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EXHIBIT 10.4
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
ARRIS INTERACTIVE L.L.C.,
A DELAWARE LIMITED LIABILITY COMPANY
AUGUST 3, 2001
THE INTERESTS IN ARRIS INTERACTIVE L.L.C. (THE "INTERESTS") ARE SUBJECT TO THE
RESTRICTIONS ON TRANSFER AND OTHER TERMS AND CONDITIONS SET FORTH IN ARTICLE
VIII OF THIS AGREEMENT. THE INTERESTS HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES
ONLY AND HAVE NOT BEEN REGISTERED UNDER (I) ANY STATE SECURITIES LAWS, OR (II)
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
NEITHER THE INTERESTS, NOR ANY PART THEREOF, MAY BE OFFERED FOR SALE, PLEDGED,
HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT (A) IN COMPLIANCE
WITH THE TERMS AND CONDITIONS OF ARTICLE VIII OF THIS AGREEMENT AND (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR IN A TRANSACTION WHICH IS EXEMPT FROM
REGISTRATION UNDER SUCH LAWS OR WHICH IS OTHERWISE IN COMPLIANCE WITH SUCH LAWS.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS............................................................................................1
1.01. Definitions.............................................................................................1
1.02. Exhibits and Schedules..................................................................................9
1.03. Other Capitalized Terms.................................................................................9
ARTICLE II GENERAL...............................................................................................9
2.01. Formation and Management................................................................................9
2.02. Name of the Limited Liability Company...................................................................9
2.03. Office of the Limited Liability Company and Agent for Service of Process...............................10
2.04. Qualification..........................................................................................10
2.05. Purposes...............................................................................................10
2.06. Members................................................................................................10
2.07. Term...................................................................................................10
2.08. Liability of Members...................................................................................10
2.09. No Partnership.........................................................................................11
2.10. Title to Company Property..............................................................................11
2.11. No Individual Authority................................................................................11
2.12. Investment Representations.............................................................................11
ARTICLE III CAPITAL CONTRIBUTIONS; ADDITIONAL FINANCING.........................................................11
3.01. Capital Accounts.......................................................................................11
3.02. Capital Contributions..................................................................................12
3.03. Other Contributions: No Withdrawal of or Interest on Capital...........................................12
3.04. Third Party Loans......................................................................................12
3.05. Member Loans...........................................................................................12
3.06. Reduction of Capital Accounts..........................................................................12
3.07. Capital Accounts.......................................................................................12
3.08. Negative Capital Accounts..............................................................................14
3.09. No Resignation or Withdrawal of Capital................................................................14
ARTICLE IV DISTRIBUTIONS........................................................................................14
4.01. Distribution of Cash Flow..............................................................................14
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4.02. Distribution of Capital Proceeds.......................................................................14
4.03. Limitations on Distributions...........................................................................14
4.04. Class B Member Distribution Preference in Bankruptcy...................................................14
4.05. Tax Withholding........................................................................................15
4.06. No Limitations on Redemption...........................................................................15
ARTICLE V ALLOCATION OF NET PROFITS AND NET LOSSES..............................................................16
5.01. Net Profit.............................................................................................16
5.02. Net Loss...............................................................................................16
5.03. Limitation on Net Loss Allocations.....................................................................16
5.04. Other Items............................................................................................16
5.05. Special Allocations....................................................................................16
5.06. Curative Allocations...................................................................................18
5.07. Other Allocation Rules.................................................................................18
5.08. Section 704(c) Allocation..............................................................................19
ARTICLE VI MANAGEMENT...........................................................................................19
6.01. Management of the Company..............................................................................19
6.02. Officers...............................................................................................20
6.03. Binding the Company....................................................................................21
6.04. Contracts with Members.................................................................................21
6.05. Required Approval by Members...........................................................................21
6.06. Member Action..........................................................................................22
6.07. Indemnification........................................................................................23
ARTICLE VII FISCAL MATTERS......................................................................................25
7.01. Books and Records......................................................................................25
7.02. Financial and Other Reports............................................................................26
7.03. Bank Accounts..........................................................................................26
7.04. Tax Matters Partner....................................................................................26
7.05. Tax Elections and Decisions............................................................................27
ARTICLE VIII TRANSFERS OF INTERESTS.............................................................................27
8.01. General Restrictions on Transfer.......................................................................27
8.02. Redemption of Interest of Class B Interest.............................................................28
8.03. Mandatory Exchange for New Securities..................................................................30
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ARTICLE IX DISSOLUTION AND LIQUIDATION..........................................................................33
9.01. Events Causing Dissolution.............................................................................33
9.02. Procedures on Dissolution..............................................................................33
9.03. Distributions Upon Liquidation.........................................................................34
ARTICLE X MISCELLANEOUS PROVISIONS..............................................................................35
10.01. Applicable Law.........................................................................................35
10.02. Counterparts...........................................................................................35
10.03. Separability of Provisions.............................................................................35
10.04. Article and Section Titles.............................................................................35
10.05. Amendments.............................................................................................35
10.06. No Third Party Beneficiaries...........................................................................35
10.07. Successors and Assigns.................................................................................36
10.08. Notice.................................................................................................36
10.09. Subordination..........................................................................................37
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ARRIS INTERACTIVE L.L.C.
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of
ARRIS INTERACTIVE L.L.C., a Delaware limited liability company (the "Company"),
dated and effective as of August 3, 2001 (the "Closing Date"), by and among
ANTEC Corporation, a Delaware corporation that is in the process of changing its
name to Arris International, Inc. ("ANTEC"), Arris Group, Inc., a Delaware
corporation ("Newco"), and Nortel Networks LLC, a Delaware limited liability
company ("Nortel").
WHEREAS, ANTEC and Nortel, as the only members, are parties to the
Amended and Restated Limited Liability Company Agreement of Arris Interactive
L.L.C., dated as of March 31, 1999 (the "Amended and Restated Limited Liability
Company Agreement");
WHEREAS, in connection with the transactions contemplated by the
Agreement and Plan of Reorganization, dated as of October 18, 2000, as amended
(the "Agreement and Plan of Reorganization"), among ANTEC, Newco, Broadband
Transition Corporation, a Delaware corporation, Nortel Networks Inc., a Delaware
corporation ("Nortel Networks"), Nortel, and the Company, the parties hereto
desire to amend and restate the Amended and Restated Limited Liability Company
Agreement in its entirety.
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged, ANTEC and Nortel hereby agree to
amend and restate the Amended and Restated Limited Liability Company Agreement
in its entirety as follows:
ARTICLE I
DEFINITIONS
1.01. DEFINITIONS. The following capitalized terms used in this
Agreement shall have the respective meanings ascribed to them below:
"Act" shall mean the Delaware Limited Liability Company Act, as amended
from time to time.
"Administrative Agent" shall have the meaning specified in the Senior
Credit Agreement.
"Adjusted Capital Account Balance" shall mean with respect to any
Member, the balance, in such Member's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments:
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(i) credit to such Capital Account any amounts which such
Member is obligated to restore, because of a promissory note to the
Company or otherwise pursuant to Regulation Section
1.704-1(b)(2)(ii)(c), or is deemed to be obligated to restore pursuant
to the penultimate sentence in each of Regulation Sections
1.704-2(g)(1)(ii) and 1.704-2(i)(5); and
(ii) debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
This definition of Adjusted Capital Account Balance is intended to
comply with Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently with such Regulations.
"Affiliate" shall mean, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person; provided, however, that none of the Company, Newco and ANTEC shall, for
the purposes of this Agreement, be, or be deemed or construed to be, an
Affiliate of Nortel, Nortel Networks or any of their respective Affiliates.
"Agreement" shall mean this Second Amended and Restated Limited
Liability Company Agreement as it may be amended, restated, amended and
restated, supplemented, or otherwise modified from time to time.
"ANTEC" shall have the meaning set forth in the introductory paragraph
hereof.
"Assignee" shall have the meaning set forth in Section 8.01(a) hereof.
"Bankruptcy" means the occurrence of any of the events specified in
Section 8.6 or Section 8.7 of the Senior Credit Agreement.
"Borrowers" shall have the meaning specified in the Senior Credit
Agreement .
"Capital Account" shall have the meaning specified in Section 3.07
hereof.
"Capital Contribution" shall mean any contribution by a Member to the
capital of the Company.
