, Trust C and Trust D as follows: 4.3.1 Trust A shall be a separate trust held under Section 5. It shall consist of assets selected by the Trustee having a value equal to the largest amount, if any, that can pass free of 2 Federal estate tax, taking into account the unified credit and the state death tax credit but no other credit, reduced by the value (as finally determined for Federal estate tax purposes) of all property included in the Grantor's gross estate passing other than under this Section 4.3 (whether by Grantor's Will, other provisions of this Agreement or otherwise) which does not qualify for the Federal estate tax marital deduction or charitable deduction, and reduced further by any charges to principal that are not deducted in computing the Grantor's Federal estate tax (other than any estate, inheritance or similar taxes due by reason of the Grantor's death which are imposed by any governmental authority). In addition, if the residue of the trust estate includes any property which is excluded from the Grantor's gross estate for Federal estate tax purposes, such property (less the expenses' including taxes, if any, incurred in connection with the receipt of such property) shall be added to Trust A as principal. 4.3.2 Trust B shall be a separate trust held under Section 6 and shall consist of one-third of the assets which remain available for distribution under this Section 4.3 after deducting any amounts required to be set aside under Section 4.3.1. 4.3.3 Trust C shall be a separate trust held under Section 7 and shall consist of one-third of the assets which remain available for distribution under this Section 4.3 after deducting any amounts required to be set aside under Section 4.3.1. 4.3.4 Trust D shall be a separate trust held under Section 8 and shall consist of one-third of the assets which remain available for distribution under this Section 4.3 after deducting any amounts required to be set aside under Section 4.3.1. 4.3.5 Notwithstanding Sections 4.3.2, 4.3.3 and 4.3.4, if the Grantor's wife, Catherine C. Miller, (or, in the event of her death, her Executor) shall disclaim all or any portion of Trusts B, C or D, such disclaimed property shall be added to Trust A held under Section 5. In that event, with respect to the disclaimed property, Catherine C. Miller shall have all rights provided in Trust A except the special power of appointment under Section 5.3. 4.4 If the Grantor's wife, Catherine C. Miller, does not survive him, the residue of the trust estate shall be distributed as provided in Section 9. 4.5 Upon demand in writing by the Executor or Administrator of the Grantor's estate, the Trustee shall pay to such Executor or Administrator an amount equal to all, or such part as is demanded, of the estate, inheritance or similar taxes due by reason of the Grantor's death which are imposed by any governmental authority. If no Executor or Administrator is acting, the Trustee may pay directly any of such taxes. Such taxes shall not be paid from assets which are excluded from the Grantor's gross estate for Federal estate 3 tax purposes. If the Grantor's wife does not survive him, such taxes shall be paid from the residue of the trust estate, prior to division and distribution as provided under Section 9. If the Grantor's wife survives him, such taxes shall be paid from Trust A, except that (a) If the Grantor's Executor or Administrator fails to make the election so that any portion of Trust B fails to qualify for the Federal estate tax marital deduction, then the Federal estate tax due by reason of the Grantor's death shall be paid from the assets of that portion of Trust B for which the marital deduction was not elected to the extent that those assets are sufficient and otherwise from Trust A; or (b) If the taxes required hereunder to be paid from Trust A should exhaust Trust A, the amount thereof which cannot be paid from Trust A shall first be charged to Trust B, and if the assets allocated to Trust B are insufficient to pay any portion thereof, the balance shall be divided equally between Trust C and Trust D. 4.6 For the purposes of this Agreement, the Grantor's wife, Catherine C. Miller, shall be deemed to have survived the Grantor, any presumption of law notwithstanding, if she survives him for any period, or if there is no evidence as to the order of their deaths. SECTION 5 TRUST A 5.1 The Trustee shall, in its sole discretion, pay to Catherine C. Miller, at such times as the Trustee determines, all or such part of the net income of Trust A as the Trustee determines to be necessary to support and maintain her in the manner to which she has become accustomed. In making any such decisions, the Trustee shall consider her other income and means of support known to the Trustee, and resolve any doubts in favor of generous and liberal support for her. If all of the net income is not paid to Catherine C. Miller, the Trustee may, in its sole discretion, distribute all or any part of such undistributed income to any one or more of the Grantor's issue in such shares as the Trustee determines, or the Trustee may accumulate and add to principal all or any part of such undistributed income. 5.2 If, in the sole opinion of the Trustee, the net income of Trust A is insufficient to support and maintain Catherine C. Miller in the manner to which she has become accustomed, considering her other income and means of support known to the Trustee, the Trustee may, in its sole discretion, distribute to her as much of the principal of Trust A as the Trustee determines is necessary for such purposes, provided that the Trustee shall not distribute principal of Trust A to her at any time when principal is available for distribution to her from Trust B under Section 6.2 or Trust C under Sections 7.2 or 7.3 or Trust D under Section 8.1. 5.3 Catherine C. Miller shall nave full power to appoint, effective at the date of her death, the entire principal and any undistributed income of Trust A, or any portion thereof, to any person or persons or to any corporation or corporations, in such proportions or shares as she may designate, provided, however, that no such appointment shall be made to herself, her estate, her creditors or the creditors of her estate. 5.4 Trust A shall terminate upon the death of Catherine C. Miller. Upon termination the Trustee shall distribute the principal and any undistributed income of Trust A in such manner as Catherine C. Miller may have appointed in exercise of the power given her under Section 5.3. Any part remaining unappointed shall be distributed as provided in Section 9. 4 SECTION 6 TRUST B 6.1 The Trustee shall pay the net income of Trust B to Catherine C. Miller at least quarter-annually during her life. 6.2 If, in the sole opinion of the Trustee, the net income of Trust B is insufficient to support and maintain Catherine C. Miller in the manner to which she has become accustomed, considering her other income and means of support known to the Trustee, the Trustee may, in its sole discretion, distribute to her as much of the principal of Trust B as the Trustee determines is necessary for such purposes. In such event, if any portion of Trust B falls to qualify for the Federal estate tax marital deduction, the Trustee shall distribute for such purposes principal of Trust B with respect to which the election was made, or if none, other principal of Trust B, provided, however, that in no event shall other principal of Trust B be distributed when there is available for distribution principal of Trust C or Trust D. 6.3 Trust B shall terminate upon the death of Catherine C. Miller. Upon termination any undistributed income accrued or accumulated by the Trustee prior to termination of Trust B shall be distributed to the estate of Catherine C. Miller, and the remaining assets of Trust B shall be distributed as provided in Section 9. SECTION 7 TRUST C 7.1 The Trustee shall pay the net income of Trust C to Catherine C. Miller at least quarter-annually during her life. 7.2 Catherine C. Miller shall have the power to withdraw, at any one time or from time to time, any part or all of the principal of Trust C upon first giving written notice to the Trustee of her intention to withdraw. 7.3 If, in the sole opinion of the Trustee, the net income of Trust C is insufficient to support and maintain Catherine C. Miller in the manner to which she has become accustomed, considering her other income and means of support known to the Trustee, the Trustee may, in its sole discretion, distribute to her as much of the principal of Trust C as the Trustee determines is necessary for such purposes. 7.4 Catherine C. Miller shall have full power to appoint, effective at the date of her death, the entire principal and any undistributed income of Trust C, or any portion thereof, to her estate, or to any person or persons or any corporation or corporations. 5 7.5 Trust C shall terminate upon the death of Catherine C. Miller. Upon termination the principal and any undistributed income (even though accrued or accumulated by the Trustee prior to her death) of Trust C shall be distributed in such manner as Catherine C. Miller may have appointed in exercise of the power given her under Section 7.4. Any part remaining unappointed shall be paid as follows: The Trustee shall pay to the Executor or Administrator of her estate such sum as may be required for the payment of any estate, inheritance or similar taxes imposed by any governmental authority by reason of her death and by reason of her possession of the general power of appointment with respect to the assets of Trust C, over and above the amount of such taxes which would have been payable upon her death from her estate had the assets of Trust C not been included in the determination of such taxes. The balance of the unappointed principal and undistributed income of Trust C shall be distributed as provided in Section 9. SECTION 8 TRUST D 8.1 The Trustee shall, in its sole discretion, pay to Catherine C. Miller or apply for her use or benefit all or any part of the net income and principal of Trust D as the Trustee deems appropriate at such times as the Trustee deems appropriate. Any net income not paid to Catherine C. Miller shall be accumulated and added to principal. 8.2 Trust D shall terminate upon the death of Catherine C. Miller. Upon termination the Trustee shall distribute the principal and any undistributed income of Trust D to the estate of Catherine C. Miller. SECTION 9 DISTRIBUTION UPON DEATH OF GRANTOR AND GRANTOR'S WIFE 9.1 Upon the death of the last to die of the Grantor and the Grantor's wife, Catherine C. Miller, any trust assets which are required to be distributed as provided in this Section 9 shall be divided into as many equal shares as there are children of the Grantor then living and deceased children of the Grantor with issue then living. One such equal share shall be held under Section 9.2 as a separate trust for the benefit of each then living child of the Grantor. One such equal share shall be distributed, per stirpes, to the then living issue of each deceased child of the Grantor, subject to Section 9.3. 9.2 If any of the Grantor's children who becomes entitled to all or any share of the residue of the trust estate at the time of the Grantor's death or all or any share of the principal and undistributed income of any trust or held hereunder upon its termination is under age 35 at the time set for distribution to him, his share shall not be distributed to him directly, but shall be held by the Trustee as a separate trust for his benefit as follows: 6 9.2.1 The Trustee shall pay the net income of the trust to the child for whom the trust is held at least as often as quarter-annually during his life. 9.2.2 If, in the sole opinion of the Trustee, the net income of the trust is insufficient to provide for the support, comfort, maintenance, education and medical care of the child for whom the trust is held, considering his other income and means of support known to the Trustee, the Trustee may, in its sole discretion, distribute principal of the trust for such purposes. The word "education" when used in this Agreement may include private schooling, college or university education and, in an appropriate case, post-graduate education, and also, without limitation, all tuition, board, lodging, fees, travel expenses and other expenses incidental thereto. 9.2.3 The trust shall terminate as to one-fourth of the principal thereof on the date when the child for whom the trust is held attains age 25; as to one-half of the balance of the principal thereof on the date when such child attains age 30; and as to the remaining principal and any undistributed income thereof on the date when such child attains age 35; and distribution shall be made to such person of the shares indicated on such dates. If, in the sole opinion of the Trustee, the trust estate has at any time been so reduced as to make it uneconomical or otherwise impractical to continue to hold it in trust, the trust shall terminate and the Trustee shall distribute the principal, and any undistributed income thereof to the child for whom the trust is held, outright and free of trust. If at the time the trust is established the child for whom the trust is held has attained age 25 but has not yet attained age 35, the Trustee shall distribute directly to such child the share of the trust estate as to which the trust would have terminated if it had been established when such child was under age 25 and continued to the date it is in fact established, and the Trustee shall hold the balance of the trust estate for such child under the terms and conditions hereof. If the child for whom the trust is held dies before receiving distribution of all of the principal and any undistributed income of the trust, the trust shall terminate on the date of his death, and the Trustee shall distribute the principal and any undistributed income thereof to his then living issue, per stirpes, subject to Section 9.3, or if none, to the Grantor's then living issue, per stirpes, provided that any share of the trust estate required to be distributed to a child of the Grantor shall be subject to this Section 9.2, and any share of the trust estate required to be distributed to a more remote issue of the Grantor shall be subject to Section 9.3. 9.3 If any issue of the Grantor more remote than a child who becomes entitled to all or any share of the residue of the trust estate at the time of the Grantor's death or all or any share of the principal and undistributed income of any trust held hereunder upon its termination is under age 21 at the time set for distribution to him or her, his or her share shall not be distributed to him or her directly, but shall continue to be held by the Trustee as a separate trust for his or her benefit as follows: The Trustee shall pay as much of the net income and, if necessary, principal of the trust as it deems appropriate at such times as it deems appropriate to provide for the support, comfort, maintenance, education and medical care of the person for whom the trust is held. Any net income not currently required for such purposes shall be accumulated and added to the principal of the trust. The trust shall terminate on the first to occur of the following: the date when the person for whom the trust is held attains age 21; the date of death of such person; and the date when, in the sole 7 opinion of the Trustee, the trust estate has been so reduced as to make it uneconomical or otherwise impractical to hold it in trust. Upon termination of the trust, the Trustee shall distribute the principal and any undistributed income thereof to the person for whom the trust is held, if living, or if not, to his or her estate. 9.4 Solely for purposes of investment convenience, the Trustee may hold and invest the assets of the separate trusts held under this Section 9 as a unit, without physically dividing them, until actual division becomes necessary in order to make distribution, and in such case the Trustee shall allocate to each separate trust its proportionate part of receipts and expenditures. If at any time there shall be held under Section 9.2 or Section 9.3 more than one trust for the same person, the trusts for such person under such section shall be combined and treated as on trust estate. SECTION 10 GENERAL PROVISIONS 10.1 The Trustee shall have the following powers, in addition to authority the Trustee may have under the laws of any state, which the Trustee may exercise without order of court: 10.1.1 To collect, pay and compromise debts and claims. 10.1.2 To borrow money, including authority for a corporate Trustee to borrow from itself in its nonfiduciary capacity. 10.1.3 To sell real and personal property, publicly and privately; to give options to buy real and personal property for any length of time; to lease real and personal property for any term; to mortgage real property; to pledge personal property; and to execute and deliver instruments to effectuate such powers. 10.1.4 To retain property received by the Trustee (including securities issued by a corporate Trustee or its affiliate), regardless of whether such property is authorized by law for investment by fiduciaries; and to invest and reinvest the proceeds of the sale of such property, and cash, in whatever property the Trustee deems reasonable (including participation in any common trust fund established and maintained by a corporate Trustee for collective investment of fiduciary funds), whether or not the investment is authorized by law for investment by fiduciaries. A corporate Trustee may invest in securities issued by it or its affiliate only at the written direction of the Grantor during his lifetime or, after his death, at the written direction of the primary income beneficiary of the trust for which such securities are purchased, the parent, guardian or custodian to act for any beneficiary who is not competent to act. The provisions of this Section 10.1.4 shall be subject to Section 2.4. 10.1.5 To exercise and not exercise, as the Trustee deems reasonable, rights of ownership incident to securities that the Trustee may hold, including rights to vote, give proxies 8 and execute consents, provided that securities issued by a corporate Trustee or its affiliate shall be voted by the Grantor during his lifetime or, after his death, by the primary income beneficiary of the trust to which such securities are allocated, the parent, guardian or custodian to act for any beneficiary who is not competent to act. 10.1.6 To sell or issue call options against any security or asset now or hereafter held in the trust estate, including without limitation the sale or issuance of any option which is traded on the Chicago Board Options Exchange, the American Exchange or any other Exchange; to take any and all action as may be, in the Trustee's opinion, necessary or advisable in connection with the sale or issuance of such options, including the execution and delivery of escrow receipts; and to purchase any call option, including the re-purchase of any call option which the Trustee may have sold, even if at a loss. 10.1.7 To hold property in the name of a nominee. 10.1.8 To sell property to and to borrow funds from one trust in favor of another trust established by this Agreement as if dealing with outside interests. 10.1.9 To permit any beneficiary of any trust to enjoy the use of any residential real estate and tangible personal property from the date of the Grantor's death which the Trustee may receive in kind. The Trustee shall not be liable for any consumption, damage, injury to or loss of property so used, nor shall the beneficiaries of any such trust be liable for any non-negligent consumption, damage, injury to or loss of property so used. 10.1.10 To hold, retain and continue to operate any business interest received, whether organized as a sole proprietorship, partnership (general or limited) or corporation, for such time and in such manner as the Trustee may deem advisable, without liability on the part of the Trustee for any losses resulting therefrom; to dissolve, liquidate or sell at such time and upon such terms as the Trustee may deem advisable; to use the assets of the trust estate for the purposes of the business; to use the income from such business for business purposes, including but not limited to the establishing of additional reserve and depreciation accounts, establishing funds for future expansion and growth and such other business purposes as the Trustee may deem advisable; to borrow money for business purposes and to pledge or encumber the assets of the business or other assets of the trust estate to secure a loan; to employ such officers, managers, employees or agents as the Trustee may deem advisable in the management of such business, including electing representatives of the Trustee to take part in the management of such business as directors, officers or employees, and any such representatives of the Trustee may receive compensation for their services in addition to the fee to which the Trustee may be entitled for the Trustee's services in the administration of the trusts held hereunder; and to have such additional powers as may be necessary to enable the Trustee to continue or to dispose of any such business interest. 10.2 No person leasing or purchasing property from or lending money to or otherwise dealing with any trust and no transfer agent requested to transfer corporate securities to or from any 9 trust need inquire as to the purpose of the lease, sale, loan, transfer or assignment or see to the application of the proceeds, and the receipt of the Trustee shall be a complete acquittance and discharge of such person for the amount paid. 10.3 The Trustee is authorized to distribute trust assets in cash or in kind, or partly in each. When the Trustee is required to make a division of trust assets and to distribute such assets either to separate trusts created hereunder (such as Trust A, Trust B, Trust C and Trust D) to beneficiaries outright, or to any combination of trusts and beneficiaries, the Trustee is authorized to make any such division and distribution in such manner as the Trustee shall determine. If the Trustee determines not to divide real property, the Trustee may convey undivided interests therein. The Trustee need not divide each trust asset proportionately among the trusts and beneficiaries entitled to distribution. The Trustee may select specific assets for allocation to one trust or beneficiary to the exclusion of the others so long as each trust and beneficiary receives the share to which he, she or it is entitled of the fair market value of the trust assets which are the subject of such division and distribution. If it is necessary for the Trustee to value trust assets for the purposes of division and distribution, each such asset shall be valued at what the Trustee determines to be its fair market value on the date of distribution. Notwithstanding the foregoing, if Trust A, Trust B, Trust C and Trust D are to be established hereunder, assets which do not qualify for the marital deduction shall be allocated to Trust A. 10.4 The Grantor recognizes that under the Federal tax law applicable at the date of execution of this Agreement there are substantially different tax consequences associated with the numerous tax elections which are required to be made by the Executor or Administrator of the Grantor's estate and by the Trustee which may affect the various beneficiaries in different ways. The Trustee shall not be required to make any compensatory adjustments to any beneficiary by reason of the manner in which any such election was exercised. 10.5 The administrative and discretionary powers granted the Trustee herein shall be exercised in such a manner as not to diminish in any way the full beneficial enjoyment of the Grantor's wife, Catherine C. Miller, in Trust C nor to restrict her general power of appointment with respect to Trust C, and in the exercise of such administrative and discretionary powers the Trustee shall use the same degree of judgment and care a prudent man would use if he were the owner of the trust assets. If at any time any of the assets allocated to Trust B consist of unproductive property, the Trustee shall convert such unproductive property to income producing property upon written notice from the Grantor's wife. 10.6 If the Trustee has a reasonable doubt about the manner of allocating any credit or charge to principal or income under applicable law, the Trustee shall have the power, exercisable as a fiduciary in good faith: to determine whether assets received shall be treated as principal or income, provided that distributions of capital gains by regulated investment companies, capital gains on the sale of assets and stock dividends in stock of the declaring corporation shall be allocated to principal; to charge or apportion expenses or losses to principal or income; to establish and maintain reasonable reserves for depreciation, depletion, amortization and obsolescence, and if any portion of the trust 10 estate consists of a wasting asset, to establish and maintain reasonable reserves for such asset; and to amortize or not to amortize both premiums and discounts on investments. 10.7 The Trustee is authorized to employ legal counsel, investment counsel and other agents in any matter in connection with the administration of any of the trusts, such as agents for the collection of rentals or the management or sale of any of the trust estate. The Trustee may pay such compensation and expenses in connection therewith as the Trustee deems reasonable under the circumstances. 10.8 The Trustee assumes no responsibility with respect to the validity or enforceability of any policy of insurance delivered or made payable to the Trustee hereunder, nor with respect to the payment of any premiums or other amounts that may be due or may become due on any such policy, nor does the Trustee assume responsibility for doing anything else that may be required in order to keep any such policy in force. Any insurance company which has issued a policy of insurance payable to the Trustee hereunder need not inquire into or take notice of this Agreement, nor see to the application of the proceeds of any such policy or any other amounts paid to the Trustee, and the receipt of the Trustee shall be a complete release and discharge of the insurance company for the amount so paid and shall be binding upon every beneficiary of any trust created hereunder. If a dispute arises with respect to the collection by the Trustee of the proceeds of any such policy, the Trustee shall have authority to compromise such dispute in any manner the Trustee deems to be in the best interests of the trust, and the Trustee may enter into any agreement with respect to such compromise which the Trustee deems appropriate and may release any insurance company from any liability under any such policy. The Trustee need not engage in litigation to collect the proceeds due under any such policy unless and until the Trustee is fully indemnified to the Trustee's satisfaction by beneficiaries of the trust from any liability which may result from such litigation, including obligations incurred by the Trustee for attorney fees, court costs and other expenses incident to such litigation. 10.9 If the Trustee receives a benefit by reason of the Grantor's death under any plan for employees or for self-employed persons or under an individual retirement account, and if the Trustee may elect to take such benefit either as a lump sum payment or installments over a period of years, the Trustee shall have the sole right to make such election in the manner the Trustee deems best. However, to assist the Trustee in making such election, the following shall serve as general guidelines: (a) The Grantor recognizes that under the Federal tax law applicable at the date of execution of this Agreement there are substantially different estate and income tax consequences from the receipt of such benefit, depending upon whether the benefit is paid in a lump sum or in installments. Also, the Grantor recognizes that the decision may involve significant investment considerations and that distribution in a lump sum or in installments may affect various beneficiaries in different ways, totally apart from tax or investment considerations. It is the Grantor's intention that the Trustee exercise such right of election so as to produce what in the Trustee's judgment is the 11 best overall tax and investment result, and not be influenced by the particular wishes or desires of any trust beneficiary. (b) The Trustee may utilize any means available to it for calculating the estimated tax consequences of the Trustee's election to receive the benefit in a lump sum or in installments. The Trustee may pay any fees or expenses which may be required to obtain such information. The Trustee shall, however, consider any such information as advisory in nature, it being the Grantor's intention that the Trustee exercise its own judgment based on all facts and circumstances and all information available to the Trustee. (c) The Grantor recognizes that it may be difficult for the Trustee to exercise the discretion granted to it, and that the decision is dependent upon subjective as well as objective factors. Therefore, the Grantor expressly exonerates the Trustee from any liability as a result of such decision to any person whomsoever, provided only that the Trustee acts in good faith. 