-----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, ElpNqa4dKehZzcCIublG50YcA+bv7OTxNDM/M8Ot62o0/U3RKeBLLJp8J0Lkd14R Re0w/7s3HjDWAMtMjydW7Q== 0000895345-06-000846.txt : 20061030 0000895345-06-000846.hdr.sgml : 20061030 20061030171731 ACCESSION NUMBER: 0000895345-06-000846 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20061030 DATE AS OF CHANGE: 20061030 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NATIONAL FUEL GAS CO CENTRAL INDEX KEY: 0000070145 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 131086010 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0905 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-37191 FILM NUMBER: 061172994 BUSINESS ADDRESS: STREET 1: 6363 MAIN STREET CITY: WILLIAMSVILLE STATE: NY ZIP: 14221-5887 BUSINESS PHONE: 716-857-7000 MAIL ADDRESS: STREET 1: 6363 MAIN STREET STREET 2: 6363 MAIN STREET CITY: WILLIAMSVILLE STATE: NY ZIP: 14221-5887 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: New Mountain Vantage LP CENTRAL INDEX KEY: 0001349525 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 787 SEVENTH AVENUE STREET 2: 49TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 212-720-0300 MAIL ADDRESS: STREET 1: 787 SEVENTH AVENUE STREET 2: 49TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10019 SC 13D 1 prsc13d.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 NATIONAL FUEL GAS COMPANY ------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $1 PER SHARE ------------------------------------------------------------------- (Title of Class of Securities) 636180101 --------------------------------------------------------- (CUSIP Number) STEVEN B. KLINSKY NEW MOUNTAIN VANTAGE, L.P. 787 SEVENTH AVENUE, 49TH FLOOR NEW YORK, NY 10019 (212) 720-0300 Copies to: PAUL REINSTEIN FRIED, FRANK, HARRIS, SHRIVER & JACOBSON LLP ONE NEW YORK PLAZA NEW YORK, NY 10004-1980 (212) 859-8000 --------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) OCTOBER 19, 2006 --------------------------------------------------------- (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 ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box: [ ] *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 ("Act") 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. 636180101 Page 2 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE GP, L.L.C. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 3,727,900 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 3,727,900 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,727,900 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.5% 14 TYPE OF REPORTING PERSON OO SCHEDULE 13D CUSIP NO. 636180101 Page 3 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE, L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 869,100 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 869,100 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 869,100 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.0% 14 TYPE OF REPORTING PERSON PN SCHEDULE 13D CUSIP NO. 636180101 Page 4 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE (CALIFORNIA), L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 866,700 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 866,700 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 866,700 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.0% 14 TYPE OF REPORTING PERSON PN SCHEDULE 13D CUSIP NO. 636180101 Page 5 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE (TEXAS), L.P. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 632,100 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 632,100 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 632,100 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.8% 14 TYPE OF REPORTING PERSON PN SCHEDULE 13D CUSIP NO. 636180101 Page 6 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE ADVISERS, L.L.C. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 3,828,200 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 3,828,200 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,828,200 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.6% 14 TYPE OF REPORTING PERSON OO SCHEDULE 13D CUSIP NO. 636180101 Page 7 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE (CAYMAN) LTD. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 1,460,300 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 1,460,300 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,460,300 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.8% 14 TYPE OF REPORTING PERSON CO SCHEDULE 13D CUSIP NO. 636180101 Page 8 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NEW MOUNTAIN VANTAGE HOLDCO LTD. 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION CAYMAN ISLANDS 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 1,460,300 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 1,460,300 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,460,300 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.8% 14 TYPE OF REPORTING PERSON CO SCHEDULE 13D CUSIP NO. 636180101 Page 9 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) STEVEN B. KLINSKY 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS AF, PF 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES OF AMERICA 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 5,188,200 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 5,188,200 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,188,200 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 6.2% 14 TYPE OF REPORTING PERSON IN SCHEDULE 13D CUSIP NO. 636180101 Page 10 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) NMV SPECIAL HOLDINGS, LLC 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION DELAWARE 7 SOLE VOTING POWER NUMBER OF 0 SHARES 8 SHARED VOTING POWER BENEFICIALLY 1,360,000 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 0 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 1,360,000 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,360,000 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.6% 14 TYPE OF REPORTING PERSON 00 SCHEDULE 13D CUSIP NO. 636180101 Page 11 of 26 Pages 1 NAME OF REPORTING PERSON I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY) CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [x] (b) [ ] 3 SEC USE ONLY 4 SOURCE OF FUNDS WC 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] 6 CITIZENSHIP OR PLACE OF ORGANIZATION UNITED STATES OF AMERICA 7 SOLE VOTING POWER NUMBER OF 723,690 SHARES 8 SHARED VOTING POWER BENEFICIALLY 1,360,000 OWNED BY 9 SOLE DISPOSITIVE POWER EACH 642,640 REPORTING 10 SHARED DISPOSITIVE POWER PERSON WITH 1,441,050 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,083,690 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 2.5% 14 TYPE OF REPORTING PERSON EP ITEM 1. SECURITY AND ISSUER This statement on Schedule 13D ("Statement") relates to the common stock, par value $1 per share ("Common Stock"), of National Fuel Gas Company, a New Jersey corporation (the "Issuer"). The principal executive offices of the Issuer are located at 6363 Main Street, Williamsville, New York 14221. ITEM 2. IDENTITY AND BACKGROUND (A) - (C) AND (F). This Statement is filed by New Mountain Vantage GP, L.L.C., a Delaware limited liability company ("Vantage GP"), New Mountain Vantage, L.P., a Delaware limited partnership ("NMV"), New Mountain Vantage (California), L.P., a Delaware limited partnership ("NMVC"), New Mountain Vantage (Texas), L.P., a Delaware limited partnership ("NMVT"), New Mountain Vantage Advisers, L.L.C., a Delaware limited liability company ("NMV Advisers"), New Mountain Vantage (Cayman) Ltd., a Cayman Islands exempt limited company ("NMV Offshore"), New Mountain Vantage HoldCo Ltd., a Cayman Islands exempt limited company ("NMV Offshore HoldCo"), Mr. Steven B. Klinsky (collectively, the "NMV Entities"), NMV Special Holdings, LLC, a Delaware limited liability company ("NMVSH"), and the California Public Employees' Retirement System, a unit of the California State and Consumer Services Agency charged with oversight of the Public Employees' Retirement Fund ("CalPERS"), (NMV Entities, NMVSH and CalPERS, collectively, the "Reporting Persons"). NMV, NMVC, NMVT, NMV Offshore HoldCo, NMVSH and CalPERS are referred to together as the "Purchasers."(1) - --------------------- (1) Neither the present filing nor anything contained herein shall be construed as an admission that any Reporting Person constitutes a "person" for any purposes other than Section 13(d) of the Securities Exchange Act of 1934, as amended. Vantage GP is the general partner of NMV, NMVC and NMVT and the managing member of NMVSH, and is principally engaged in the business of serving as NMV's, NMVC's and NMVT's general partner and NMVSH's managing member. NMV Offshore is the sole member of NMV Offshore HoldCo and NMV Offshore HoldCo was formed to hold securities on behalf of NMV Offshore. NMV Advisers serves as the investment advisor and manager of each of NMV, NMVC, NMVT and NMV Offshore and is principally engaged in the business of managing NMV, NMVC, NMVT and NMV Offshore. Each of NMV, NMVC, NMVT and NMV Offshore was formed to seek long-term capital appreciation primarily through investments in publicly traded equity securities of companies whose equity securities are listed primarily on a U.S. securities exchange. Mr. Klinsky is the sole managing member of Vantage GP and the sole member of NMV Advisers. Mr. Klinsky is engaged principally in the business of serving as the sole managing member of Vantage GP and the sole member of NMV Advisers and as the Chief Executive Officer and sole member of New Mountain Capital, L.L.C., a Delaware limited liability company ("New Mountain") which is principally engaged in managing private equity funds. Mr. Klinsky is a citizen of the United States of America. NMVSH's sole members are Vantage GP and CalPERS. NMVSH was formed for the purpose of investing in shares of Common Stock and carrying out its investment strategy as further described in Item 6. CalPERS provides retirement and health benefits to more than 1.4 million public employees, retirees, and their families and more than 2,500 employers. CalPERS is the nation's largest public pension fund with assets totaling more than $213 billion. The principal business address of each of the Reporting Persons (other than NMV Offshore, NMV Offshore HoldCo and CalPERS) is 787 Seventh Avenue, 49th Floor, New York, NY 10019. The principal business address of each of NMV Offshore and NMV Offshore HoldCo is c/o Walkers SPV Limited, PO Box 908GT, Walker House, Mary Street, George Town, Grand Cayman, Cayman Islands. The principal business address of CalPERS is Lincoln Plaza, 400 Q Street, Sacramento, CA 95814. The Reporting Persons have entered into a joint filing agreement, dated as of October 30, 2006, a copy of which is attached to this Statement as Exhibit 99.1. Each of the Reporting Persons is responsible for the completeness and accuracy of the information concerning him or it contained herein, but is not responsible for the completeness and accuracy of the information concerning the others, except to the extent that he or it knows or has reason to believe that such information is inaccurate. (D - (E). None of the Reporting Persons during the last five years has been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors) or was party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person 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. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The aggregate purchase price of the 5,911,890 shares of Common Stock owned by the Purchasers is $202,759,529.36, including brokerage commissions. The shares of Common Stock owned by the Purchasers were acquired with working capital. ITEM 4. PURPOSE OF TRANSACTION The Reporting Persons purchased the shares of Common Stock based on the Reporting Persons' belief that the shares of Common Stock, when purchased, were undervalued and represented an attractive investment opportunity. Most importantly, based on work done on behalf of the Reporting Persons by Schlumberger Data & Consulting Services and others, the Reporting Persons believe that the shallow conventional oil and gas assets of the Issuer in the Appalachian basin have not been fully analyzed or developed and that such actions can be accomplished in a cost effective manner, which would generate value for the Issuer and its stockholders. The Reporting Persons have communicated a summary of their research findings to the Issuer's management. In addition, the Reporting Persons believe that the Issuer's Appalachian acreage may contain exploration and development opportunities in deeper formations and in the Devonian shale formation. The Reporting Persons intend to communicate with the Issuer's management, its stockholders and others regarding the Appalachian oil and gas assets and to recommend that the value of the assets be fully analyzed and reported to the Issuer's stockholders, and that these assets be more fully utilized by the Issuer in an expeditious manner. Except as set forth in this Statement, the Reporting Persons have no present plans or proposals that relate to or would result in any transaction, event or action described in paragraphs (a) through (j) of Item 4 of the form of Schedule 13D promulgated under the Act. In pursuing their investment businesses, the Reporting Persons analyze the operations, capital structure and markets of companies, including the Issuer, on a continuous basis through analysis of documentation and discussions with knowledgeable industry and market observers and with representatives of such companies. From time to time, one or more of the Reporting Persons may hold discussions with third parties, the management of such companies or the board of directors of such companies in which the Reporting Person may suggest or take a position with respect to potential changes in the operations, management or capital structure of such companies as a means of enhancing stockholder value. Each of the Reporting Persons reserves the right, in light of its continuing analysis and discussions as described above and its ongoing evaluation of the market price of the Common Stock, conditions in the securities markets generally, general economic and industry conditions, its business objectives and other relevant factors, to change its plans and intentions at any time, as it deems appropriate. In particular, and without limiting the generality of the foregoing, any one or more of the Reporting Persons (and their respective affiliates) may purchase additional shares of Common Stock or other securities of the Issuer or may sell or transfer shares of Common Stock or other securities of the Issuer in public or private transactions, may distribute Common Stock or other securities of the Issuer in-kind to their partners or member, as applicable, may seek board representation, may make proposals concerning changes to the operations, management or capital structure of the Issuer, may enter into privately negotiated derivative transactions with institutional counterparties to hedge the market risk of some or all of their positions in the Common Stock or other securities, and/or may take any other action that might result in any transaction, event or action described in paragraphs (a) through (j) of Item 4 of the form of Schedule 13D promulgated under the Act. Any such transactions may be effected at any time or from time to time, subject to any applicable limitations imposed on the transactions by the Securities Act or other applicable law. Except as described in this Statement and except for arrangements between and among the Reporting Persons, none of the Reporting Persons has any contracts, agreements, arrangements, understandings or relationships with any other person or entity for the purpose of acquiring, holding, voting or disposing of any shares of Common Stock. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (A). The aggregate percentage of shares of Common Stock reported owned by each person named herein is based upon 83,400,866 shares of Common Stock outstanding, which is the total number of shares of Common Stock outstanding as of July 31, 2006 as reported in the Issuer's Amended Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, as filed with the Securities and Exchange Commission on September 14, 2006. As of the close of business on October 27, 2006, as described below, the Reporting Persons may be deemed to beneficially own an aggregate of 5,911,890 shares of Common Stock representing, in the aggregate, approximately 7.1% of the issued and outstanding shares of Common Stock. As of the close of business on October 27, 2006, Mr. Klinsky may be deemed to beneficially own an aggregate of 5,188,200 shares of Common Stock that may be deemed to be beneficially owned by NMV, NMVC, NMVT, NMV Offshore and NMVSH representing, in the aggregate, approximately 6.2% of the issued and outstanding shares of Common Stock. Mr. Klinsky disclaims beneficial ownership of the shares of Common Stock beneficially owned by NMV, NMVC, NMVT, NMV Offshore and NMVSH, to the extent that partnership interests or limited liability company interests in NMV, NMVC, NMVT, NMV Offshore and NMVSH are held by persons other than Mr. Klinsky. As of the close of business on October 27, 2006, NMV Advisers may be deemed to beneficially own an aggregate of 3,828,200 shares of Common Stock that may be deemed to be beneficially owned by NMV, NMVC, NMVT and NMV Offshore representing, in the aggregate, approximately 4.6% of the issued and outstanding shares of Common Stock. NMV Advisers disclaims beneficial ownership of the shares of Common Stock beneficially owned by NMV, NMVC, NMVT and NMV Offshore, to the extent that partnership interests in NMV, NMVC, NMVT and NMV Offshore are held by persons other than NMV Advisers. As of the close of business on October 27, 2006, Vantage GP may be deemed to beneficially own an aggregate of 3,727,900 shares of Common Stock that may be deemed to be beneficially owned by NMV, NMVC, NMVT and NMVSH representing, in the aggregate, approximately 4.5% of the issued and outstanding shares of Common Stock. Vantage GP disclaims beneficial ownership of the shares of Common Stock beneficially owned by NMV, NMVC, NMVT and NMVSH to the extent that partnership interests or limited liability company interests in NMV, NMVC, NMVT and NMVSH are held by persons other than Vantage GP. As of the close of business on October 27, 2006, NMV Offshore may be deemed to beneficially own an aggregate of 1,460,300 shares of Common Stock that may be deemed to be beneficially owned by NMV Offshore HoldCo, representing approximately 1.8% of the issued and outstanding shares of Common Stock. As of the close of business on October 27, 2006, (i) NMV may be deemed to beneficially own an aggregate of 869,100 shares of Common Stock, representing approximately 1.0% of the issued and outstanding shares of Common Stock, (ii) NMVC may be deemed to beneficially own an aggregate of 866,700 shares of Common Stock, representing approximately 1.0% of the issued and outstanding shares of Common Stock, (iii) NMVT may be deemed to beneficially own an aggregate of 632,100 shares of Common Stock, representing approximately 0.8% of the issued and outstanding shares of Common Stock and (iv) NMV Offshore HoldCo may be deemed to beneficially own an aggregate of 1,460,300 shares of Common Stock, representing approximately 1.8% of the issued and outstanding shares of Common Stock. As of the close of business on October 27, 2006, NMVSH may be deemed to beneficially own an aggregate of 1,360,000 shares of Common Stock, representing approximately 1.6% of the issued and outstanding shares of Common Stock. As of the close of business on October 27, 2006, CalPERS may be deemed to beneficially own an aggregate of 2,083,690 shares of Common Stock that may be deemed to be beneficially owned by NMVSH and by CalPERS, representing approximately 2.5% of the issued and outstanding shares of Common Stock. CalPERS disclaims beneficial ownership of the shares of Common Stock beneficially owned by NMVSH to the extent that membership interests in NMVSH are held by persons other than CalPERS. In addition to the foregoing, Mr. F. Fox Benton III, who has entered into a consulting agreement with New Mountain as discussed in Item 6, is the President, director and a shareholder of Moreno Energy, Inc., a Texas Corporation ("Moreno Energy"). Mr. Benton has advised the Reporting Persons that Moreno Energy may be deemed to beneficially own, as of October 27, 2006, an aggregate of 5,000 shares of Common Stock, representing less than .01% of the issued and outstanding shares of Common Stock and that Mr. Benton may be deemed to beneficially own all of the shares of Common Stock that may be deemed to be beneficially owned by Moreno Energy. Moreno Energy is an energy investment company engaged principally in the business of owning direct interests in oil and gas properties and both private and public securities of energy companies. The principal business address of Moreno Energy is 8818 Stable Crest Blvd., Houston, TX 77024. No agreement or understanding exists between Mr. Benton or Moreno Energy, on the one hand, and any of the Reporting Persons, on the other hand, with respect to the disposition or the power to vote any of the shares of Common Stock that may be deemed to be beneficially owned by Moreno Energy or Mr. Benton or with respect to the acquisition by Mr. Benton or Moreno Energy of any additional shares of Common Stock. (B). Except as set forth below, each Reporting Person may be deemed to share the power to vote or direct the vote and to dispose or to direct the disposition of the shares of Common Stock that the Reporting Person may be deemed to beneficially own as described above. CalPERS may be deemed to have the sole power to vote or direct the vote and to dispose or to direct the disposition of the 642,640 shares of Common Stock that CalPERS owns directly. CalPERS may be deemed to share the power to dispose or to direct the disposition of the 81,050 shares of Common Stock that CalPERS beneficially owns through managers who manage stock portfolios on behalf of CalPERS and may be deemed to have the sole power to vote or direct the vote of such shares of Common Stock. (C). Schedule A annexed hereto lists all transactions in the shares of Common Stock during the past sixty days by the Reporting Persons. All of such transactions were effected in the open market. (D). No person is known by any Reporting Person to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any shares of Common Stock that may be deemed to be beneficially owned by any Reporting Person. (E). Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Other than as described herein, there are no contracts, arrangements, understandings or relationships among the Reporting Persons, or between the Reporting Persons and any other person, with respect to the securities of the Issuer. On October 18, 2006, NMVSH was formed as a Delaware limited liability company for the purpose of carrying out its investment strategy which is the achievement of capital appreciation by investing in the Issuer through open market purchases of Common Stock and related securities and working together with NMV for the purpose of demonstrating to the Issuer's management values that can be achieved for the Issuer and its shareholders by exploiting more fully the Issuer's existing assets or otherwise. Pursuant to the Limited Liability Company Agreement of NMVSH, dated as of October 19, 2006 (the "LLC Agreement"), a copy of which is attached hereto as Exhibit 99.2, Vantage GP is the Class A Member and Managing Member of NMVSH (the "Class A Member" or "Managing Member") and CalPERS is the Class B Member of NMVSH (the "Class B Member"). NMVSH has no other members. The LLC Agreement provides that the Managing Member, subject to the provisions of the LLC Agreement, will have the sole and exclusive right and authority to manage and control the business and affairs of NMVSH. Subject to limited exceptions, the Class B Member will make all determinations with respect to all acquisitions and dispositions of the Issuer's securities by NMVSH and exercise all shareholder rights, including voting rights, relating to such securities. The Class B Member is required to consult with the Class A Member prior to making any such acquisitions or dispositions and in the exercise of such rights and to make a good faith effort to coordinate any acquisitions, dispositions or exercise of rights with acquisitions and dispositions of securities of the Issuer and exercise of rights relating to such securities by affiliates of the Class A Member. The LLC Agreement also provides that the Managing Member will, after consultation with the Class B Member, cause NMVSH to prepare and make all regulatory filings and public statements concerning NMVSH's investment in Common Stock, and have such discussions and correspondence with the Issuer's management, board of directors and stockholders as the Managing Member will determine in furtherance of the investment strategy of NMVSH. The Class B Member has also agreed to certain restrictions on the acquisition of securities of the Issuer by the Class B Member and its affiliates other than NMVSH. In addition, the Class B Member may not take any action that would require a regulatory filing by NMVSH, except for the disposition of securities of the Issuer. The LLC Agreement further provides that the Class A Member is entitled to an annual incentive allocation of a portion of the appreciation in the value of the Common Stock held by NMVSH equal to 20% of the amount by which the value of such Common Stock exceeds a specified index. To the extent that performance of Common Stock held by NMVSH in any year does not generally exceed the specified index, the performance in a subsequent period must first exceed the amount of any underperformance before the Class A Member is entitled to an incentive allocation. The foregoing summary of the LLC Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the LLC Agreement attached as Exhibit 99.2 and incorporated herein by reference. New Mountain has entered into a consulting agreement with Mr. F. Fox Benton III (the "Consulting Agreement"), a copy of which is attached hereto as Exhibit 99.3, pursuant to which Mr. Benton will advise and assist the NMV Entities with respect to their investment strategy regarding the Issuer. The Consulting Agreement provides that, as part of the compensation for Mr. Fox's services, Mr. Fox will be paid a success fee based upon the performance of the NMV Entities' investment in shares of Common Stock. The foregoing summary of the Consulting Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Consulting Agreement attached as Exhibit 99.3 and incorporated herein by reference. From time to time, each of the NMV Entities may lend portfolio securities to brokers, banks or other financial institutions. These loans typically obligate the borrower to return the securities, or an equal amount of securities of the same class, to the lender on demand and typically the borrower is entitled to exercise voting rights and to retain dividends during the term of the loan. From time to time, to the extent permitted by applicable law, each of the NMV Entities may borrow securities, including shares of Common Stock, for the purpose of effecting, and may effect, short sale transactions, and may purchase securities for the purpose of closing out short sale positions in such securities. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS 99.1 Joint Filing Agreement, dated October 30, 2006. 99.2 Limited Liability Company Agreement of NMVSH, dated October 19, 2006, among Vantage GP and CalPERS. 99.3 Amended and Restated Letter agreement, dated October 25, 2006, by and between New Mountain and Mr. Benton. SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: October 30, 2006 NEW MOUNTAIN VANTAGE GP, L.L.C. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE, L.P. By: New Mountain Vantage GP, L.L.C., its general partner By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE (CALIFORNIA), L.P. By: New Mountain Vantage GP, L.L.C., its general partner By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE (TEXAS), L.P. By: New Mountain Vantage GP, L.L.C., its general partner By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky NEW MOUNTAIN VANTAGE ADVISERS, L.L.C. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE (CAYMAN) LTD. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Director NEW MOUNTAIN VANTAGE HOLDCO LTD. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Director NMV SPECIAL HOLDINGS, LLC By: New Mountain Vantage GP, L.L.C., its managing member By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM By: /s/ Christianna Wood ----------------------- Senior Investment Officer SCHEDULE A TRANSACTIONS IN THE PAST SIXTY DAYS BY THE PURCHASERS NMV - ------------------ ------------------------- ------------------------------ Date Shares of Common Stock Approximate Price per Share Purchased (inclusive of commissions) - ------------------ ------------------------- ------------------------------ 9/14/2006 60,200 37.11 - ------------------ ------------------------- ------------------------------ 10/6/2006 49,200 35.45 - ------------------ ------------------------- ------------------------------ 10/9/2006 200 35.53 - ------------------ ------------------------- ------------------------------ 10/10/2006 44,200 35.80 - ------------------ ------------------------- ------------------------------ 10/12/2006 3,400 36.04 - ------------------ ------------------------- ----------------------------- 10/16/2006 1,800 35.98 - ------------------ ------------------------- ------------------------------ 10/17/2006 37,500 36.04 - ------------------ ------------------------- ------------------------------ 10/17/2006 29,700 36.01 - ------------------ ------------------------- ------------------------------ 10/18/2006 59,400 36.12 - ------------------ ------------------------- ------------------------------ 10/19/2006 22,800 36.08 - ------------------ ------------------------- ------------------------------ NMVC - ------------------ ------------------------- ------------------------------ Date Shares of Common Stock Approximate Price per Share Purchased (inclusive of commissions) - ------------------ ------------------------- ------------------------------ 9/14/2006 61,100 37.11 - ------------------ ------------------------- ------------------------------ 10/6/2006 18,800 35.45 - ------------------ ------------------------- ------------------------------ 10/9/2006 100 35.53 - ------------------ ------------------------- ------------------------------ 10/10/2006 40,100 35.80 - ------------------ ------------------------- ------------------------------ 10/12/2006 3,500 36.04 - ------------------ ------------------------- ------------------------------ 10/16/2006 1,800 35.98 - ------------------ ------------------------- ------------------------------ 10/17/2006 38,300 36.04 - ------------------ ------------------------- ------------------------------ 10/17/2006 30,200 36.01 - ------------------ ------------------------- ------------------------------ 10/18/2006 59,100 36.12 - ------------------ ------------------------- ------------------------------ 10/19/2006 22,800 36.08 - ------------------- ------------------------- ------------------------------ NMVT - ------------------ ------------------------- ------------------------------ Date Shares of Common Stock Approximate Price per Share Purchased (inclusive of commissions) - ------------------ ------------------------- ------------------------------ 9/21/2006 41,200 36.73 - ------------------ ------------------------- ------------------------------ 9/25/2006 41,200 35.98 - ------------------ ------------------------- ------------------------------ 9/26/2006 40,000 36.43 - ------------------ ------------------------- ------------------------------ 9/27/2006 25,400 36.30 - ------------------ ------------------------- ------------------------------ 9/29/2006 18,500 36.38 - ------------------ ------------------------- ------------------------------ 9/29/2006 26,100 36.38 - ------------------ ------------------------- ------------------------------ 10/2/2006 10,300 36.37 - ------------------ ------------------------- ------------------------------ 10/3/2006 5,600 36.34 - ------------------ ------------------------- ------------------------------ 10/3/2006 106,100 35.99 - ------------------ ------------------------- ------------------------------ 10/4/2006 127,300 35.72 - ------------------ ------------------------- ------------------------------ 10/6/2006 42,100 35.45 - ------------------ ------------------------- ------------------------------ 10/9/2006 200 35.53 - ------------------ ------------------------- ------------------------------ 10/10/2006 34,700 35.80 - ------------------ ------------------------- ------------------------------ 10/12/2006 2,500 36.04 - ------------------ ------------------------- ------------------------------ 10/16/2006 1,400 35.98 - ------------------ ------------------------- ------------------------------ 10/17/2006 27,800 36.04 - ------------------ ------------------------- ------------------------------ 10/17/2006 21,100 36.01 - ------------------ ------------------------- ------------------------------ 10/18/2006 43,700 36.12 - ------------------ ------------------------- ------------------------------ 10/19/2006 16,900 36.08 NMV Offshore HoldCo - ------------------ ------------------------- ------------------------------ Date Shares of Common Stock Approximate Price per Share Purchased (inclusive of commissions) - ------------------ ------------------------- ------------------------------ 9/8/2006 152,900 37.47 - ------------------ ------------------------- ------------------------------ 9/11/2006 116,600 36.92 - ------------------- ------------------------- ----------------------------- 9/12/2006 12,900 37.10 - ------------------ ------------------------- ------------------------------ 9/14/2006 41,800 37.11 - ------------------ ------------------------- ------------------------------ NMVSH - ----------------- ------------------------- ------------------------------ Date Shares of Common Stock Approximate Price per Share Purchased (inclusive of commissions) - ------------------ ------------------------- ------------------------------ 10/23/2006 478,100 36.80 - ------------------- ------------------------- ------------------------------ 10/24/2006 203,000 37.05 - ------------------ ------------------------- ------------------------------ 10/24/2006 57,900 37.00 - ------------------- ------------------------- ------------------------------ 10/26/2006 328,300 37.69 - ------------------- ------------------------- ------------------------------ 10/27/2006 292,700 37.73 - ------------------- ------------------------- ------------------------------ CalPERS - ----------------- ------------------------- ------------------------------ Date Shares of Common Stock Approximate Price per Share Purchased/(Sold) (inclusive of commissions) - ------------------ ------------------------- ------------------------------ 8/31/2006 (1,300) 38.05 - ------------------ ------------------------- ------------------------------ 8/31/2006 2,044 38.09 - ------------------ ------------------------- ------------------------------ 8/31/2006 6,131 38.09 - ------------------- ------------------------- ------------------------------ 8/31/2006 100 38.18 - ------------------ ------------------------- ------------------------------ 9/1/2006 2,900 38.37 - ------------------ ------------------------- ------------------------------ 9/5/2006 (800) 38.52 - ------------------ ------------------------- ------------------------------ 9/6/2006 (3,400) 38.01 - ------------------ ------------------------- ------------------------------ 9/7/2006 (27,300) 37.63 - ------------------ ------------------------- ------------------------------ 9/8/2006 (13,600) 37.48 - ------------------ ------------------------- ------------------------------ 9/11/2006 (7,400) 36.92 - ------------------ ------------------------- ------------------------------ 9/12/2006 (2,800) 37.10 - ------------------ ------------------------- ------------------------------ 9/13/2006 (6,600) 37.21 - ------------------ ------------------------- ------------------------------ 9/14/2006 (4,700) 37.10 - ------------------ ------------------------- ------------------------------ 9/15/2006 (8,800) 36.82 - ------------------ ------------------------- ------------------------------ 9/18/2006 (2,700) 36.86 - ------------------ ------------------------- ------------------------------ 9/19/2006 (2,800) 36.91 - ------------------ ------------------------- ------------------------------ 9/20/2006 (5,500) 37.07 - ------------------ ------------------------- ------------------------------ 9/21/2006 (3,100) 36.73 - ------------------ ------------------------- ------------------------------ 9/22/2006 (2,900) 36.41 - ------------------ ------------------------- ------------------------------ 9/28/2006 300 36.74 - ------------------ ------------------------- ------------------------------ 9/29/2006 (500) 36.36 - ------------------ ------------------------- ------------------------------ 10/10/2006 (5,600) 35.77 - ------------------ ------------------------- ------------------------------ 10/11/2006 (6,600) 35.96 - ------------------ ------------------------- ------------------------------ 10/12/2006 (8,700) 36.10 - ------------------ ------------------------- ------------------------------ 10/16/2006 (8,000) 36.36 - ------------------ ------------------------- ------------------------------ 10/18/2006 (5,200) 36.10 - ------------------ ------------------------- ------------------------------ 10/20/2006 (1,400) 36.43 - ------------------ ------------------------- ------------------------------ 10/23/2006 (68,800) 36.88 - ------------------ ------------------------- ------------------------------ 10/23/2006 (13,700) 36.82 - ------------------ ------------------------- ------------------------------ 10/25/2006 (1,000) 37.63 - ------------------ ------------------------- ------------------------------ 10/25/2006 (8,500) 37.63 - ------------------ ------------------------- ------------------------------ 10/26/2006 (1,650) 37.88 - ------------------- ------------------------- ------------------------------ 10/27/2006 (10,800) 37.77 - ------------------- ------------------------- ------------------------------ EX-99 2 exh99_1.txt EXHIBIT 99.1 JOINT FILING AGREEMENT The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement shall be filed on behalf of each of the undersigned without the necessity of filing additional joint filing agreements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the others, except to the extent that it knows or has reason to believe that such information is inaccurate. This Agreement may be executed in counterparts and each of such counterparts taken together shall constitute one and the same instrument. Dated: October 30, 2006 NEW MOUNTAIN VANTAGE GP, L.L.C. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE, L.P. By: New Mountain Vantage GP, L.L.C., its general partner By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE (CALIFORNIA), L.P. By: New Mountain Vantage GP, L.L.C., its general partner By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE (TEXAS), L.P. By: New Mountain Vantage GP, L.L.C., its general partner By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member /s/ Steven B. Klinsky -------------------------- Steven B. Klinsky NEW MOUNTAIN VANTAGE ADVISERS, L.L.C. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member NEW MOUNTAIN VANTAGE (CAYMAN) LTD. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Director NEW MOUNTAIN VANTAGE HOLDCO LTD. By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Director NMV SPECIAL HOLDINGS, LLC By: New Mountain Vantage GP, L.L.C., its managing member By: /s/ Steven B. Klinsky ----------------------- Steven B. Klinsky Managing Member CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM By: /s/ Christianna Wood ----------------------- Senior Investment Officer EX-99.2 3 exh-99_2.txt EXHIBIT 99.2 ----------------------------------------------------- LIMITED LIABILITY COMPANY AGREEMENT OF NMV SPECIAL HOLDINGS, LLC DATED AS OF OCTOBER 19, 2006 ----------------------------------------------------- =========================================================================== THE MEMBERSHIP INTERESTS IN NMV SPECIAL HOLDINGS, LLC HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), THE SECURITIES LAWS OF ANY STATE, OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND THOSE LAWS. THE INTERESTS MUST BE ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS AND (II) THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE INTERESTS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH THOSE LAWS AND THIS AGREEMENT. TABLE OF CONTENTS PAGE ARTICLE I DEFINITIONS...................................................1 ARTICLE II ORGANIZATION.................................................5 Section 2.01 Formation.................................................5 Section 2.02 Name......................................................5 Section 2.03 Organizational Certificates and Other Filings.............5 Section 2.04 Principal Place of Business...............................5 Section 2.05 Registered Office and Registered Agent....................5 Section 2.06 Term......................................................6 Section 2.07 Fiscal Year...............................................6 Section 2.08 No State-Law Partnership..................................6 Section 2.09 Purpose...................................................6 Section 2.10 Powers of the Company.....................................6 Section 2.11 Investment Restrictions...................................6 Section 2.12 Members' Rights and Obligations...........................6 Section 2.13 Liability of Members......................................7 ARTICLE III MANAGEMENT OF THE COMPANY...................................8 Section 3.01 The Managing Member.......................................8 Section 3.02 Delegation by Managing Member.............................8 Section 3.03 Authority of the Managing Member..........................8 Section 3.04 Term and Replacement of the Managing Member...............9 Section 3.05 Expenses..................................................9 ARTICLE IV CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND ALLOCATIONS..............................................................9 Section 4.01 Capital Contributions.....................................9 Section 4.02 Capital Accounts..........................................9 Section 4.03 Capital Account Allocations..............................10 Section 4.04 Changes of