"Capital Proceeds" shall mean the net proceeds from:
(i) loans to the Company in excess of current or
reasonably anticipated Company needs (including reasonable reserves for
Company debt obligations and working capital as determined by the
Managing Member) or excess funds received from refinancing of any
Company indebtedness (x) after the payment of, or provision for the
payment of, all costs and expenses incurred by the Company in
connection with such refinancing, and (y) after deduction or retention
of such sums as are deemed necessary to be retained as a reserve for
the conduct of the business of the Company; and
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(ii) any sale, exchange, condemnation or other disposition
of any capital asset of the Company or from claims on policies of
insurance maintained by the Company for damage to or destruction of
capital assets of the Company or the loss of title thereto (to the
extent that such proceeds exceed the actual or estimated costs of
repairing or replacing the assets damaged or destroyed if, pursuant to
this Agreement, such assets are repaired or replaced) (x) after the
payment of, or provision for the payment of, all costs and expenses
incurred by the Company in connection with such sale or other
disposition or the receipt of such insurance proceeds, as the case may
be, and (y) after deduction or retention of such sums as are deemed
necessary by the Managing Member to be retained as a reserve for the
conduct of the business of the Company.
"Cash Flow" shall mean for any period the Gross Receipts of the Company
for such period less Operating Expenses for such period.
"Certificate" shall mean the Certificate of Formation of the Company
filed under and pursuant to the Act with the Office of the Secretary of State of
the State of Delaware, as it may, from time to time, be amended in accordance
with the Act.
"Certificate of Designations" shall mean the Certificate of
Designations of Series A Convertible Subordinated Preferred Stock of Newco in
the form of Exhibit 1 hereto.
"Change of Control," with respect to Newco, shall have the meaning set
forth in the Indenture dated as of May 18, 1998, between ANTEC and The Bank of
New York, as it may be amended, restated, amended and restated, supplemented or
otherwise modified from time to time.
"Class A Interest" shall mean all of a Class A Member's limited
liability company interest in the Company, including the rights to receive
allocations and distributions, to vote, and to consent or approve.
"Class A Members" shall mean ANTEC and Newco and any transferees of
ANTEC or Newco permitted hereunder.
"Class A Sharing Ratio" shall mean, with respect to each Class A
Member, the percentage set forth opposite such Class A Member's name on Schedule
A.
"Class B Interest" shall mean the Class B Member's limited liability
company interest in the Company, which includes the specified right to receive
allocations pursuant to Article V and distributions pursuant to Article IV and
the redemption rights provided in Section 8.02 but does not include the right to
vote in matters of the Company unless expressly stated otherwise in this
Agreement or required by the Act.
"Class B Member" shall mean Nortel and any transferee of Nortel
permitted hereunder so long as the Class B Interest has not been redeemed in
full.
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"Class B Return" shall mean an amount equal to ten percent (10%) per
annum, compounded annually determined on the basis of a 360 day year, accruing
to the extent not paid pursuant to Sections 4.01, 4.02, 8.02 or 9.03 herein, of
the average daily balance of Class B Unreturned Capital during the period
commencing on the Closing Date and ending on the date of any calculation.
"Class B Unreturned Capital" shall mean an amount equal to the excess,
if any, of (i) the sum of (A) the Initial Class B Balance and (B) the Class B
Return compounded as set forth in the definition of "Class B Return" herein,
over (ii) the aggregate amount actually distributed to Class B Member after the
Closing Date pursuant to Sections 4.01, 4.02, 8.02 or 9.03 herein.
"Closing Date" shall have the meaning set forth in the introductory
paragraph hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Company" shall have the meaning set forth in the introductory
paragraph hereof.
"Default" and "Event of Default" shall have the meaning specified in
the Senior Credit Agreement.
"Depreciation" shall mean for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization, or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; provided, however, that if the federal income tax
depreciation, amortization, or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the Managing Member.
"DGCL" shall mean the General Corporation Law of the State of Delaware,
as amended from time to time.
"Excess Availability" shall have the meaning specified in the Senior
Credit Agreement.
"Fair Market Value" shall mean, with respect to Newco Common Stock, the
average closing price per share of Newco Common Stock on The Nasdaq Stock Market
(or, if Newco Common Stock is not then trading thereon, such other nationally
recognized stock market or exchange, if any, on which Newco Common Stock may
then be actively traded) for the twenty (20) consecutive trading days ending two
(2) trading days prior to the date of determination. In the absence of trading
of Newco Common Stock in such trading markets, the Fair Market Value shall be as
reasonably determined by the board of directors of Newco based upon a written
valuation report prepared by an independent valuation firm.
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"Fiscal Year" shall mean the twelve month period ending December 31 of
each year; provided that the last Fiscal Year shall be the period beginning on
January 1 of the calendar year in which the final liquidation and termination of
the Company is completed and ending on the date such final liquidation and
termination is completed (to the extent any computation or other provision
hereof provides for an action to be taken on a Fiscal Year basis, an appropriate
proration or other adjustment shall be made in respect of the first or final
Fiscal Year to reflect that such period is less than a full calendar year period
as determined by the Managing Member in its reasonable discretion).
"Gross Asset Value" shall mean with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market
value of such asset, as determined by the contributing Member and the
Managing Member.
(ii) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as
determined by the Managing Member in its reasonable discretion, at each
of the following times: (a) the acquisition of an additional Interest
in the Company by any new or existing Member for more than a de minimis
contribution; (b) the distribution by the Company to a Member of more
than a de minimis amount of Company property as consideration for an
Interest in the Company; and (c) the liquidation of the Company within
the meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations;
provided, however, that the adjustments pursuant to clauses (a) and (b)
above shall be made only if the Managing Member reasonably determines
that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in the Company.
(iii) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair
market value of such asset on the date of distribution as determined by
the Managing Member in its reasonable discretion.
(iv) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into
account in determining the Capital Accounts pursuant to Regulation
Section 1.704-1(b)(2)(iv)(m), clause (iv) of the definition of "Net
Profit" or "Net Loss," and Section 5.05(g) hereof, provided, however,
that Gross Asset Values shall not be adjusted pursuant to this
subsection to the extent the Managing Member determines that an
adjustment pursuant to subsection (ii) of this definition is necessary
or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this subsection.
(v) If the Gross Asset Value of an asset has been
determined or adjusted
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pursuant to paragraphs (i), (ii) or (iv) above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Profit and Net
Loss.
"Gross Receipts" shall mean receipts (other than Capital Proceeds and
Capital Contributions), calculated on an accrual basis, from the conduct of the
business of the Company from all sources.
"Indemnitee" shall have the meaning set forth in Section 6.07 hereof.
"Initial Class B Balance" shall mean the amount of $100,000,000.
"Interest" shall mean Class A Interest or Class B Interest (if any) or
any other class of interest in the Company subsequently created pursuant to this
Agreement.
"Law" or "Laws" shall mean federal, state and local statutes, case law,
rules, regulations, ordinances, codes and the like which are in full force and
effect from time to time and which affect the Company or the operation of the
Company's business.
"Liquidator" shall mean any Person or Persons (including the Managing
Member and one or more officers of the Company) charged with winding up and/or
liquidating the business, affairs and/or assets of the Company in accordance
with the provisions hereof, each of which Persons shall be deemed to be a
"liquidating trustee" within the meaning of the Act.
"Managing Member" shall mean initially Newco, or any successor Managing
Member elected by the Class A Members owning, in the aggregate, a majority of
the Class A Interests.
"Maximum Quarterly Class B Redemption" shall have the meaning set forth
in Section 8.02(a) hereof.
"Member" shall mean each of Newco, ANTEC and Nortel and any other
Person hereafter admitted to the Company as a member as provided in this
Agreement, but such term does not include any Person which has ceased to be a
member of the Company, unless the Agreement states otherwise.
"Member Loan" shall mean a loan made by a Member pursuant to Section
3.05.