10.10 If a beneficiary ("Donee") exercises a power of appointment given her under any section of this Agreement, the Donee may appoint the property outright or in trust. If the Donee appoints in trust, she may select a trustee or trustees, establish such administrative powers as she deems appropriate, create different types of interests, including the creation of new powers of appointment, and impose any lawful conditions upon any appointment. A Donee may exercise her power of appointment only by an instrument or instruments in writing (other than a Will) signed in the presence of two witnesses and delivered to the Trustee prior to such Donee's death. If a Donee executes more than one instrument purporting to appoint the same trust property, the instrument last executed in conformity with the foregoing provisions shall be effective with respect to such property. 10.11 Income or principal of any trust created under this Agreement which becomes payable or is, in the discretion of the Trustee, distributable to any beneficiary who is incapacitated or incompetent may be paid to such beneficiary, despite his or her incapacity or incompetency, to his or her parent or parents, to the guardian or guardians of his or her person or estate, to a custodian for such beneficiary designated by the Trustee, or to any person, corporation or institution for the benefit of such beneficiary, as the Trustee deems reasonable. The receipt of any such payee shall be a complete discharge and release of the Trustee. 10.12 For all purposes of this Agreement, a person, including the Grantor, shall be considered incapacitated or incompetent if under age 18, or if so declared by a court having jurisdiction, or if such person's personal physician or any two physicians selected by the Trustee shall advise the Trustee of such incapacity or incompetency in writing. Any such incapacity or incompetency established in the first instance by declaration of court may be removed only by such court, or if established in the first instance by such person's personal physician or any two physicians selected as above provided, may be removed by either the personal physician then serving such person or any two physicians selected by the Trustee (who need not be the same two physicians who may have advised the Trustee of such person's incapacity or incompetency). 12 10.13 The words "child" or "children," when used in this Agreement, shall mean lineal descendants of the first degree only, including an adopted person or persons. The word "issue" shall mean lineal descendants of any degree, including an adopted person or persons. 10.14 Notwithstanding any other provisions of this Agreement, unless terminated at an earlier date under other provisions hereof, all trusts herein created shall terminate 21 years after the death of the last to die of the Grantor, the Grantor's wife and the Grantor's issue who are living on the date of the termination of the Grantor's power to revoke the trusts established by this Agreement, whether such power terminates by death of the Grantor or otherwise, and thereupon the Trustee shall distribute to the persons then entitled to receive income from any trust the share of the trust from which any such person is then entitled to receive income. 10.15 Notwithstanding any other provisions of this Agreement, if the Grantor survives his wife and if the Trustee should receive any property under her Last Will and Testament, or any proceeds of insurance policies owned by her on her life, or any other property owned by her and passing to the Trustee by reason of her death, to be added to any trust under this Agreement, the Grantor shall have none of the powers reserved to him under Section 2 with respect to such property, nor shall any such property be used for the purposes set forth in Sections 4.2 and 4.5. 10.16 Throughout this Agreement words used in the singular or plural shall be read in the plural or singular, and pronouns shall be read in the feminine, masculine or neuter gender, as the facts or context may require to accomplish the purpose intended. 10.17 This trust has been accepted by the Trustee in the State of Ohio, and all questions pertaining to the trust and its validity and the administration thereof, and to the construction of this Agreement, shall be determined in accordance with the laws of the State of Ohio. SECTION 11 THE TRUSTEE 11.1 References in this Agreement to the "Trustee" shall include not only The Central Trust Company, N.A., but also any corporation, which may succeed to its trust business. 11.2 Upon the written request of the Grantor during his life, The Central Trust Company, N.A., or any Trustee then acting hereunder, shall resign as Trustee as of the date fixed in the request, which shall not be earlier than 30 days after the date of the request, and any Trustee acting hereunder shall have the right to resign upon 30 days' notice to the Grantor, if living, and if not, to all of the beneficiaries then entitled to receive income who are legally competent and to the guardians or custodians of those who are not legally competent. Upon the resignation of any Trustee, voluntarily or involuntarily, the Trustee shall turn over the assets and administration of the trusts then held hereunder to such bank or trust company authorized to do business under the laws of any state or under the National Bank Act of the United States as may be selected by the Grantor, if living and 13 competent, or if not, by such beneficiaries or their guardians or custodians. After the death of the Grantor, if his wife, Catherine C. Miller, survives him, she shall have the same right which the Grantor had during his lifetime to require a Trustee to resign and to designate another bank or trust company as Trustee. 11.3 For its services in connection with the administration of each trust held hereunder, the Trustee shall be entitled to receive such compensation as is provided for in its current schedule of fees effective from time to time. Unless the Grantor otherwise directs, such compensation shall be charged against income except for compensation on principal distributions which shall be charged entirely against principal. 11.4 If there shall be included among the assets of any trust held hereunder assets which are located in another state, and if under the laws of such other state the Trustee acting hereunder cannot or will not serve as Trustee of such assets, then the Trustee is authorized, in its sole discretion, to select some individual or corporation authorized to do business in such other state to serve as its agent for purposes of holding title to and/or managing such assets, with all the powers, authorities and duties granted the Trustee under this Agreement. The individual or corporation who serves as agent for such purposes shall be entitled to such compensation as the Trustee and such agent may agree. Such agent shall exercise all powers and authorities with regard to such out-of-state assets after consultation with and at the direction of the Trustee, it being the Grantor's intention to vest in the Trustee the power to supervise and control such agent in the conduct of such office. Such agent shall not participate in decisions relative to other assets of the trust and shall not be required to give bond. If the out-of-state assets are sold, the sale proceeds shall be paid to the Trustee. 11.5 Any successor Trustee shall have each and every right, privilege, power, discretion, authority and duty of the original Trustee and shall be subject to the same responsibilities. Any successor Trustee shall qualify by executing a written instrument of acceptance of the trusteeship which shall be attached to any counterpart or copy of this Agreement. No bond shall be required of any Trustee for serving as such. SECTION 12 DESIGNATION OF ADVISOR 12.1 Notwithstanding Sections 10.1.3, 10.1.4 and 10.1.6, after the Grantor's death, the Grantor's son, Lloyd I. Miller, III, if living and competent, shall serve as advisor to the Trustee during any time Trust A, Trust B, Trust C or Trust D is being held hereunder under the following conditions: The Trustee shall not make any investments, reinvestments or changes in investments of the assets of Trust A, Trust B, Trust C or Trust D without first consulting with and obtaining the advice of the advisor. The Trustee need not act in accordance with the advice and counsel of the advisor, but if it does so, the Trustee shall not be liable to any person for or as a result of any action or failure to act if in accordance with such advice and counsel. No person, firm or corporation 14 dealing with the Trustee shall be bound to see that the provisions of this Section 12 are complied with, and all such persons, firms and corporations may proceed as if this Section 12 did not appear in this Agreement. The Trustee need not obtain the advice and counsel of the advisor if the Trustee requests such advice and counsel in writing and if the advisor fails to reply to the Trustee within five days from the date of such request by telephone, telegram, mail or in person. IN WITNESS WHEREOF, the Grantor and the Trustee have signed duplicates hereof, each of which shall be deemed an original, on the date first above written. /s/ Lloyd I. Miller ------------------------- /s/ James S. Wachs Lloyd I. Miller - --------------------------- /s/ Joyce I. Hoyt - --------------------------- As to Lloyd I. Miller THE CENTRAL TRUST COMPANY, N.A. By: /s/ Joseph D. Landen ---------------------------- Joseph D. Landen, Executive /s/ Tai E. Baugher II Vice President - ------------------------------------- /s/ Bertha M. Hall - ------------------------------------- As to The Central Trust Company, N.A. STATE OF OHIO, COUNTY OF HAMILTON: SS: Before me, the undersigned, a Notary Public in and for said county and state, personally appeared Lloyd I. Miller, who executed the foregoing Agreement as the Grantor and acknowledged the signing thereof to be his voluntary act for the uses and purposes therein contained. IN TESTIMONY WHEREOF, I have signed and affixed my seal to this Agreement on September 20, 1983. /s/ James S. Wachs ------------------------------------ Notary Public 15 EX-99.2 4 y57429dex99-2.txt OPERATING AGREEMENT OF MILFAM LLC EXHIBIT 99.2 OPERATING AGREEMENT OF MILFAM LLC, AN OHIO LIMITED LIABILITY COMPANY This operating agreement is entered into as of December 10, 1996 by Lloyd I. Miller, III, the Irrevocable Trust U/A Catherine C. Miller dated March 26, 1991, and the Irrevocable Trust U/A Lloyd I. Miller, III dated December 31, 1991. RECITALS The Company was established as an Ohio limited liability company pursuant to articles of organization filed by Martin E. Mooney and Barbara F. Applegarth as the initial members. Mr. Mooney and Ms. Applegarth have resigned as members and the parties hereto have been admitted as members. The parties have agreed to organize and operate a limited liability company under the laws of the State of Ohio in accordance with the terms and subject to the conditions set forth in this Agreement. NOW, THEREFORE, for good and valuable consideration, the parties, intending legally to be bound, agree as follows: SECTION I DEFINED TERMS The following capitalized terms shall have the meanings specified in this Section I. Other terms are defined in this Agreement, and, throughout this Agreement, those terms shall have the meanings respectively ascribed to them. "Act" means the Ohio Limited Liability Company Act, Chapter 1705 Ohio Revised Code as amended from time to time. "Adjusted Capital Account Deficit" means, with respect to any Interest Holder, the deficit balance, if any, in the Interest Holder's Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments: (i) the deficit shall be decreased by the amounts which the Interest Holder is obligated to restore pursuant to Section 4.4(b), or is deemed obligated to restore pursuant to Regulation Section 1.704-1(b)(2)(ii)(c); and (ii) the deficit shall be increased by the items described in Regulation Section 1.704-1(b)(2)(ii)-(d)(4), (5), and (6). "Agreement" means this Agreement, as amended from time to time. "Capital Account" means the account to be maintained by the Company for each Interest Holder in accordance with the following provisions: (i) an Interest Holder's Capital Account shall be credited with the Interest Holder's Capital Contributions, the amount of any Company liabilities assumed by the Interest Holder (or which are secured by Company property distributed to the Interest Holder), the Interest Holder's distributive share of Profit, and any item in the nature of income or gain specially allocated to the Interest Holder pursuant to the provisions of Section IV (other than Section 4.3(c)); and (ii) an Interest Holder's Capital Account shall be debited with the amount of money and the fair market value of any Company property distributed to the Interest Holder, the amount of any liabilities of the Interest Holder assumed by the Company (or which are secured by property contributed by the Interest Holder to the Company), the Interest Holder's distributive share of Loss, and any item in the nature of expenses or losses specially allocated to the Interest Holder pursuant to the provisions of Section IV (other than Section 4.3(c)). If any Membership Interest is transferred pursuant to the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent the Capital Account is attributable to the transferred Membership Interest. If the book value of Company property is adjusted pursuant to Section 4.3(c), the Capital Account of each Membership Interest Holder shall be adjusted to reflect the aggregate adjustment in the same manner as if the Company had recognized gain or loss equal to the amount of such aggregate adjustment. It is intended that the Capital Accounts of all Interest Holders shall be maintained in compliance with the provisions of Regulation Section 1.704-1(b), and all provisions of this Agreement relating to the maintenance of Capital Accounts shall be interpreted and applied in a manner consistent with that Regulation. "Capital Contribution" means the total amount of cash and the fair market value of any other assets contributed (or deemed contributed under Regulation Section 1.704-1(b)(2)(iv)(d)) to the Company by a Member, net of liabilities assumed or to which the assets are subject. "Cash Flow" means all cash funds derived from operations of the Company (including interest received on reserves), without reduction for any non-cash charges, but less cash funds used to pay current operating expenses and to pay or establish reasonable reserves for future expenses, debt repayments, capital improvements, and replacements as determined by the Manager. Cash Flow shall be increased by the reduction of any reserve previously established. "Code" means the Internal Revenue Code of 1986, as amended, or any corresponding provision of any succeeding law. - 2 - "Company" means the limited liability company formed in accordance with this Agreement. "Family Member" means Catherine Ward and any of her descendants and any trusts for their benefit. "Interest Holder" means any Person who holds a Membership Interest, whether as a Member or an unadmitted assignee of a Member. "Involuntary Transfer" means, with respect to any Interest Holder, the transfer of any interest in the Company upon death, divorce, insolvency, bankruptcy or other proceeding with respect to creditors. "Involuntary Withdrawal" means, with respect to any Member, the occurrence of any of the following events: (i) the Member makes an assignment for the benefit of creditors; (ii) the Member files a voluntary petition of bankruptcy; (iii) the Member is adjudged bankrupt or insolvent; (iv) the Member files a petition or answer seeking for the Member any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation; (v) the Member files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in any proceeding described in Subsection (iv); (vi) any proceeding against the Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, continues for one hundred twenty (120) days after the commencement thereof, or the appointment of a trustee, receiver, or liquidator for the Member or all or any substantial part of the Member's properties without the Member's agreement or acquiescence, which appointment is not vacated or stayed for ninety (90) days or, if the appointment is stayed, for ninety (90) days after the expiration of the stay during which period the appointment is not vacated; (vii) if the Member is an individual, the Member's death or adjudication by a court of competent jurisdiction as incompetent to manage the Member's person or property; - 3 - (viii) if the Member is acting as a Member by virtue of being a trustee of a trust, the termination of the trust; (ix) if the Member is a partnership or another limited liability company, the dissolution and commencement of winding up of the partnership or limited liability company; (x) if the Member is a corporation, the dissolution of the corporation or the revocation of its charter; or (xi) if the Member is an estate, the distribution by the fiduciary of the estate's entire interest in the limited liability company. "Manager" is the Person designated as such in Section 5.1 and any successors thereto. If there is more than one Manager, the term "Manager" shall include all such persons as the context requires. "Member" means each Person signing this Agreement and any Person who subsequently is admitted as a Member of the Company. "Member Loan Nonrecourse Deductions" means any Company deductions that would be Nonrecourse Deductions if they were not attributable to a loan made or guaranteed by a Member within the meaning of Regulation Section 1.704-2(i). "Membership Interest" means an Interest Holder's share of the Profits and Losses of, and the right to receive distributions from, the Company. "Membership Rights" means all of the rights of a Member in the Company, including a Member's: (i) Membership Interest; and (ii) the rights granted to Members under this Agreement or under the Act. "Minimum Gain" has the meaning set forth in Regulation Section 1.704-2(d). Minimum Gain shall be computed separately for each Interest Holder in a manner consistent with the Regulations under Code Section 704(b). "Negative Capital Account" means a Capital Account with a balance of less than zero. "Nonrecourse Deductions" has the meaning set forth in Regulation Section 1.704-2(b)(1). The amount of Nonrecourse Deductions for a taxable year of the Company equals the net increase, if any, in the amount of Minimum Gain during that taxable year, determined according to the provisions of Regulation Section 1.704-2(c). - 4 - "Nonrecourse Liability" means any liability of the Company with respect to which no Member has personal liability determined in accordance with Code Section 752 and the Regulations promulgated thereunder. "Percentage" means, (i) as to a Member, the percentage set forth after the Member's name on Exhibit A, as amended from time to time, and (ii) as to an Interest Holder who is not a Member, the Percentage of the Member whose Membership Interest has been acquired by such Interest Holder, to the extent the Interest Holder has succeeded to that Member's Membership Interest. "Person" means and includes any individual, corporation, partnership, association, limited liability company, trust, estate, or other entity. "Positive Capital Account" means a Capital Account with a balance greater than zero. "Profit" and "Loss" means, for each taxable year of the Company (or other period for which Profit or Loss must be computed) the Company's taxable income or loss determined in accordance with Code Section 703(a), with the following adjustments: (i) all items of income, gain, loss, deduction, or credit required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing taxable income or loss; and (ii) any tax-exempt income of the Company, not otherwise taken into account in computing Profit or Loss, shall be included in computing taxable income or loss; and (iii) any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section 1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit or Loss, shall be subtracted from taxable income or loss; and (iv) gain or loss resulting from any taxable disposition of Company property shall be computed by reference to the adjusted book value of the property disposed of, notwithstanding the fact that the adjusted book value differs from the adjusted basis of the property for federal income tax purposes; and (v) in lieu of the depreciation, amortization, or cost recovery deductions allowable in computing taxable income or loss, there shall be taken into account the depreciation computed based upon the adjusted book value of the asset; and (vi) notwithstanding any other provision of this definition, any items which are specially allocated pursuant to Section 4.3 hereof shall not be taken into account in computing Profit or Loss. - 5 - "Regulations" means the income tax regulations, including any temporary regulations, from time to time promulgated under the Code. "Secretary" means the Secretary of State of Ohio. "Voluntary Transfer" means any voluntary sale, hypothecation, pledge, assignment, attachment, or other voluntary transfer. "Voluntary Withdrawal" means a Member's dissociation with the Company by means other than a transfer or an Involuntary Withdrawal. "Units" has the meaning set forth in Section 3.7. SECTION II FORMATION AND NAME: OFFICE; PURPOSE; TERM 2.1 Organization. The parties shall operate a limited liability company pursuant to the Act and the provisions of this Agreement and, for that purpose, have caused Articles of Organization to be executed and filed with the Secretary. 2.2 Name of the Company. The name of the Company shall be "Milfam LLC." The Company may do business under that name and under any other name or names upon which the Manager selects. If the Company does business under a name other than that set forth in its Articles of Organization, then the Company shall file a fictitious name certificate as required by law. 2.3 Purpose. The Company is organized solely to serve as general partner of a limited partnership that will purchase, acquire, buy, sell, own, trade in, hold,and otherwise deal in securities, and to do any and all things necessary, convenient, or incidental to such purpose. 2.4 Term. The term of the Company shall begin upon the filing of the Articles of Organization with the Secretary and shall continue in existence until December 31, 2050, unless its existence is sooner terminated pursuant to Section VII of this Agreement. 2.5 Principal Office. The principal office of the Company in Ohio shall be located at 2500 PNC Center, 201 East Fifth Street, Cincinnati, Ohio 45202 or at any other place that the Manager selects. 2.6 Statutory Agent. The name and address of the Company's statutory agent in the State of Ohio shall be Martin E. Mooney, 2500 PNC Center, 201 East Fifth Street, Cincinnati, Ohio 45202. 2.7 Members. The name and present mailing address of each Member, as well as the number of Units owned by each Member, are set forth on Exhibit A. - 6 - SECTION III MEMBERS; CAPITAL; CAPITAL ACCOUNTS 3.1 Initial Capital Contributions. Within a reasonable time following the execution of this Agreement, the Members shall contribute to the Company cash or other property having a value in the amounts set forth opposite their respective names on Exhibit A. 3.2 Additional Capital Contributions. No Member shall be required to contribute any additional capital to the Company, and no Member shall have any personal liability for any obligation of the Company. 3.3 No Interest on Capital Contributions. Interest Holders shall not be paid interest on their Capital Contributions. 3.4 Return of Capital Contributions. Except as otherwise provided in this Agreement, no Interest Holder shall have the right to receive the return of any Capital Contribution. 3.5 Form of Return of Capital. If an Interest Holder is entitled to receive a return of a Capital Contribution, the Interest Holder shall not have the right to receive anything but cash in return of the Interest Holder's Capital Contribution. 3.6 Capital Accounts. A separate Capital Account shall be maintained for each Interest Holder. 3.7 Units. Ownership rights in the Company will be reflected in Units. Subject to limitations on voting rights imposed by this Agreement, each Unit has equal governance rights with every other Unit and, in matters subject to a vote of the Members, each Unit carries with it the right to one vote. Except as otherwise provided herein, each Unit has equal rights with every other Unit with respect to sharing of Profits and Losses and with respect to distributions. The Manager will determine when and for what consideration the Company will issue Units, and, subject to any limitations imposed by this Agreement, the Manager will determine how many Units may be issued. For each Member, the records of the Company will state the value and nature of the contribution received by the Company and the number of Units received in return by the Member. The Company initially will have 100,000 Units. 3.8 Loans. Any Member may, at any time, make a loan to the Company in any amount and on those terms upon which the Company and the Member agree. - 7 - SECTION IV PROFIT, LOSS AND DISTRIBUTIONS 4.1 Allocations of Profit or Loss. (a) Allocation to Manager. While Lloyd I. Miller, III serves as Manager of the Company, he shall be allocated an amount equal to the sum of any guaranteed payment paid to the Company pursuant to Section 3.8 of the respective Partnership Agreements of Milfam I L.P. and Milfam II L.P and any profit allocated to the Company pursuant to Sections 4.1(a)(2)(i) and (ii) of such agreements. (b) Remaining Profit or Loss. After giving effect to the special allocations set forth in Sections 4.1(a) and 4.3, for any taxable year of the Company, Profit or Loss shall be allocated to the Interest Holders in proportion to their Units. 4.2 Distributions (a) Cash Flow. Cash Flow for each taxable year of the Company shall be distributed first to Lloyd I. Miller, III while he serves as Manager of the Company in an amount sufficient to cause cumulative Cash Flow distributed to him pursuant to this sentence to equal the cumulative Profits allocated to him pursuant to Section 4.1(a). The balance of any Cash Flow shall be distributed to the Interest Holders in proportion to their Units at such time and in such amounts as are determined by the Manager, in his sole discretion. (b) Distribution on Termination. On termination of the Company, assets shall be distributed and applied by the Company in the following order and priority: (i) to the payment of all expenses of the Company incident to winding up; then (ii) to the payment of debts and liabilities of the Company then due and outstanding (including all debts due to any Interest Holder); then (iii) to the establishment of any reserves which the Manager deems necessary for liabilities or obligations of the Company; then (iv) the balance shall be distributed to the Interest Holders in accordance with their respective Capital Account balances. 4.3 Regulatory Allocations. (a) Qualified Income Offset. No Interest Holder shall be allocated Losses or deductions if the allocation causes an Interest Holder to have an Adjusted Capital Account Deficit. If an Interest Holder receives (1) an allocation of Loss or deduction (or item thereof) or (2) any - 8 - distribution, which causes the Interest Holder to have an Adjusted Capital Account Deficit at the end of any taxable year, then all items of income and gain of the Company (consisting of a pro rata portion of each item of Company income, including gross income and gain) for that taxable year shall be allocated to that Interest Holder, before any other allocation is made of Company items for that taxable year, in the amount and in proportions required to eliminate the excess as quickly as possible. This Section 4.3(a) is intended to comply with, and shall be interpreted consistently with, the "qualified income offset" provisions of the Regulations promulgated under Code Section 704(b). (b) Minimum Gain Chargeback. Except as set forth in Regulation Section 1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net decrease in Minimum Gain, each Interest Holder, prior to any other allocation pursuant to this Section IV, shall be specially allocated items of gross income and gain for such taxable year (and, if necessary, subsequent taxable years) in an amount equal to that Interest Holder's share of the net decrease of Minimum Gain, computed in accordance with Regulation Section 1.704-2(g). Allocations of gross income and gain pursuant to this Section 4.3(b) shall be made first from gain recognized from the disposition of Company assets subject to non-recourse liabilities (within the meaning of the Regulations promulgated under Code Section 752), to the extent of the Minimum Gain attributable to those assets, and thereafter, from a pro rata portion of the Company's other items of income and gain for the taxable year. It is the intent of the parties hereto that any allocation pursuant to this Section 4.3(b) shall constitute a "minimum gain chargeback" under Regulation Section 1.704-2(f). (c) Contributed Property and Book-ups. In accordance with Code Section 704(c) and the Regulations thereunder, as well as Regulation Section 1.704-l(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any property contributed (or deemed contributed) to the Company shall, solely for tax purposes, be allocated among the Interest Holders so as to take account of any variation between the adjusted basis of the property to the Company for federal income tax purposes and its fair market value at the date of contribution (or deemed contribution). If the adjusted book value of any Company asset is adjusted as provided herein, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the adjusted basis of the asset for federal income tax purposes and its adjusted book value in the manner required under Code Section 704(c) and the Regulations thereunder. (d) Code Section 754 Adjustment. To the extent an adjustment to the tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of the 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 basis), and the gain or loss shall be specially allocated to the Interest Holders in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to that Section of the Regulations. (e) Nonrecourse Deductions. Nonrecourse Deductions for a taxable year or other period shall be specially allocated among the Interest Holders in proportion to their Units. - 9 - (f) Member Loan Nonrecourse Deductions. Any Member Loan Nonrecourse Deduction for any taxable year or other period shall be specially allocated to the Interest Holder who bears the risk of loss with respect to the loan to which the Member Loan Nonrecourse Deduction is attributable in accordance with Regulation Section 1.704-2(b). (g) Withholding. All amounts required to be withheld pursuant to Code Section 1446 or any other provision of federal, state, or local tax law shall be treated as amounts actually distributed to the affected Interest Holders for all purposes under this Agreement. 