Interest......................................13 Section 4.05 Valuation of Assets......................................13 Section 4.06 Liabilities; Reserves....................................13 Section 4.07 Tax Allocations..........................................13 Section 4.08 Determination by the Managing Member of Certain Matters..................................................14 ARTICLE V DISTRIBUTIONS................................................14 Section 5.01 Distributions............................................14 Section 5.02 Limitations on Distributions.............................14 i ARTICLE VI TRANSFERS OF INTERESTS......................................15 Section 6.01 Transfer of a Member's Interest..........................15 Section 6.02 Substituted Member.......................................15 ARTICLE VII DURATION AND DISSOLUTION...................................15 Section 7.01 Duration.................................................15 Section 7.02 Dissolution..............................................16 Section 7.03 No Restoration Obligation................................16 ARTICLE VIII TAX RETURNS; REPORTS TO MEMBERS...........................16 Section 8.01 Tax Returns..............................................16 Section 8.02 Reports to Current Members...............................17 Section 8.03 Tax Reports to Members and Former Members................17 Section 8.04 Confidentiality..........................................17 ARTICLE IX EXCULPATION AND INDEMNIFICATION.............................19 Section 9.01 Performance of Duties....................................19 Section 9.02 Right to Indemnification.................................20 Section 9.03 Advance Payment..........................................20 Section 9.04 Nonexclusivity of Rights.................................21 Section 9.05 Savings Clause...........................................21 ARTICLE X GENERAL PROVISIONS...........................................21 Section 10.01 Members' Holdings........................................21 Section 10.02 Other Expenses and Costs.................................21 Section 10.03 General..................................................22 Section 10.04 Amendments to Limited Liability Company Agreement........22 Section 10.05 Governing Law............................................22 Section 10.06 Notices..................................................22 Section 10.07 Entire Agreement.........................................23 ii LIMITED LIABILITY COMPANY AGREEMENT of NMV SPECIAL HOLDINGS, LLC a Delaware limited liability company (the "Company"), dated and effective as of October 19, 2006, among the Persons listed on the signature pages hereto. WHEREAS, the Company was formed by the filing of a Certificate of Formation, dated as of October 18, 2006, which was filed in the office of the Secretary of State of Delaware on October 18, 2006. WHEREAS, the Members desire to enter into this Agreement to set forth their binding agreement as to the affairs of the Company, the conduct of its business and the rights and obligations of the Company. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE I DEFINITIONS ----------- As used in this Agreement, the following terms have the following meanings: "Accounting Period" means the period beginning on (a) in the case of the first Accounting Period, the Company's initial closing date and (b) in the case of each subsequent Accounting Period, the first Business Day following the last Business Day of the immediately preceding Accounting Period, as the case may be, and ending on the earliest of: (i) the date immediately preceding the next date on which the Company receives a capital contribution, (ii) the next date on which any Member effects a withdrawal, (iii) the next date on which the Company makes a distribution, (iv) the last Business Day of each calendar quarter, (v) the date on which the Company dissolves or (vi) such other date as the Managing Member determines, in its sole discretion, that an allocation should be made among the Members. "Act" shall mean the Delaware Limited Liability Company Act (6 Del. C. ss. 18-101, et seq.), aS amended from time to time, or any successor statute thereto. "Affiliate" means, with respect to a Person, any other Person which directly or indirectly controls, is controlled by or is under common control with the first Person. As used herein with respect to a Member, the term Affiliate shall not include the Company. "Agreement" shall mean this Limited Liability Company Agreement, as amended, modified, supplemented or restated from time to time. This Agreement shall be deemed a "limited liability company agreement" within the meaning of Section 18-101(7) of the Act. "Allocation Date" has the meaning specified in Section 4.03(b)(ii). "Allocation Payment Date" has the meaning specified in Section 5.02. "Available Cash" shall mean, as of any date, the excess, if any, of (i) all cash received by the Company from dispositions of Securities by the Company less (ii) such cash reserves as may be determined by the Managing Member pursuant to Section 4.6. "Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934, except that in calculating the beneficial ownership of any particular "person" (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934), such "person" will be deemed to have beneficial ownership of all securities that such "person" has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition (exclusive of any rights of first refusal, rights of first offer, rights under proxies or similar rights that have not been exercised). The terms "Beneficially Owns", "Beneficially Owned" and "Beneficial Ownership" will have a corresponding meaning. "Business Day" means any day on which both the New York Stock Exchange is open for business and banks are required by law to be open for business in New York, New York. "Capital Account" has the meaning specified in Section 4.02(a). "Certificate" has the meaning specified in Section 2.01. "Class A Member" shall mean the holder of Class A Units. "Class B Member" shall mean the holder of Class B Units. "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. "Commitment" has the meaning specified in Section 4.01. "Company" shall have the meaning assigned to it in the opening paragraph of this Agreement. "Confidential Information" has the meaning specified in Section 8.04. "Contribution" shall mean, as the context may require, contributions made (or deemed to be made) by a Member to, or on behalf of, the Company. "Corporate Event" means an acquisition, merger, spin-off, or other corporate event involving Pubco. "Distributed Securities" means securities which may be distributed to shareholders of Pubco in respect of the Shares in a Corporate Event. "Excess Performance Amount" has the meaning specified in Section 4.03. "Fiscal Year" has the meaning specified in Section 2.07. "FOIA" has the meaning specified in Section 8.04(c). "Incentive Allocation" has the meaning specified in Section 4.03(b). "Index Funds" shall mean the broad based passive funds of the Class B Member and its Affiliates which track certain specified indices. "Investment Strategy" means the achievement of capital appreciation by (i) investing in Pubco through open market purchases of Shares, investing in Related Securities and acquiring Distributed Securities and (ii) working together with Vantage for the purpose of demonstrating to Pubco's management values that can be achieved for Pubco and its shareholders by exploiting more fully Pubco's existing assets or otherwise. "Managing Member" means the Class A Member. The Managing Member shall be deemed to be a "manager" within the meaning of Section 18-101(10) of the Act. "Members" means the parties who hold a Membership Interest. The Members shall constitute the "members" (as that term is defined in Section 18-101(11) of the Act) of the Company. "Membership Interest" shall mean a Member's limited liability company interest, held in the form of units, in such Member's capacity as a Member in the Company, including such Member's right to share in the Company's profits and losses and distributions (including, without limitation, distributions of liquidation proceeds) pursuant to this Agreement and the Act and the right, if any, to participate in the management of the business and the affairs of the Company. "Membership Units" shall mean units of membership interest held by a Member representing such Member's Membership Interest and shall refer to the Class A Units or Class B Units as the context requires. "Net Asset Value" has the meaning specified in Section 4.05. "Net Loss" with respect to any period of determination, means the excess, if any, of the Company's Net Asset Value at the beginning of that period over the Net Asset Value at the end of that period (prior to the Incentive Allocation for such period), minus the amount of any distributions and withdrawals for that period, and plus the amount of any capital contributions to the Partnership during that period. "Net Profit" with respect to any period of determination, means the excess, if any, of the Company's Net Asset Value at the end of that period (prior to the Incentive Allocation for such period) over the Net Asset Value at the beginning of that period, plus the amount of any distributions and withdrawals for that period, and minus the amount of any capital contributions to the Company during that period. "Open Meetings Act" has the meaning specified in Section 8.04(b). "Performance Period" means, with respect to any Capital Account of a Member, the period beginning on either the date of the Member's initial capital contribution in respect of such Capital Account or the first Business Day following the last Business Day of the immediately preceding Performance Period, as the case may be, and ending on the earlier of (i) the next succeeding December 31st (or, if such date is not a Business Day, the last preceding Business Day) and (ii) the date on which the Company terminates. "Person" means any individual, partnership, joint venture, corporation, limited liability company, unincorporated organization or association, trust (including the trustees thereof in their capacity as such), government (or agency or subdivision thereof) or other entity. "Pro Rata Share" has the meaning specified in Section 10.02(d). "Proceeding" has the meaning specified in Section 9.02. "Proceeding Costs" has the meaning specified in Section 9.02. "Pubco" means National Fuel Gas Company, a New Jersey corporation. "Public Records Act" has the meaning specified in Section 8.04(b). "Related Securities" means rights, options, futures contracts, forward contracts, "spot" transactions, swap arrangements and other derivative instruments related thereto and other securities or instruments for the purpose of hedging or otherwise in connection with the Member's investment in Pubco. "Remaining Undistributed Allocation" has the meaning specified in Section 5.02. "Securities" means Shares, Related Securities and Distributed Securities. "Shares" means the shares of common stock, $1.00 par value per share, of Pubco. "Tax Matters Member" has the meaning specified in Section 8.01. "Underperformance Amount" has the meaning specified in Section 4.03. "Underperformance Carry-forward Amount" has the meaning specified in Section 4.03. "Unfunded Commitment" means, with respect to any Member as of any date, the amount of such Member's Commitment that has not been funded as a capital contribution. "Undistributed Incentive Allocation" means, as of any date, the aggregate amount credited to the Capital Account of the Class A Member pursuant to Section 4.3(b) for any Performance Period prior to such date that has not been distributed in cash to the Class A Member. "Vantage" means New Mountain Vantage, L.P., a Delaware limited partnership, and its related funds. ARTICLE II ORGANIZATION ------------ Section 2.01. Formation. The Members hereby agree to continue the Company which was formed as a Delaware limited liability company by the execution and filing of a Certificate of Formation (as the same may be amended from time to time, the "Certificate") by an authorized person as required by the Act. The rights, powers, duties, obligations and liabilities of the Members (in their respective capacities as such) shall be determined pursuant to the Act and this Agreement. To the extent that the rights, powers, duties, obligations and liabilities of any Member (in its capacity as such) are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control. Section 2.02. Name. The name of the Company shall be NMV Special Holdings, LLC, and all business of the Company shall be conducted in that name or in such other names, that comply with applicable law, as the Managing Member may select from time to time. Section 2.03...Organizational Certificates and Other Filings. If requested by the Managing Member, the Members shall promptly execute all certificates and other documents consistent with the terms of this Agreement necessary for the Managing Member to accomplish all filing, recording, publishing and other acts that may be required to comply with all requirements for (a) the formation and operation of a limited liability company under the laws of the State of Delaware and (b) the operation of the Company as a business in all jurisdictions where the Company conducts or proposes to conduct business. Section 2.04. Principal Place of Business. The principal place of business of the Company shall be located at 787 Seventh Avenue, 49th Floor, New York, New York 10019 or at such other place as the Managing Member may from time to time select. Section 2.05. Registered Office and Registered Agent. The address of the Company's registered office in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The name and address of the Company's registered agent for service of process in the State of Delaware is The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The Manager Member may at any time change the Company's registered office and/or registered agent for service of process in the State of Delaware. Section 2.06. Term. The term of the Company shall commence on the date on which the Certificate is filed in the office of the Secretary of State of Delaware and shall continue until dissolved or