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ARTICLE V
Management of the Fellowship
5.1 Subject to the provisions of this agreement, the
Business and affairs of the Fellowship shall be managed
by a management committee (the "Committee"), which shall
be constituted and shall carry on its proceedings in
the following manner:
(a) the Committee shall consist of such number of members
as Gandalf may determine from time to time, which shall
be not fewer than three and not more than nine members;
the Committee shall initially consist of three members,
being Gandalf, Aragorn and Frodo;
(b) Gandalf shall have the right to appoint two members
of his choice to the Committee and Aragorn shall have
the right to appoint one member of his choice to the
Committee; provided that if the number of members of
the Committee is increased by Gandalf at any time, Aragorn
shall at all times be entitled to appoint a number of
members of the Committee proportionate to his Ratio
or, if such calculation does not result in a whole number,
the next larger number of members of the Committee;
(c) if a nominee of either Fellow is unable to attend
any meeting of the Committee, such Fellow may by notice
in writing addressed to the Committee and delivered
at or before such meeting substitute another person
as its nominee at such meeting. The choice of such substitute
shall be approved by the other Fellow, and such approval
shall not be unreasonably withheld. Such substitute
shall be entitled to attend such meeting on behalf of
such Fellow who is unable to so attend, and shall have
all the voting rights of such Fellow; provided that
if any such member is ill or unable to attend a meeting
or meetings for an extended period of time, such member
shall have the right to appoint a substitute as its
nominee, and such substitute shall thereupon be deemed
to have been appointed by the Fellow to fill a vacancy
created by the original nominee of such Fellow while
unable to act as a member of the Committee and such
substitute shall continue to act as a member of the
Committee until such Fellow by a further such notice
substitutes for such person the original nominee of
such Fellow or any other qualified person thus designated
by such Fellow as its nominee, whereupon the person
thus designated in such notice shall likewise be deemed
to have been appointed by the Committee to fill a vacancy
resulting from such substitute ceasing to act as a member;
(d) it is the intention of the Fellows that a regularly
scheduled meeting of the Committee shall be held each
quarter and that additional meetings of the Committee
may be called by either Fellow or by any member of the
Committee; not less than five business days notice shall
be given of any meeting of the Committee to the nominees
of each Fellow at the address of such Fellow set out
in Article XVII hereof, in the manner provided for in
such Article; meetings of the Committee shall be held
not less frequently than quarterly, to discuss financial
results, planning of the Business, budgets, capital
expenditures and all other matters referred to in sections
5.2 and 5.3 and to review financial statements;
(e) a quorum for meetings of the Committee shall be
a majority of the members, present in person or present
by means of such conventional or magical or other communication
facilities as permit all persons participating in the
meeting to communicate with each other simultaneously
and instantaneously (and, for greater certainty, a meeting
of the Committee may be constituted at which some members
are present in person and other members are present
by means of such communication facilities), provided
that if a quorum is not constituted at any meeting of
the Committee for which notice has been duly given by
reason of the failure or refusal of the nominees of
either Fellow to attend, if the other Fellow's nominees
did attend such meeting such other Fellow may thereupon
give notice as above of a further meeting of the Committee
to transact the business which was to have been transacted
at the meeting at which no quorum was constituted and,
notwithstanding the foregoing, a quorum for such further
meeting of the Committee shall be any one or more members
present by any of the aforesaid means;
(f) all questions proposed for consideration at meeting
of the members shall be determined and all resolutions
shall be passed, in order to be effective, by the votes
of not less than a majority of the members present at
such a meeting; and
(g) neither the President, if any, of the Fellowship
nor the Chairman of any meeting of the Committee shall
by virtue of his office, position or for any other reason,
be entitled to any second, double or casting vote in
respect of any matters coming before such meeting, notwithstanding
any statutory provision or rule of law to the contrary.