"Net Profit" or "Net Loss" shall mean for each Fiscal Year the
Company's taxable income or taxable loss for such Fiscal Year, as determined
under Section 703(a) of the Code, and Regulation Section 1.703-1, but with the
following adjustments:
(i) Any tax exempt income, as described in Section
705(a)(1)(B) of the Code, realized by the Company during such Fiscal
Year shall be added to such taxable income or taxable loss;
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(ii) Any expenditures of the Company described in Section
705(a)(2)(B) of the Code for such Fiscal Year or treated as being so
described in Regulation Section 1.704-1(b)(2)(iv)(i) and not otherwise
taken into account in this subsection shall be subtracted from such
taxable income or taxable loss;
(iii) The amount of any gain or loss required to be
recognized by the Company during such Fiscal Year by reason of a sale
or other disposition of Company property, and any depreciation,
amortization or cost recovery deductions with respect to Company
property to which the Company is entitled for any Fiscal Year, shall be
computed as if the Company's adjusted basis in such property for income
tax purposes were equal to the Gross Asset Value (and taking into
account Depreciation in lieu of such depreciation, amortization or cost
recovery deductions), and any adjustment to the Gross Asset Value shall
be treated as a Net Profit or Net Loss; and
(iv) to the extent an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code Section
743(b) is required pursuant to Regulation Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital
Accounts as a result of a distribution other than in complete
liquidation of a Member's Interest, the amount of such adjustment shall
be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for
purposes of computing Net Profit or Net Loss.
This definition is intended to comply with the Regulations and any and
all other items which must be included in Net Profit or Net Loss in order for
this Agreement to comply with said Regulations shall be included in such
concept. Notwithstanding any other provision of this definition, any items of
income, gain, deduction, loss or credit which are specially allocated shall not
be taken into account in computing Net Profit or Net Loss. The intent of this
definition is that no reference to Net Profit or Net Loss include such specially
allocated items.
"New Securities" shall have the meaning set forth in Section 8.03
hereof.
"Newco" shall have the meaning set forth in the introductory paragraph
hereof.
"Newco Preferred Stock" shall mean the Series A Convertible
Subordinated Preferred Stock of Newco, par value $1.00 per share, having the
powers, designations, preferences and rights specified in the Certificate of
Designations.
"Nortel" shall have the meaning set forth in the introductory paragraph
hereof.
"Officers" shall have the meaning set forth in Section 6.02 hereof.
"Operating Expenses" shall mean all expenditures of any kind incurred
by the Company after the Closing Date hereof in the normal course of its
business, including, without limitation, debt service (principal and interest)
payable on indebtedness of the Company (whether to a third
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party or to a Member), plus such sums as are deemed reasonably necessary by the
Managing Member as a reserve to be retained for the conduct of the business of
the Company, and capital expenditures and investments in other assets, but
excluding, without duplication: (A) payments with respect to federal, state or
local income, franchise or similar taxes of any Member and all kinds of taxes
payable in lieu thereof, and (B) any non-cash charges for depreciation or
amortization of any Company asset.
"Optional Indemnitee" shall have the meaning set forth in Section 6.07
hereof.
"Person" shall mean any corporation, limited or general partnership,
limited liability company, trust, unincorporated association, any other entity
or organization, governmental agency, bureau, department or other body, or an
individual.
"Regulations" shall mean the United States Department of Treasury
Regulations (including Temporary Regulations) promulgated under the Code.
"Revolving Loan Commitment Termination Date" shall have the meaning
specified in the Senior Credit Agreement.
"Regulatory Allocations" shall have the meaning set forth in Section
5.06 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Senior Credit Agreement" shall mean the Credit Agreement, of even date
herewith, by and among the Company, ANTEC, Credit Suisse First Boston, The CIT
Group/Business Credit, Inc., and a syndicate of banks, financial institutions
and other investors party thereto, as such Credit Agreement may be amended,
restated, amended and restated, supplemented, or otherwise modified. References
to provisions of, and terms defined in, the Senior Credit Agreement shall be
interpreted as applying equally to the comparable provisions and terms of any
such amendment, restatement, amendment and restatement, supplement or other
modification.
"Senior Credit Facilities" shall mean (i) the senior secured revolving
credit facility providing for revolving loans and other extensions of credit in
an aggregate principal amount of $175,000,000 pursuant to the Senior Credit
Agreement as such $175,000,000 in aggregate principal amount of revolving loans
and other extensions of credit may be increased by additional revolving loans
and additional extensions of credit pursuant to an uncommitted facility of up to
$25,000,000 in aggregate principal amount made available to the Borrowers
pursuant to the Senior Credit Agreement; (ii) any refinancing, refunding,
replacement, restatement, amendment, amendment and restatement, renewal,
restructuring (including without limitation to increase the amount of available
borrowing thereunder (but not above $200,000,000 in aggregate principal amount
outstanding at any time), supplement or other modification of such facilities
and (iii) the definitive documentation including credit, guarantee, security,
intercreditor and other related instruments and documentation evidencing such
facilities, in each case as amended, restated, amended and restated, refinanced,
refunded, renewed, replaced, restructured (including without limitation to
increase the amount of available borrowing thereunder (but not above
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$200,000,000 in aggregate principal amount outstanding at any time),
supplemented or otherwise modified.
"Senior Debt" shall have the meaning specified in the Subordination
Agreement.
"Special Allocations" shall mean allocations made pursuant to Section
5.05 hereof.
"Subordination Agreement" shall mean the Subordination Agreement dated
as of August 3, 2001, among Nortel, The CIT Group/Business Credit, Inc., as
Administrative Agent, Newco, and the Company, as such Subordination Agreement
may be amended, restated, amended and restated, supplemented or otherwise
modified from time to time.
"Transfer" shall refer to any sale, exchange, redemption, assignment,
conveyance, license, sublicense, encumbrance, hypothecation, gift, pledge, grant
of a security interest, or other transfer, disposition or alienation in any way
(whether voluntarily, involuntarily, by reason of merger involving the Company,
by operation of law, or otherwise). Transfer shall specifically include
assignments and distributions resulting from death, incompetency, bankruptcy,
insolvency, liquidation and dissolution.
1.02. EXHIBITS AND SCHEDULES. The Exhibits and Schedules attached
hereto are hereby incorporated by this reference.
1.03. OTHER CAPITALIZED TERMS. Capitalized terms not otherwise
defined herein shall have the respective meanings given them in the Agreement
and Plan of Reorganization.
ARTICLE II
GENERAL
2.01. FORMATION AND MANAGEMENT. On November 9, 1995, the Company was
formed as a Delaware limited liability company by delivering the Certificate to
the Delaware Secretary of State in accordance with the provisions of the Act.
The Company shall be managed by the Managing Member in accordance with Section
6.01 of this Agreement and the rights and obligations of the Members shall be
governed by this Agreement and by the Act. If there is a conflict between the
provisions of this Agreement and the Act, the provisions of the Act shall
control (it being understood that if the Act provides for a particular rule but
allows the members of a limited liability company to provide to the contrary in
the limited liability company agreement, and if the parties hereto have so
provided hereunder, then such provisions shall not be deemed to constitute a
conflict for purposes of the foregoing).
2.02. NAME OF THE LIMITED LIABILITY COMPANY. The name of the Company
is "Arris Interactive L.L.C." The name of the Company may be changed at any time
or from time to time by the Managing Member.
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2.03. OFFICE OF THE LIMITED LIABILITY COMPANY AND AGENT FOR SERVICE
OF PROCESS. The address of the registered office of the Company in the State of
Delaware is Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇. The name of the resident agent at such address for service of process on
the Company in the State of Delaware is The Corporation Trust Company. The
Managing Member may cause the Company to change from time to time its resident
agent for service of process, or the location of its registered office in the
State of Delaware. The Company's principal place of business shall be located at
Atlanta, Georgia. The Managing Member may establish places of business of the
Company within and without the State of Georgia, as and when required by the
Company's business and in furtherance of its purposes set forth in Section 2.05
hereof, and may appoint agents for service of process in all jurisdictions in
which the Company shall conduct business.
2.04. QUALIFICATION. The Managing Member shall cause to be filed
such certificates and documents as may be necessary or appropriate to comply
with the Act and any other applicable requirements for the operation of a
limited liability company in accordance with the laws of the jurisdictions in
which the Company shall conduct business, and shall continue to do so for so
long as the Company conducts business therein.
2.05. PURPOSES. The Company is formed for the object and purpose of,
and the nature of the business to be conducted and promoted by the Company is,
engaging in any lawful act or activity for which limited liability companies may
be formed under the Act and engaging in any and all activities necessary,
convenient, desirable or incidental to the foregoing.