terminated pursuant to this Agreement or the Act. The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate as provided in the Act. Section 2.07. Fiscal Year. The fiscal year of the Partnership (the "Fiscal Year") shall end on December 31 of each calendar year or any other date deemed advisable by the Managing Member and permitted under the Code. The Company shall have the same Fiscal Year for United States federal and state income tax purposes and for financial and partnership accounting purposes. Section 2.08. No State-Law Partnership. The Members intend that the Company shall not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member or Managing Member shall be a partner or joint venturer of any other Member or Managing Member, for any purposes other than tax purposes, and this Agreement shall not be construed to the contrary. Section 2.09. Purpose. The Company is formed for the purpose of carrying out the Investment Strategy. The Company shall have the power to engage in all activities and transactions which the Managing Member deems necessary or advisable in connection with the foregoing (but subject to the investment restrictions set forth in Section 2.11 and the Member's rights and obligations set forth in Section 2.12). Section 2.10. Powers of the Company. The Company shall have and may exercise all the powers and privileges to the fullest extent permitted by law as are necessary, appropriate or incidental to the conduct, promotion or attainment of the purpose of the Company, subject to the provisions of this Agreement, including, without limitation, (a) the Managing Member may, on behalf of the Company, enter into and perform any and all documents, agreements and instruments, all without any further act, vote or approval of any other Member; and (b) the Managing Member may authorize any Person to enter into and perform any document on behalf of the Company. Section 2.11. Investment Restrictions. The Company will not make any investments other than purchasing and acquiring the Securities. Section 2.12. Members' Rights and Obligations. Notwithstanding any provision in this Agreement to the contrary, the Members shall have the following rights and obligations: (a) Subject to the other provisions of this Agreement, the Class B Member shall have the right to cause the Company to make all acquisitions and dispositions of Securities by the Company and to execute and deliver any agreement, instrument or certificate on behalf, and in the name, of the Company that may be necessary in connection with acquisition and dispositions of Securities; provided, however, that the Class B Member shall consult with the Class A Member prior to any such acquisitions and dispositions, and shall make a good faith effort to coordinate any such acquisitions and dispositions with any acquisitions and dispositions of Securities by Affiliates of the Class A Member. (b) The Class B Member shall have the right to cause the Company to exercise all shareholder rights relating to Securities, including voting rights; provided, however, that the Class B Member shall consult with the Class A Member in the exercise of all such rights, and shall make a good faith effort to coordinate the exercise of such rights with the exercise of rights in Securities owned by Affiliates of the Class A Member. (c) The Class B Member shall use reasonable best efforts to provide daily notification to the Class A Member with respect to all trades of Securities by the Company and with respect to all trades in any other Securities Beneficially Owned by the Class B Member or any of its Affiliates or which are traded for the account of the Class B Member or its Affiliates. In addition, the Class B Member shall provide the Class A Member with reasonable access to all financial data relating to any such Securities for purposes of any regulatory filings of the Company. (d) Until such time as the Class B Member has made capital contributions to the Company equal to its Commitment and all of such Commitment has been utilized to acquire Securities or otherwise as permitted herein, the Class B Member and its Affiliates shall not, other than through the Company (or as a member of a "group" with Affiliates of the Class A Member), acquire Beneficial Ownership of any Securities, and shall not permit any other party to acquire Securities for the account of the Class B Member or any of its Affiliates; provided, however, the provisions of this Section 12.2(d) shall not apply to acquisitions of Securities by external investment managers for the account of the Class B Member or any of its Affiliates until such time as the Company files a Schedule 13D under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. Notwithstanding the foregoing, the Class B Member may through its Index Funds Beneficially Own up to 0.1% (10 basis points) of the outstanding Shares of Pubco above the Class B Member and its Affiliates' ownership of outstanding Shares of Pubco as of the date of this Agreement at any one time other than through the Company. (e) Notwithstanding any other provision hereof, the Class B Member and its Affiliates shall not knowingly take any actions which will require any regulatory filings by the Company which the Company would not be required to make in the absence of such action without the consent of the Managing Member, which consent shall not be unreasonably withheld; provided, however, nothing herein shall prevent the Class B Member and its Affiliates from disposing, or causing the Company to dispose, of Securities at any time from time to time. (f) The Managing Member shall, after consultation with the Class B Member, cause the Company to prepare and make all regulatory filings and public statements, and have such discussions and correspondence with Pubco's management, board of directors and stockholders, as the Managing Member shall determine in furtherance of the Investment Strategy. The Class B Member shall cooperate with the Managing Member with respect to all such filings, statements, decisions and correspondence, including, without limitation, playing an active role, if so requested by the Managing Member, in any such discussions or correspondence. Section 2.13. Liability of Members. Except as required by the Act or as expressly set forth in this Agreement, no Member shall have any personal liability whatsoever in such Member's capacity as a Member, whether to the Company, to any of the other Members, to the creditors of the Company or to any third party, for the debts, liability, commitments or other obligations of the Company or for any losses of the Company. Each Member shall be liable only to make capital contributions as and when required by this Agreement and the other payments required to be made by such Member under the Act or this Agreement. ARTICLE III MANAGEMENT OF THE COMPANY ------------------------- Section 3.01. The Managing Member. Subject to the terms and conditions of this Agreement, the Managing Member shall have the sole and exclusive right and authority to manage and control the business and affairs of the Company, and shall possess all rights and powers of a "manager" of a limited liability company as provided by the Act and applicable law. Section 3.02. Delegation by Managing Member. The Managing Member shall have the power and authority to delegate the Managing Member's rights and powers to manage and control the business and affairs of the Company, by written instrument, to one or more Persons, including any officer, employee or agent of the Company, any Member or the Managing Member. The Managing Member may, by written instrument, authorize any Person (including, without limitation, any Member) to enter into and perform under any document on behalf of the Company. Section 3.03. Authority of the Managing Member. The parties agree that the Managing Member shall have the sole and exclusive power and authority on behalf of and without further action or consent of the Members: (a) to execute and deliver or to authorize the execution and delivery of any documents in the ordinary course of business on behalf of the Company; (b) to employ, retain, consult with and dismiss such personnel as may be required for accomplishment of the business purpose set forth in Article II; (c) to engage attorneys, consultants and accountants for the Company; (d) to develop or cause to be developed accounting procedures for the maintenance of the Company's books of account; (e) to appoint auditors; (f) to do all such other acts as shall be specifically authorized in this Agreement or by the Members in writing from time to time, including but not limited to, those acts set forth in Section 2.12(f); and (g) to adopt such agreements with other Persons which are practical to preserve its rights to conduct business. Section 3.04. Term and Replacement of the Managing Member. The Managing Member shall serve in its capacity as such until the dissolution or resignation of the Managing Member. Section 3.05. Expenses. The Company shall bear all out-of-pocket expenses relating to the Company's operations. The Class A Member shall bear all expenses relating to the formation and organization of the Company other than the legal fees of the Class B Member and its Affiliates related thereto. ARTICLE IV CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS AND ALLOCATIONS -------------------------------- Section 4.01. Capital Contributions. (a) Each of the Members have made a capital commitment (each a "Commitment") to the Company in the amount set forth in Schedule A and in return therefor have received the Membership Units set forth in Schedule A. (b) The Class B Member shall make capital contributions from time to time as needed to fund the purchase of Securities; provided, that, such capital contributions shall reduce the Class B Member's Unfunded Commitment. (c) Simultaneously with the first capital contribution by the Class B Member, the Class A Member shall make a capital contribution in an amount equal to its entire Unfunded Commitment. (d) The Managing Member, in its sole discretion, may request additional capital contributions from the Class B Member from time to time as needed to fund the payment of all out-of-pocket expenses of the Company and all other obligations of the Company under the terms of this Agreement. (e) Notwithstanding the other provisions of this Section 4.01 (i) the Class A Member shall have the right from time to time to make additional capital commitments up to the amount set forth in Schedule A and in return therefor receive the additional Membership Units set forth in Schedule A; and (ii) the Class A Member shall have the right from time to time to make additional capital contributions up to the amount of the additional capital commitments in clause (i) of this provision. Section 4.02. Capital Accounts. (a) The Company shall establish for each Member a capital account ("Capital Account"). Capital Accounts shall be adjusted as provided in this Article. (b) The initial balance of the Capital Account of each Member shall be the amount of such Member's initial Contribution to the Company. The initial balance of the Capital Account of each Member shall from time to time be: (i) Increased by (a) the amount of any cash or the fair market value of any Securities contributed to the Company by such Member in addition to its initial capital contribution, and (b) the positive adjustments to such Capital Account provided for in this Article; and (ii) Decreased by (a) the amount of cash and the fair market value of other property distributed to or withdrawn by such Member and (b) the negative adjustments to such Capital Account provided for in this Article. Section 4.03. Capital Account Allocations. (a) Subject to the Incentive Allocation, as of the last Business Day of each Accounting Period, the Capital Account of each Member, including the Managing Member, shall initially be credited to reflect the Net Profit or debited to reflect the Net Loss of the Company during such Accounting Period, pro rata in proportion to the Members' respective Capital Account balances at the beginning of the Accounting Period. All calculations of Net Profit and Net Loss and the calculation of the Incentive Allocation shall be made after deduction for all general, administrative, and other operating expenses of the Company (but excluding the Company's Incentive Allocation) and any amounts necessary, in the Company's discretion, as appropriate reserves therefor. (b) Notwithstanding Section 4.03(a), after giving effect to the allocations provided for in Section 4.03(a), the amount, if any, of Net Profit credited to the Capital Account of each Member for such Accounting Period shall be reallocated between the Class A Member and the Class B Member as follows: (i) as of the last Business Day of each Performance Period, the Capital Account of the Class B Member shall be debited, and the Capital Account of the Class A Member shall be credited, in an amount equal to the Incentive Allocation, if any, during such Performance Period; and (ii) on the day on which the Class B Member makes a partial or total withdrawal from the Company, the Capital Account of the Class A Member shall be credited, and the Capital Account of the Class B Member shall be debited, in an amount equal to such portion of the Incentive Allocation then accrued as of such date (determined as if such date were the end of a Performance Period) as is in proportion to the reduction of the Class A Member's Capital Account effected by such withdrawal (which proportion shall be based on such Capital Account immediately before giving effect to such withdrawal) (any such date upon which Net Profit is reallocated as set forth in (i) or (ii) is referred to as an "Allocation Date"). The "Incentive Allocation" with respect to the Class A Member, as of the last Business Day of any Performance Period, shall equal twenty percent (20%) of the Excess Performance Amount (as defined below) for such Performance Period; provided that the Incentive Allocation for any Performance Period shall not exceed 100% of the Net Profit credited to the Capital Account of the Class B Member pursuant to Section 4.03(a) in respect of such Performance Period. The "Excess Performance Amount" for a Performance Period shall equal the amount, if any, by which: (i) the sum (whether