4.4 Liquidation and Dissolution. (a) If the Company is liquidated, the assets of the Company shall be distributed to the Interest Holders in accordance with the balances in their respective Capital Accounts, after taking into account the allocations of Profit or Loss pursuant to Section 4.1, if any, and distributions, if any, of cash or property, if any, pursuant to Sections 4.2. (b) No Interest Holder shall be obligated to restore a Negative Capital Account. 4.5 General. (a) Timing of Distributions. Except as otherwise provided in this Agreement, the timing and amount of all distributions shall be determined by the Manager. (b) Distributions in Kind. If any assets of the Company are distributed in kind to the Interest Holders, those assets shall be valued on the basis of their fair market value, and any Interest Holder entitled to any interest in those assets shall receive that interest as a tenant-in-common with all other Interest Holders so entitled. Unless the Manager otherwise agrees, the fair market value of the assets shall be determined by an independent appraiser who shall be selected by the Manager. The Profit or Loss for each unsold asset shall be determined as if the asset had been sold at its fair market value, and the Profit or Loss shall be allocated as provided in Section 4.1 and shall be properly credited or charged to the Capital Accounts of the Interest Holders prior to the distribution of the assets in liquidation pursuant to Section 4.4. (c) Timing of Allocations. All Profit and Loss shall be allocated, and all distributions shall be made, to the Persons shown on the records of the Company to have been Interest Holders as of the last day of the taxable year for which the allocation or distribution is to be made. Notwithstanding the foregoing, unless the Company's taxable year is separated into segments, if there is a Transfer or an Involuntary Withdrawal during the taxable year, the Profit and Loss shall be allocated between the original Interest Holder and the successor on the basis of the number of days each was an Interest Holder during the taxable year; provided, however, the Company's taxable year shall be segregated into two or more segments in order to account for Profit, Loss, or proceeds attributable to any extraordinary non-recurring items of the Company. - 10 - (d) Amendments. The Manager is authorized, upon the advice of the Company's tax counsel, to amend this Article IV to comply with the Code and the Regulations promulgated under Code Section 704(b); provided, however, that no amendment shall materially affect distributions to an Interest Holder without the Interest Holder's prior written consent. SECTION V MANAGEMENT: RIGHTS, POWERS, AND DUTIES 5.1 Management. (a) Manager. The Company shall be managed by one or more Managers. The number of Managers shall be determined periodically by the Members owning 75 percent or more of the Units. The Company initially will have one Manager. Lloyd I. Miller, III is hereby designated to serve as the initial Manager. At such time as he is unable or unwilling to serve as Manager, Catherine Ward will designate one or more banks or trust companies authorized to do business under the laws of any state or under the National Bank Act of the United States to serve as Manager. (b) General Powers. The Manager shall have full, exclusive, and complete discretion, power, and authority, subject in all cases to the other provisions of this Agreement and the requirements of applicable law, to manage, control, administer, and operate the business and affairs of the Company for the purposes herein stated, and to make all decisions affecting such business and affairs, including without limitation, for Company purposes, the power to: (i) acquire by purchase, exchange, lease, or otherwise, any real or personal property, tangible or intangible; (ii) construct, operate, maintain, finance, and improve, and to own, sell, convey, assign, mortgage, or lease any real estate and any personal property; (iii) sell, dispose, trade, or exchange assets; (iv) enter into agreements and contracts and to give receipts, releases, and discharges; (v) purchase liability and other insurance to protect properties and business; (vi) borrow money for and on behalf of the Company, on a secured or unsecured basis, and, in connection therewith, execute and deliver instruments authorizing the confession of judgment against the Company. - 11 - (vii) execute or modify leases and options; (viii) prepay, in whole or in part, refinance, amend, modify, or extend any mortgages or deeds of trust which may affect any asset and in connection therewith to execute for and on behalf of the Company any extensions, renewals, or modifications of such mortgages or deeds of trust; (ix) execute any and all other instruments and documents which may be necessary or in the opinion of the Manager desirable to carry out the intent and purpose of this Agreement, including, but not limited to, documents whose operation and effect extend beyond the term of the Company; (x) make any and all expenditures which the Manager deems necessary or appropriate in connection with the management of the affairs of the Company and the carrying out of its obligations and responsibilities under this Agreement, including, without limitation, all legal, accounting, and other related expenses incurred in connection with the organization and financing and operation of the Company; (xi) enter into any kind of activity necessary to, in connection with, or incidental to, the accomplishment of the purposes of the Company; (xii) invest and reinvest Company reserves in short-term instruments or money market funds; (xiii) purchase, invest and reinvest, retain, operate and sell any business interest, whether organized as a sole proprietorship, partnership, trust, limited liability company or other type of entity, for such time and in such manner as the Manager may deem advisable; (xiv) employ legal counsel, investment counsel and other agents in any manner in connection with the administration of the assets of the Company and to pay such compensation and expenses in connection therewith as the Manager deems reasonable under the circumstances; and (xv) employ officers, managers, employees or agents as the Manager may deem advisable in its management of the Company's business; (c) Limitation on Authority of Manager. If there is more than one Manager, decisions of the Managers will require the approval of a majority of the Managers. While Lloyd I. Miller, III serves as manager, he shall have complete control over all of the affairs of the Company - 12 - and need not seek the consent or approval of any Member with respect to any action. Any Manager who serves after him shall not undertake any of the following without the approval of the Members: (i) the sale of substantially all of the assets of the Company; (ii) admitting additional Members to the Company; (iii) issuing additional Units; (iv) hiring of a professional manager to run the Company or a significant part of the Company; (v) determining the compensation to be paid to the Manager; or (vi) engaging in business in any jurisdiction which does not provide for the registration of limited liability companies. (d) Limitation on Authority of Members. (i) No Member is an agent of the Company solely by virtue of being a Member, and no Member has authority to act for the Company solely by virtue of being a Member. (ii) This Section 5.1 supersedes any authority granted to the Members pursuant to Section 1705.25(A) of the Act. Any Member who takes any action or binds the Company in violation of this Section 5.1 shall be solely responsible for any loss and expense incurred by the Company as a result of the unauthorized action and shall indemnify and hold the Company harmless with respect to the loss or expense. (e) Removal of Manager. Lloyd I. Miller, III may not be removed as Manager except for cause. The Members may remove any other Manager for cause. For cause means the occurrence of any of the following conditions: (i) the Manager commits a felonious criminal act; (ii) the Manager's continuous and uninterrupted inability for a period of two months or more to perform the duties required under this Agreement by reason of accident, illness or disease; (iii) taking an action with reckless disregard for the best interest of the Company; or (vi) an intentional breach of this Agreement. - 13 - In addition to removing a Manager for reasons set forth above, any Manager, other than Lloyd I. Miller, III, may be removed for continued unsatisfactory performance. To remove a Manager on such basis, Members owning 75% or more of the Units held by Members (exclusive of the Units owned by the Manager) must state in writing the basis for the Manager's unsatisfactory performance. The Manager will be given a 90-day period within which to have his performance deemed satisfactory. If, at the close of such 90-day period, Members owning 75% or more of the Units held by Members (exclusive of Units owned by the Manager) still deem the Manager's performance unsatisfactory, the Manager may be removed. A new Manager will be appointed by Catherine Ward or her legal representative while she is still alive, and, after her death, by Members owning a majority of the Units held by Members. 5.2 Meetings of and Voting by Members. (a) Voting. Any Member holding Units will be entitled to vote such Units. (b) Meetings. A meeting of the Members may be called at any time by the Manager or by those Members entitled to vote holding at least fifty-one percent (51%) of the Units held by Members. Meetings of Members shall be held at the Company's principal place of business or at any other place designated by the Person calling the meeting. Not less than ten (3) nor more than ninety (90) days before each meeting, the Person calling the meeting shall give written notice of the meeting to each Member entitled to vote at the meeting. The notice shall state the time, place, and purpose of the meeting. Notwithstanding the foregoing provisions, each Member who is entitled to notice waives notice if before or after the meeting the Member signs a waiver of the notice which is filed with the records of Members' meetings, or is present at the meeting in person or by proxy. Unless this Agreement provides otherwise, at a meeting of Members, the presence in person or by proxy of Members holding not less than a majority of the Units then held by Members entitled to vote constitutes a quorum. Subject to any limitations set forth in this Agreement, a Member entitled to vote may vote either in person or by written proxy signed by the Member or by his duly authorized attorney in fact. (c) Required Vote. Except as otherwise provided in this Agreement, wherever this Agreement requires the approval of Members, the affirmative vote of Members holding or entitled to vote a majority or more of the Units for which votes may be cast shall be required to approve the matter. (d) Written Consent. In lieu of holding a meeting, the Members entitled to vote may take action by a written instrument indicating the consent of Members holding or entitled to vote a majority or more of the Units for which votes may be cast. 5.3 Personal Services. (a) Required Services. No Member shall be required to perform services for the Company solely by virtue of being a Member. Unless approved by the Manager, no Member shall - 14 - perform services for the Company or be entitled to compensation for services performed for the Company. (b) Compensation. The Manager shall be entitled to reasonable compensation for services performed for the Company as set forth above. In addition, the Manager shall be entitled to reimbursement for expenses reasonably incurred in connection with the activities of the Company. 5.4 Duties of Parties. (a) Time Commitment. The Manager shall devote such time to the business and affairs of the Company as is necessary to carry out the Manager's duties set forth in this Agreement. (b) Outside Ventures. Except as otherwise expressly provided in Section 5.4(c), nothing in this Agreement shall be deemed to restrict in any way the rights of any Member to conduct any other business or activity whatsoever, and the Member shall not be accountable to the Company or to any Member with respect to that business or activity even if the business or activity competes with the Company's business. The organization of the Company shall be without prejudice to the respective rights of the Members to maintain, expand, or diversify such other interests and activities and to receive and enjoy profits or compensation therefrom. Each Member waives any rights the Member might otherwise have to share or participate in such other interests or activities of any other Member. (c) Arm's Length Dealings. Each Member understands and acknowledges that the conduct of the Company's business may involve business dealings and undertakings with Members. In any of those cases, those dealings and undertakings shall be at arm's length and on commercially reasonable terms. 5.5 Liability and Indemnification. (a) Standard Imposed. The Manager shall not be liable, responsible, or accountable, in damages or otherwise, to any Member or to the Company for any act performed by the Manager within the scope of the authority conferred on the Manager by this Agreement, except as provided in Section 1705.29(D) of the Act. (b) Right to Indemnity. The Company shall indemnify the Manager for any act performed by the Manager within the scope of the authority conferred on the Manager by this Agreement unless the act is proved by clear and convincing evidence to have been undertaken with deliberate intent to cause injury to the Company, with reckless disregard for the best interest of the Company, or to be an intentional breach of this Agreement. - 15 - 5.6 Power of Attorney. (a) Grant of Power. Each Member constitutes and appoints the Manager as the Member's true and lawful attorney-in-fact ("Attorney-in-Fact"), and in the Member's name, place and stead, to make, execute, sign, acknowledge, and file: (i) Articles of Organization or any amendment thereto, which has been approved as provided in this Agreement; (ii) all documents (including amendments to articles of organization) which the Attorney-in-Fact deems appropriate to reflect any amendment, change, or modification of this Agreement; (iii) any and all other certificates or other instruments required to be filed by the Company under the laws of the State of Ohio or of any other state or jurisdiction, including, without limitation, any certificate or other instruments necessary in order for the Company to continue to qualify as a limited liability company under the laws of the State of Ohio; (iv) one or more fictitious or trade name certificates; and (v) all documents which may be required to dissolve and terminate the Company and to cancel its Articles of Organization. (b) Irrevocability. The foregoing power of attorney is irrevocable and is coupled with an interest, and, to the extent permitted by applicable law, shall survive the death or disability of a Member. It also shall survive the Involuntary or Voluntary Transfer of an Interest, except that if the transferee is approved for admission as a Member, this power of attorney shall survive the delivery of the assignment for the sole purpose of enabling the Attorney-in-Fact to execute, acknowledge, and file any documents needed to effectuate the substitution. Each Member shall be bound by any representations made by the Attorney-in-Fact acting in good faith pursuant to this power of attorney, and each Member hereby waives any and all defenses which may be available to contest, negate, or disaffirm the action of the Attorney-in-Fact taken in good faith under this power of attorney. - 16 - SECTION VI TRANSFER OF INTERESTS AND WITHDRAWALS OF MEMBERS 6.1 Transfers. (a) General Restriction. No Person may make any transfer, either a Voluntary Transfer, Involuntary Transfer, or otherwise, of all or any portion of or any interest or rights in the Person's Membership Rights or Membership Interest unless the following conditions ("Conditions of Transfer") are satisfied: (i) The transfer will not require registration of Membership Interests or Membership Rights under any federal or state securities laws; (ii) The transferee agrees to be bound by the terms of Section VI of this Agreement. (iii) the transfer will not result in the termination of the Company pursuant to Code Section 708; and (iv) the transferor complies with the right of first refusal provisions set forth in Section 6.1(d). (b) Permitted Transfer. If the Conditions of Transfer are satisfied, then a Member or Interest Holder may transfer all or any portion of that Person's Membership Interest. Without receiving the consent of Members owning at least 75% of the Units, exclusive of Units held by the Transferors, the transfer of a Membership Interest pursuant to this Section 6.1 shall not result in the transfer of any of the transferor's other Membership Rights, if any, and the transferee of the Membership Interest shall have no right to: (i) become a Member; (ii) exercise any Membership Rights other than those specifically pertaining to the ownership of a Membership Interest; or (iii) act as an agent of the Company. (c) Consent to Restriction. Each Member hereby acknowledges the reasonableness of the prohibition contained in this Section 6.1 in view of the purposes of the Company and the relationship of the Members. The transfer of any Membership Rights or Membership Interests in violation of the prohibition contained in this Section 6.1 shall be deemed invalid, null and void, and of no force or effect. Any Person to whom Membership Rights are attempted to be transferred in violation of this Section shall not be entitled to vote on matters coming before the Members, participate in the management of the Company, act as an agent of the Company, receive distributions from the Company, or have any other rights in or with respect to the Membership Rights. - 17 - (d) Right of First Refusal. (i) If: (A) an Interest Holder (a "Transferor") intends to transfer all or any portion of, or any interest or rights in a Membership Interest either to a bona fide third party purchaser or pursuant to an Involuntary Transfer, or, (B) an Interest Holder is a spouse of a Family Member, and the Interest Holder and such Family Member are divorced, the Transferor shall so notify the Company (the "Transfer Notice"). The Transfer Notice shall describe the terms upon which the Membership Interest is to be transferred or that the Interest Holder and the Family Member are getting a divorce. The Company shall have the option (the "Company Option") to purchase all of the Membership Interest to be transferred on the terms proposed by a bona fide third party purchaser. With respect to an Involuntary Transfer or divorce, the Company also shall have the option to purchase all of the Membership Interest that is subject to the Involuntary Transfer or that is owned by the Member who is getting divorced, for a price equal to the fair market value of the Membership Interest as determined by an independent appraiser, taking into account adjustments for lack of marketability, lack of control and any other adjustments that may apply (the "Purchase Price"). (ii) The Company Option shall be and remain irrevocable for a period (the "Company Option Period") ending at 11:59 P.M. local time at the Company's principal office on the thirtieth (30th) Day following the date the Transfer Notice is given to the Company. (iii) At any time during the Company Option Period, the Company may elect to exercise the Company Option by giving written notice of its election to the Transferor. The Transferor shall not be deemed a Member for the purpose of voting on whether the Company shall elect to exercise the Company Option. (iv) If the Company chooses to exercise the Company Option, the Company's notice of its election shall fix a closing date for the purchase, which shall not be earlier than five (5) days after the date of the notice of election or more than thirty (30) days after the expiration of the Company Option Period. - 18 - (v) If the Company chooses to exercise the Company Option, the Purchase Price shall be paid, at the Company's election, in cash at closing or in up to 48 equal monthly installments with interest at the applicable federal rate in effect as of the date of closing. In the latter case, payment will be secured by the Membership Interest purchased. (vi) If the Company fails to exercise the Company Option, the other Members will have the option to acquire the Membership Interest in the same proportions as the Units that the acquiring Member owns bears to the total number of Units owned by the Members who desire to acquire Membership Interest that is the subject of the transfer, or in such other proportions as the Members may agree (the"Member Option"). The terms of the Member Option will be the same as the terms of the Company Option. (vii) The Member Option shall be and remain irrevocable for a period (the "Member Option Period") ending at 11:59 P.M. local time at the Company's principal office on the thirtieth (30th) Day following the date the Company Option Period expires. (viii) If a Member chooses to exercise the Member Option, the Purchase Price shall be paid, at the election of the Member, in cash at closing or in up to 48 equal monthly installments with interest at the applicable federal rate in effect as of the date of closing. In the latter case, payment will be secured by the Membership Interest purchased. (ix) If the Members fails to exercise the Member Option, the Transferor shall be permitted to offer and sell for a period of ninety (90) days (the "Free Transfer Period") after the expiration of the Member Option Period on the terms set forth in the notice or at a price not less than the Purchase Price. If the Transferor does not Transfer the Membership Interest within the Free Transfer Period, the Transferor's right to Transfer the Membership Interest pursuant to this Section shall terminate. (x) Any Transfer of the Transferor Interest made after the last day of the Free Transfer Period or without strict compliance with the terms, provisions, and conditions of this Section and other terms, provisions, and conditions of this Agreement, shall be null, void and of no force or effect. 6.2 Voluntary Withdrawal. No Member shall have the right or power to Voluntarily Withdraw from the Company. - 19 - 6.3 Involuntary Withdrawal. Immediately upon the occurrence of an Involuntary Withdrawal, the successor of the withdrawn Member shall thereupon become an Interest Holder but shall not become a Member. The interest held will be subject to the option rights set forth in Section 6.1. SECTION VII DISSOLUTION, LIQUIDATION AND TERMINATION OF THE COMPANY 7.1 Events of Dissolution. The Company shall be dissolved upon the happening of any of the following events: (a) when the period fixed for its duration in Section 2.4 has expired; (b) upon the written agreement of Members owning 75% or more of the Units; or (c) upon the death, insanity, bankruptcy, retirement, resignation,or expulsion of any Member, unless remaining Members owning a majority of the Units owned by remaining Members elect to continue the business of the Company pursuant to the terms of this Agreement within 120 days after the occurrence of such event. 7.2 Procedure for Winding Up and Dissolution. If the Company is dissolved, the Manager shall wind up its affairs. On winding up of the Company, the assets of the Company shall be distributed, first, to creditors of the Company, including Interest Holders who are creditors, in satisfaction of the liabilities of the Company, and then to the Interest Holders in accordance with Section 4.4 of this Agreement. 7.3 Filing of Certificate of Dissolution. If the Company is dissolved, the Manager shall promptly file a Certificate of Dissolution with the Secretary. If there is no Manager, then the Certificate of Dissolution shall be filed by the remaining Members; if there are no remaining Members, the Certificate shall be filed by the last Person to be a Member; if there is neither a Manager, remaining Members, or a Person who last was a Member, the Certificate shall be filed by the legal or personal representatives of the Person who last was a Member. SECTION VIII BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS 8.1 Bank Accounts. All funds of the Company shall be deposited in a bank account or accounts maintained in the Company's name. The Manager shall determine the institution or institutions at which the accounts will be opened and maintained, the types of accounts, and the Persons who will have authority with respect to the accounts and the funds therein. - 20 - 8.2 Books and Records. (a) Records Kept. The Manager shall keep or cause to be kept complete and accurate books and records of the Company and supporting documentation of the transactions with respect to the conduct of the Company's business. The records shall include, but not be limited to, financial statements of the Company for the three most recent fiscal years, a copy of the Articles of Organization and operating agreement, together with any relevant powers of attorney, information regarding the amount of cash or agreed value of property or services contributed, or agreed to be contributed in the future, by each Member, the respective rights of the Company and each Member regarding the return of contributions, and the Company's federal, state, or local tax returns. (b) Accounting Method. The books and records shall be maintained in accordance with sound accounting practices and shall be available at the Company's principal office for examination by any Member or by Member's duly authorized representative at any and all reasonable times during normal business hours. (c) Reimbursement. Each Member shall reimburse the Company for all costs and expenses incurred by the Company in connection with the Member's inspection and copying of the Company's books and records. 8.3 Annual Accounting Period. The annual accounting period of the Company shall be its taxable year. The Company's taxable year shall be selected by the Manager, subject to the requirements and limitations of the Code. 8.4 Reports. As soon as practicable after the end of each taxable year of the Company, the Manager shall cause to be sent to each Person who was a Member at any time during the accounting year then ended that tax information concerning the Company which is necessary for preparing the Interest Holder's income tax returns for that year. At the request of any Member, and at the Member's expense, the Manager shall cause an audit of the Company's books and records to be prepared by independent accountants for the period requested by the Member. 8.5 Tax Matters Partner. Lloyd I. Miller, III shall be the Company's tax matters partner ("Tax Matters Partner"). The Tax Matters Partner shall have all powers and responsibilities provided in Code Section 6221, et seq. The Tax Matters Partner shall keep all Members informed of all notices from government taxing authorities that may come to the attention of the Tax Matters Partner. The Company shall pay and be responsible for all reasonable third-party costs and expenses incurred by the Tax Matters Partner in performing those duties. A Member shall be responsible for any costs incurred by the Member with respect to any tax audit or tax-related administrative or judicial proceeding against any Member, even though it relates to the Company. The Tax Matters Partner may not compromise any dispute with the Internal Revenue Service without the approval of the Members. 