5.2 No action shall be taken in regard to any of the
following matters except with the prior express sanction
of a resolution of the Committee approved in accordance
with section 5.1 by not less than a majority of the
members, which majority shall include at least one nominee
of each Fellow, or the written consent of both Fellows
(provided that the consent or approval of a Fellow or
its nominees on the Committee shall cease to be required
hereunder if such Fellow has a Ratio of less than [10%];
(a) except as specifically provided in this agreement,
any change in the organization of the Fellowship, including,
without limitation any amendment to this agreement or
any dissolution or reorganization or conversion to a
limited Fellowship;
(b) the admission of a new Fellow other than in accordance
with Article IX and/or Article X hereof;
(c) the increase or reduction of a Ratio, except as
expressly provided for in Article 9.7;
(d) any sale, assignment, transfer or other disposition
of, whether absolute or by way of security, or mortgage,
charge, pledge or other encumbrance of or grant of a
security interest in a Fellowship Interest, other than
in accordance with the provisions of this agreement;
(e) any change of the auditors of the Fellowship, which
shall be a firm of chartered accountants independent
of each of the Fellows and their Principals;
(f) any material change in the business activities of
the Fellowship so as to include any operations other
than the Business;
(g) any proposed sale, lease, exchange or other disposition
of all or substantially all of the property or assets
of the Fellowship or any operating division of the Business,
other than in the ordinary course of the Business;
(h) any assignment mortgage, charge pledge or encumbrance
of, or grant of a security interest in, property or
assets of the Fellowship other than to an arm's-length
lender or in the ordinary course of the Business;
(i) any provision of any guarantee, indemnity or other
financial support by the Fellowship other than to arm's-length
lender or in the ordinary course of the Business;
(j) any transaction between the Fellowship and any person
not dealing at arm's -length with the Fellowship or
either of the Fellows or their Affiliates;
(k) any matter that might dilute a Fellow's Ratio to
less than 10%;
(l) the provision of any services to the Fellowship
by either Fellow not covered under Article 5.5;
(m) compensation arrangements for the Fellows and management
of the Fellowship;
(n) any determination that financing or additional capital
are required by the Fellowship, so as to give rise to
obligations of the Fellows under section 4.3;
(o) any other matter requiring the consent of both of
the Fellows pursuant to any other provision of this
agreement.
5.3 No action shall be taken in regard to any of the
following matters except with the prior express sanction
of a resolution of the Committee approved in accordance
with section 5.1(f), provided that approval in accordance
with section 5.2 shall be required for any such matter
that is also referred to in section 5.2:
(a) the approval of, or any material amendments to,
the annual operating budget of the Fellowship;
(b) any approval of, or material proposed changes in,
collective agreements in respect of employees of the
Fellowship, employee benefit plans of the Fellowship;
(c) any creation of any long-term indebtedness of the
Fellowship to a lender;
(d) any proposed material changes in the policies or
strategies of the Business;
(e) the selection and appointment of a managing director
for the Fellowship, to be responsible for the day to
day functioning of the Fellowship, and who shall be
responsible directly to the management committee for
the results of the Fellowship;
(f) the hiring, termination and any adjustment in compensation
of any senior management person of the Fellowship;
(g) the formulation and implementation of new policies
and practices regarding customer and supplier contracts
and dealings;
(h) the signatures of two authorized persons on all
cheques, promissory notes, bills of exchange, agreements
to give security and all agreements, documents, and
instruments obligating the Fellowship to the Bank;
(i) any borrowing of money, applying for or obtaining
a line of credit or other credit facility, or any material
change in banking or other financial arrangements by
the Fellowship;
(j) any investment in or purchase of any business by
the Fellowship, whether directly or by acquiring the
entity through or by which the business is operated
or in any other manner, other than in the ordinary course
of the Business;
(k) any proposed material changes in the policies or
strategies of the Business; or
(l) any matters involving all of the insurance coverage
of the Fellowship.
5.4 An annual operating budget and an annual capital
spending plan for the Fellowship shall be prepared each
fiscal year and shall be approved, prior to the commencement
of such fiscal year, in accordance with section 5.3.