positive or negative) of (A) the aggregate Net Profits or Net Losses allocated to the Class B Member for such Performance Period, minus (B) any expenses charged to the Class B Member for such Performance Period exceeds (ii) the Benchmark (as defined below) for such Performance Period (the amount in any Performance Period by which clause (ii) exceeds clause (i) is referred to herein as the "Underperformance Amount"). The "Benchmark" for any Performance Period shall be an amount (whether positive or negative) equal to: (i) the product of (A) the sum of (I) the Class B Member's Capital Account balance as of the first Business Day of such Performance Period and (II) the Underperformance Carry-forward Account of the Class B Member as of the last day of the immediately preceding Performance Period, multiplied by (B) the percentage return (positive or negative) of the S&P 500(R) total return index, as published froM time to time by Standard & Poor's; plus: (ii) the excess, if any, of: (A) the product of: (I) 1.5% per annum and (II) the Class B Member's Capital Account balance as of the first Business Day of such Performance Period; over (B) the Class B Member's allocable share of all expenses for such Performance Period; plus: (iii) the Underperformance Carry-forward Account of the Class B Member as of the last day of the immediately preceding Performance Period. The "Underperformance Carry-forward Account" of the Class B Member shall (i) have an initial balance of zero, (ii) be increased by the Underperformance Amount, if any, of any Performance Period as of the end of such Performance Period and (iii) be decreased (but not below zero) by the Excess Performance Amount (net of any Incentive Allocation relating thereto) of any Performance Period as of the end of such Performance Period. As of any date on which the Capital Account balance of the Class B Member is reduced as a result of a distribution which is not reinvested or a withdrawal, the balance of the related Underperformance Carry-forward Account that is included in determining the Incentive Allocation shall be reduced (but not below zero), effective as of the beginning of the then-current Performance Period, by an amount equal to (a) such balance multiplied by (b) a fraction the numerator of which is equal to the amount of the distribution which is not reinvested or the withdrawal amount and the denominator of which is equal to such Capital Account balance immediately before giving effect to such distribution or withdrawal; provided that no such reduction shall be made in the event that such distribution is the result of a disposition of Securities by the Company that has been coordinated with a substantially contemporaneous disposition of Securities by the Class A Member or its Affiliates. If the Class B Member makes a capital contribution or receives a distribution or withdrawal during any Performance Period, the Benchmark for such Performance Period shall be calculated on the following basis: (i) such Performance Period shall be divided into sub-performance periods, with a sub-performance period ending as of the business day immediately preceding each such capital contribution or the date of each such distribution and withdrawal, as applicable, and a new sub-performance period beginning immediately thereafter, (ii) a sub-benchmark shall be calculated for each such sub-performance period on the same basis as is provided in this paragraph for the calculation of the Benchmark and (iii) the Benchmark for such Performance Period shall equal the sum of the sub-benchmarks for all such sub-performance periods within such Performance Period. (c) Notwithstanding anything to the contrary contained herein, no allocation of Net Loss shall be made pursuant to this Section 4.03 to the Capital Account of the Class A Member to the extent that it would cause or increase a deficit balance in such Capital Account as of the end of the Accounting Period to which the allocation relates in excess of its Unfunded Commitment. Solely for purposes of this Section 4.03(c), the balance of a Member's Capital Account shall be reduced by the amounts described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). (d) Notwithstanding anything to the contrary contained herein, any Member who unexpectedly receives an allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that creates or increases a deficit balance in the Member's Capital Account shall be allocated items of gross income and gain for Capital Account purposes in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations, the deficit balance as quickly as possible. Any amounts allocated pursuant to this Section 4.03(d) for any Accounting Period shall be excluded from Net Profit or Net Loss for the Accounting Period. (e) Notwithstanding anything to the contrary contained herein, but subject to Sections 4.03(c) and (d), if any allocations are made pursuant to Section 4.03(c) or 4.03(d), subsequent allocations pursuant to this Section 4.03 shall be made so that the net amount of any items allocated to each Member shall, to the extent possible, be equal to the net amount that would have been allocated to each Member if allocations pursuant to Section 4.03(c) or 4.03(d) had not been made. (f) To the extent, if any, that expenses to be borne by the Class A Member are deemed to constitute items of Company loss, expense or deduction rather than items of loss, expense or deduction of the Class A Member, the payment of such expenses by the Class A Member shall be deemed a capital contribution to the Company and such items shall be allocated 100% to the Class A Member. (g) The foregoing provisions and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with those Regulations. Section 4.04. Changes of Interest. To determine possible varying interests of Members during a taxable year, the Company may use any method allowable under the Code and deemed advisable by the Managing Member. Section 4.05. Valuation of Assets. The net asset value of the Company ("Net Asset Value") shall be determined as of the end of each Accounting Period and at such other times as the Managing Member may determine and shall be equal to the excess of value of the Company's assets over the amount of its liabilities, determined in accordance with U.S. generally accepted accounting principles and the guidelines contained in the CFA Institute Performance Presentation Standards. For the avoidance of any doubt, the value of any security held by the Company as of any date (i) that is primarily traded on a securities exchange shall be the closing sale price of such security on the principal securities exchange on which it is traded as of such date or, if no sales occurred on any such day, the mean between the closing "bid" and "asked prices" on such day, and (ii) the principal market for which is to be the over-the-counter market, the closing sale price on such day, as published by NASDAQ or any similar organization, or if such price is not so published on any such day, the mean between the closing "bid" and "asked" prices, if available, on such day, which prices may be obtained from any reputable pricing service, broker or dealer, provided, that the value of any such security as of any date that is not a Business Day shall be determined as aforesaid but as of the immediately preceding Business Day. All other Securities and assets for which market quotations are not readily available shall be valued at fair market value as reasonably determined in good faith by the Managing Member. Section 4.06. Liabilities; Reserves. Liabilities shall be determined in accordance with generally accepted accounting principles, applied on a consistent basis; provided, that the Managing Member in its discretion may provide reserves for estimated accrued expenses, liabilities and contingencies. Such reserves shall be charged and accrued against the net assets of the Company, in proportion to the respective Capital Account balances of each Member, in any amounts that the Managing Member deems in good faith to be necessary or prudent. Section 4.07. Tax Allocations. For each Fiscal Year, items of income, gain, loss, deduction or credit (including items of income or gain which are not subject to federal income taxation and items which are not deductible for federal income tax purposes and not properly chargeable to capital account) shall be allocated solely for income tax purposes among the Members in any manner, as reasonably determined by the Managing Member, that reflects equitably amounts credited or debited to each Member's Capital Account for the current and prior Fiscal Years. In this regard, the Company may specially allocate additional items of ordinary income or loss or capital gain (including short-term capital gain) or loss to a Member withdrawing all or part of its Capital Account pursuant to Article V insofar as is possible to reduce the difference, if any, between the aggregate amounts allocated to such Member's Capital Account and the aggregate amount of tax items allocated to such Member. For purposes of the foregoing, the Company may determine that an equitable method of allocation includes, without limitation, an allocation (i) pro rata based upon the relative differences between amounts allocated to the Capital Accounts and the aggregate amounts of tax items allocated to the relevant Members, or (ii) solely to the relevant Member with the greatest such differences (taking into account such allocations). These allocations shall be made pursuant to the general principles of Sections 704(b) and 704(c) of the Code and in accordance with any temporary or final regulations adopted thereunder. Section 4.08. Determination by the Managing Member of Certain Matters. All matters concerning the valuation of Securities and other assets of the Company, the allocation of profits, gains and losses among the Members, including taxes thereon, and accounting procedures not expressly provided for by the terms of this Agreement shall be determined in good faith by the Managing Member. ARTICLE V DISTRIBUTIONS ------------- Section 5.01. Distributions. Except as otherwise provided herein, distributions of cash and other assets to Members, if any, shall be made in accordance with each Member's Capital Account, at the times mutually agreed upon by the Members. Section 5.02. Distributions of the Incentive Allocation. Subject to the provisions of this Section 5.2, on the third Business Day after each Allocation Date, or as soon thereafter as practicable (each, an "Allocation Payment Date"), the Class A Member shall have the right to cause the Company to distribute to the Class A Member an amount equal to the lesser of (a) the Undistributed Incentive Allocation as of such Allocation Payment Date and (b) the amount of Available Cash held by the Company on such Allocation Payment Date. If, on any such Allocation Payment Date, the Undistributed Incentive Allocation minus the Available Cash is greater than zero, such difference (the "Remaining Undistributed Allocation") shall be paid as follows: (a) Upon receipt by the Company of Available Cash following such Allocation Payment Date, such Available Cash shall, unless otherwise agreed by the Class A Member, be first utilized to make a distribution to the Class A Member in an amount equal to the Remaining Undistributed Allocation relating to such Allocation Payment Date until the entire amount of the Remaining Undistributed Allocation relating to such Allocation Payment Date has been distributed to the Class A Member. (b) If, after twenty four months following an Allocation Payment Date, the full amount of the Remaining Undistributed Allocation relating to such Allocation Payment Date has not been distributed to the Class A Member, the Class B Member shall, upon notice from the Class A Member, cause the Company to dispose of Securities, at one or more times following such twenty four month period, in an aggregate amount sufficient to generate Available Cash for the Company for the purpose of making a distribution (or distributions) to the Class A Member of all Remaining Undistributed Allocation relating to such Allocation Payment Date not previously distributed to the Class A Member. (c) In the event that an amount would be available for distribution to the Class A Member pursuant to the first sentence of this Section 5.02 on an Allocation Payment Date or pursuant to Section 5.02(a) thereafter, and the Class A Member elects not to have such amount distributed to it at that time, then (i) the Class A Member may cause such amount to be reserved for future distribution in respect of its Remaining Undistributed Allocation relating to such Payment Date and (ii) to the extent that the Class A Member does not cause such amount to be reserved, the Class B Member shall, upon notice from the Class A Member, cause the Company to dispose of Securities at one or more times in an aggregate amount sufficient to generate Available Cash for the Company for the purpose of making a distribution (or distributions) to the Class A Member of all Remaining Undistributed Allocation relating to such Allocation Payment Date not previously distributed to the Class A Member. Notwithstanding the foregoing, at no such time shall the Class A Member receive a distribution of the Incentive Allocation if such distribution would cause the Class A Member's Capital Account to have a balance less than the amount of the Class A Member's capital contributions. Section 5.03. Limitations on Distributions. Notwithstanding any provision in this Agreement to the contrary, neither the Company nor the Managing Member on behalf of the Company may make a distribution to any Member on account of such Member's Membership Interest if such distribution would violate the Act. ARTICLE VI TRANSFERS OF INTERESTS ---------------------- Section 6.01. Transfer of a Member's Interest. Each Member agrees that it will not, directly or indirectly, transfer or assign any Membership Interests, except with the consent of the other Member. Any attempt to transfer or assign or any purported transfer or assignment of any Membership Interests without the consent of the other Member shall be null and void. Notwithstanding the foregoing, no consent shall be required for transfers or assignments to an Affiliate of a Member. Section 6.02. Substituted