8.6 Tax Elections. The Manager shall have the authority to make all Company elections permitted under the Code, including, without limitation, elections of methods of depreciation and - 21 - elections under Code Section 754. The decision to make or not make an election shall be at the sole and absolute discretion of the Manager. SECTION IX GENERAL PROVISIONS 9.1 Assurances. Each Member shall execute all certificates and other documents and shall do all such filing, recording, publishing, and other acts as the Manager deems appropriate to comply with the requirements of law for the formation and operation of the Company and to comply with any laws, rules, and regulations relating to the acquisition, operation, or holding of the property of the Company. 9.2 Notifications. Any notice, demand, consent, election, offer, approval, request, or other communication (collectively a "notice") required or permitted under this Agreement must be in writing and either delivered personally, telecopied or sent by certified or registered mail, postage prepaid, return receipt requested. A notice must be addressed to an Interest Holder at the Interest Holder's last known address on the records of the Company. A notice to the Company must be addressed to the Company's principal office. A notice that is sent by mail will be deemed given three (3) business days after it is mailed. Any party may designate, by notice to all of the others, substitute addresses or addressees for notices; and, thereafter, notices are to be directed to those substitute addresses or addressees. 9.3 Specific Performance. The parties recognize that irreparable injury will result from a breach of any provision of this Agreement and that money damages will be inadequate to fully remedy the injury. Accordingly, in the event of a breach or threatened breach of one or more of the provisions of this Agreement, any party who may be injured (in addition to any other remedies which may be available to that party) shall be entitled to one or more preliminary or permanent orders (i) restraining and enjoining any act which would constitute a breach or (ii) compelling the performance of any obligation which, if not performed, would constitute a breach. 9.4 Complete Agreement. This Agreement constitutes the complete and exclusive statement of the agreement among the Members. It supersedes all prior written and oral statements, including any prior representation, statement, condition, or warranty. Except as expressly provided otherwise herein, this Agreement may not be amended without the written consent of all of the Members. 9.5 Applicable Law. All questions concerning the construction, validity and interpretation of this Agreement and the performance of the obligations imposed by this Agreement shall be governed by the internal law, not the law of conflicts, of the State of Ohio. 9.6 Section Titles. The headings herein are inserted as a matter of convenience only and do not define, limit or describe the scope of this Agreement or the intent of the provisions hereof. - 22 - 9.7 Binding Provisions. This Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective heirs, executors, administrators, personal and legal representatives, successors, and permitted assigns. 9.8 Jurisdiction and Venue. Any suit involving any dispute or matter arising under this Agreement may only be brought in the courts of the State of Ohio. All Members hereby consent to the exercise of personal jurisdiction by any such court with respect to any such proceeding. 9.9 Terms. Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular, and plural, as the identity of the Person may in the context require. 9.10 Severability of Provisions. Each provision of this Agreement shall be considered severable; and if, for any reason, any provision or provisions herein are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this Agreement which are valid. 9.11 Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which, when taken together, constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart. IN WITNESS WHEREOF, the parties have executed, or caused this Agreement to be executed, under seal, as of the date set forth hereinabove. /s/ Lloyd I. Miller, III --------------------------- Lloyd I. Miller, III Irrevocable Trust U/A Catherine C. Miller dated March 26, 1991 By: /s/ Lloyd I. Miller, III ----------------------------------------------- Irrevocable Trust U/A Lloyd I. Miller, III dated December 31, 1991 By: /s/ Lloyd I. Miller, III ---------------------------------------------- - 23 - RESIGNATION The undersigned hereby resign as Members of Milfam LLC effective as of the time of the admission as Members of the parties to the foregoing Agreement. Date: December 12, 1996 /s/ Barbara F. Applegarth ----------------- ----------------------------------------------- Barbara F. Applegarth /s/ Martin E. Mooney ----------------------------------------------- Martin E. Mooney - 24 - EX-99.3 5 y57429dex99-3.txt MILFAM I L.P. PARTNERSHIP AGREEMENT EXHIBIT 99.3 PARTNERSHIP AGREEMENT OF MILFAM I L.P. THIS PARTNERSHIP AGREEMENT is made and entered into as of the 11th day of December, 1996 between Milfam LLC, an Ohio limited liability company (herein referred to as the "General Partner"), Trust B under Section 6 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983, Trust D under Section 8 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983, Lloyd I. Miller, III and Martin G. Miller (herein collectively referred to as the "Limited Partners"). DEFINED TERMS Capitalized words and phrases used in this Agreement have the following meanings: (a) "Act" means the Georgia Revised Uniform Limited Partnership Act law, as set forth in Sections 14-9-100 to -1204 of the Georgia Code Annotated, as amended from time to time (or any corresponding provisions of succeeding law). (b) "Agreement" or "Partnership Agreement" means this partnership agreement, as amended from time to time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder," refer to this Agreement as a whole, unless the context otherwise requires. (c) "Bankruptcy" of a Partner shall be deemed to have occurred 60 days after the happening of any of the following: (1) the filing of an application by a Partner for, or a consent to, the appointment of a trustee of the Partner's assets, (2) the filing by a Partner of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing the Partner's inability to pay the Partner's debts as they come due, (3) the making by a Partner of a general assignment for the benefit of creditors, (4) the filing by a Partner of an answer admitting the material allegations of, or consenting to, or defaulting in answering a bankruptcy petition filed against the Partner in any bankruptcy proceeding, or (5) the entry of an order, judgment, or decree by any court of competent jurisdiction adjudicating a Partner bankrupt or appointing a trustee of the Partner's assets, and that order, judgment, or decree continuing unstayed and in effect for a period of 60 days. (d) "Basis Point" means one hundredth of one percent (.01 percent), 100 Basis Points are equal to one percent. (e) "Capital Account" means, with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions: (i) To each Partner's Capital Account there shall be credited such Partner's Capital Contributions, such Partner's distributive share of Profits and any items in the nature of income or gain which are specially allocated to such Partner. (ii) To each Partner's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Partnership Property distributed to such Partner pursuant to any provision of this Agreement net of liabilities assumed by the Partner or to which such property is subject, and such Partner's distributive share of Losses and any items in the nature of expenses or losses which are specially allocated to such Partner. (iii) In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. The General Partner shall make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Sections 1.704-1(b) and 1.704-2 of the Regulations. (f) "Capital Contribution" means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership by such Partner. (g) "Code" means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). (h) "Family" and "Family Member" mean Catherine Ward and her descendants and trusts created for their benefit. (i) "General Partner" means any Person who (i) is listed as such in Exhibit A, attached, or has become a General Partner pursuant to the terms of this Agreement, and (ii) has not ceased to be a General Partner pursuant to the terms of this Agreement. (j) "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (i) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the contributing Partner and the Partnership; (ii) The Gross Asset Value of all Partnership assets shall be adjusted to equal their respective gross fair market values, as determined by the General Partner, as of the following times: (a) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership Property as - 2 - consideration for an interest in the Partnership if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; and (c) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); (iii) The Gross Asset Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution; and (iv) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross Asset Values shall not be adjusted to the extent the General Partner determines that an adjustment is not necessary or appropriate in connection with a transaction that would otherwise result in an adjustment. If the Gross Asset Value of an asset has been determined or adjusted, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (k) "Lehman Brothers Rate of Return" means the rate of return of the Lehman Brothers Intermediate Bond Index for the period in question expressed in Basis Points, as determined by a third party selected by the General Partner who is qualified to make such a determination. (l) "Limited Partner" means any Person whose name is set forth on Exhibit A of this Agreement as Limited Partner or who has been admitted as an additional or Substituted Limited Partner pursuant to the terms of this Agreement. "Limited Partners" means all such Persons. (m) "Net Cash Flow" means the gross cash proceeds from Partnership operations and from the sale or other disposition of assets of the Partnership less the portion thereof used to pay or establish reserves for all Partnership expenses, debt payments, capital improvements, replacements and contingencies, all as determined by the General Partner. "Net Cash Flow" shall not be reduced by depreciation, amortization, cost recovery deductions or similar allowances. (n) "Partners" means all General Partners and all Limited Partners, where no distinction is required by the context in which the term is used herein. "Partner" means any one of the Partners. (o) "Partnership" means the partnership formed pursuant to this Agreement and the partnership continuing the business of this Partnership in the event of dissolution as herein provided. - 3 - (p) "Partnership Property" means all real and personal property acquired by the Partnership and any improvements thereto, and shall include both tangible and intangible property. (q) "Person" means any individual, partnership, corporation, trust or other entity. (r) "Profits" and "Losses" means, for each fiscal year or other period, an amount equal to the Partnership's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(l) shall be included in taxable income or loss), with the following adjustments: (i) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses shall be added to such taxable income or loss; (ii) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses shall be subtracted from such taxable income or loss; (iii) In the event the Gross Asset Value of any Partnership asset is adjusted, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses. (iv) Gain or loss resulting from any disposition of Partnership Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; (v) Notwithstanding any other provision herein, any items which are specially allocated shall not be taken into account in computing Profits or Losses. (s) "Regulations" means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). (t) "Standard & Poor's Rate of Return" means the rate of return of the Standard & Poor's Index for the period in question expressed in Basis Points, as determined by a third party selected by the General Partner who is qualified to make such a determination. (u) "Substituted Limited Partner" means any Person admitted to the Partnership as a Limited Partner pursuant to Article 6 hereof. - 4 - (v) "Unit(s)" means any one (or part thereof) or more of the 1 million units that are authorized to be issued to Partners representing an interest in the Partnership as described in this Agreement. ARTICLE 1 NAME AND PURPOSES SECTION 1.1 FORMATION. The Partners do hereby form the Partnership as a limited partnership pursuant to the Act, for the purposes hereinafter described. SECTION 1.2 NAME AND OFFICE. The Partnership shall be conducted under the name of Milfam I L.P. (the "Partnership"). The principal office and place of business of the Partnership in Georgia shall be located at 1201 Peachtree Street, N.E., Atlanta Georgia 30361, or such other place as the General Partner may from time to time determine on prior notice to the Limited Partners. SECTION 1.3 PURPOSES AND POWERS. (a) The purposes of the Partnership and the business to be carried on and the objectives to be effected by it are: (i) To acquire, hold, and, in all respects, deal with stocks, bonds, and other investment securities and, in the sole discretion of the General Partner, to acquire one or more memberships on recognized national exchanges and to engage in any other business permitted by the Act in order to make a profit, increase Family wealth, and provide a means for members of the Family to become knowledgeable of and preserve Family assets; (ii) To provide a means for resolving any disputes that may arise among Family members with respect to the management of Family assets so as to preserve harmony among Family members and avoid costs associated with litigation; (iii) To maintain control of Family assets; (iv) To provide a means to consolidate certain Family assets; (v) To provide more centralized management for Family assets; (vi) To serve as liaison with outside advisors, such as legal counsel, accountants, banks and portfolio managers; (vii) To benefit from economies of scale that can be realized by consolidating Family assets; - 5 - (viii) To provide a means of facilitating gifts to Family members without fractionalizing assets; (ix) To provide protection to Family assets from claims of creditors brought against Family members; (x) To prevent the transfer of a Family member's interest in Family assets in the event of a failed marriage; (xi) To provide flexibility in taking advantage of business and investment opportunities, to increase Family wealth and profits that are not available through trusts, corporations or other entities, and to make investments in accordance with the modern portfolio theory; (xii) To facilitate the administration and reduce the cost associated with the disability or probate of the estate of Family members and to reduce or eliminate probate and guardianship proceedings in foreign jurisdictions; (xiii) To promote knowledge of and communication about Family assets while allowing restrictions to be placed on disclosure of information thereby permitting confidentiality to be preserved as needed; (xiv) To enter into, continue, perform and carry out contracts of any kind necessary to, in connection with, or incidental to, the accomplishment of the purposes of the Partnership; (xv) To acquire any property, or any rights therein or appurtenant thereto, necessary for the accomplishment of such purposes; (xvi) To borrow money, and to issue evidence of indebtedness and to secure the same by mortgage, deed of trust, pledge or other lien, in furtherance of any or all of the purposes of the Partnership, and to continue in effect and assume any liabilities or indebtedness that may have been incurred by any predecessor partnership; and (xvii) To carry on any other activities necessary to, in connection with or incidental to the foregoing. SECTION 1.4 TERM. The Partnership shall continue in full effect until December 31, 2050, and thereafter from year to year with the agreement of all Partners, unless sooner dissolved and terminated as herein provided. - 6 - SECTION 1.5 AGENT AND TAX MATTERS PARTNER. Lloyd I. Miller, III shall be the Tax Matters Partner for the Partnership for purposes of Section 6231(a)(7) of the Code. CT Corporation System shall be the agent for the Partnership for service of process in the State of Georgia. ARTICLE 2 CAPITAL CONTRIBUTIONS SECTION 2.1 CAPITAL CONTRIBUTIONS. Each Partner has made or will make a Capital Contribution to the Partnership in the amount set forth on Exhibit A. Contributions may be made in cash or property. In addition, a contribution may be made by delivery of a promissory note or other obligation to contribute cash or property. Each Partner's Capital Contribution is based upon the number of Units the Partner acquires. The Partnership is authorized to issue up to 100,000 Units at an initial cost of $1,000 per Unit. Fractional Units may be issued. SECTION 2.2 DIVERSIFICATION. The initial Capital Contribution made by each Partner will be in the form of stocks, bonds and other securities. No such Capital Contribution will be accepted by the Partnership if the acceptance thereof would cause the Partnership to be an "investment company" within the meaning of section 351 of the Code and the regulations thereunder. To provide further assurance that the Partnership will not be an investment company as a result of accepting a Capital Contribution made by any Partner, each Partner will be required to contribute, as such Partner's initial Capital Contribution, a "diversified portfolio of stocks and securities" within the meaning of Section 1.351-1(c)(6) of the Regulations. SECTION 2.3 FUTURE CAPITAL CONTRIBUTIONS. If the Partnership requires additional funding to provide working capital or for any other purpose, no Partner shall have any obligation to advance such funds personally to the Partnership except as otherwise provided herein. SECTION 2.4 LOANS TO THE PARTNERSHIP. Any Partner will be permitted to make loans to the Partnership from time to time in such amounts and on such terms as such Partner and the Partnership may agree. In no event, however, will a Partner be permitted to loan funds to the Partnership on terms less favorable to the Partnership than those that could be obtained from an unrelated creditor. SECTION 2.5 GENERAL PROVISIONS. A Limited Partner shall not be liable for any of the debts of the Partnership or be required to contribute any capital or lend any funds to the Partnership other than as expressly provided in this Agreement. The General Partner shall not have any personal liability for the repayment of the Capital Contributions of any Limited Partner, except as provided to the contrary in this Agreement. Unless otherwise provided herein, no interest will be paid on or imputed to any capital contributed to the Partnership. SECTION 2.6 ADDITIONAL UNITS. The Partnership may increase the number of authorized Units with the consent of Partners holding a majority of the Units. The cost of additional Units will - 7 - be determined by the General Partner by dividing the total value of Units outstanding by the number of Units outstanding. The determination will be made as nearly as practicable to the date on which additional Units are to be issued. ARTICLE 3 RIGHTS, POWERS AND DUTIES OF THE PARTNERS SECTION 3.1 MANAGEMENT AND CONTROL OF THE PARTNERSHIP. (a) The General Partner shall have the full and exclusive right to manage and control the business and affairs of the Partnership and to make all decisions regarding the affairs of the Partnership. In the course of such management, the General Partner may acquire, encumber, hold title to, pledge, sell, release or otherwise dispose of Partnership Property and interests therein when and upon such terms as it determines to be in the best interests of the Partnership. The General Partner shall have all of the rights, powers and obligations of a partner of a partnership without limited partners, except as otherwise provided under the Act. (b) No Limited Partner who is not also a General Partner shall participate in the management of or have any control over the Partnership's business nor have the power to represent, act for, sign for or bind the General Partner or the Partnership. (c) In fulfilling its obligations set forth in paragraph (a) above, and to the extent not inconsistent with that paragraph, the General Partner shall have the authority to borrow money in the name of the Partnership, and in connection with any such borrowing, to mortgage, pledge, encumber and hypothecate the assets of the Partnership. SECTION 3.2 AUTHORITY OF THE GENERAL PARTNER. In addition to the rights and powers the General Partner has under this Agreement and law, the General Partner shall, except to the extent otherwise provided herein, have all rights and powers required or appropriate to manage the Partnership business, including without limitation, the right to hire other professional advisors and other personnel to provide services to the Partnership. To accomplish the purposes of the Partnership the authority of the General Partner includes, but is not limited to the following: (a) to purchase, sell, invest in and deal in stocks, bonds, notes, evidence of indebtedness and any other securities of any person whether foreign or domestic; (b) to guarantee the financial transactions of others that are for the benefit of the Partnership; (c) to borrow money; (d) to sell, pledge, or dispose of assets of the Partnership; - 8 - (e) to carry such insurance as the General Partner deems necessary; and (f) to perform all acts deemed appropriate by the General Partner to carry out the purposes of the Partnership. SECTION 3.3 AUTHORITY OF PARTNERS TO DEAL WITH THE PARTNERSHIP. The Partnership may acquire property or services from any Partner, or lease or sell any property to the any Partner provided the terms of such transactions are arm's-length and in furtherance of the purposes of the Partnership. SECTION 3.4 RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER. (a) Without the unanimous consent of the Limited Partners, the General Partner shall not have the authority to: (i) Do any act in contravention of this Agreement; (ii) Do any act which would make it impossible to carry on the business of the Partnership; (iii) Confess a judgment against the Partnership; (iv) Admit a Person as a General Partner; or (v) Elect to dissolve the Partnership. SECTION 3.5 DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER. (a) The General Partner shall use his best efforts to take all actions that may be necessary or appropriate for the continuation of the Partnership's valid existence as a limited partnership and for the acquisition, holding and operation of Partnership Property, in accordance with the provisions of this Agreement and applicable laws and regulations. (b) The General Partner shall at all times act with integrity and good faith and exercise diligence in all activities relating to the conduct of the Partnership business and in resolving conflicts of interest. (c) The General Partner shall prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) all Federal, state and local tax returns required to be filed by the Partnership. The General Partner shall, to the extent that Partnership funds are available, cause the Partnership to pay any taxes payable by the Partnership. (d) The General Partner shall use its best efforts to cause the Partnership to be formed, reformed, qualified to do business or registered under any applicable assumed or fictitious name - 9 - statute or similar law if required by such law in any state in which the Partnership then owns property or transacts business. (e) The General Partner shall have the sole and exclusive right to manage and operate the business of the Partnership with full and exclusive authority to act for and on behalf of and as agent of the Partnership and to take any and all reasonable actions deemed by the General Partner to be necessary or advisable in connection therewith. The General Partner shall operate the business of the Partnership in a commercially reasonable manner and shall do so at such time and in such manner as the General Partner, in its sole discretion, shall reasonably deem fit and further, shall endeavor and take all reasonable actions to operate the Partnership so as to provide income and capital growth for the Partners. SECTION 3.6 OTHER RIGHTS OF LIMITED PARTNERS. The Limited Partners shall not participate in the management or control of the business of, or transact any business for, the Partnership. The Limited Partners shall have no power to sign for or bind the Partnership in their capacity as Limited Partners. Limited Partners owning 90% or more of the outstanding Units held by Limited Partners will have the right to remove the General Partner at any time. SECTION 3.7 OTHER INTERESTS OF PARTNERS. The Partners may engage in or possess an interest in other business ventures of every nature and description, independently or with others, including, but not limited to, the investment business in all its aspects. Neither the Partnership nor the other Partners shall have any rights in and to such independent ventures or the income or profits derived therefrom. SECTION 3.8 COMPENSATION TO GENERAL PARTNER. In addition to any Profits that may be allocated to the General Partner, as compensation for various administrative, reporting, advisory and other services that are to be performed by the General Partner, the General Partner will receive a guaranteed payment equal to .30 percent (30 Basis Points) of the Gross Asset Value of all Partnership assets as of December 31 of each year. The fee will be payable in four equal quarterly installments during the succeeding and will be treated as earned during the succeeding year. The fee will be adjusted if the Partnership has a short taxable year. SECTION 3.9 CONFIDENTIALITY OF INFORMATION. The Partners acknowledge that they may receive information regarding the Partnership in the nature of trade secrets or that otherwise is confidential, the release of which may be damaging to the Partnership or Persons with which it does business. Each Partner shall hold in strict confidence any information it receives regarding the Partnership that is identified as being confidential (and if that information is provided in writing, that is so marked) and may not disclose it to any Person other than another Partner, except for disclosures (1) compelled by law, (2) to advisers or representatives of the Partner or Assignees of the Partner, but only if they have agreed to be bound by the provisions of this Section 3.9, or (3) of information that Partner also has received from a source independent of the Partnership that the Partner reasonably believes obtained that information without breach of any obligation of confidentiality. The Partners acknowledge that breach of the provisions of this Section 3.9 may cause irreparable injury to the Partnership for which monetary damages are inadequate, difficult to compute, or both. - 10 - Accordingly, the Partners agree that the provisions of this Section 3.9 may be enforced by specific performance and other appropriate injunctive or equitable relief. ARTICLE 4 ALLOCATIONS SECTION 4.1 ALLOCATION OF PROFITS AND LOSSES. (a) PROFITS. Profits for any fiscal period shall be allocated among the Partners as follows: (1) First, Profits shall be allocated to Partners who have been allocated Losses pursuant to Section 4.1(b)(2) in proportion to the Losses so allocated to them until the cumulative amount of Profits allocated to Partners pursuant to this Section 4.1(a)(1) is equal to the cumulative amount of Losses allocated to Partners pursuant to Section 4.1(b)(2). (2) Second, Profits will be allocated to the General Partner based upon the investment performance of the Partnership during the calendar year (or other period agreed upon by the Partners). The Profits allocated to the General Partner will be determined as follows: (i) If the rate of return for equity investments earned by the Partnership for the year (or such other period as may be determined by the Partners) exceeds the Standard & Poor's Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .50 percent (50 Basis Points) of the average Gross Asset Value of equity investments held by the Partnership during such year (or other period determined by the Partners). If the rate of return for equity investments earned by the Partnership for the year (or such other period as may be determined by the Partners) does not exceed the Standard & Poor's Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .05 percent (5 Basis Points) of the average Gross Asset Value of equity investments held by the Partnership during such year (or other period determined by the Partners). If the period over which the rate of return is measured is greater than or less than one year, appropriate adjustments will be made to the amount by which the rate of the return earned by the Partnership on equity investments must exceed the Standard & Poor's Rate of Return in order for the General Partner to earn .50 percent rather than .05 percent of the Gross Asset Value of equity investments held by the Partnership. The rate of return on - 11 - Partnership equity investments will be determined in the same manner that the Standard & Poor's Rate of Return is determined. (ii) If the rate of return for fixed income investments earned by the Partnership for the year (or such other period as may be determined by the