2.06. MEMBERS. The current Members of the Company are Newco, ANTEC
and Nortel. Subject to Section 6.05 and compliance with the other provisions of
this Agreement, additional members may be admitted to the Company, solely upon
the prior written consent of the Managing Member, which may be withheld for any
or no reasons, unless stated otherwise in this Agreement (including, without
limitation, Section 8.01(b)).
2.07. TERM. The existence of the Company commenced upon the
effectiveness of the Certificate and the Company shall have a perpetual
existence, unless and until it is dissolved and terminated in accordance with
Article IX.
2.08. LIABILITY OF MEMBERS. Except as otherwise expressly provided
by the Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member. Without limiting the foregoing, (a) no Member, in its capacity as a
Member, shall have any liability or obligation to restore any negative balance
in its Capital Account, and (b) the failure of the Company to observe any
formalities or requirements relating to exercise of its powers or management of
its business or affairs under this Agreement or the Act shall not be grounds for
imposing personal liability on the Members for liabilities of the Company.
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2.09. NO PARTNERSHIP. The Company is not intended to be a general
partnership, limited partnership or joint venture, and no Member shall be
considered to be a partner or joint venture of any other Member, for any
purposes other than foreign and domestic federal, state, provincial and local
income tax purposes, and this Agreement shall not be construed to suggest
otherwise.
2.10. TITLE TO COMPANY PROPERTY. All property owned by the Company,
whether real or personal, tangible or intangible, shall be deemed to be owned by
the Company as an entity, and no Member, individually, shall have any ownership
of such property. The Company may hold any of its assets in its own name or in
the name of its nominee, which nominee may be one or more trusts. Any property
held by a nominee trust for the benefit of the Company shall, for purposes of
this Agreement, be treated as if such property were directly owned by the
Company.
2.11. NO INDIVIDUAL AUTHORITY. No Member shall, without the express,
prior written consent of the Managing Member, take any action for or on behalf
of or in the name of the Company, or assume, undertake or enter into any
commitment, debt, duty or obligation binding upon the Company, except for
actions expressly provided for in this Agreement, and any action taken in
violation of the foregoing limitation shall, to the fullest extent permitted by
law, be void.
2.12. INVESTMENT REPRESENTATIONS.
(a) Investment Intent. Each Member hereby represents and
warrants to each other Member and to the Company that it has acquired its
interest in the Company solely for its own account with the intention of holding
such interest for investment purposes only.
(b) Unregistered Interests. Each Member hereby
acknowledges that it is aware that its Interests have not been registered under
the Securities Act or under any state securities laws. Each Member further
understands and acknowledges that its representations and warranties contained
in this Section 2.13 are being relied upon by the Company and by the other
Members as the basis for the exemption of the Members' Interests in the Company
from the registration requirements of the Securities Act and under all state
securities laws. Subject to Section 6.05(c), each Member further acknowledges
that the Company will not and has no obligation to recognize any sale, transfer,
or assignment of a Member's Interest in the Company to any Person unless and
until the provisions of Article VIII hereof applicable to such sale, transfer or
assignment have been fully satisfied.
ARTICLE III
CAPITAL CONTRIBUTIONS; ADDITIONAL FINANCING
3.01. CAPITAL ACCOUNTS. For each Member (and each permitted
assignee), the Company shall establish and maintain a separate Capital Account.
The initial Capital Account balances of the Members as of the Closing Date shall
be set forth in Schedule A.
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3.02. CAPITAL CONTRIBUTIONS. Pursuant to the Agreement and Plan of
Reorganization, on the Closing Date, Nortel shall contribute the amounts
specified in Section 4.02 of the Agreement and Plan of Reorganization. In
exchange for such contribution, the Company shall issue to Nortel the Class B
Interest.
3.03. OTHER CONTRIBUTIONS: NO WITHDRAWAL OF OR INTEREST ON CAPITAL.
Each Class A Member may contribute to the capital of the Company any amounts
requested by the Managing Member to be so contributed. The Class B Member may
not further contribute to the capital of the Company and shall have no
obligation to make any further or additional Capital Contribution. No interest
shall accrue on any Capital Contributions, and no Member shall have the right to
withdraw or to have returned or be repaid any Capital Contribution made by it or
to receive any other payment in respect of its Interest, except as specifically
provided in this Agreement (including, without limitation, Sections 8.02 and
9.03).
3.04. THIRD PARTY LOANS. In the event that the Company requires
additional funds to carry out its purposes, to conduct its business and affairs,
or to meet its obligations, or to make any expenditure authorized by this
Agreement, the Company may borrow funds from such Persons, and on such terms and
conditions, as may be approved by the Managing Member.
3.05. MEMBER LOANS. Any Member, including the Managing Member, may
lend funds to the Company to carry out its purposes, to conduct its business and
affairs, or to meet its obligations, or to make any expenditure authorized by
this Agreement, in each case upon the approval of the Managing Member (provided
that the Class B Member shall have no obligation to lend any such funds to the
Company, and this Agreement shall not be construed to suggest otherwise). Unless
otherwise agreed by the lender and the Managing Member, a Member Loan shall bear
interest at the "prime rate" published by The Wall Street Journal plus two
percent (2%) and shall be payable out of Cash Flow, Capital Proceeds or on
liquidation as provided in Sections 4.01, 4.02 and 9.03, respectively; provided
that in all events all other terms of any Member Loan shall be commercially
reasonable and established on an arms-length basis.
3.06. REDUCTION OF CAPITAL ACCOUNTS. Any distribution to a Member,
whether pursuant to Section 4.01 or 4.02 or any other Section of this Agreement,
shall reduce the amount of such Member's Capital Account in accordance with
Section 3.07, but no adjustment in the Interests of any Member shall be made on
account of any such distribution, except as otherwise specifically provided in
this Agreement.
3.07. CAPITAL ACCOUNTS.
(a) "Capital Account" means an account that shall be
maintained for each Member and which, as of any given date, shall be an amount
equal to the following:
(i) The aggregate amount of cash that has been
contributed to the capital of the Company as of such date by or on
behalf of such Member; plus
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(ii) The agreed upon Gross Asset Value (as of the
date of contribution) of any property other than cash that has been
contributed to the capital of the Company as of such date by such
Member and the amount of liabilities assumed by any such Member under
Section 752 of the Code or which is secured by any Company property
distributed to such Member; plus
(iii) The aggregate amount of the Company's Net
Profit that has been allocated to such Member as of such date pursuant
to the provisions of Section 5.01 or any items of income or gain which
are specially allocated to such Member or other positive adjustment
required by the Regulations and which have not been previously taken
into account in determining Capital Accounts; minus
(iv) The aggregate amount of the Company's Net
Loss that has been allocated to such Member as of such date pursuant to
Section 5.02 and the amount of any item of expense deduction or loss
which is specially allocated to such Member; and minus
(v) The aggregate amount of cash and the agreed
upon Gross Asset Value of all other property (as of the date of
distribution) that has been distributed to or on behalf of such Member
and the amount of any liabilities of such Member assumed by the Company
under Section 752 of the Code or which are secured by any property
contributed by such Member to the Company or other negative adjustment
required by the Regulations and which have not been previously taken
into account in determining Capital Accounts.
(b) Upon the sale, transfer, assignment or other
disposition of an Interest in the Company after the date of this Agreement, the
Capital Account of the transferor Member that is attributable to the transferred
Interest will be carried over to the transferee Member. In the case of a sale or
exchange of any Interest in the Company at a time when an election under Code
Section 754 is in effect, the Capital Account of the transferee Member shall not
be adjusted to reflect the adjustments to the adjusted tax bases of Company
property required under Code Sections 754 and 743, except as otherwise permitted
by Regulation Section 1.704-1(b)(2)(iv)(m).
(c) The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Regulation Section 1.704-1(b), and shall be interpreted and applied
in a manner consistent with such Regulation. In the event the Members shall
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities that are secured by contributed or distributed
property or that are assumed by the Company or the Members), are computed in
order to comply with such Regulation, the Managing Member may make such
modification, provided that such modification is not likely to have a material
effect on the amounts distributable to any Member pursuant to Section 9.03
hereof upon the dissolution of the Company.
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3.08. NEGATIVE CAPITAL ACCOUNTS. Any Member having a deficit or
negative balance in its Capital Account shall not be required to restore such
deficit capital amount or otherwise to contribute capital to the Company to
restore its Capital Account.