Member. A Person who acquires any Membership Interest shall be admitted as a Member of the Company, with all rights, duties and obligations accompanying such membership pursuant to this Agreement and the Act, immediately upon such Person binding itself to this Agreement by executing the same, signing on a counterpart or executing a joinder agreement. ARTICLE VI DURATION AND DISSOLUTION ------------------------ Section 7.01. Duration. The Company shall continue until it is dissolved and wound up upon the first to occur of the following: (a) the unanimous written consent of the Members; (b) the entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act; and (c) at any time there are no Members as provided under Section 18-802 of the Act. Section 7.02. Dissolution. Upon dissolution of the Company, the Company shall be wound up and liquidated. The Managing Member or any other person or persons who are winding-up the affairs of the Company shall make distributions out of Company assets in the following manner and order: (a) first, to the payment of the expenses of the winding up, liquidation and dissolution of the Company; (b) second, to pay all creditors of the Company, other than Members, either by the payment thereof or the making of reasonable provision therefor; (c) third, to establish reserves, in amounts established by the Managing Member or such liquidator, to meet other liabilities of the Company; and (d) fourth, to pay, in accordance with the terms agreed among them and otherwise on a pro rata basis, all creditors of the Company that are Members, either by the payment thereof or the making of reasonable provision therefor. The remaining proceeds, if any, plus any remaining assets of the Company, shall be applied and distributed pro rata in accordance with the positive balances of the Members' Capital Accounts, as determined after taking into account all adjustments to Capital Accounts (including the Incentive Allocation) for the Fiscal Year during which the liquidation occurs, by the end of such Fiscal Year or, if later, within ninety (90) days after the date of such liquidation. For purposes of the application of this Section 7.02 and determining Capital Accounts on liquidation, all unrealized gains, losses and accrued income and deductions of the Company shall be treated as realized and recognized immediately before the date of distribution. Section 7.03. No Restoration Obligation. No Member shall have an obligation to restore a negative balance in its Capital Account. ARTICLE VII TAX RETURNS; REPORTS TO MEMBERS ------------------------------- Section 8.01. Tax Returns. The Managing Member shall prepare and file, or cause the accountants of the Company to prepare and file, a federal information tax return in compliance with Section 6031 of the Code and any other returns that are required thereby together with any required foreign, state and local income tax and information returns for each tax year of the Company. The Managing Member shall be designated on the Company's annual federal information tax return, and have full powers and responsibilities, as the "Tax Matters Member" of the Company for purposes of Section 6231(a)(7) of the Code. If the Company shall be the subject of an income tax audit by any federal, state, or local authority, the Tax Matters Member shall be authorized to act for, and its decision shall be final and binding on, the Company and each Member. Section 8.02. Reports to Current Members. (a) Within ninety (90) days after the end of each Fiscal Year or as soon thereafter as reasonably possible, the Company shall prepare and mail to each Member, a financial report setting forth as of the end of that Fiscal Year: (i) a balance sheet of the Company; (ii) a statement showing the Net Profit or Net Loss, as the case may be, and aggregate Incentive Allocation for that year; and (iii) the Member's Capital Account as of the beginning and end of that Fiscal Year and the manner of its calculation. (b) In addition, the Company shall with reasonable promptness provide to each Member a report of its estimated Capital Account balance as of the last Business Day of each calendar month. (c) Subject to any applicable legal or contractual limitations as well as reasonable confidentiality restrictions established by the Managing Member as of the date hereof, the Class B Member shall have full access to the Company's books, records, personnel and accountants. Section 8.03. Tax Reports to Members and Former Members. The Company shall make commercially reasonable efforts to deliver to each Member and, to the extent necessary, to each former Member (or its legal representatives), prior to April 15 of each year a report setting forth in sufficient detail information which shall enable the Member or former Member (or its legal representatives) to prepare their respective federal income tax returns in accordance with the laws, rules and regulations then prevailing (including Schedule K-1s). Section 8.04. Confidentiality. (a) In connection with the organization of the Company and its ongoing business, the Members may receive or have access to confidential information concerning the Company including, without limitation, information regarding investments or positions in Pubco, valuations, analyses, financial information, and trade secrets (the "Confidential Information"), which is non-public and may be proprietary in nature. No Member, nor any Affiliate of any Member, shall disclose or cause to be disclosed any Confidential Information to any Person nor use any Confidential Information for its own purposes or its own account, except (a) to its employees, officers, directors and advisors, in each case who agree to keep such information confidential, in connection with monitoring its investment in the Company and (b) as otherwise required by any regulatory authority, law or regulation, or by legal process. (b) The Managing Member, on behalf of the Company, hereby acknowledges that the Class B Member is a public agency subject to state laws, including, without limitation, the California Public Records Act (Cal. Govt. Code ss. 6250, et seq.) (the "Public Records Act"), which provides generally that all records relating to A public agency's business are open to public inspection and copying unless exempted under the Public Records Act, and the Bagley-Keene Open Meetings Act (Cal. Govt. Code ss. 11,120, et seq.) (the "Open Meetings Act"), which provides generally for open meetings for local legislative bodies. Neither the Company nor the Managing Member shall make any claim against the Class B Member if it makes available to the public any report, notice or other information the Class B Member received from the Company or the Managing Member which was required to be made public by the Class B Member pursuant to any of the foregoing laws, including the Public Records Act or the Open Meetings Act. (c) To the extent that the Managing Member determines in good faith that there is a reasonable likelihood that as a result of the Freedom of Information Act, 5 U.S.C. ss. 552, ("FOIA"), any state public records accesS law, any state or other jurisdiction's laws similar in intent or effect to FOIA, or any other similar statutory or regulatory requirement, the Class B Member or any of its Affiliates may be required to disclose non-public information relating to the Company, the Class B Member hereby agrees to use commercially reasonable efforts to notify the Managing Member promptly in writing of any such potential disclosure and to take commercially reasonable steps to oppose and prevent the requested disclosure unless (i) a court order to disclose such information has been issued by a court of competent jurisdiction or the Class B Member is advised by counsel (which may be staff counsel regularly employed by the Class B Member) that there exists no reasonable basis on which to oppose such disclosure, (ii) the Managing Member does not object in writing to such disclosure within ten (10) days (or such lesser time period as stipulated by the applicable law) of such notice or (iii) such disclosure relates solely to fund-level, aggregate performance information (i.e., aggregate cash flows, overall "IRRs", the year of formation of the Company, and the Class B Member's own capital contribution) and does not include (A) any information relating to the Company, (B) copies of this Agreement and related documents or (C) any other information not referred to in clause (iii) above. (d) In order to preserve the confidentiality, and to prevent the disclosure by the Class B Member which disclosure the Managing Member determines in good faith is reasonably likely to occur, of certain information disseminated by the Managing Member or the Company under this Agreement that the Class B Member is entitled to receive pursuant to the provisions of this Agreement, including, but not limited to, quarterly, annual and other reports (other than U.S. Internal Revenue Service Schedule K-1s) and information provided at the Company's informational meetings, the Managing Member may (i) require the Class B Member to return any copies of any of the foregoing information provided to it by the Managing Member or the Company to the extent that the Class B Member is permitted to do so under applicable law, (ii) provide to the Class B Member access to any of the foregoing information only at the Company's (or its counsel's) office or (iii) withhold all or any part of the foregoing information otherwise to be provided to the Class B Member other than the fund-level, aggregate performance information specified in Section 8.04(c)(iii) above and the U.S. Internal Revenue Service Schedule K-1s; provided, that the Managing Member shall not withhold any information pursuant to this clause (iv) if the Class B Member confirms in writing to the Managing Member that compliance with the procedures provided for in clauses (ii) or (iii) above or other means mutually agreeable to the Managing Member and the Class B Member would be legally sufficient to prevent such potential disclosure. (e) The Managing Member hereby agrees that the obligation of the Class B Member pursuant to Section 8.04(c) above to use commercially reasonable efforts to notify the Managing Member promptly in writing of any such potential disclosure shall apply only to the maximum extent permitted by law. If applicable, the Managing Member shall provide to the Class B Member the evidence described in paragraph (f), below, within five (5) Business Days (or such shorter period as is reasonably necessary to assist the Class B Member in complying with statutory deadlines) of the notice the Class B Member provides under this paragraph (e). (f) The Class B Member reasonably believes that it will not be required to disclose information in its records about any investment of the Company if the Managing Member provides satisfactory evidence (taking into account evidentiary standards and changes to the public disclosure laws of the State of California, which may expand or contract applicable public disclosure act exemptions) that: (i) such information is a "trade secret" (as defined in Cal. Civil Code ss. 3426.1(d)) of the Company thaT (A) derives independent economic value from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; (B) is subject to the reasonable efforts under the circumstances of the Managing Member and the Company to maintain its secrecy; and (C) the non-disclosure of which would not conceal fraud or work an injustice (see Cal. Evidence Code ss. 1060); or (ii) the interests served by not disclosing such information clearly outweigh the public interest served by disclosure of such information. (g) The Company may take legal action to prevent the disclosure of the information regarding the Company's investments and, in doing so, assumes all expenses and liabilities incurred by it in connection with such legal action. ARTICLE IX EXCULPATION AND INDEMNIFICATION ------------------------------- Section 9.01. Performance of Duties. (a) No Member or Managing Member shall have any duty to any other Member or the Company, except as expressly set forth herein. In performing its duties, each such Person shall be entitled to rely in good faith on the provisions of this Agreement and on information, opinions, reports or statements (including financial statements and information, opinions, reports or statements as to the value or amount of the assets, liabilities, profits or losses of the Company or any facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid) of the following other Persons or groups: the Managing Member, one or more employees of the Managing Member; any attorney, independent accountant, appraiser or other expert or professional employed or engaged by or on behalf of the Company or the Managing Member; or any other Person who has been selected with reasonable care by or on behalf of the Company or the Managing Member in each case as to matters which such relying Person reasonably believes to be within such other Person's competence. The preceding sentence shall in no way limit any Person's right to rely on information to the extent provided in Section 18-406 of the Act. No Member or Managing Member of the Company shall be personally liable under any judgment of a court, or in any other manner, for any debt, obligation or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise, solely by reason of being a Member or Managing Member of the Company. (b) Any duties (including fiduciary duties) of a Member or Managing Member to the Company or to any other Member that would otherwise apply at law or in equity are hereby eliminated to the fullest extent permitted under the Delaware Act and any other applicable law; provided that (a) the foregoing shall not eliminate the obligation of each Member to act in compliance with the express terms of this Agreement and (b) the foregoing shall not be deemed to eliminate the implied contractual covenant of good faith and fair dealing. Section 9.02. Right to Indemnification. Subject to the limitations and conditions provided for in this Article IX, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or arbitrative (hereinafter a "Proceeding"), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that such Person, or a Person of which such Person is the legal representative, is