Partners) exceeds the Lehman Brothers Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .50 percent (50 Basis Points) of the average Gross Asset Value of fixed income investments held by the Partnership during such year (or other period determined by the Partners). If the rate of return for fixed income investments earned by the Partnership for the year (or such other period as may be determined by the Partners) does not exceed the Lehman Brothers Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .05 percent (5 Basis Points) of the average Gross Asset Value of fixed income investments held by the Partnership during such year (or other period determined by the Partners). If the period over which the rate of return is measured is greater than or less than one year, appropriate adjustments will be made to the amount by which the rate of the return earned by the Partnership on equity investments must exceed the Lehman Brothers Rate of Return in order for the General Partner to earn .50 percent rather than .05 percent of the Gross Asset Value of fixed income investments held by the Partnership. The rate of return on Partnership fixed income investments will be determined in the same manner that the Lehman Brothers Rate of Return is determined. (3) Third, any remaining Profits shall be allocated among Partners based upon the number of Units held by each Partner in proportion to the number of Units outstanding. (b) LOSSES. Losses for any fiscal period shall be allocated among the Partners as follows: (1) First, Losses shall be allocated among Partners based upon the number of Units held by each Partner in proportion to the number of Units outstanding, except that Losses shall not be allocated pursuant to this Section 4.1(b)(1) to the extent such allocation would cause any Limited Partner to have a deficit in such Limited Partner's Capital Account at the end of such fiscal year. (2) Second, any Loss that cannot be allocated to a Limited Partner because it would create a deficit in such Limited Partner's Capital shall be allocated first to other Limited Partners for whom the allocation would not create a deficit in such Limited Partners' respective Capital Accounts in proportion to the - 12 - positive balances in such Limited Partner's Capital Account and then to the General Partner. SECTION 4.2 TAX ALLOCATIONS: CODE SECTION 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Gross Asset Value. Any elections or other decisions relating to such allocations shall be made by the General Partner in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.2 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Partner's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement. SECTION 4.3 OTHER ALLOCATIONS RULES. (a) In the event additional Partners are admitted to the Partnership on different dates during any fiscal year, or their interests in the Partnership otherwise vary during the year, the Profits (or Losses) may be allocated to the Partners in accordance with Section 706, of the Code, or rules comparable to those allowed by Section 706 of the Code, using any convention permitted by law and selected by the General Partner. (b) For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Section 706 of the Code and the Regulations thereunder. (c) Except as otherwise provided in this Agreement, all items of Partnership income, gain, loss, deduction and any other allocations not otherwise provided for shall be divided among the Partners in the same proportions as they share Profits or Losses, as the case may be, for the year. SECTION 4.4 NONRECOURSE LIABILITIES. The allocation provisions set forth in this Agreement are based on the premise that the Partnership has not incurred and will not incur any nonrecourse liabilities as that term is defined in Section 1.752-1(a)(2) of the Treasury regulations. If the Partnership should incur such liabilities, the Agreement will be amended to assure compliance with Section 704(b) of the Code and the Treasury regulations thereunder. ARTICLE 5 DISTRIBUTIONS - 13 - SECTION 5.1 DISTRIBUTIONS TO GENERAL PARTNER. Distributions of Net Cash Flow for any period, if made, will be distributed first to the General Partner until the cumulative Net Cash Flow distributed to the General Partner under this Section 5.1 for the current and all past periods is equal to the cumulative Profits allocated to the General Partner for the current and all prior periods pursuant to Section 4.1(a)(2). SECTION 5.2 REMAINING NET CASH FLOW. After the distributions described in Section 5.1 have been made, if any additional distributions are made, the balance of the Net Cash Flow will be distributed among the Partners based upon the number of Units held by each Partner in proportion to the number of Units outstanding. The timing and the amount of distributions of Net Cash Flow will be in the sole discretion of the General Partner. ARTICLE 6 ASSIGNMENT OF LIMITED PARTNER'S INTEREST SECTION 6.1 GENERAL PROVISION. The Partnership interest of a Limited Partner, which includes the Units representing such interest, may be assigned in whole or in part as permitted by the provisions of this Article 6. SECTION 6.2 ASSIGNEES. The assignment, sale, transfer or pledge of a Partnership interest, in whole or in part, by a Limited Partner is permitted in accordance with the terms of this Agreement. Once an interest has been assigned, transferred, pledged or otherwise encumbered, the assignee, transferee, pledgee or otherwise (hereinafter, the "assignee") may not exercise any rights of a Limited Partner with respect to such interest except those granted to the assignee by the Act unless the assignee becomes a substitute Limited Partner in accordance with Section 6.3. An assignment entitles the assignee to receive, to the extent assigned, the assignor's Partnership interest, including, without limitation, any distributions associated with such interest. SECTION 6.3 PLEDGES. If any Partner or assignee at any time desires to pledge or hypothecate any or all of the interest in the Partnership then owned by him, he may do so provided (i) that such transaction is a bona fide pledge or hypothecation to a financial institution and (ii) that such financial institution at the time of such pledge agrees in writing to afford the other Partners a right of first refusal to repurchase the interest in the Partnership in the manner described in Section 6.5 in the event of the sale of such interest upon foreclosure. SECTION 6.4 TRANSFER TO FAMILY MEMBER. Any Partner may voluntarily assign, with or without consideration, all or any part of such Partner's interest in the Partnership to a Family Member provided such Family Member takes the interest subject to the restrictions set forth in this Agreement. SECTION 6.5 RIGHT OF FIRST REFUSAL. Except for transfers described in Section 6.4, if any Person desires to transfer any or all of the interest in the Partnership owned by him, or if any such - 14 - interest becomes subject to an involuntary transfer such Person (the "Transferor") will so notify the Partnership and the other Partners in writing (the "Other Partners"). The notice will set forth the name and address of the proposed transferee, who, in the case of a sale, must be a bona fide prospective purchaser, the date of the proposed transfer, the proposed transfer price (in terms of a dollar amount) and the other terms and conditions of the proposed transfer. For a period of 60 days after receipt of such notice, the Partnership may purchase some or all of the offered interest by giving written notice to the Transferor. If the Partnership does not elect to purchase the entire interest, it shall notify the Other Partners of the portion of the interest it did not elect to purchase, and the Other Partners shall have 45 days after expiration of such 60-day period to purchase all, but not less than all, of the interest that the Partnership did not elect to purchase. Such purchase by the Other Partners will be in proportion to the ownership interest in the Partnership owned by such Other Partners (omitting, for purposes of such calculation, the ownership interest owned by the Transferor) unless they agree otherwise. If any of the Other Partners declines to purchase his proportion of such interest, the remaining Other Partners may purchase such interest in proportion to their interests in the Partnership (counting for this purpose only the interests in the Partnership of the Other Partners who wish to purchase some or all of the interest to be transferred). If all of the remaining interest proposed to be transferred is not agreed to be purchased by the Other Partners, the Transferor may transfer the remaining interest to the assignee. Any transfer must completed in accordance with the terms of the notice given to the Partnership. In addition, Persons to whom any interest is transferred must, as a condition to such transfer, enter into an agreement with the parties hereto (or all parties except the transferor) setting forth restrictions on transfer and other provisions for repurchase identical to the limitations imposed by this Agreement. SECTION 6.6 SUBSTITUTE LIMITED PARTNER. The assignee of the whole or a portion of a Partnership interest shall be admitted as a substitute Limited Partner upon compliance with the following conditions: (a) The assignee must deliver to the Partnership an executed counterpart of the instrument of assignment, satisfactory in substance and form to the General Partner that contains a statement of the assignor's desire that the assignee be admitted as a substitute Limited Partner and the assignee's agreement to be bound by this Agreement. This condition shall be deemed to be met in the case of a Successor in Interest, defined hereinafter. (b) The General Partner, in its sole discretion, must consent in writing to the admission of the assignee as a substitute Limited Partner. (c) The assignor and the assignee must execute and acknowledge such instruments as the General Partner may deem necessary or desirable to effect such admission, and the assignee agrees to pay all expenses in connection with such admission. SECTION 6.7 DEATH OF LIMITED PARTNER. The Partnership shall not be dissolved, wound up and terminated upon the death, insanity, incompetency or bankruptcy of a Limited Partner. If a Limited Partner shall die or be declared insane, incompetent or bankrupt, he shall cease to be a Limited Partner and, if designated by the Limited Partner, his Successor in Interest, as hereinafter - 15 - defined, shall succeed to the interest of the former Limited Partner in the Profits, Losses, credits and distributions of the Partnership. A Limited Partner's Successor in Interest shall be such person as the Limited Partner, from time to time, has designated in writing. In the event that a Limited Partner fails to designate a Successor in Interest, or if the person designated is not then living, or for any reason renounces or disclaims the Partnership interest or is unable to succeed to such Partnership interest, the Successor in Interest shall be the spouse of the former Limited Partner. If the spouse is not then living or for any other reason is unable to succeed to the Partnership interest, or if the spouse renounces or disclaims such Partnership interest, or if there is no spouse, the Successor in Interest shall be the executor or administrator of the deceased Limited Partner's estate, the guardian of an insane or incompetent Limited Partner's estate, or the trustee in bankruptcy of a bankrupt Limited Partner's estate, who shall hold or distribute such Partnership interest in accordance with applicable fiduciary law. SECTION 6.8 RESTRICTIONS ON SUCCESSOR IN INTEREST. The Successor in Interest shall be subject to all of the restrictions specified in this Article 6 applicable to the assignee of an interest and shall not become a substitute Limited Partner except upon compliance with the conditions hereinabove specified. The Successor in Interest shall be entitled to receive all sums payable with respect to the interest of the Partner to which the Successor in Interest succeeds. If agreed to by the General Partner, the Successor in Interest of a deceased former Limited Partner shall be deemed to be the recipient, for federal income tax purposes, of the portion of the deceased former Limited Partner's distributive share of the Profit or Loss (or items thereof) of the Partnership for the taxable year during which the deceased former Limited Partner died in proportion to the part of the year that the Successor in Interest is entitled to such Profit or Loss. SECTION 6.9 WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may withdraw from the Partnership prior to termination of the Partnership. ARTICLE 7 SALE OF A GENERAL PARTNER'S INTEREST SECTION 7.1 GENERAL RESTRICTION. A General Partner shall not transfer all or any part of his interest in the Partnership without obtaining the consent of Limited Partners owning a majority of the Units held by Limited Partners. ARTICLE 8 EVENTS OF WITHDRAWAL SECTION 8.1 PROCEDURE FOLLOWING EVENT OF WITHDRAWAL. Upon the occurrence of an Event of Withdrawal, the General Partner concerned shall cease to be a member of the Partnership and the Partnership shall have the option to liquidate the Partnership interest of such General Partner. - 16 - The Partnership and all its Partners shall be notified of such event by the withdrawing General Partner or his legal representative or by any remaining General Partner. SECTION 8.2 EXERCISE OF OPTION. The Partnership shall exercise its option by serving written notice upon the General Partner concerned or the legal representative of such General Partner within ninety (90) days from the date it receives notification of the Event of Withdrawal. The purchase price to be paid by the Partnership for the interest shall equal the fair market value of such interest, as determined by agreement of the parties or by appraisal if they cannot agree as of the date of such notice, and shall be paid in full by cashier's check or certified check at the closing or on such other terms as the parties agree. SECTION 8.3 CONTINUATION OF PARTNERSHIP. If the Partnership exercises its option, the Partnership shall not dissolve, wind up and terminate but its business shall be continued if there is a remaining General Partner or, if there is not a remaining General Partner, if the Limited Partners consent in writing to the continuation of the business of the Partnership and to the appointment of a new General Partner effective as of the date of withdrawal of the former General Partner. The interests of the Partners shall be adjusted appropriately to reflect the liquidation of the General Partner's interest and, if applicable, the admission of a new General Partner. SECTION 8.4 TERMINATION. Upon the occurrence of an Event of Withdrawal at such time as the Partnership has a sole General Partner, the Partnership shall be dissolved, wound up and terminated unless all of the Limited Partners consent in writing to the continuance of the Partnership as contemplated in Sections 8.3. SECTION 8.5 EVENT OF WITHDRAWAL DEFINED. For purposes of this Agreement, an Event of Withdrawal shall include the occurrence of any event set forth in Section 14-9-602 of the Act upon compliance with any notification requirements imposed by the Act. A voluntary withdrawal by a General Partner will not be in violation of this Agreement provided the General Partner provides written notice to Limited Partners holding 2/3 or more of the Partnership Units held by Limited Partners at least 10 days in advance of such withdrawal. ARTICLE 9 PROVISIONS APPLICABLE TO ALL ASSIGNMENTS AND TRANSFERS SECTION 9.1 GENERAL RESTRICTIONS. Notwithstanding anything to the contrary in this Agreement, any assignment or purchase under Articles 6, 7 or 8 may be prohibited by the General Partner if such assignment or purchase would, in the opinion of counsel for the Partnership, result in the termination of the Partnership under Section 708(b)(l)(B) of the Code. SECTION 9.2 SECTION 6050K. Upon the transfer or assignment of any Partnership interest, the transferor or assignor must provide to the Partnership the information set forth in Section 6050 - 17 - K of the Code, and the Partnership shall furnish the required information to the Internal Revenue Service, the transferor and the transferee as required by such section. ARTICLE 10 TERMINATION OF THE PARTNERSHIP SECTION 10.1 EVENTS CAUSING TERMINATION. The Partnership shall dissolve, wind up and terminate upon the first to occur of the following: (a) The expiration of the term of the Partnership; (b) The occurrence of an Event of Withdrawal unless the business of the Partnership is continued as provided in Article 8; (c) Upon the written consent of all Partners. SECTION 10.2 PROCEDURE ON TERMINATION. Upon the occurrence of an event described in Section 10.1, the General Partner (or, if none, a Limited Partner appointed by the Limited Partners) shall proceed to liquidate and wind up the business of the Partnership. Upon fifteen (15) days' prior written notice to all of the Partners identifying the assets to be sold, the liquidating Partner(s) may, in lieu of selling the Partnership assets, convey undivided interests in the assets to the Partners or distribute the assets in kind to the Partners. The Partnership assets and the proceeds of any liquidation sale shall be applied and distributed at the closing of any sale in the following order of priority: (a) To the payment of all debts and liabilities of the Partnership and all expenses of liquidation. (b) To the setting up of such reserves as the liquidating Partners may deem necessary for any contingent liabilities of the Partnership. Any reserves shall be deposited with an escrowee to be applied to the discharge of any contingent liabilities, and, at the expiration of whatever period the liquidating Partner may deem advisable, the balance shall be distributed as provided in clause (c) below. (c) The balance, if any, shall be distributed to the Partners in accordance with their Capital Accounts, adjusted to reflect the Gross Asset Value of each asset, notwithstanding any statutory priorities the Limited Partners may have under the provisions of the laws of the Act. SECTION 10.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the event the Partnership is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, (i) distributions shall be made pursuant to Article 10 to the Partners who have positive Capital Accounts in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations, and (ii) if any Partner's Capital - 18 - Account has a deficit balance (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall contribute to the capital of the Partnership the amount necessary to restore such deficit balance to zero in compliance with Section 1.704-1 (b)(2)(ii)(b)(3) of the Regulations. In the discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the Partners pursuant to the preceding sentence may be: (a) Distributed to a trust established for the benefit of the Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the Partners arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the Partners from time to time, in the reasonable discretion of the General Partner, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the Partners pursuant to this Agreement; or (b) Withheld to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld amounts shall be distributed to the Partners as soon as practicable. SECTION 10.4 RIGHTS OF PARTNERS. Except as otherwise provided in this Agreement, each Partner shall look solely to the assets of the Partnership for the return of his Capital Contribution and shall have no right or power to demand or receive property other than cash from the Partnership. No Partner shall have priority over any other Partner as to the return of his Capital Contributions, distributions or allocations. ARTICLE 11 FISCAL MATTERS SECTION 11.1 BOOKS AND RECORDS. The General Partner shall maintain full and accurate books of the Partnership at the Partnership's principal place of business, showing all receipts and expenditures, assets and liabilities, Profits and Losses, and all other records necessary for recording the Partnership's business and affairs, including those sufficient to record the allocations and distributions provided for in Article 4 and Article 5. The books of the Partnership shall be kept on either a cash or an accrual basis as determined by the General Partner. Each Partner and his duly authorized representatives shall at all times during regular business hours have access to and may inspect and copy any of such books and records. SECTION 11.2 PARTNERSHIP YEAR. The annual accounting period of the Partnership shall be the calendar year. - 19 - SECTION 11.3 PARTNERSHIP BANK ACCOUNTS. The General Partner shall receive all moneys of the Partnership and shall deposit the same in one or more banking accounts. All expenditures by the General Partner shall be made by checks drawn against the Partnership accounts. Withdrawals from Partnership accounts shall be made upon such signature or signatures as the General Partner shall authorize. SECTION 11.4 ACCOUNTING DECISIONS. All decisions as to accounting matters, except as specifically provided to the contrary herein, shall be made by the General Partner. SECTION 11.5 FEDERAL INCOME TAX ELECTIONS. The decision to make or not make any other election that is described in the Code including, without limitation, a Section 754 election, shall be made in the discretion of the General Partner. ARTICLE 12 ALTERNATIVE DISPUTE RESOLUTION ("ADR"); BINDING ARBITRATION 12.1 AGREEMENT TO USE PROCEDURE. The Partners have entered into this Agreement in good faith in the belief that it is mutually advantageous to them. It is with that same spirit of cooperation that they pledge to attempt to resolve any dispute amicably without the necessity of litigation. Accordingly, they agree if any dispute arises between them relating to this Agreement (the "Dispute"), they will first utilize the procedures specified in this Article 12 (the "Procedure") prior to any Additional Proceedings. 12.2 INITIATION OF PROCEDURE. The Partner seeking to initiate the Procedure (the "Initiating Partner") shall give written notice to the other Partners, describing in general terms the nature of the Dispute, the Initiating Partner's claim for relief an identifying one or more individuals with authority to negotiate the Dispute on such Partner's behalf. The Partner(s) receiving such notice (the "Responding Partner," whether one or more) shall have five (5) business days within which to designate by written notice to the Initiating Partner, one or more individuals with authority to negotiate the Dispute on such Partner's behalf. The individuals so designated shall be known as the "Authorized Individuals." The Initiating Partner and the Responding Partner shall collectively be referred to as the "Disputing Partners" or individually "Disputing Partner." 12.3 DIRECT NEGOTIATIONS. The Authorized Individuals shall be entitled to make such investigation of the Dispute as they deem appropriate, but agree to promptly, and in no event later than thirty (30) days from the date of the Initiating Partner's written notice, meet to discuss resolution of the Dispute. The Authorized Individuals shall meet at such times and places and with such frequency as they may agree. If the Dispute has not been resolved within thirty (30) days from the date of their initial meeting, the Disputing Partners shall cease direct negotiations and shall submit the Dispute to mediation in accordance with the following procedure. - 20 - 12.4 SELECTION OF MEDIATOR. The Authorized Individuals shall have five (5) business days from the date they cease direct negotiations to submit to each other a written list of acceptable qualified attorney-mediators not affiliated with any of the Partners. Within five (5) days from the date of receipt of such list, the Authorized Individuals shall rank the mediators in numerical order of preference and exchange such rankings. If one or more names are on both lists, the highest ranking person shall be designated as the mediator. If no mediator has been selected under this procedure, the Disputing Partners agree jointly to request a State or Federal District Judge of their choosing (or if they cannot agree, the Chief Judge of the United States District Court for the county in which the principal office of the Partnership is located, and if that Judge refuses to act, the Presiding Judge of the State Administrative Judicial Region for said county) to supply within ten (10) business days a list of potential qualified attorney-mediators. Within five (5) business days of receipt of the list, the Authorized Individuals shall again rank the proposed mediators in numerical order of preference and shall simultaneously exchange such list and shall select as the mediator the individual receiving the highest combined ranking. If such mediator is not available to serve, they shall proceed to contact the mediator who was next highest in ranking until they are able to select a mediator. 12.5 TIME AND PLACE OF MEDIATION. In consultation with the mediator selected, the Authorized Individuals shall promptly designate a mutually convenient time and place for the mediation, and unless circumstances require otherwise, such time to be not later than forty-five (45) days after selection of the mediator. 12.6 EXCHANGE OF INFORMATION. In the event any Disputing Partner to this Agreement has substantial need for information in the possession of another Disputing Partner to this Agreement in order to prepare for the mediation, all Disputing Partners shall attempt in good faith to agree to procedures for the expeditious exchange of such information, with the help of the mediator if required. 12.7 SUMMARY OF VIEWS. At least seven (7) days prior to the first scheduled session of the mediation, each Disputing Partner shall deliver to the mediator and to the other Disputing Partners a concise written summary of its views on the matter in Dispute, and such other matters required by the mediator. The mediator may also request that a confidential issue paper be submitted by each Disputing Partner to him. 12.8 PARTIES TO BE REPRESENTED. In the mediation, each Disputing Partner shall be represented by an Authorized Individual and may be represented by counsel. In addition, each Disputing Partner may, with permission of the mediator, bring such additional Persons as needed to respond to questions, contribute information, and participate in the negotiations. 12.9 CONDUCT OF MEDIATION. The mediator shall determine the format for the meetings, designed to assure that both the mediator and the Authorized Individuals have an opportunity to hear an oral presentation of each Disputing Partner's views on the matter in dispute, and that the authorized parties attempt to negotiate a resolution of the matter in dispute, with or without the assistance of counsel or others, but with the assistance of the mediator; to this end, the mediator is - 21 - authorized to conduct both joint meetings and separate private caucuses with the Disputing Partners. The mediation session shall be private. To the extent permitted under applicable law, the mediator will keep confidential all information learned in private caucus with any Disputing Partner unless specifically authorized by such Disputing Partner to make disclosure of the information to the other Disputing Partner. The Disputing Partners commit to participate in the proceedings in good faith with the intention of resolving the Dispute if at all possible. 12.10 TERMINATION OF PROCEDURE. The Disputing Partners agree to participate in the mediation procedure to its conclusion. The mediation shall be terminated (1) by the execution of a settlement agreement by the Disputing Partners, (2) by a declaration of the mediator that the mediation is terminated, or (3) by a written declaration of a Disputing Partner to the effect that the mediation process is terminated at the conclusion of one full day's mediation session. Even if the mediation is terminated without a resolution of the Dispute, the Disputing Partners agree not to terminate negotiations and not to commence any litigation or other legal proceedings to resolve the Dispute ("Additional Proceedings") prior to the expiration of five (5) days following the mediation. Notwithstanding the foregoing, any Disputing Partner may commence Additional Proceedings within such five (5) day period if the Dispute could be barred by an applicable statute of limitations. 12.11 FEES OF MEDIATION; DISQUALIFICATION. The fees and expenses of the mediator shall be shared equally by the Disputing Partners. The mediator shall be disqualified as a witness, consultant, expert or counsel for any Disputing Partner with respect to the Dispute and any related matters. 12.12 CONFIDENTIALITY. To the extent permitted under applicable law, the mediation process shall be confidential, and no stenographic, visual or audio record shall be made. All conduct, statements, promises, offers, views and opinions, whether oral or written, made in the course of the mediation by any Disputing Partner, their agents, employees, representatives or other invitees and by the mediator shall be confidential and shall, in addition and where appropriate, be deemed privileged. To the extent permitted under applicable law, such conduct, statements, promises, offers, views and opinions shall not be discoverable or admissible for any purpose, including impeachment, in any litigation or other proceeding involving the parties, and shall not be disclosed to anyone not an agent, employee, expert, witness, or representative of any of the Partners; provided, however, that evidence otherwise discoverable or admissible is not excluded from discovery or admission as a result of its use in the mediation. 