3.09. NO RESIGNATION OR WITHDRAWAL OF CAPITAL. Except as provided in
Article VIII, no Member shall have the right to resign or withdraw from the
Company or to withdraw any portion of the capital of the Company at any time.
Upon dissolution of the Company, the Members' capital shall be distributed
pursuant to Section 9.03 hereof.
ARTICLE IV
DISTRIBUTIONS
4.01. DISTRIBUTION OF CASH FLOW. Subject to Section 9.03, the
Company shall distribute Cash Flow as follows: (a) to the Class B Member to make
the redemption payments specified in Section 8.02 in respect of the Class B
Interest; (b) to repay amounts borrowed pursuant to Section 3.05 as and when
determined by the Managing Member; and (c) to the Class A Members as and when
determined by the Managing Member; provided that it is acknowledged and agreed
that (x) this Section 4.01 is not intended to, and shall not, override or
otherwise qualify the limitations on the Company's obligations contained in
Section 8.02 hereof, and (y) the Company shall not have any obligation to make,
and shall not make, any redemption payments with respect to the Class B Interest
pursuant to Section 4.01(a) unless and until such redemption payment is
permitted by Section 8.02.
4.02. DISTRIBUTION OF CAPITAL PROCEEDS. The Company shall distribute
to the Members Capital Proceeds as provided herein (including, without
limitation, Section 8.02 and Section 9.03), and otherwise as and when determined
by the Managing Member; provided that it is acknowledged and agreed that (x)
this Section 4.02 is not intended to, and shall not, override or otherwise
qualify the limitations on the Company's obligations contained in Section 8.02
hereof, and (y) the Company shall not have any obligation to make, and shall not
make, any redemption payments with respect to the Class B Interest pursuant to
Section 4.02 unless and until such redemption payment is permitted by Section
8.02.
4.03. LIMITATIONS ON DISTRIBUTIONS. Except as provided in Sections
4.01, 4.02, 4.04, 8.02 and 9.03, distributions of cash or other property shall
be made to the Members at such time or times, in such amounts, and in such
manner, as the Managing Member shall determine. Notwithstanding any provision to
the contrary contained in this Agreement, the Company shall not make a
distribution to any Member on account of its Interest if such distribution would
violate the Act or other applicable law or, in the case of a distribution with
respect to the Class B Interest, violate Section 8.02(b) or exceed the Class B
Unreturned Capital plus any unpaid Class B Return.
4.04. CLASS B MEMBER DISTRIBUTION PREFERENCE IN BANKRUPTCY. If (a) a
Bankruptcy occurs as to the Company and (b) an exchange described in Section
8.03 has not occurred, no
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other Member of the Company shall be entitled to receive any distributions under
this Agreement until the Class B Member has received a distribution of (i) the
Class B Unreturned Capital and (ii) any unpaid Class B Return. Nothing herein
shall be construed to permit a distribution to the Class B Member that otherwise
is prohibited by the Subordination Agreement.
4.05. TAX WITHHOLDING. If the Company incurs any obligation to pay
any amount in respect of taxes (including withholding taxes and any interest,
penalties or additions to tax) imposed on income of or distributions made to any
Member or former Member, any amount so required to be paid by the Company with
respect to such Person shall be treated for all purposes of this Agreement as if
it had been loaned to such Person, and the Managing Member shall cause the
Company to give prompt written notice to such Person of the date and amount of
such loan. Any withholding taxes withheld pursuant to this Section 4.05 shall be
withheld at the maximum applicable statutory rate under the applicable tax law
unless the Managing Member shall have received an opinion of counsel or other
evidence, satisfactory to the Managing Member in its reasonable discretion, to
the effect that a lower rate is applicable or that no withholding is applicable.
Each Member covenants, for itself, its successors, assigns, heirs and personal
representatives, that such Person shall pay to the Company at any time after
notice of the loan has been given, but not later than twenty (20) days after the
Company delivers a written demand to such Person for such repayment (which
demand may be made at any time prior to or after the dissolution of the Company
or the withdrawal of such Person or its predecessors from the Company);
provided, however, that if any such repayment is not made within such 20-day
period, such Person shall pay interest to the Company at a rate equal to the
"prime rate" published by The Wall Street Journal, adjusted daily, for the
entire period commencing on the date on which the Company paid such amount and
ending on the date on which such Person repays such amount to the Company
together with all accrued but previously unpaid interest. The Company shall (1)
collect such unpaid amounts (including interest) from any Company distributions
that otherwise would be made to such Person and/or (2) subtract from the Capital
Account of such Person, no later than the day prior to the Company's initial
liquidating distribution, any such unpaid amounts (plus unpaid interest) not so
collected, in each case treating the amount so collected or subtracted as having
been distributed to such Person at the time of such collection or subtraction.
4.06. NO LIMITATIONS ON REDEMPTION. For the avoidance of doubt,
notwithstanding anything to the contrary in this Agreement (including, without
limitation, the provisions of Section 4.01 and Section 4.02 to the extent they
may be construed to imply that the Company shall not, unless otherwise
determined by the Managing Member, be obligated to distribute assets other than
Cash Flow and Capital Proceeds in connection with the redemption of the Class B
Interest required by the provisions of Section 8.02 hereof), the provisions of
this Article IV shall be in all respects subject to, and shall not in any way
limit or restrict, the Company's obligations under Section 8.02(a) and Section
9.03 (in each case subject to the limitations set forth in Section 8.02(b) and
the Subordination Agreement), except for amounts owed to the Company pursuant to
Section 4.05.
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ARTICLE V
ALLOCATION OF NET PROFITS AND NET LOSSES
5.01. NET PROFIT. Except as otherwise provided in this Article V,
all Net Profit of the Company for each Fiscal Year shall be allocated to the
Members as follows:
(a) First, to the Members, pro rata in proportion to the
cumulative allocations of Net Loss to each Member pursuant to Section 5.03 until
the cumulative Net Profit allocated to each Member pursuant to this clause (a)
is equal to the cumulative Net Loss allocated to such Member pursuant to Section
5.03 (such Net Profit to be allocated in reverse chronological order of the
allocation of the Net Loss pursuant to Section 5.03 which has not been
previously offset by an allocation under this Section 5.01(a));
(b) Second, to the Class A Members, pro rata in
proportion to the cumulative Net Loss allocated to each Class A Member pursuant
to Section 5.02 until the cumulative Net Profit allocated to each Class A Member
pursuant to this clause (b) is equal to the cumulative Net Loss allocated to
such Class A Member pursuant to Section 5.02 (such Net Profit to be allocated in
reverse chronological order of the allocation of the Net Loss pursuant to
Section 5.02 which has not been previously offset by an allocation under this
Section 5.01(b)); and
(c) Thereafter, to the Class A Members pro rata in
proportion to their then respective Class A Sharing Ratios.
5.02. NET LOSS. Except as otherwise provided in this Agreement, all
Net Loss of the Company for each Fiscal Year shall be allocated to the Class A
Members pro rata in proportion to their then respective Class A Sharing Ratios.
5.03. LIMITATION ON NET LOSS ALLOCATIONS. Notwithstanding any
provision of this Agreement to the contrary, except as otherwise specifically
provided in this Section 5.03 in no event shall Net Loss be allocated to a
Member if such allocation would result in such Member's having a negative
Adjusted Capital Account Balance at the end of any Fiscal Year. All Net Loss in
excess of the limitation set forth in this Section 5.03 shall be allocated to
any remaining Member with a positive Adjusted Capital Account Balance, and if
all such Adjusted Capital Account Balances are zero or negative, to the Class A
Members pursuant to Section 5.02 above.
5.04. OTHER ITEMS. Except as provided herein, for tax purposes, all
items of income, gain, loss, deduction or credit shall be allocated in the same
manner as are Net Profit and Net Loss.
5.05. SPECIAL ALLOCATIONS. Notwithstanding Sections 5.01, 5.02 and
5.03 above, the following allocations of Net Profit or Net Loss or items thereof
shall be made in the following order of priority:
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(a) MINIMUM GAIN CHARGEBACK. To the extent required by
Regulation Section 1.704-2(f), if there is a net decrease in "partnership
minimum gain" (within the meaning of Regulation Section 1.704-2(b)(2)), then
each Member will be allocated items of income and gain (calculated in accordance
with clauses (i), (ii) and (iii) of the definition of "Net Profit" or "Net
Loss"), before any other allocation of Net Profit or Net Loss, equal to that
Member's share of the net decrease in partnership minimum gain determined in
accordance with Regulation Section 1.704-2(g)(2).