or was a Member or Managing Member (or officer or director or shareholder of any of the foregoing) shall be indemnified by the Company to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including, without limitation, reasonable attorneys' fees incurred in connection with any such Proceeding or any action by a Person to enforce its rights under this Article IX) actually incurred by such Person in connection with such Proceeding, appeal, inquiry or investigation (any of such judgments, penalties, fines, settlements or expenses "Proceeding Costs"), except to the extent that any such judgments, penalties, fines, settlements and expenses shall have been the result of gross negligence, fraud or intentional misconduct of the Person otherwise entitled to indemnification. The indemnification under this Article IX shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Article IX shall be deemed contract rights, and no amendment, modification or repeal of this Article IX shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings, appeals, inquiries or investigations arising prior to any amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Article IX could involve indemnification for negligence or under theories of strict liability. Section 9.03. Advance Payment. The right to indemnification conferred in this Article IX shall include the right to be paid or reimbursed by the Company the reasonable expenses incurred by a Person of the type entitled to be indemnified under Section 9.02 who was, is or is threatened to be, made a named defendant or respondent in a Proceeding in advance of the final disposition of the Proceeding and without any determination as to the Person's ultimate entitlement to indemnification; provided, however, that such Person shall be obligated to repay all amounts so advanced if it shall ultimately be determined that such indemnified Person is not entitled to be indemnified under this Article IX or otherwise. Section 9.04. Nonexclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in this Article IX shall not be exclusive of any other right that a Member or Managing Member or other Person indemnified pursuant to this Article IX may have or hereafter acquire under any law (common or statutory) or provision of this Agreement or otherwise. Section 9.05. Savings Clause. If this Article IX or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Person indemnified pursuant to this Article IX as to costs, charges and expenses (including reasonable attorneys' fees), judgments, fines and amounts paid in settlement with respect to any such Proceeding, appeal, inquiry or investigation to the full extent permitted by any applicable portion of this Article IX that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE X GENERAL PROVISIONS ------------------ Section 10.01. Members' Holdings. The Class A Member represents and warrants that it and its Affiliates Beneficially Own as of the day immediately prior to the date of this Agreement approximately 4.5152% of the outstanding Shares of Pubco (without giving effect to any Beneficial Ownership as a result of being a member of a "group" with the Class B Member and its Affiliates) and hold no other interests in Pubco as of such date. The Class B Member represents and warrants that it and its Affiliates Beneficially Own as of the day immediately prior to the date of this Agreement approximately 0.9946% of the outstanding Shares of Pubco (without giving effect to any Beneficial Ownership as a result of being a member of a "group" with the Class A Member and its Affiliates) and hold no other interests in Pubco as of such date. Section 10.02. Other Expenses and Costs. (a) The Company shall pay to the Class A Member and its Affiliates, the Company's Pro Rata Share of costs, fees and expenses of the Class A Member or any of its Affiliates in furtherance of the Investment Strategy, including, but not limited to, costs, fees and expenses of advisors and counsel of making and preparing regulatory filings, of corresponding with Pubco's management, and of research relating to the Investment Strategy and any Proceeding Costs of the Class A Member or any of its Affiliates relating to the Investment Strategy (other than any Proceeding Costs which are the result of gross negligence, fraud or intentional misconduct of the Class A Member or any of its Affiliates). (b) The Class A Member or its Affiliates shall: (i) pay to the Company, its Pro Rata Share of any Proceeding Costs of the Company relating to the Investment Strategy (other than any Proceeding Costs which are the result of gross negligence, fraud or intentional misconduct of the Class B Member or any of its Affiliates); and (ii) pay to the Class B Member, its Pro Rata Share of any Proceeding Costs of the Class B Member or its Affiliates relating to the Investment Strategy (other than any Proceeding Costs which are the result of gross negligence, fraud or intentional misconduct of the Class B Member or any of its Affiliates). (c) To the extent that Vantage and its related funds shall be required to indemnify any Covered Person (as such term is defined in the limited partnership agreements for Vantage and its related funds) in connection with the Investment Strategy, the Company and the Class B Member shall pay to Vantage its Pro Rata Share of such indemnification obligations. (d) As used in this Section 10.2, "Pro Rata Share," (i) with respect to the Class A Member, shall mean the fraction, expressed as a percentage, equal to (y) the aggregate acquisition cost of investments in Securities by the Class A Member and its Affiliates divided by (z) the aggregate acquisition cost of investments in Securities by the Company and the Class A Member and its Affiliates and (ii) with respect to the Company or the Class B Member, shall mean the fraction, expressed as a percentage, equal to (y) the aggregate acquisition cost of investments in Securities by the Company divided by (z) the aggregate acquisition cost of investments in Securities by the Company and the Class A Member and its Affiliates; in each case, without giving effect to any dispositions of Securities by the Company or by the Class A Member or any of its Affiliates, as applicable. To the extent that following any payment of amounts hereunder the Pro Rata Share changes, the Class A Member, the Class B Member and the Company, as applicable, shall make such payments to each other as are necessary to reflect the intent of this Section. Section 10.03. General. This Agreement (a) shall be binding on the executors, administrators, estates, heirs and legal successors and representatives of the Members and (b) may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Section 10.04. Amendments to Limited Liability Company Agreement. The terms and provisions of this Agreement may be modified or amended at any time by unanimous written consent of the Members. Section 10.05. Governing Law. The parties expressly agree that all the terms and provisions hereof shall be construed under the laws of the State of Delaware and, without limitation thereof, that the Act as now adopted or as may be hereafter amended shall govern the partnership aspects of this Agreement. Section 10.06. Notices. Each notice relating to this Agreement shall be in writing and delivered (a) in person, by registered or certified mail or by private courier (b) by facsimile or (c) by electronic mail. All notices to the Company shall be addressed to its office and principal place of business. All notices addressed to a Member shall be addressed to the Member at the address set forth in the records of the Company. Section 10.07. Entire Agreement. This Agreement constitutes the entire contract among the parties hereto relative to the subject matter hereof and supersedes all prior term sheets, discussions, negotiations and agreements, written or oral, with respect thereto. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. NEW MOUNTAIN VANTAGE GP, L.L.C. By: /s/ Steven B. Klinsky --------------------------- Name: Steven B. Klinsky Title: Managing Member of New Mountain Vantage GP. L.L.C. CALIFORNIA PUBLIC EMPLOYEES' RETIREMENT SYSTEM By: /s/ Christy Wood --------------------------- Name: Christy Wood Title: Senior Investment Officer SCHEDULE A MEMBERSHIP INTERESTS -------------------- Class A Member Class A Units Capital Commitment - ------------------------------------- ---------------- ------------------ New Mountain Vantage GP, L.L.C. 100.00 $100,000 ---------------- ------------------ 100.00 $100,000 Additional Additional Class A Units Capital Commitment ---------------- ------------------ 900.00 $900,000 ---------------- ------------------ 900.00 $900,000 Class B Member Class B Units Capital Commitment - ------------------------------------ ---------------- ------------------ California Public Employees' Retirement System 100.00 $100,000,000 ---------------- ------------------ 100.00 $100,000,000 EX-99.3 4 exh-99_3.txt Exhibit 99.3 [New Mountain Capital LLC Letterhead] October 18, 2006 Mr. F. Fox Benton III 919 Milam St. Suite 1900 Houston, TX 77002 Dear Fox, This letter amends and restates the letter between the parties, dated July 13, 2006. In connection with your services to New Mountain Capital, LLC ("NMC"), the parties agree as follows: Services and Arrangement 1. You agree to advise and assist NMC and New Mountain Vantage, L.P. (together with its related funds, "Vantage"), with respect to their investment in National Fuel Gas Company (the "Company"). 2. NMC will refer to you as a Senior Advisor to NMC. 3. You are being retained as an independent contractor to NMC and you are not authorized to bind NMC in any way. Compensation 4. NMC will pay you a total of $50,000 for the duration of this agreement. Payments will be made in 12 equal monthly installments on the 15th day of each month, unless such day is a weekend or a national holiday, in which case payment will be made on the business day immediately preceding such day. No federal, state or local income taxes will be withheld from these payments. NMC will provide you with a 1099 form for the appropriate tax period. The first payment will be made on August 15, 2006. 5. NMC will compensate you for your reasonable out-of-pocket expenses incurred in performing your obligations hereunder in accordance with NMC's expense reimbursement policies. 6. Unless otherwise agreed by NMC and you, NMC will pay to you, for your contributions as a Senior Advisor, an annual success fee based upon the performance of Vantage's investment in the Company (the "Success Fee"). The Success Fee shall be equal to the product of (a) a fraction, the numerator of which is the marked to market gains during the calendar year of the Total Investment (other than any gains reflected in a prior year's Success Fee) and the denominator of which is the Total Investment multiplied by (b) $1,000,000. "Total Investment" shall mean the aggregate purchase price of Vantage's investment in the Company (disregarding any dispositions of such investment). The Success Fee shall be paid to you by January 15th of the year following the year on which such calculation is based. No federal, state or local income taxes will be withheld from these payments. NMC will provide you with a 1099 form for the appropriate tax period. 7. You agree that NMC will be the only person or entity that you advise or assist with respect to an investment in or other transaction with the Company. You further agree that you will notify NMC of any trade made by you or your affiliates in securities of the Company on the same calendar day of such trade. 8. Your entitlement to any compensation is contingent on your not breaching the terms of this agreement. Confidentiality 9. You will be furnished by NMC with certain information which is non-public, confidential and/or proprietary in nature. This information, together with analyses, compilations, forecasts, studies or other documents which contain such information, as well as any other information concerning NMC's investment in or other transaction with the Company or NMC's consideration thereof will be kept confidential by you and will not, without NMC's prior written consent, be disclosed by you to any third party and will not be used by you for your own account or in any way detrimental to NMC. All copies of such information will, at NMC's election, be destroyed or returned to NMC promptly upon NMC's request. Indemnity 10. Vantage shall indemnify you and hold you harmless against all losses or claims to which you may become subject in connection with the performance of your services hereunder; provided, however, that nothing herein shall require indemnification with respect to any such loss or claim arising from your negligence, fraud, bad faith or willful misconduct or your violation of any contractual obligations to which you are subject. 11. Promptly after receipt by you of notice of your involvement in any action for which indemnification is being sought hereunder, you shall notify NMC in writing of such involvement. NMC shall be entitled to assume and direct your defense in connection with such action, and you shall have the right to employ a separate counsel at your own expense and to participate in the defense of such action. NMC and Vantage shall not be liable for any settlement of any action effected without their written consent. General 12. This agreement, except for the provisions of Sections 6 through 11, will terminate automatically 13 months from the date hereof, unless (i) terminated earlier by NMC (which termination shall not, subject to Section 8, affect your entitlement to compensation set forth herein) or (ii) extended upon the parties' mutual written agreement. The provisions of Sections 6 through 11 will survive the termination of this agreement and continue until Vantage no longer holds any securities of the Company. 13. This agreement shall be governed by the laws of the State of New York (other than the conflicts of laws provisions thereof). We look forward to you joining our team. Should you have any questions about this agreement, please feel free to contact David DiDomenico or myself. Sincerely, /s/ Adam J. Collins Adam J. Collins Managing Director Accepted and agreed to: /s/ F. Fox Benton III ----------------------- F. Fox Benton III -----END PRIVACY-ENHANCED MESSAGE-----