12.13 ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof which the Partners are unable to resolve using other procedures in this Article 12, shall be settled by arbitration in accordance with the rules of American Arbitration Association by one or more arbitrators appointed under such rules, in the place determined by the parties to the dispute, or if they cannot agree on the location, in Cincinnati, Ohio. The decision of the arbitrator shall be final and binding upon all parties hereto. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The expenses of arbitration shall be borne equally by the Partners who are parties to the dispute. - 22 - ARTICLE 13 GENERAL PROVISIONS SECTION 13.1 NOTICES. Except as otherwise provided in this Agreement, any and all notices, consents, waivers, requests, votes or other instruments or communications provided for under this Agreement shall be in writing, signed by the party giving the same and shall be deemed properly given only if sent by registered or certified United States mail, postage prepaid, addressed: (a) in the case of the Partnership or the General Partner, to the Partnership or the General Partner, as the case may be, at the principal place of business of the Partnership, (b) in the case of any Partner to such Partner at his address set forth in the records of the Partnership. Each Partner may, by notice to the Partnership, specify any other address for the receipt of such instruments of communications. Any such communication sent by telegram shall be properly given when received by the person to whom it is sent. SECTION 13.2 INDEMNIFICATION OF GENERAL PARTNER. A General Partner shall not be liable to the Partnership or the Limited Partners for any act or omission performed or omitted by the General Partner in good faith pursuant to the authority granted to the General Partner by the Partnership Agreement, but not for fraud, bad faith or gross negligence. The Partnership shall indemnify the General Partner for any loss or damage incurred by the General Partner on behalf of the Partnership in or in furtherance of the Partnership interests, except for liability arising out of fraud, bad faith or gross negligence. If a claim for indemnification against liabilities under the Securities Act of 1933 (other than for expenses incurred in successful defense) is asserted against the Partnership by the General Partner under the Agreement or otherwise, the Partnership will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy, and will be governed by the final adjudication of such issue. In the event the General Partner pays any debt of the Partnership, the General Partner shall be reimbursed therefor from Partnership assets. SECTION 13.3 INTEGRATION. This Agreement embodies the entire agreement and understanding among the Partners relating to the subject matter hereof, and supersedes all prior agreements and understandings relating to such subject matter. SECTION 13.4 APPLICABLE LAW. This Agreement and the rights of the Partners shall be governed by and construed and enforced in accordance with the laws of the State of Georgia. SECTION 13.5 COUNTERPARTS. This Agreement may be executed in several counterparts and all so executed shall constitute one Agreement binding on all the parties hereto, notwithstanding that all the parties are not signatory to the original counterpart. SECTION 13.6 SEPARABILITY. In case any one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the - 23 - validity, legality and enforceability of the remaining provisions contained herein and any other application thereof shall not in any way be affected or impaired thereby. SECTION 13.7 BINDING EFFECT. Except as herein otherwise provided to the contrary, this Agreement shall be binding upon, and inure to the benefit of, the Partners and their respective heirs, executors, administrators, successors and permitted assigns. SECTION 13.8 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner is not required to deliver or mail a copy of the Partnership's certificate of limited partnership or any other certificate to any of the Limited Partners. SECTION 13.9 AUTHORITY TO AMEND. Amendments to this Agreement shall require the approval of the General Partner and the Limited Partners owning a majority of the outstanding Units held by Limited Partners. Notwithstanding the foregoing, no Partner's interest in Profits, Losses or cash distributions will be reduced without the consent of that Partner. A copy of any amendment shall be mailed in advance to all of the Limited Partners. SECTION 13.10 GENDER. Wherever the context shall so require, all words herein in a particular gender shall be deemed to include other genders where applicable. In addition, singular words shall include the plural and plural words shall include the singular. SECTION 12.11 MEETINGS. Meetings of the Partners shall be held not less than fifteen (15) days nor more than thirty (30) days after receipt of written notice from the General Partner. The General Partner will give notice of a meeting at any time upon their own choosing or within five (5) days after they shall receive demand for a meeting from Limited Partners who own at least thirty percent of the outstanding Units. - 24 - IN WITNESS WHEREOF, the parties have hereunto set their hands as of the day and year first above written. [GENERAL PARTNER] MILFAM LLC, an Ohio limited liability company By: /s/ Lloyd I. Miller, III -------------------------------- LIMITED PARTNERS: Trust B under Section 6 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983 By:/s/ Blair Thompson --------------------------------- Trust D under Section 8 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983 By:/s/Steven Hendrickson --------------------------------- /s/ Lloyd I. Miller, III ------------------------------------ Lloyd I. Miller, III /s/ Martin G. Miller ------------------------------------ Martin G. Miller MILFAM I L.P., A GEORGIA LIMITED PARTNERSHIP PARTNERSHIP AGREEMENT THE INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE LAW. THE INTEREST HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (II) AN OPINION OF COUNSEL SATISFACTORY TO THE MILFAM I L.P. (THE "PARTNERSHIP") TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND SUCH LAWS. - 26 - EX-99.4 6 y57429dex99-4.txt MILFAM II, L.P. PARTNERSHIP AGREEMENT EXHIBIT 99.4 PARTNERSHIP AGREEMENT OF MILFAM II L.P. THIS PARTNERSHIP AGREEMENT is made and entered into as of the 11th day of December, 1996 between Milfam LLC, an Ohio limited liability company (herein referred to as the "General Partner"), Trust B under Section 6 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983, Trust D under Section 8 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983, Lloyd I. Miller, III, and Martin G. Miller (herein collectively referred to as the "Limited Partners"). DEFINED TERMS Capitalized words and phrases used in this Agreement have the following meanings: (a) "Act" means the Georgia Revised Uniform Limited Partnership Act law, as set forth in Sections 14-9-100 to -1204 of the Georgia Code Annotated, as amended from time to time (or any corresponding provisions of succeeding law). (b) "Agreement" or "Partnership Agreement" means this partnership agreement, as amended from time to time. Words such as "herein," "hereinafter," "hereof," "hereto" and "hereunder," refer to this Agreement as a whole, unless the context otherwise requires. (c) "Bankruptcy" of a Partner shall be deemed to have occurred 60 days after the happening of any of the following: (1) the filing of an application by a Partner for, or a consent to, the appointment of a trustee of the Partner's assets, (2) the filing by a Partner of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing the Partner's inability to pay the Partner's debts as they come due, (3) the making by a Partner of a general assignment for the benefit of creditors, (4) the filing by a Partner of an answer admitting the material allegations of, or consenting to, or defaulting in answering a bankruptcy petition filed against the Partner in any bankruptcy proceeding, or (5) the entry of an order, judgment, or decree by any court of competent jurisdiction adjudicating a Partner bankrupt or appointing a trustee of the Partner's assets, and that order, judgment, or decree continuing unstayed and in effect for a period of 60 days. (d) "Basis Point" means one hundredth of one percent (.01 percent), 100 Basis Points are equal to one percent. (e) "Capital Account" means, with respect to any Partner, the Capital Account maintained for such Partner in accordance with the following provisions: (i) To each Partner's Capital Account there shall be credited such Partner's Capital Contributions, such Partner's distributive share of Profits and any items in the nature of income or gain which are specially allocated to such Partner. (ii) To each Partner's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Partnership Property distributed to such Partner pursuant to any provision of this Agreement net of liabilities assumed by the Partner or to which such property is subject, and such Partner's distributive share of Losses and any items in the nature of expenses or losses which are specially allocated to such Partner. (iii) In the event any interest in the Partnership is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Regulations. The General Partner shall make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Sections 1.704-1(b) and 1.704-2 of the Regulations. (f) "Capital Contribution" means, with respect to any Partner, the amount of money and the initial Gross Asset Value of any property (other than money) contributed to the Partnership by such Partner. (g) "Code" means the Internal Revenue Code of 1986, as amended from time to time (or any corresponding provisions of succeeding law). (h) "Family" and "Family Member" mean Catherine Ward and her descendants and trusts created for their benefit. (i) "General Partner" means any Person who (i) is listed as such in Exhibit A, attached, or has become a General Partner pursuant to the terms of this Agreement, and (ii) has not ceased to be a General Partner pursuant to the terms of this Agreement. (j) "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows: (i) The initial Gross Asset Value of any asset contributed by a Partner to the Partnership shall be the gross fair market value of such asset, as determined by the contributing Partner and the Partnership; (ii) The Gross Asset Value of all Partnership assets shall be adjusted to equal their respective gross fair market values, as determined by the General Partner, as of the following times: (a) the acquisition of an additional interest in the Partnership by any new or existing Partner in exchange for more than a de minimis Capital Contribution; (b) the distribution by the Partnership to a Partner of more than a de minimis amount of Partnership Property as - 2 - consideration for an interest in the Partnership if the General Partner reasonably determines that such adjustment is necessary or appropriate to reflect the relative economic interests of the Partners in the Partnership; and (c) the liquidation of the Partnership within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g); (iii) The Gross Asset Value of any Partnership asset distributed to any Partner shall be the gross fair market value of such asset on the date of distribution; and (iv) The Gross Asset Values of Partnership assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross Asset Values shall not be adjusted to the extent the General Partner determines that an adjustment is not necessary or appropriate in connection with a transaction that would otherwise result in an adjustment. If the Gross Asset Value of an asset has been determined or adjusted, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. (k) "Lehman Brothers Rate of Return" means the rate of return of the Lehman Brothers Intermediate Bond Index for the period in question expressed in Basis Points, as determined by a third party selected by the General Partner who is qualified to make such a determination. (l) "Limited Partner" means any Person whose name is set forth on Exhibit A of this Agreement as Limited Partner or who has been admitted as an additional or Substituted Limited Partner pursuant to the terms of this Agreement. "Limited Partners" means all such Persons. (m) "Net Cash Flow" means the gross cash proceeds from Partnership operations and from the sale or other disposition of assets of the Partnership less the portion thereof used to pay or establish reserves for all Partnership expenses, debt payments, capital improvements, replacements and contingencies, all as determined by the General Partner. "Net Cash Flow" shall not be reduced by depreciation, amortization, cost recovery deductions or similar allowances. (n) "Partners" means all General Partners and all Limited Partners, where no distinction is required by the context in which the term is used herein. "Partner" means any one of the Partners. (o) "Partnership" means the partnership formed pursuant to this Agreement and the partnership continuing the business of this Partnership in the event of dissolution as herein provided. - 3 - (p) "Partnership Property" means all real and personal property acquired by the Partnership and any improvements thereto, and shall include both tangible and intangible property. (q) "Person" means any individual, partnership, corporation, trust or other entity. (r) "Profits" and "Losses" means, for each fiscal year or other period, an amount equal to the Partnership's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(l) shall be included in taxable income or loss), with the following adjustments: (i) Any income of the Partnership that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses shall be added to such taxable income or loss; (ii) Any expenditures of the Partnership described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Profits or Losses shall be subtracted from such taxable income or loss; (iii) In the event the Gross Asset Value of any Partnership asset is adjusted, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses. (iv) Gain or loss resulting from any disposition of Partnership Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; (v) Notwithstanding any other provision herein, any items which are specially allocated shall not be taken into account in computing Profits or Losses. (s) "Regulations" means the Income Tax Regulations promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations). (t) "Standard & Poor's Rate of Return" means the rate of return of the Standard & Poor's Index for the period in question expressed in Basis Points, as determined by a third party selected by the General Partner who is qualified to make such a determination. (u) "Substituted Limited Partner" means any Person admitted to the Partnership as a Limited Partner pursuant to Article 6 hereof. - 4 - (v) "Unit(s)" means any one (or part thereof) or more of the 1 million units that are authorized to be issued to Partners representing an interest in the Partnership as described in this Agreement. ARTICLE 1 NAME AND PURPOSES SECTION 1.1 FORMATION. The Partners do hereby form the Partnership as a limited partnership pursuant to the Act, for the purposes hereinafter described. SECTION 1.2 NAME AND OFFICE. The Partnership shall be conducted under the name of Milfam II L.P. (the "Partnership"). The principal office and place of business of the Partnership in Georgia shall be located at 1201 Peachtree Street, N.E., Atlanta Georgia 30361, or such other place as the General Partner may from time to time determine on prior notice to the Limited Partners. SECTION 1.3 PURPOSES AND POWERS. (a) The purposes of the Partnership and the business to be carried on and the objectives to be effected by it are: (i) To acquire, hold, and, in all respects, deal with stocks, bonds, and other investment securities and, in the sole discretion of the General Partner, to acquire one or more memberships on recognized national exchanges and to engage in any other business permitted by the Act in order to make a profit, increase Family wealth, and provide a means for members of the Family to become knowledgeable of and preserve Family assets; (ii) To provide a means for resolving any disputes that may arise among Family members with respect to the management of Family assets so as to preserve harmony among Family members and avoid costs associated with litigation; (iii) To maintain control of Family assets; (iv) To provide a means to consolidate certain Family assets; (v) To provide more centralized management for Family assets; (vi) To serve as liaison with outside advisors, such as legal counsel, accountants, banks and portfolio managers; (vii) To benefit from economies of scale that can be realized by consolidating Family assets; - 5 - (viii) To provide a means of facilitating gifts to Family members without fractionalizing assets; (ix) To provide protection to Family assets from claims of creditors brought against Family members; (x) To prevent the transfer of a Family member's interest in Family assets in the event of a failed marriage; (xi) To provide flexibility in taking advantage of business and investment opportunities, to increase Family wealth and profits that are not available through trusts, corporations or other entities, and to make investments in accordance with the modern portfolio theory; (xii) To facilitate the administration and reduce the cost associated with the disability or probate of the estate of Family members and to reduce or eliminate probate and guardianship proceedings in foreign jurisdictions; (xiii) To promote knowledge of and communication about Family assets while allowing restrictions to be placed on disclosure of information thereby permitting confidentiality to be preserved as needed; (xiv) To enter into, continue, perform and carry out contracts of any kind necessary to, in connection with, or incidental to, the accomplishment of the purposes of the Partnership; (xv) To acquire any property, or any rights therein or appurtenant thereto, necessary for the accomplishment of such purposes; (xvi) To borrow money, and to issue evidence of indebtedness and to secure the same by mortgage, deed of trust, pledge or other lien, in furtherance of any or all of the purposes of the Partnership, and to continue in effect and assume any liabilities or indebtedness that may have been incurred by any predecessor partnership; and (xvii) To carry on any other activities necessary to, in connection with or incidental to the foregoing. SECTION 1.4 TERM. The Partnership shall continue in full effect until December 31, 2050, and thereafter from year to year with the agreement of all Partners, unless sooner dissolved and terminated as herein provided. - 6 - SECTION 1.5 AGENT AND TAX MATTERS PARTNER. Lloyd I. Miller, III shall be the Tax Matters Partner for the Partnership for purposes of Section 6231(a)(7) of the Code. CT Corporation System shall be the agent for the Partnership for service of process in the State of Georgia. ARTICLE 2 CAPITAL CONTRIBUTIONS SECTION 2.1 CAPITAL CONTRIBUTIONS. Each Partner has made or will make a Capital Contribution to the Partnership in the amount set forth on Exhibit A. Contributions may be made in cash or property. In addition, a contribution may be made by delivery of a promissory note or other obligation to contribute cash or property. Each Partner's Capital Contribution is based upon the number of Units the Partner acquires. The Partnership is authorized to issue up to 100,000 Units at an initial cost of $1,000 per Unit. Fractional Units may be issued. SECTION 2.2 DIVERSIFICATION. The initial Capital Contribution made by each Partner will be in the form of stocks, bonds and other securities. No such Capital Contribution will be accepted by the Partnership if the acceptance thereof would cause the Partnership to be an "investment company" within the meaning of section 351 of the Code and the regulations thereunder. To provide further assurance that the Partnership will not be an investment company as a result of accepting a Capital Contribution made by any Partner, each Partner will be required to contribute, as such Partner's initial Capital Contribution, a "diversified portfolio of stocks and securities" within the meaning of Section 1.351-1(c)(6) of the Regulations. SECTION 2.3 FUTURE CAPITAL CONTRIBUTIONS. If the Partnership requires additional funding to provide working capital or for any other purpose, no Partner shall have any obligation to advance such funds personally to the Partnership except as otherwise provided herein. SECTION 2.4 LOANS TO THE PARTNERSHIP. Any Partner will be permitted to make loans to the Partnership from time to time in such amounts and on such terms as such Partner and the Partnership may agree. In no event, however, will a Partner be permitted to loan funds to the Partnership on terms less favorable to the Partnership than those that could be obtained from an unrelated creditor. SECTION 2.5 GENERAL PROVISIONS. A Limited Partner shall not be liable for any of the debts of the Partnership or be required to contribute any capital or lend any funds to the Partnership other than as expressly provided in this Agreement. The General Partner shall not have any personal liability for the repayment of the Capital Contributions of any Limited Partner, except as provided to the contrary in this Agreement. Unless otherwise provided herein, no interest will be paid on or imputed to any capital contributed to the Partnership. SECTION 2.6 ADDITIONAL UNITS. The Partnership may increase the number of authorized Units with the consent of Partners holding a majority of the Units. The cost of additional Units will - 7 - be determined by the General Partner by dividing the total value of Units outstanding by the number of Units outstanding. The determination will be made as nearly as practicable to the date on which additional Units are to be issued. ARTICLE 3 RIGHTS, POWERS AND DUTIES OF THE PARTNERS SECTION 3.1 MANAGEMENT AND CONTROL OF THE PARTNERSHIP. (a) The General Partner shall have the full and exclusive right to manage and control the business and affairs of the Partnership and to make all decisions regarding the affairs of the Partnership. In the course of such management, the General Partner may acquire, encumber, hold title to, pledge, sell, release or otherwise dispose of Partnership Property and interests therein when and upon such terms as it determines to be in the best interests of the Partnership. The General Partner shall have all of the rights, powers and obligations of a partner of a partnership without limited partners, except as otherwise provided under the Act. (b) No Limited Partner who is not also a General Partner shall participate in the management of or have any control over the Partnership's business nor have the power to represent, act for, sign for or bind the General Partner or the Partnership. (c) In fulfilling its obligations set forth in paragraph (a) above, and to the extent not inconsistent with that paragraph, the General Partner shall have the authority to borrow money in the name of the Partnership, and in connection with any such borrowing, to mortgage, pledge, encumber and hypothecate the assets of the Partnership. SECTION 3.2 AUTHORITY OF THE GENERAL PARTNER. In addition to the rights and powers the General Partner has under this Agreement and law, the General Partner shall, except to the extent otherwise provided herein, have all rights and powers required or appropriate to manage the Partnership business, including without limitation, the right to hire other professional advisors and other personnel to provide services to the Partnership. To accomplish the purposes of the Partnership the authority of the General Partner includes, but is not limited to the following: (a) to purchase, sell, invest in and deal in stocks, bonds, notes, evidence of indebtedness and any other securities of any person whether foreign or domestic; (b) to guarantee the financial transactions of others that are for the benefit of the Partnership; (c) to borrow money; (d) to sell, pledge, or dispose of assets of the Partnership; - 8 - (e) to carry such insurance as the General Partner deems necessary; and (f) to perform all acts deemed appropriate by the General Partner to carry out the purposes of the Partnership. SECTION 3.3 AUTHORITY OF PARTNERS TO DEAL WITH THE PARTNERSHIP. The Partnership may acquire property or services from any Partner, or lease or sell any property to the any Partner provided the terms of such transactions are arm's-length and in furtherance of the purposes of the Partnership. SECTION 3.4 RESTRICTIONS ON THE AUTHORITY OF THE GENERAL PARTNER. (a) Without the unanimous consent of the Limited Partners, the General Partner shall not have the authority to: (i) Do any act in contravention of this Agreement; (ii) Do any act which would make it impossible to carry on the business of the Partnership; (iii) Confess a judgment against the Partnership; (iv) Admit a Person as a General Partner; or (v) Elect to dissolve the Partnership. SECTION 3.5 DUTIES AND OBLIGATIONS OF THE GENERAL PARTNER. (a) The General Partner shall use his best efforts to take all actions that may be necessary or appropriate for the continuation of the Partnership's valid existence as a limited partnership and for the acquisition, holding and operation of Partnership Property, in accordance with the provisions of this Agreement and applicable laws and regulations. (b) The General Partner shall at all times act with integrity and good faith and exercise diligence in all activities relating to the conduct of the Partnership business and in resolving conflicts of interest. (c) The General Partner shall prepare or cause to be prepared and shall file on or before the due date (or any extension thereof) all Federal, state and local tax returns required to be filed by the Partnership. The General Partner shall, to the extent that Partnership funds are available, cause the Partnership to pay any taxes payable by the Partnership. (d) The General Partner shall use its best efforts to cause the Partnership to be formed, reformed, qualified to do business or registered under any applicable assumed or fictitious name - 9 - statute or similar law if required by such law in any state in which the Partnership then owns property or transacts business. (e) The General Partner shall have the sole and exclusive right to manage and operate the business of the Partnership with full and exclusive authority to act for and on behalf of and as agent of the Partnership and to take any and all reasonable actions deemed by the General Partner to be necessary or advisable in connection therewith. The General Partner shall operate the business of the Partnership in a commercially reasonable manner and shall do so at such time and in such manner as the General Partner, in its sole discretion, shall reasonably deem fit and further, shall endeavor and take all reasonable actions to operate the Partnership so as to provide income and capital growth for the Partners. SECTION 3.6 OTHER RIGHTS OF LIMITED PARTNERS. The Limited Partners shall not participate in the management or control of the business of, or transact any business for, the Partnership. The Limited Partners shall have no power to sign for or bind the Partnership in their capacity as Limited Partners. Limited Partners owning 90% or more of the outstanding Units held by Limited Partners will have the right to remove the General Partner at any time. SECTION 3.7 OTHER INTERESTS OF PARTNERS. The Partners may engage in or possess an interest in other business ventures of every nature and description, independently or with others, including, but not limited to, the investment business in all its aspects. Neither the Partnership nor the other Partners shall have any rights in and to such independent ventures or the income or profits derived therefrom. SECTION 3.8 COMPENSATION TO GENERAL PARTNER. In addition to any Profits that may be allocated to the General Partner, as compensation for various administrative, reporting, advisory and other services that are to be performed by the General Partner, the General Partner will receive a guaranteed payment equal to .25 percent (25 Basis Points) of the Gross Asset Value of all Partnership assets as of December 31 of each year. The fee will be payable in four equal quarterly installments during the succeeding and will be treated as earned during the succeeding year. The fee will be adjusted if the Partnership has a short taxable year. SECTION 3.9 CONFIDENTIALITY OF INFORMATION. The Partners acknowledge that they may receive information regarding the Partnership in the nature of trade secrets or that otherwise is confidential, the release of which may be damaging to the Partnership or Persons with which it does business. Each Partner shall hold in strict confidence any information it receives regarding the Partnership that is identified as being confidential (and if that information is provided in writing, that is so marked) and may not disclose it to any Person other than another Partner, except for disclosures (1) compelled by law, (2) to advisers or