(b) MEMBER MINIMUM GAIN CHARGEBACK. If a Member suffers a
net decrease in "partner nonrecourse debt minimum gain" (within the meaning of
Regulation Section 1.704-2(i)(4)) in any Fiscal Year, then that Member will be
allocated items of income and gain (calculated in accordance with clauses (i),
(ii) and (iii) of the definition of "Net Profit" or "Net Loss") to the extent
required by Regulation Section 1.704-2(i)(4).
(c) QUALIFIED INCOME OFFSET. In the event any Member
unexpectedly receives any adjustments, allocations, or distributions described
in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain (calculated in
accordance with clauses (i), (ii) and (iv) of the definition of "Net Profit" or
"Net Loss") shall be specially allocated to each such Member in an amount and
manner sufficient to eliminate, to the extent required by the Regulations, the
negative Adjusted Capital Account Balance of such Member as quickly as possible,
provided that an allocation pursuant to this clause (c) shall be made if and
only to the extent that such Member would have a negative Adjusted Capital
Account Balance after all other allocations provided for in this Article V. This
provision is intended to constitute a "qualified income offset" within the
meaning of Regulation Section 1.704-2(b)(ii)(d).
(d) GROSS INCOME ALLOCATION. In the event any Member has
a deficit Capital Account at the end of any Fiscal Year that is in excess of the
sum of (i) the amount such Member is obligated to restore (pursuant to the terms
of a promissory note to the Company or otherwise), and (ii) the amount such
Member is deemed to be obligated to restore pursuant to the penultimate sentence
of each of Regulation Sections 1.704-2(g)(1)(ii) and 1.704-2(i)(5) each such
Member shall be specially allocated items of Company income and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this clause (d) shall be made if and only to the extent that such
Member would have a deficit Capital Account in excess of such sum after all
other allocations provided for in this Article V have been tentatively made as
if Section 5.05(c) and this clause (d) were in not in this Article V.
(e) NONRECOURSE DEDUCTIONS. If there are any "nonrecourse
deductions" (within the meaning of Regulation Sections 1.704-2(b)(1) and
1.704-2(c)) in a Fiscal Year, then such deductions shall be allocated to the
Class A Members pro rata in accordance with their then respective Class A
Sharing Ratios.
(f) MEMBER NONRECOURSE DEDUCTIONS. If there are any
"partner nonrecourse deductions" (within the meaning of Regulation Section
1.704-2(i)(1)) in a Fiscal Year, then such deductions will be allocated to the
Member who bears the economic risk of loss for the "partner
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nonrecourse liability" (within the meaning of Regulation Section 1.704-2(b)(4))
to which the deductions are attributable.
(g) SECTION 754 ADJUSTMENTS. To the extent an adjustment
to the adjusted tax basis of any Company asset pursuant to Code Section 734(b)
or Code Section 743(b) is required, pursuant to Regulation Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
(h) CLASS B PRIORITY ALLOCATION. At the end of each
Fiscal Year, all or part of the Company items of gross income or gross gain for
the Fiscal Year remaining after the application of Sections 5.05(a)-(g), if any,
shall be specially allocated to the Class B Member(s), pro rata in accordance
with their Class B Interests, in proportion to and to the extent of the excess
of (x) the cumulative distributions of the Class B Return pursuant to this
Agreement from the Closing Date to the end of such Fiscal Year, or with respect
to such Fiscal Year, over (y) the cumulative items of gross income or gross gain
previously allocated to such Class B Member pursuant to this Section 5.05(h).
5.06. CURATIVE ALLOCATIONS. The allocations set forth in Sections
5.05(a) through 5.05(e) (the "Regulatory Allocations") are intended to comply
with certain requirements of Regulation Sections 1.704-1(b) and 1.704-2(b).
Notwithstanding any other provisions of this Agreement, other than the
Regulatory Allocations, the Regulatory Allocations shall be taken into account
in allocating other items of income, gain, loss and deduction among the Members
so that, to the extent possible, the net amount of such allocations of other
items and the Regulatory Allocations to each Member shall be equal to the net
amount that would have been allocated to such Member if the Regulatory
Allocations had not occurred. The Members shall, with respect to each Fiscal
Year, apply the provisions of this Section 5.06 in whatever manner is likely to
minimize the economic distortions that might otherwise result from the
Regulatory Allocations.
5.07. OTHER ALLOCATION RULES. The following rules shall apply for
purposes of making tax allocations:
(a) "Excess nonrecourse liabilities" of the Company
within the meaning of Regulations Section 1.752-3(a)(3), shall be allocated to
the Class A Members in proportion to their respective Class A Sharing Ratios.
(b) For purposes of determining the Net Profit, Net Loss
or any other items allocable to any period, Net Profit, Net Loss and any such
other items shall be determined on a daily, monthly or other basis, pursuant to
any permissible method under Code Section 706 and the Regulations promulgated
thereunder as selected by the Managing Member in its reasonable discretion
without regard to the tax consequences to any Member.
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(c) The Members are aware of the income tax consequences
of the allocations made by this Article V and hereby agree to be bound by the
provisions of this Article V in reporting their shares of the Company income and
loss for income tax purposes.
(d) To the extent permitted by Regulations Section
1.704-2(h)(3), the Members shall treat distributions of Capital Proceeds as not
allocable to an increase in "partnership minimum gain" (within the meaning of
Regulation Section 1.704-2(b)(2)) to the extent the distribution does not cause
or increase a deficit balance in the Adjusted Capital Account Balance of any
Member.
5.08. SECTION 704(C) ALLOCATION. Notwithstanding any other provision
of this Agreement to the contrary, any gain or loss and any depreciation and
cost recovery deductions recognized by the Company for income tax purposes in
any Fiscal Year with respect to all or any part of the Company's property that
is required or permitted to be allocated among the Members in accordance with
Section 704(c) of the Code and any Regulations promulgated thereunder so as to
take into account the variation, if any, between the adjusted tax basis of such
property at the time of its contribution and the Gross Asset Value of such
property at the time of its contribution, shall be allocated to the Members for
income tax purposes using any method described in Section 1.704-3 of the
Regulations as selected by the Members. If and when the Capital Accounts of the
Members are adjusted pursuant to the definition of "Gross Asset Value" or
otherwise pursuant to Regulation Sections 1.704-1(b)(2)(iv)(f) or (g) with
respect to a revaluation of any asset of the Company, then subsequent
allocations of income, gain, loss, and deduction, including without limitation
depreciation or deductions for cost recovery with respect to such asset, shall
take into account any variation between the then existing adjusted basis of such
asset for federal income tax purposes and the agreed value of such asset, as
such computations may be required under Sections 704(b) and 704(c) of the Code
and Regulation Section 1.704-1(b)(4)(i). Any elections or other decisions
relating to such allocations shall be made by the Managing Member in its
reasonable discretion without regard to the tax consequences to any Member.
ARTICLE VI
MANAGEMENT
6.01. MANAGEMENT OF THE COMPANY.
(a) The management of the Company is fully reserved to
the Class A Members, and the Company shall not have non-member "managers," as
such term is used in the Act. Subject to the other provisions of this Agreement,
the powers of the Company shall be exercised by or under the authority of, and
the business and affairs of the Company shall be managed under the direction and
authority of the Managing Member who, in its sole and absolute discretion, shall
make all decisions and take all actions for the Company. Except as set forth in
the foregoing provisions of this Section 6.01 or expressly provided otherwise
elsewhere in this Agreement, no Member (in its capacity as a Member) has the
right, power or authority to act for or on behalf of the Company, to do any act
that would be binding on the Company, or to incur
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any expenditures on behalf of the Company. Decisions or actions with respect to
the Company taken by the Managing Member in accordance with this Agreement shall
constitute decisions or actions by the Company and shall be binding on the
Company and each Member, officer and employee of the Company.