representatives of the Partner or Assignees of the Partner, but only if they have agreed to be bound by the provisions of this Section 3.9, or (3) of information that Partner also has received from a source independent of the Partnership that the Partner reasonably believes obtained that information without breach of any obligation of confidentiality. The Partners acknowledge that breach of the provisions of this Section 3.9 may cause irreparable injury to the Partnership for which monetary damages are inadequate, difficult to compute, or both. - 10 - Accordingly, the Partners agree that the provisions of this Section 3.9 may be enforced by specific performance and other appropriate injunctive or equitable relief. ARTICLE 4 ALLOCATIONS SECTION 4.1 ALLOCATION OF PROFITS AND LOSSES. (a) PROFITS. Profits for any fiscal period shall be allocated among the Partners as follows: (1) First, Profits shall be allocated to Partners who have been allocated Losses pursuant to Section 4.1(b)(2) in proportion to the Losses so allocated to them until the cumulative amount of Profits allocated to Partners pursuant to this Section 4.1(a)(1) is equal to the cumulative amount of Losses allocated to Partners pursuant to Section 4.1(b)(2). (2) Second, Profits will be allocated to the General Partner based upon the investment performance of the Partnership during the calendar year (or other period agreed upon by the Partners). The Profits allocated to the General Partner will be determined as follows: (i) If the rate of return for equity investments earned by the Partnership for the year (or such other period as may be determined by the Partners) exceeds the Standard & Poor's Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .50 percent (50 Basis Points) of the average Gross Asset Value of equity investments held by the Partnership during such year (or other period determined by the Partners). If the rate of return for equity investments earned by the Partnership for the year (or such other period as may be determined by the Partners) does not exceed the Standard & Poor's Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .05 percent (5 Basis Points) of the average Gross Asset Value of equity investments held by the Partnership during such year (or other period determined by the Partners). If the period over which the rate of return is measured is greater than or less than one year, appropriate adjustments will be made to the amount by which the rate of the return earned by the Partnership on equity investments must exceed the Standard & Poor's Rate of Return in order for the General Partner to earn .50 percent rather than .05 percent of the Gross Asset Value of equity investments held by the Partnership. The rate of return on - 11 - Partnership equity investments will be determined in the same manner that the Standard & Poor's Rate of Return is determined. (ii) If the rate of return for fixed income investments earned by the Partnership for the year (or such other period as may be determined by the Partners) exceeds the Lehman Brothers Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .50 percent (50 Basis Points) of the average Gross Asset Value of fixed income investments held by the Partnership during such year (or other period determined by the Partners). If the rate of return for fixed income investments earned by the Partnership for the year (or such other period as may be determined by the Partners) does not exceed the Lehman Brothers Rate of Return by 100 Basis Points or more, the General Partner will be allocated Profits equal to .05 percent (5 Basis Points) of the average Gross Asset Value of fixed income investments held by the Partnership during such year (or other period determined by the Partners). If the period over which the rate of return is measured is greater than or less than one year, appropriate adjustments will be made to the amount by which the rate of the return earned by the Partnership on equity investments must exceed the Lehman Brothers Rate of Return in order for the General Partner to earn .50 percent rather than .05 percent of the Gross Asset Value of fixed income investments held by the Partnership. The rate of return on Partnership fixed income investments will be determined in the same manner that the Lehman Brothers Rate of Return is determined. (3) Third, any remaining Profits shall be allocated among Partners based upon the number of Units held by each Partner in proportion to the number of Units outstanding. (b) LOSSES. Losses for any fiscal period shall be allocated among the Partners as follows: (1) First, Losses shall be allocated among Partners based upon the number of Units held by each Partner in proportion to the number of Units outstanding, except that Losses shall not be allocated pursuant to this Section 4.1(b)(1) to the extent such allocation would cause any Limited Partner to have a deficit in such Limited Partner's Capital Account at the end of such fiscal year. (2) Second, any Loss that cannot be allocated to a Limited Partner because it would create a deficit in such Limited Partner's Capital shall be allocated first to other Limited Partners for whom the allocation would not create a deficit in such Limited Partners' respective Capital Accounts in proportion to the - 12 - positive balances in such Limited Partner's Capital Account and then to the General Partner. SECTION 4.2 TAX ALLOCATIONS: CODE SECTION 704(c). In accordance with Code Section 704(c) and the Regulations thereunder, income, gain, loss and deduction with respect to any property contributed to the capital of the Partnership shall, solely for tax purposes, be allocated among the Partners so as to take account of any variation between the adjusted basis of such property to the Partnership for federal income tax purposes and its initial Gross Asset Value. Any elections or other decisions relating to such allocations shall be made by the General Partner in any manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.2 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Partner's Capital Account or share of Profits, Losses, other items or distributions pursuant to any provision of this Agreement. SECTION 4.3 OTHER ALLOCATIONS RULES. (a) In the event additional Partners are admitted to the Partnership on different dates during any fiscal year, or their interests in the Partnership otherwise vary during the year, the Profits (or Losses) may be allocated to the Partners in accordance with Section 706, of the Code, or rules comparable to those allowed by Section 706 of the Code, using any convention permitted by law and selected by the General Partner. (b) For purposes of determining the Profits, Losses or any other items allocable to any period, Profits, Losses and any such other items shall be determined on a daily, monthly, or other basis, as determined by the General Partner using any permissible method under Section 706 of the Code and the Regulations thereunder. (c) Except as otherwise provided in this Agreement, all items of Partnership income, gain, loss, deduction and any other allocations not otherwise provided for shall be divided among the Partners in the same proportions as they share Profits or Losses, as the case may be, for the year. SECTION 4.4 NONRECOURSE LIABILITIES. The allocation provisions set forth in this Agreement are based on the premise that the Partnership has not incurred and will not incur any nonrecourse liabilities as that term is defined in Section 1.752-1(a)(2) of the Treasury regulations. If the Partnership should incur such liabilities, the Agreement will be amended to assure compliance with Section 704(b) of the Code and the Treasury regulations thereunder. ARTICLE 5 DISTRIBUTIONS - 13 - SECTION 5.1 DISTRIBUTIONS TO GENERAL PARTNER. Distributions of Net Cash Flow for any period, if made, will be distributed first to the General Partner until the cumulative Net Cash Flow distributed to the General Partner under this Section 5.1 for the current and all past periods is equal to the cumulative Profits allocated to the General Partner for the current and all prior periods pursuant to Section 4.1(a)(2). SECTION 5.2 REMAINING NET CASH FLOW. After the distributions described in Section 5.1 have been made, if any additional distributions are made, the balance of the Net Cash Flow will be distributed among the Partners based upon the number of Units held by each Partner in proportion to the number of Units outstanding. The timing and the amount of distributions of Net Cash Flow will be in the sole discretion of the General Partner. ARTICLE 6 ASSIGNMENT OF LIMITED PARTNER'S INTEREST SECTION 6.1 GENERAL PROVISION. The Partnership interest of a Limited Partner, which includes the Units representing such interest, may be assigned in whole or in part as permitted by the provisions of this Article 6. SECTION 6.2 ASSIGNEES. The assignment, sale, transfer or pledge of a Partnership interest, in whole or in part, by a Limited Partner is permitted in accordance with the terms of this Agreement. Once an interest has been assigned, transferred, pledged or otherwise encumbered, the assignee, transferee, pledgee or otherwise (hereinafter, the "assignee") may not exercise any rights of a Limited Partner with respect to such interest except those granted to the assignee by the Act unless the assignee becomes a substitute Limited Partner in accordance with Section 6.3. An assignment entitles the assignee to receive, to the extent assigned, the assignor's Partnership interest, including, without limitation, any distributions associated with such interest. SECTION 6.3 PLEDGES. If any Partner or assignee at any time desires to pledge or hypothecate any or all of the interest in the Partnership then owned by him, he may do so provided (i) that such transaction is a bona fide pledge or hypothecation to a financial institution and (ii) that such financial institution at the time of such pledge agrees in writing to afford the other Partners a right of first refusal to repurchase the interest in the Partnership in the manner described in Section 6.5 in the event of the sale of such interest upon foreclosure. SECTION 6.4 TRANSFER TO FAMILY MEMBER. Any Partner may voluntarily assign, with or without consideration, all or any part of such Partner's interest in the Partnership to a Family Member provided such Family Member takes the interest subject to the restrictions set forth in this Agreement. SECTION 6.5 RIGHT OF FIRST REFUSAL. Except for transfers described in Section 6.4, if any Person desires to transfer any or all of the interest in the Partnership owned by him, or if any such - 14 - interest becomes subject to an involuntary transfer such Person (the "Transferor") will so notify the Partnership and the other Partners in writing (the "Other Partners"). The notice will set forth the name and address of the proposed transferee, who, in the case of a sale, must be a bona fide prospective purchaser, the date of the proposed transfer, the proposed transfer price (in terms of a dollar amount) and the other terms and conditions of the proposed transfer. For a period of 60 days after receipt of such notice, the Partnership may purchase some or all of the offered interest by giving written notice to the Transferor. If the Partnership does not elect to purchase the entire interest, it shall notify the Other Partners of the portion of the interest it did not elect to purchase, and the Other Partners shall have 45 days after expiration of such 60-day period to purchase all, but not less than all, of the interest that the Partnership did not elect to purchase. Such purchase by the Other Partners will be in proportion to the ownership interest in the Partnership owned by such Other Partners (omitting, for purposes of such calculation, the ownership interest owned by the Transferor) unless they agree otherwise. If any of the Other Partners declines to purchase his proportion of such interest, the remaining Other Partners may purchase such interest in proportion to their interests in the Partnership (counting for this purpose only the interests in the Partnership of the Other Partners who wish to purchase some or all of the interest to be transferred). If all of the remaining interest proposed to be transferred is not agreed to be purchased by the Other Partners, the Transferor may transfer the remaining interest to the assignee. Any transfer must completed in accordance with the terms of the notice given to the Partnership. In addition, Persons to whom any interest is transferred must, as a condition to such transfer, enter into an agreement with the parties hereto (or all parties except the transferor) setting forth restrictions on transfer and other provisions for repurchase identical to the limitations imposed by this Agreement. SECTION 6.6 SUBSTITUTE LIMITED PARTNER. The assignee of the whole or a portion of a Partnership interest shall be admitted as a substitute Limited Partner upon compliance with the following conditions: (a) The assignee must deliver to the Partnership an executed counterpart of the instrument of assignment, satisfactory in substance and form to the General Partner that contains a statement of the assignor's desire that the assignee be admitted as a substitute Limited Partner and the assignee's agreement to be bound by this Agreement. This condition shall be deemed to be met in the case of a Successor in Interest, defined hereinafter. (b) The General Partner, in its sole discretion, must consent in writing to the admission of the assignee as a substitute Limited Partner. (c) The assignor and the assignee must execute and acknowledge such instruments as the General Partner may deem necessary or desirable to effect such admission, and the assignee agrees to pay all expenses in connection with such admission. SECTION 6.7 DEATH OF LIMITED PARTNER. The Partnership shall not be dissolved, wound up and terminated upon the death, insanity, incompetency or bankruptcy of a Limited Partner. If a Limited Partner shall die or be declared insane, incompetent or bankrupt, he shall cease to be a Limited Partner and, if designated by the Limited Partner, his Successor in Interest, as hereinafter - 15 - defined, shall succeed to the interest of the former Limited Partner in the Profits, Losses, credits and distributions of the Partnership. A Limited Partner's Successor in Interest shall be such person as the Limited Partner, from time to time, has designated in writing. In the event that a Limited Partner fails to designate a Successor in Interest, or if the person designated is not then living, or for any reason renounces or disclaims the Partnership interest or is unable to succeed to such Partnership interest, the Successor in Interest shall be the spouse of the former Limited Partner. If the spouse is not then living or for any other reason is unable to succeed to the Partnership interest, or if the spouse renounces or disclaims such Partnership interest, or if there is no spouse, the Successor in Interest shall be the executor or administrator of the deceased Limited Partner's estate, the guardian of an insane or incompetent Limited Partner's estate, or the trustee in bankruptcy of a bankrupt Limited Partner's estate, who shall hold or distribute such Partnership interest in accordance with applicable fiduciary law. SECTION 6.8 RESTRICTIONS ON SUCCESSOR IN INTEREST. The Successor in Interest shall be subject to all of the restrictions specified in this Article 6 applicable to the assignee of an interest and shall not become a substitute Limited Partner except upon compliance with the conditions hereinabove specified. The Successor in Interest shall be entitled to receive all sums payable with respect to the interest of the Partner to which the Successor in Interest succeeds. If agreed to by the General Partner, the Successor in Interest of a deceased former Limited Partner shall be deemed to be the recipient, for federal income tax purposes, of the portion of the deceased former Limited Partner's distributive share of the Profit or Loss (or items thereof) of the Partnership for the taxable year during which the deceased former Limited Partner died in proportion to the part of the year that the Successor in Interest is entitled to such Profit or Loss. SECTION 6.9 WITHDRAWAL OF LIMITED PARTNER. No Limited Partner may withdraw from the Partnership prior to termination of the Partnership. ARTICLE 7 SALE OF A GENERAL PARTNER'S INTEREST SECTION 7.1 GENERAL RESTRICTION. A General Partner shall not transfer all or any part of his interest in the Partnership without obtaining the consent of Limited Partners owning a majority of the Units held by Limited Partners. ARTICLE 8 EVENTS OF WITHDRAWAL SECTION 8.1 PROCEDURE FOLLOWING EVENT OF WITHDRAWAL. Upon the occurrence of an Event of Withdrawal, the General Partner concerned shall cease to be a member of the Partnership and the Partnership shall have the option to liquidate the Partnership interest of such General Partner. - 16 - The Partnership and all its Partners shall be notified of such event by the withdrawing General Partner or his legal representative or by any remaining General Partner. SECTION 8.2 EXERCISE OF OPTION. The Partnership shall exercise its option by serving written notice upon the General Partner concerned or the legal representative of such General Partner within ninety (90) days from the date it receives notification of the Event of Withdrawal. The purchase price to be paid by the Partnership for the interest shall equal the fair market value of such interest, as determined by agreement of the parties or by appraisal if they cannot agree as of the date of such notice, and shall be paid in full by cashier's check or certified check at the closing or on such other terms as the parties agree. SECTION 8.3 CONTINUATION OF PARTNERSHIP. If the Partnership exercises its option, the Partnership shall not dissolve, wind up and terminate but its business shall be continued if there is a remaining General Partner or, if there is not a remaining General Partner, if the Limited Partners consent in writing to the continuation of the business of the Partnership and to the appointment of a new General Partner effective as of the date of withdrawal of the former General Partner. The interests of the Partners shall be adjusted appropriately to reflect the liquidation of the General Partner's interest and, if applicable, the admission of a new General Partner. SECTION 8.4 TERMINATION. Upon the occurrence of an Event of Withdrawal at such time as the Partnership has a sole General Partner, the Partnership shall be dissolved, wound up and terminated unless all of the Limited Partners consent in writing to the continuance of the Partnership as contemplated in Sections 8.3. SECTION 8.5 EVENT OF WITHDRAWAL DEFINED. For purposes of this Agreement, an Event of Withdrawal shall include the occurrence of any event set forth in Section 14-9-602 of the Act upon compliance with any notification requirements imposed by the Act. A voluntary withdrawal by a General Partner will not be in violation of this Agreement provided the General Partner provides written notice to Limited Partners holding 2/3 or more of the Partnership Units held by Limited Partners at least 10 days in advance of such withdrawal. ARTICLE 9 PROVISIONS APPLICABLE TO ALL ASSIGNMENTS AND TRANSFERS SECTION 9.1 GENERAL RESTRICTIONS. Notwithstanding anything to the contrary in this Agreement, any assignment or purchase under Articles 6, 7 or 8 may be prohibited by the General Partner if such assignment or purchase would, in the opinion of counsel for the Partnership, result in the termination of the Partnership under Section 708(b)(l)(B) of the Code. SECTION 9.2 SECTION 6050K. Upon the transfer or assignment of any Partnership interest, the transferor or assignor must provide to the Partnership the information set forth in Section 6050 - 17 - K of the Code, and the Partnership shall furnish the required information to the Internal Revenue Service, the transferor and the transferee as required by such section. ARTICLE 10 TERMINATION OF THE PARTNERSHIP SECTION 10.1 EVENTS CAUSING TERMINATION. The Partnership shall dissolve, wind up and terminate upon the first to occur of the following: (a) The expiration of the term of the Partnership; (b) The occurrence of an Event of Withdrawal unless the business of the Partnership is continued as provided in Article 8; (c) Upon the written consent of all Partners. SECTION 10.2 PROCEDURE ON TERMINATION. Upon the occurrence of an event described in Section 10.1, the General Partner (or, if none, a Limited Partner appointed by the Limited Partners) shall proceed to liquidate and wind up the business of the Partnership. Upon fifteen (15) days' prior written notice to all of the Partners identifying the assets to be sold, the liquidating Partner(s) may, in lieu of selling the Partnership assets, convey undivided interests in the assets to the Partners or distribute the assets in kind to the Partners. The Partnership assets and the proceeds of any liquidation sale shall be applied and distributed at the closing of any sale in the following order of priority: (a) To the payment of all debts and liabilities of the Partnership and all expenses of liquidation. (b) To the setting up of such reserves as the liquidating Partners may deem necessary for any contingent liabilities of the Partnership. Any reserves shall be deposited with an escrowee to be applied to the discharge of any contingent liabilities, and, at the expiration of whatever period the liquidating Partner may deem advisable, the balance shall be distributed as provided in clause (c) below. (c) The balance, if any, shall be distributed to the Partners in accordance with their Capital Accounts, adjusted to reflect the Gross Asset Value of each asset, notwithstanding any statutory priorities the Limited Partners may have under the provisions of the laws of the Act. SECTION 10.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS. In the event the Partnership is "liquidated" within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations, (i) distributions shall be made pursuant to Article 10 to the Partners who have positive Capital Accounts in compliance with Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations, and (ii) if any Partner's - 18 - Capital Account has a deficit balance (after giving effect to all contributions, distributions and allocations for all taxable years, including the year during which such liquidation occurs), such Partner shall contribute to the capital of the Partnership the amount necessary to restore such deficit balance to zero in compliance with Section 1.704-1 (b)(2)(ii)(b)(3) of the Regulations. In the discretion of the General Partner, a pro rata portion of the distributions that would otherwise be made to the Partners pursuant to the preceding sentence may be: (a) Distributed to a trust established for the benefit of the Partners for the purposes of liquidating Partnership assets, collecting amounts owed to the Partnership, and paying any contingent or unforeseen liabilities or obligations of the Partnership or of the Partners arising out of or in connection with the Partnership. The assets of any such trust shall be distributed to the Partners from time to time, in the reasonable discretion of the General Partner, in the same proportions as the amount distributed to such trust by the Partnership would otherwise have been distributed to the Partners pursuant to this Agreement; or (b) Withheld to provide a reasonable reserve for Partnership liabilities (contingent or otherwise) and to reflect the unrealized portion of any installment obligations owed to the Partnership, provided that such withheld amounts shall be distributed to the Partners as soon as practicable. SECTION 10.4 RIGHTS OF PARTNERS. Except as otherwise provided in this Agreement, each Partner shall look solely to the assets of the Partnership for the return of his Capital Contribution and shall have no right or power to demand or receive property other than cash from the Partnership. No Partner shall have priority over any other Partner as to the return of his Capital Contributions, distributions or allocations. ARTICLE 11 FISCAL MATTERS SECTION 11.1 BOOKS AND RECORDS. The General Partner shall maintain full and accurate books of the Partnership at the Partnership's principal place of business, showing all receipts and expenditures, assets and liabilities, Profits and Losses, and all other records necessary for recording the Partnership's business and affairs, including those sufficient to record the allocations and distributions provided for in Article 4 and Article 5. The books of the Partnership shall be kept on either a cash or an accrual basis as determined by the General Partner. Each Partner and his duly authorized representatives shall at all times during regular business hours have access to and may inspect and copy any of such books and records. SECTION 11.2 PARTNERSHIP YEAR. The annual accounting period of the Partnership shall be the calendar year. - 19 - SECTION 11.3 PARTNERSHIP BANK ACCOUNTS. The General Partner shall receive all moneys of the Partnership and shall deposit the same in one or more banking accounts. All expenditures by the General Partner shall be made by checks drawn against the Partnership accounts. Withdrawals from Partnership accounts shall be made upon such signature or signatures as the General Partner shall authorize. SECTION 11.4 ACCOUNTING DECISIONS. All decisions as to accounting matters, except as specifically provided to the contrary herein, shall be made by the General Partner. SECTION 11.5 FEDERAL INCOME TAX ELECTIONS. The decision to make or not make any other election that is described in the Code including, without limitation, a Section 754 election, shall be made in the discretion of the General Partner. ARTICLE 12 ALTERNATIVE DISPUTE RESOLUTION ("ADR"); BINDING ARBITRATION 12.1 AGREEMENT TO USE PROCEDURE. The Partners have entered into this Agreement in good faith in the belief that it is mutually advantageous to them. It is with that same spirit of cooperation that they pledge to attempt to resolve any dispute amicably without the necessity of litigation. Accordingly, they agree if any dispute arises between them relating to this Agreement (the "Dispute"), they will first utilize the procedures specified in this Article 12 (the "Procedure") prior to any Additional Proceedings. 12.2 INITIATION OF PROCEDURE. The Partner seeking to initiate the Procedure (the "Initiating Partner") shall give written notice to the other Partners, describing in general terms the nature of the Dispute, the Initiating Partner's claim for relief an identifying one or more individuals with authority to negotiate the Dispute on such Partner's behalf. The Partner(s) receiving such notice (the "Responding Partner," whether one or more) shall have five (5) business days within which to designate by written notice to the Initiating Partner, one or more individuals with authority to negotiate the Dispute on such Partner's behalf. The individuals so designated shall be known as the "Authorized Individuals." The Initiating Partner and the Responding Partner shall collectively be referred to as the "Disputing Partners" or individually "Disputing Partner." 12.3 DIRECT NEGOTIATIONS. The Authorized Individuals shall be entitled to make such investigation of the Dispute as they deem appropriate, but agree to promptly, and in no event later than thirty (30) days from the date of the Initiating Partner's written notice, meet to discuss resolution of the Dispute. The Authorized Individuals shall meet at such times and places and with such frequency as they may agree. If the Dispute has not been resolved within thirty (30) days from the date of their initial meeting, the Disputing Partners shall cease direct negotiations and shall submit the Dispute to mediation in accordance with the following procedure. - 20 - 12.4 SELECTION OF MEDIATOR. The Authorized Individuals shall have five (5) business days from the date they cease direct negotiations to submit to each other a written list of acceptable qualified attorney-mediators not affiliated with any of the Partners. Within five (5) days from the date of receipt of such list, the Authorized Individuals shall rank the mediators in numerical order of preference and exchange such rankings. If one or more names are on both lists, the highest ranking person shall be designated as the mediator. If no mediator has been selected under this procedure, the Disputing Partners agree jointly to request a State or Federal District Judge of their choosing (or if they cannot agree, the Chief Judge of the United States District Court for the county in which the principal office of the Partnership is located, and if that Judge refuses to act, the Presiding Judge of the State Administrative Judicial Region for said county) to supply within ten (10) business days a list of potential qualified attorney-mediators. Within five (5) business days of receipt of the list, the Authorized Individuals shall again rank the proposed mediators in numerical order of preference and shall simultaneously exchange such list and shall select as the mediator the individual receiving the highest combined ranking. If such mediator is not available to serve, they shall proceed to contact the mediator who was next highest in ranking until they are able to select a mediator. 12.5 TIME AND PLACE OF MEDIATION. In consultation with the mediator selected, the Authorized Individuals shall promptly designate a mutually convenient time and place for the mediation, and unless circumstances require otherwise, such time to be not later than forty-five (45) days after selection of the mediator. 12.6 EXCHANGE OF INFORMATION. In the event any Disputing Partner to this Agreement has substantial need for information in the possession of another Disputing Partner to this Agreement in order to prepare for the mediation, all Disputing Partners shall attempt in good faith to agree to procedures for the expeditious exchange of such information, with the help of the mediator if required. 12.7 SUMMARY OF VIEWS. At least seven (7) days prior to the first scheduled session of the mediation, each Disputing Partner shall deliver to the mediator and to the other Disputing Partners a concise written summary of its views on the matter in Dispute, and such other matters required by the mediator. The mediator may also request that a confidential issue paper be submitted by each Disputing Partner to him. 12.8 PARTIES TO BE REPRESENTED. In the mediation, each Disputing Partner shall be represented by an Authorized Individual and may be represented by counsel. In addition, each Disputing Partner may, with permission of the mediator, bring such additional Persons as needed to respond to questions, contribute information, and participate in the negotiations. 12.9 CONDUCT OF MEDIATION. The mediator shall determine the format for the meetings, designed to assure that both the mediator and the Authorized Individuals have an opportunity to hear an oral presentation of each Disputing Partner's views on the matter in dispute, and that the authorized parties attempt to negotiate a resolution of the matter in dispute, with or without the assistance of counsel or others, but with the assistance of the mediator; to this end, the mediator is - 21 - authorized to conduct both joint meetings and separate private caucuses with the Disputing Partners. The mediation session shall be private. To the extent permitted under applicable law, the mediator will keep confidential all information learned in private caucus with any Disputing Partner unless specifically authorized by such Disputing Partner to make disclosure of the information to the other Disputing Partner. The Disputing Partners commit to participate in the proceedings in good faith with the intention of resolving the Dispute if at all possible. 12.10 TERMINATION OF PROCEDURE. The Disputing Partners agree to participate in the mediation procedure to its conclusion. The mediation shall be terminated (1) by the execution of a settlement agreement by the Disputing Partners, (2) by a declaration of the mediator that the mediation is terminated, or (3) by a written declaration of a Disputing Partner to the effect that the mediation process is terminated at the conclusion of one full day's mediation session. Even if the mediation is terminated without a resolution of the Dispute, the Disputing Partners agree not to terminate negotiations and not to commence any litigation or other legal proceedings to resolve the Dispute ("Additional Proceedings") prior to the expiration of five (5) days following the mediation. Notwithstanding the foregoing, any Disputing Partner may commence Additional Proceedings within such five (5) day period if the Dispute could be barred by an applicable statute of limitations. 12.11 FEES OF MEDIATION; DISQUALIFICATION. The fees and expenses of the mediator shall be shared equally by the Disputing Partners. The mediator shall be disqualified as a witness, consultant, expert or counsel for any Disputing Partner with respect to the Dispute and any related matters. 12.12 CONFIDENTIALITY. To the extent permitted under applicable law, the mediation process shall be confidential, and no stenographic, visual or audio record shall be made. All conduct, statements, promises, offers, views and opinions, whether oral or written, made in the course of the mediation by any Disputing Partner, their agents, employees, representatives or other invitees and by the mediator shall be confidential and shall, in addition and where appropriate, be deemed privileged. To the extent permitted under applicable law, such conduct, statements, promises, offers, views and opinions shall not be discoverable or admissible for any purpose, including impeachment, in any litigation or other proceeding involving the parties, and shall not be disclosed to anyone not an agent, employee, expert, witness, or representative of any of the Partners; provided, however, that evidence otherwise discoverable or admissible is not excluded from discovery or admission as a result of its use in the mediation. 12.13 ARBITRATION. Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof which the Partners are unable to resolve using other procedures in this Article 12, shall be settled by arbitration in accordance with the rules of American Arbitration Association by one or more arbitrators appointed under such rules, in the place determined by the parties to the dispute, or if they cannot agree on the location, in Cincinnati, Ohio. The decision of the arbitrator shall be final and binding upon all parties hereto. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The expenses of arbitration shall be borne equally by the Partners who are parties to the dispute. - 22 - ARTICLE 13 GENERAL PROVISIONS SECTION 13.1 NOTICES. Except as otherwise provided in this Agreement, any and all notices, consents, waivers, requests, votes or other instruments or communications provided for under this Agreement shall be in writing, signed by the party giving the same and shall be deemed properly given only if sent by registered or certified United States mail, postage prepaid, addressed: (a) in the case of the Partnership or the General Partner, to the Partnership or the General Partner, as the case may be, at the principal place of business of the Partnership, (b) in the case of any Partner to such Partner at his address set forth in the records of the Partnership. Each Partner may, by notice to the Partnership, specify any other address for the receipt of such instruments of communications. Any such communication sent by telegram shall be properly given when received by the person to whom it is sent. SECTION 13.2 INDEMNIFICATION OF GENERAL PARTNER. A General Partner shall not be liable to the Partnership or the Limited Partners for any act or omission performed or omitted by the General Partner in good faith pursuant to the authority granted to the General Partner by the Partnership Agreement, but not for fraud, bad faith or gross negligence. The Partnership shall indemnify the General Partner for any loss or damage incurred by the General Partner on behalf of the Partnership in or in furtherance of the Partnership interests, except for liability arising out of fraud, bad faith or gross negligence. If a claim for indemnification against liabilities under the Securities Act of 1933 (other than for expenses incurred in successful defense) is asserted against the Partnership by the General Partner under the Agreement or otherwise, the Partnership will, unless in the opinion of its counsel, the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy, and will be governed by the final adjudication of such issue. In the event the General Partner pays any debt of the Partnership, the General Partner shall be reimbursed therefor from Partnership assets. SECTION 13.3 INTEGRATION. This Agreement embodies the entire agreement and understanding among the Partners relating to the subject matter hereof, and supersedes all prior agreements and understandings relating to such subject matter. SECTION 13.4 APPLICABLE LAW. This Agreement and the rights of the Partners shall be governed by and construed and enforced in accordance with the laws of the State of Georgia. SECTION 13.5 COUNTERPARTS. This Agreement may be executed in several counterparts and all so executed shall constitute one Agreement binding on all the parties hereto, notwithstanding that all the parties are not signatory to the original counterpart. SECTION 13.6 SEPARABILITY. In case any one or more of the provisions contained in this Agreement or any application thereof shall be invalid, illegal or unenforceable in any respect, the - 23 - validity, legality and enforceability of the remaining provisions contained herein and any other application thereof shall not in any way be affected or impaired thereby. SECTION 13.7 BINDING EFFECT. Except as herein otherwise provided to the contrary, this Agreement shall be binding upon, and inure to the benefit of, the Partners and their respective heirs, executors, administrators, successors and permitted assigns. SECTION 13.8 CERTIFICATE OF LIMITED PARTNERSHIP. The General Partner is not required to deliver or mail a copy of the Partnership's certificate of limited partnership or any other certificate to any of the Limited Partners. SECTION 13.9 AUTHORITY TO AMEND. Amendments to this Agreement shall require the approval of the General Partner and the Limited Partners owning a majority of the outstanding Units held by Limited Partners. Notwithstanding the foregoing, no Partner's interest in Profits, Losses or cash distributions will be reduced without the consent of that Partner. A copy of any amendment shall be mailed in advance to all of the Limited Partners. SECTION 13.10 GENDER. Wherever the context shall so require, all words herein in a particular gender shall be deemed to include other genders where applicable. In addition, singular words shall include the plural and plural words shall include the singular. SECTION 12.11 MEETINGS. Meetings of the Partners shall be held not less than fifteen (15) days nor more than thirty (30) days after receipt of written notice from the General Partner. The General Partner will give notice of a meeting at any time upon their own choosing or within five (5) days after they shall receive demand for a meeting from Limited Partners who own at least thirty percent of the outstanding Units. - 24 - IN WITNESS WHEREOF, the parties have hereunto set their hands as of the day and year first above written. [General Partner] MILFAM LLC, an Ohio limited liability company By:/s/ Lloyd I. Miller, III ----------------------------- LIMITED PARTNERS: Trust B under Section 6 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983 By:/s/ Blair Thompson ----------------------------- Trust D under Section 8 of the Amended and Restated Trust U/A Lloyd I. Miller, dated September 20, 1983 By:/s/ Steven Hendrickson ---------------------- /s/ Lloyd I. Miller, III -------------------------------- Lloyd I. Miller, III /s/Martin G. Miller -------------------------------- Martin G. Miller - 25 - MILFAM II L.P., A GEORGIA LIMITED PARTNERSHIP PARTNERSHIP AGREEMENT THE INTEREST REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY APPLICABLE STATE LAW. THE INTEREST HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF (i) AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR (II) AN OPINION OF COUNSEL SATISFACTORY TO THE MILFAM II L.P. (THE "PARTNERSHIP") TO THE EFFECT THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT AND SUCH LAWS. EX-99.5 7 y57429dex99-5.txt IRREVOCABLE TRUST AGREEMENT MILGRAT II (G) IRREVOCABLE TRUST AGREEMENT MILGRAT II(G) This instrument contains all of the terms of an Irrevocable Trust Agreement made at Naples, Florida, on December 11, 2001, by Catherine C. Miller as the "Grantor" and Lloyd I. Miller as the "Trustee". This Agreement may be known as the "MILGRAT II(G)." SECTION 1 TRUST PROPERTY 1.1 The Grantor has delivered to the Trustee the property shown on Schedule A attached hereto. No additional contributions shall be made to the trust. 1.2 The Trustee agrees to hold such property in accordance with the terms set forth in this Agreement. SECTION 2 SURRENDER OF RIGHTS BY GRANTOR 2.1 This Agreement is irrevocable, and the Grantor surrenders all rights to amend or revoke it. Provided that the Trustee, acting alone, shall amend the terms of this Agreement and restrict or remove any of the powers, duties, rights and privileges of the Trustee, the beneficiaries, or any other person in any manner required for the sole purpose of ensuring that the interests of the Grantor qualify and continue to qualify as "qualified annuity interests" within the meaning of Section 2702(b)(1) of the Internal Revenue Code of 1986 as it may from time to time be amended or restated. Notice of any amendment or other change in the Agreement shall be given by the Trustee to each adult beneficiary and to the parent or guardian (or other appropriate representative designated by the court) of each minor beneficiary. SECTION 3 PAYMENTS TO GRANTOR DURING TRUST 3.1 On the day before the first anniversary of creation of the trust, the Trustee shall pay to the Grantor 48.8% of the initial net fair market value of the trust assets. On the day before the second anniversary of creation of the trust, the Trustee shall pay to the Grantor 58.56% of the initial fair market value of the trust assets. The amount to be paid to the Grantor under these provisions shall hereinafter be referred to as the "annuity amount." The annuity amount shall be paid from income and, if the annuity amount exceeds the income of the trust, from principal. In no event shall the payment for any year be made later than 105 days after the stated payment date. The taxable year of the trust shall be the calendar year. If the Grantor dies prior to the time that all annuity amounts are paid, any unpaid annuity amounts to which the Grantor is entitled shall be paid to the Grantor's estate under the same terms and conditions as such annuity amounts would have been paid to the Grantor. If short period proration is required under Reg. Sec. 25.2702-3, the provisions of such Regulation are hereby incorporated by reference. 3.2 In no event prior to the termination of the trust shall distributions be made from the trust to or for the benefit of any person other than the Grantor. 3.3 If the initial net fair market value of the trust assets is incorrectly determined by the Trustee, then within a reasonable period after the corrected value is finally determined for federal gift tax purposes, the Trustee shall redetermine the annuity amount. If the initial value is finally determined to have been too low, the Trustee shall pay the amount of the increase in such amount (reduced by any excess income payments previously paid to the Grantor, if any) to the Grantor if the underpayment relates to payments that should have been received by the Grantor. If the initial value is finally determined to have been too high, the Grantor shall pay the amount of the decrease in such amount, if any, to the Trustee. Any payment adjustment required under this Section 3.3 shall be made within a reasonable time (not to exceed six months) after such final determination. 3.4 The trust shall terminate on the day before the second anniversary of creation of the trust under this Agreement, and the trust assets, less the annuity amounts, shall be distributed to the Grantor's then living issue, per stirpes, subject to Section 4. The Grantor's interest in this trust may not be commuted. SECTION 4 TRUSTS FOR PERSONS OTHER UNDER AGE 35 4.1 If any person who becomes entitled to all or any share of the trust estate is under age 35 at the time set for distribution to him or her, his or her share shall not be distributed to him or her directly, but shall continue to be held by the Trustee as a separate trust for his or her benefit as follows: The Trustee may, in the Trustee's sole discretion, pay to or for the benefit of the person for whom the trust is held, at such times as the Trustee determines, all or such part of the net income and, if necessary, principal of the trust as the Trustee determines to be necessary to provide for such person's support, maintenance, education and medical care. Any net income not so distributed shall be accumulated and added to the principal of the trust. The trust shall terminate on the first to occur of the following: 2. the date when the person for whom the trust is held attains age 35; the date of death of such person; and the date when, in the sole opinion of the Trustee, the trust estate has been so reduced as to make it uneconomical or otherwise impractical to hold the trust estate in trust. Upon termination of the trust, the Trustee shall distribute the principal and any undistributed income thereof to the person for whom the trust is held, if living, or if not, to his or her estate. 4.2 The word "education," when used in this Agreement, shall mean all types and levels of education, both public and private, and shall include, but not be limited to, primary and secondary education, college or university education, post-graduate education, training such as that provided by a business school, vocational school or technical school, and any education which may be required because of the particular abilities or disabilities of a beneficiary. It shall also include all tuition, board, lodging, fees, books and equipment, travel expenses and other expenses incidental thereto. 4.3 Solely for the purpose of investment convenience, the Trustee may hold and invest the assets of the separate trusts held under this Section 4 as a unit, without physically dividing them, until actual division becomes necessary in order to make distribution, and in such case the Trustee shall allocate to each separate trust its proportionate part of receipts and expenditures. SECTION 5 GENERAL PROVISIONS 5.1 The Trustee shall have the following powers, in addition to authority the Trustee may have under the laws of any state, which the Trustee may exercise without order of court: 5.1.1 To collect, pay and compromise debts and claims. 5.1.2 To borrow money, including authority for a corporate Trustee to borrow from itself in a nonfiduciary capacity. 5.1.3 To sell real and personal property, publicly or privately; to give options to buy real and personal property for any length of time; to lease real and personal property for any term; to mortgage real property; to pledge personal property; and to execute and deliver instruments to effectuate such powers. 5.1.4 To retain property received by the Trustee regardless of whether such property is authorized by law for investment by fiduciaries; and to invest and reinvest the proceeds of the sale of such property, and cash, in whatever property the Trustee 3. deems reasonable, whether or not the investment is authorized by law for investment by fiduciaries. 5.1.5 To exercise and not exercise, as the Trustee deems reasonable, rights of ownership incident to securities that the Trustee may hold, including rights to vote, give proxies and execute consents, provided that a corporate Trustee shall exercise voting rights under any securities issued by it or its affiliate only at the written direction of the primary income beneficiary of the trust to which such securities are allocated, the guardian or custodian (but not the Grantor) to act for any beneficiary who is incapacitated or incompetent. 5.1.6 To hold property in the name of a nominee. 5.1.7 To hold, retain and continue to operate any business interest received, whether organized as a sole proprietorship, partnership (general or limited), limited liability company or corporation, for such time and in such manner as the Trustee may deem advisable, without liability on the part of the Trustee for any losses resulting therefrom; to dissolve, liquidate or sell at such time and upon such terms as the Trustee may deem advisable; to use the assets of the trust estate for the purposes of the business; to use the income from such business for business purposes, including but not limited to the establishing of additional reserve and depreciation accounts, establishing funds for future expansion and growth and such other business purposes as the Trustee may deem advisable; to borrow money for business purposes and to pledge or encumber the assets of the business or other assets of the trust estate to secure a loan; to employ such officers, managers, employees or agents as the Trustee may deem advisable in the management of such business, including electing representatives of the Trustee to take part in the management of such business as directors, officers or employees, and any such representatives of the Trustee may receive compensation for their services in addition to the fee to which the Trustee may be entitled for the Trustee's services in the administration of the trusts held hereunder; and to have such additional powers as may be necessary to enable the Trustee to continue or to dispose of any such business interest. 5.2 No person leasing or purchasing property from or lending money to or otherwise dealing with any trust and no transfer agent requested to transfer corporate securities to or from any trust need inquire as to the purpose of the lease, sale, loan, transfer or assignment or see to the application of the proceeds, and the receipt of the Trustee shall be a complete acquittance and discharge of such person for the amount paid. 4. 5.3 Notwithstanding other provisions of this Trust Agreement, the Grantor shall have the power to borrow assets of the trust without adequate security. This power shall not be assignable. 5.4 The Trustee is authorized to distribute trust assets in cash or in kind, or partly in each. 5.5 In allocating any credit or charge to principal or income the Trustee shall have the power, exercisable as a fiduciary in good faith: to determine whether assets received shall be treated as principal or income, provided that distributions of capital gains by regulated investment companies, capital gains on the sale of assets and stock dividends in stock of the declaring corporation shall be allocated to principal; to charge or apportion expenses or losses to principal or income; to establish and maintain reasonable reserves for depreciation, depletion, amortization and obsolescence, and if any portion of the trust estate consists of a wasting asset, to establish and maintain reasonable reserves for such asset; and to amortize or not to amortize both premiums and discounts on investments. The Trustee is relieved of the duty of compliance with the provisions of Sections 2109.66 through 2109.68 of the Ohio Revised Code and of Chapter 1340 of the Ohio Revised Code, as such provisions may from time to time be amended, but the Trustee is authorized to treat such provisions of the Ohio Revised Code as advisory in exercising the discretionary authority granted herein. 5.6 The Trustee is authorized to employ legal counsel, investment counsel and other agents in any matter in connection with the administration of the trust, such as agents for the collection of rentals or the management or sale of any of the trust estate. The Trustee may pay such compensation and expenses in connection therewith as the Trustee deems reasonable under the circumstances. 5.7 Income or principal of any trust created under this Agreement which becomes payable or is, in the discretion of the Trustee, distributable to any beneficiary who is incapacitated or incompetent may be paid to such beneficiary, despite his or her incapacity or incompetency, to the guardian or guardians of his or her estate, or to any person, corporation or institution for the benefit of such beneficiary, as the Trustee deems reasonable. The receipt of any such payee shall be a complete discharge and release of the Trustee. 5.8 For all purposes of this Agreement, a person, including the Trustee, shall be considered incapacitated or incompetent if so declared by a court having jurisdiction, or if such person's personal physician or any two physicians selected by the Trustee, or selected by the designated successor Trustee in the event of the Trustee's incapacity, shall advise the Trustee, or such successor Trustee, of such incapacity or incompetency in writing. Any such incapacity or incompetency established in the first instance by declaration of court may be removed only by such court, or if established in the first instance by such person's 5. personal physician or any two physicians selected as above provided, may be removed by either the personal physician then serving such person or any two physicians selected by the Trustee, or such successor Trustee (who need not be the same two physicians who may have certified such person's incapacity or incompetency). 5.9 The Grantor intends by this trust to make a completed gift of a vested remainder in the trust assets, subject only to the Grantor's retention of the right to receive the "annuity" amount under Section 3.1. The Grantor intends that her interests in this trust be qualified interests, as defined in Section 2702(b) of the Internal Revenue Code of 1986 as it may from time to time be amended or restated. No power, right or duty under this Agreement shall be effective or exercisable to the extent to which it would cause the Grantor's annuity interest hereunder to fail to qualify as a "qualified annuity interest" under Section 2702(b)(1) of the Internal Revenue Code of 1986 as it may from time to time be amended or restated. 5.10 Notwithstanding any other provisions of this Agreement, unless terminated at an earlier date under other provisions hereof, all trusts herein created, including those created through the exercise of a power of appointment, shall terminate 21 years after the death of the last to die of such of the Grantor and the Grantor's issue who are living on the date of execution of this Agreement, and thereupon the Trustee shall distribute to the persons then entitled to receive income from any trust the share of the trust from which any such person is then entitled to receive income. 5.11 The words "child" or "children," when used in this Agreement, shall mean lineal descendants of the first degree only. The word "issue," when used in this Agreement shall mean lineal descendants of any degree. A lineal descendant shall include an adopted person but only if the adoption occurs prior to the date such person attains age 18, the adopted person has lived with the adoptive parent in a parent-child relationship for any two consecutive years prior to the date of the Grantor's death and the adoption was not effected primarily to permit the adoptive person to receive distributions from the trust. 5.12 Notwithstanding any other provisions of this Agreement, the annuity amount shall not be paid with a note or other obligation of the trust nor shall it be paid in any manner that would result in disqualification of the annuity amount as a "qualified interest" under Section 2702(b)(1) of the Internal Revenue Code of 1986 as it may from time to time be amended or restated. 5.13 All questions pertaining to the trust and its validity and the administration thereof, and to the construction of this Agreement, shall be determined in accordance with the laws of the State of Ohio. 6. SECTION 6 THE TRUSTEE 6.1 Lloyd I. Miller shall serve as Trustee hereunder until the first to occur of his death, resignation, incapacity or incompetence. At such time as Lloyd I. Miller ceases to serve as Trustee hereunder, the successor Trustee shall be The Northern Trust Company, an Illinois corporation, Chicago, Illinois, or any corporation which may succeed to its trust business. 6.2 The Grantor's son, Lloyd I. Miller, may request the resignation of any Trustee serving hereunder. Any Trustee acting hereunder shall have the right to resign upon written notice to the Grantor, or if the Grantor is not living or living but incompetent or incapacitated, to the Grantor's children who are then living and competent and not incapacitated. After the Grantor's death, the Trustee shall give such notice to all of the beneficiaries then entitled to receive income under the trust or trusts as to which the Trustee is resigning who are not incapacitated or incompetent and to the guardian(s) or custodian(s) of those who are incapacitated or incompetent. 6.3 Upon the resignation of any Trustee, voluntarily or involuntarily, the Trustee shall turn over the assets and administration of the trust or trusts then held hereunder as to which the Trustee is resigning to such bank or trust company as may be selected by the Grantor's son, Lloyd I. Miller, or if he is incapacitated or incompetent, by the Grantor's son, Martin Miller. 6.4 An individual Trustee shall be entitled to receive reasonable compensation for serving hereunder. Such compensation has been agreed to as set forth in a schedule prepared by Trustee. A corporate Trustee shall be entitled to receive such compensation as is provided for in its current schedule of fees effective from time to time or as otherwise agreed upon. 6.5 Any successor Trustee shall have each and every right, privilege, power, discretion, authority and duty of the original Trustee and shall be subject to the same responsibilities. Any successor Trustee shall qualify by executing a written instrument of acceptance of the trusteeship which shall be attached to any counterpart or copy of this Agreement. No bond shall be required of any Trustee for serving as such. 7. IN WITNESS WHEREOF, the Grantor and the Trustee have signed duplicates hereof, each of which shall be deemed an original, on the date first above written. /s/ Catherine C. Miller ----------------------------- Catherine C. Miller, Grantor /s/ Lloyd I. Miller, III ----------------------------- Lloyd I. Miller III, Trustee 8. SCHEDULE A TO MILGRAT II(G) DATED DECEMBER 11, 2001
Units/Shares Description - ------------ ----------- 683,759 Fairmarket, Inc.
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