(b) The Managing Member in its sole and absolute
discretion may delegate all or any of its duties hereunder to such other Persons
as the Managing Member deems necessary or desirable for the transaction of the
business of the Company, and in furtherance of any such delegation, shall have
the right to appoint, employ or contract with and pay reasonable compensation to
any other Persons, but in such event the Managing Member will not be released
from its responsibilities hereunder. Such Persons may, under the supervision of
the Managing Member, administer, or assist in the administration of the routine
day-to-day management of the Company and its business and affairs; may serve as
advisors and consultants to the Managing Member in connection with decisions
made by the Managing Member; may act as consultants, accountants,
correspondents, attorneys, brokers, escrow agents, or in any other capacity; and
may perform such other acts or services for the Company as the Managing Member
in its sole and absolute discretion may approve.
6.02. OFFICERS.
(a) The officers of the Company shall consist of such
officers as may be determined by the Managing Member ("Officers"); provided,
however, that, if the Managing Member determines to establish any officer
position with a title expressly referenced in the DGCL or customarily used in
corporations organized under the DGCL, such Officer shall, to the maximum extent
possible, have the duties and responsibilities, and be deemed to have been
delegated to him by the Managing Member the rights, powers and authority,
associated with such officer position under the DGCL or customarily associated
with such officer position in such corporations, as the case may be.
(b) No Officer need be a Member. Any two or more offices
may be held by the same person. Each Officer of the Company shall be required to
devote only such time to the business and affairs of the Company as may be
reasonably necessary for the discharge of his duties and responsibilities to the
Company in such capacity, and no Officer of the Company shall be required to
devote full time to the business and affairs of the Company unless the Managing
Member determines otherwise.
(c) Except as otherwise provided by Law or by this
Agreement, each Officer shall hold office until his death, resignation or
removal, unless a different term is specified in the action of the Managing
Member designating him. Any Officer may resign by delivering his written
resignation to the Managing Member. Such resignation shall be effective upon
receipt unless it is specified to be effective at some other time or upon the
happening of some other event. Any Officer may be removed at any time, with or
without cause, by action of the Managing Member.
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(d) Except as the Managing Member may otherwise
determine, no Officer who resigns or is removed shall have any right to any
compensation as an Officer for any period following his resignation or removal,
or any right to damages on account of such removal, whether his compensation be
by the month or by the year or otherwise, unless such compensation is expressly
provided in a duly authorized written agreement with the Company.
(e) The Managing Member may, in its discretion, fill any
vacancy occurring in any office of the Company for any reason or leave such
vacancy unfilled for such period as it may determine.
6.03. BINDING THE COMPANY. Except as the Managing Member may
generally or in any particular case or cases otherwise authorize, and subject to
the other provisions of this Agreement, all deeds, leases, contracts, bonds,
notes, checks, drafts or other obligations made, accepted or endorsed by the
Company shall be signed by the Managing Member or any one or more Officers of
the Company.
6.04. CONTRACTS WITH MEMBERS. The Company may engage in business
with, or enter into one or more agreements, leases, contracts or other
arrangements for the furnishing to or by the Company of funds, goods, services
or space with, any Member or Affiliate of a Member, and may pay reasonable
compensation in connection with such business, funds, goods, services or space.
Contracts with Members or Affiliates of Members, at the discretion of the
Managing Member, need not be in writing.
6.05. REQUIRED APPROVAL BY MEMBERS.
(a) The following actions and decisions shall require the
affirmative approval, either by vote or by written consent, of Members
representing a majority of the Class A Interests:
(i) to admit any new Member to the Company,
other than (A) as specifically permitted in this Agreement
(including, without limitation, Section 8.01(b)) or (B) as
provided for in Section 6.05(c) below;
(ii) to institute proceedings to adjudicate the
Company a bankrupt, or consent to the filing of a bankruptcy
proceeding against the Company, or file a petition or answer
or consent seeking reorganization of the Company under the
Federal Bankruptcy Code or any other similar applicable
federal, state or foreign law, or consent to the filing of any
such petition against the Company, or consent to the
appointment of a receiver or liquidator or trustee or assignee
in bankruptcy or insolvency of the Company or of its property,
or make an assignment for the benefit of creditors of the
Company, or admit in writing the Company's inability to pay
its debts generally as they become due;
(iii) to dissolve or wind-up the Company; and
(iv) to merge or consolidate the Company with or
into another Person.
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(b) Subject only to Section 6.05(c) and the transactions
described in Section 8.03(a)(x), but notwithstanding anything else in this
Agreement to the contrary, for so long as any Class B Member remains a Member,
any (i) merger, consolidation or other business combination involving the
Company, (ii) conversion of the Company into any other form of entity, and (iii)
amendment of this Agreement (whether in connection with admission of a new
Member or otherwise), in each case causing or resulting in any direct or
indirect reduction of the benefits or increase of the detriments to be received
by the Class B Member hereunder, or otherwise adversely affecting the Class B
Interest, also shall require the prior affirmative written approval of a
majority of Class B Members.
(c) The Members acknowledge that a full and complete
security interest in the Class A Interest has been granted by each of the Class
A Members to the Administrative Agent, for the benefit of the lenders pursuant
to the Senior Credit Facilities. Notwithstanding anything in this Agreement to
the contrary, the Administrative Agent and the lenders under, and the other
beneficiaries of, the Senior Credit Facilities, and their successors and
assigns, shall have the absolute and unconditional right to become Class A
Members, with no need for any approval, consent or other action of the Managing
Member, the Class A Members, the Class B Members, the Company or any other
Person, upon notice to the Managing Member in connection with the Administration
Agent's enforcement of such security interest after an Event of Default under
the Senior Credit Facilities, whether through foreclosure, Transfer in lieu of
foreclosure, other exercise of rights under the Senior Credit Facilities or
otherwise (including without limitation the exercise of rights of a secured
lender).
6.06. MEMBER ACTION. In the event that any matter is required to be
submitted to the Members for their approval under the terms of this Agreement or
the Act, the following provisions shall apply:
(a) Meetings of the Members may be called by the Managing
Member. The Members entitled to vote may vote on any such matter at a meeting to
be held at such time and place as shall be designated by the Managing Member.
Any meeting of the Members may be held by conference telephone or similar
communication equipment so long as all Members entitled to vote participating in
the meeting can hear one another. Members entitled to vote on the matter shall
be given at least three (3) business days' prior written notice of any meeting;
provided that any Member may waive such notice prior to, at or after the
meeting. The notice shall specify the place, date and hour of the meeting and
the general nature of the business to be transacted.
(b) Each Class A Member shall be entitled to vote in
accordance with its Class A Sharing Ratio of the Company. At any meeting of
Members, the presence of Class A Members holding at least a majority of the
Class A Sharing Ratios and the Class B Member when entitled to vote at such
meeting, shall constitute a quorum for the transaction of business. Except as
otherwise required by this Agreement or applicable Law, the affirmative vote of
Class A Members representing more than fifty percent (50%) of the Class A
Sharing Ratios is required to constitute approval of the Class A Members.
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(c) Any action that may be taken at any meeting of
Members may be taken without a meeting and without prior notice if a consent in
writing setting forth the action so taken is signed by all Members entitled to
vote on the matter. Any such written consent may be executed and given by
telecopy or similar electronic means and such consents shall be filed with the
minutes of the proceedings of the Members.
(d) From time to time each Class A Member shall, by
notice to each other Member, designate one or more individuals who shall be
authorized to act under this Agreement for and on behalf of any such Class A
Member. Any written act, approval, consent or vote of any such representative
shall be deemed the act, approval, consent or vote of the Class A Member that
designated such representative. Each Class A Member may change any one or more
of its representatives at any time and from time to time by written notice to
each other Member.
(e) Each Class A Member agrees to indemnify, hold
harmless and defend the other Members from any liability whatsoever arising out
of such other Member's relying on the written act, approval, consent or vote of
the indemnifying Class A Member's designated representatives. If any Member
relies on any act, approval, consent or vote of any other Person associated with
a Class A Member other than the designated representative, such relying Member
assumes the risk that such act, approval, consent or vote has not been duly
authorized by the Class A Member allegedly taking or giving such act, approval,
consent or vote, and shall not be entitled to rely on any such Person's apparent
or implied authority to perform or give any such act, approval, consent or vote
on behalf of the Class A Member allegedly performing or giving same. Upon the
transfer by a Class A Member of its entire Interest, any representative
appointed by such Class A Member shall automatically cease to be a
representative of such Class A Member hereunder effective upon notice of such
transfer to each other Member.
6.07. INDEMNIFICATION.
(a) The Company shall, to the fullest extent permitted by
Law, indemnify any Person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such Person is an Officer of the Company, or is or was serving at the
request of the Company as a director or officer of any other Person (each, an
"Indemnitee"), against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding with respect to any Indemnitee,
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe was unlawful.
(b) In addition, the Company may indemnify any Person who
is not an Indemnitee who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that
such Person is an employee or agent of the Company, or was serving at
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the request of the Company as an employee or agent of any other Person (each, an
"Optional Indemnitee"), against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe was unlawful.
(c) To the extent that an Indemnitee has been successful
on the merits or otherwise in defense of any action, suit or proceeding referred
to in Section 6.07(a), or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) To the extent that an Optional Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 6.07(b), or in defense of any claim, issue or
matter therein, he may be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
(e) The Company may pay the expenses (including
attorneys' fees) incurred by an Indemnitee or Optional Indemnitee in defending a
civil, criminal, administrative or investigative action, suit or proceeding
brought by a party against the Indemnitee or Optional Indemnitee in advance of
the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Indemnitee or Optional Indemnitee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Company as authorized in this Section 6.07.
(f) Any indemnification under this Section 6.07 (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination that indemnification of the Indemnitee or
Optional Indemnitee is proper in the circumstances because he has met the
applicable standard of conduct set forth in Section 6.07(a) and Section 6.07(b).
Such determination shall be made by the Managing Member.
(g) The right of indemnification and reimbursement
provided in this Section 6.07 shall be in addition to any rights to which an
Indemnitee or Optional Indemnitee may otherwise be entitled and shall inure to
the benefit of the executors, administrators, personal representatives,
successors or assigns of each Indemnitee and Optional Indemnitee.
(h) The rights to indemnification and reimbursement
provided for in this Section 6.07 may be satisfied only out of the assets of the
Company and to the extent of the Capital Contributions of the Members and none
of the Members shall be personally liable for any claim for indemnification or
reimbursement against the Company under this Section 6.07.
(i) Except as set forth in Section 6.06(e) hereof, no
Managing Member and no Member (nor any director, shareholder, member, manager,
officer or employee of such Member, direct or indirect) shall be personally
liable or personally accountable to the Company or to any of the Members, in
damages or otherwise, for any error of judgment, for any mistake of fact or of
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law, or for any other act or thing which it may do or refrain from doing in
connection with the business and affairs of the Company, except for claims and
damages resulting from fraud, willful misconduct, bad faith, gross negligence or
a material breach of this Agreement.
(j) To the fullest extent permitted by Law, the Company
(to the extent of its assets) hereby agrees to indemnify, defend and hold
harmless each Member and its Affiliates from and against any loss, expense, or
damage (including reasonable attorneys' fees and court costs) suffered by such
Member or its Affiliate by reason of anything the Company may do or refrain from
doing or such Member may do or refrain from doing hereafter for and on behalf of
the Company and in furtherance of its interests or by reason of such Member's
status as a Member of the Company.
(k) Each Class A Member shall defend and indemnify the
Company and the other Members against, and shall hold them harmless from, any
damage, loss, liability or expense, including reasonable attorneys' fee, as and
when incurred by the Company or such other Members in connection with or
resulting from such indemnifying Class A Member's unauthorized actions, bad
faith, gross negligence, fraud, or willful misconduct.
(l) The Company and each Member that is not a Class B
Member (each, an "Indemnifying Member"), jointly and severally, shall indemnify,
defend and hold harmless each Class B Member and its Affiliates from and against
any loss, cost, expense or damage (including, without limitation, attorneys'
fees and costs, costs of investigation and court and arbitration costs) suffered
by such Class B Member or any such Affiliate by reason of, or in connection
with, (i) anything the Company may do or refrain from doing or any Indemnifying
Member may do or refrain from doing hereafter in connection with, or in any way
relating to, the business and affairs of the Company, (ii) such Class B Member's
status as a Member of the Company and/or (iii) any action or omission by such
Class B Member (or any such Affiliate) taken or omitted to be taken in
connection with any exercise of, or any waiver of or failure to exercise, any of
such Class B Member's rights and powers under this Agreement. The Company and
each Indemnifying Member hereby agree that neither any Class B Member nor any
Affiliate of a Class B Member shall have any liability or accountability, in
damages or otherwise, to the Company, any Indemnifying Member or any of their
respective Affiliates with respect to any claim, cause of action, suit or
proceeding to the extent the same is based, in whole or in part, on any actual
or alleged action or omission of a type or kind described in clause (i), (ii) or
(iii) of the preceding sentence.
ARTICLE VII
FISCAL MATTERS
7.01. BOOKS AND RECORDS. The Managing Member shall keep or cause an
officer, employee or agent of the Company or a designated third party to keep,
at the principal office of the Company or in such other location as the Managing
Member or such officer, employee, agent or third party may designate, complete
and accurate books and records of the Company,
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maintained in such form and manner as the Managing Member or such other Person
may determine, as well as any other documents and information required to be
furnished to the Members under the Act.
7.02. FINANCIAL AND OTHER REPORTS.
(a) Within fifteen (15) days after the end of each month
and within forty-five (45) days after the end of each fiscal quarter, the
Managing Member shall cause the Company to provide each Member with:
(i) an unaudited balance sheet as of the end of,
and unaudited statements of income, cash flow and Members' equity for,
each such period prepared in accordance with generally accepted
accounting principles, consistently applied, for the Company; and
(ii) to the extent not included in (i), unaudited
statement of distributions, changes in capital accounts, and tax
allocations, for the Company.
(b) Not later than the earlier of (x) five (5) business
days after the same become available to the Company, or (y) 120 days after the
end of each Fiscal Year, the Company shall provide each Member with:
(i) an audited balance sheet as of the end of,
and audited statements of income, cash flow and Members' equity for,
each such period prepared in accordance with generally accepted
accounting principles, consistently applied, for the Company; and
(ii) to the extent not included in (i), audited
statements of distributions, changes in capital accounts, and tax
allocations of the Company.
(c) Not later than 120 days after the end of each fiscal
year, the Company shall provide each Member with such information as is
necessary to complete federal and state income tax or information returns, and a
copy of the Company's federal, state and local income tax or information returns
for that year.
7.03. BANK ACCOUNTS. The Managing Member shall (or shall authorize
and direct one or more Officers of the Company to) cause the Company to open and
maintain one or more accounts with such one or more financial institutions as
the Managing Member or any such Officer may determine to be necessary or
advisable.
7.04. TAX MATTERS PARTNER. The Managing Member shall serve as the
"tax matters partner" of the Company. The "tax matters partner" is hereby
authorized to and shall perform all duties and have all powers of a "tax matters
partner" under the Code and shall serve as "tax matters partner" until its
resignation or until the designation of its successor, whichever occurs sooner.
The "tax matters partner" shall be reimbursed by the Company, for all reasonable
expenses actually incurred by the "tax matters partner" in connection with its
performance of its duties as such, and the Company shall indemnify and hold
harmless the "tax matters partner," to the maximum extent permissible under the
Act, from and against any and all losses, claims, liabilities, costs and
expenses incurred by the "tax matters partner" in connection with its
performance of its
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duties as such, except insofar as the same may have been incurred by reason of
gross negligence or willful misconduct of such "tax matters partner."
7.05. TAX ELECTIONS AND DECISIONS. Any and all federal, state and
local tax elections and decisions for the Company shall be made by the Managing
Member in its reasonable discretion without regard to the tax consequences to
any Member; provided, however, the Managing Member may not cause the Company to
be classified for federal income tax purposes as other than a partnership unless
approved in writing by all the Members.
ARTICLE VIII
TRANSFERS OF INTERESTS
8.01. GENERAL RESTRICTIONS ON TRANSFER.
(a) Except in connection with a foreclosure, a Transfer in lieu of
foreclosure, or other exercise of rights in connection with the Senior Credit
Facilities or otherwise (including without limitation exercise of rights of a
secured lender) and except as otherwise provided in Section 6.05(c), no Class A
Member may Transfer all or any part of its Interest (including the interest of
an assignee within the meaning of Section 18-702 of the Act) or its share of
capital, profits, losses, allocations or distributions hereunder to any Person
without first meeting the following requirements:
(i) the prior written approval of the Managing Member;
(ii) the execution by the transferring Member of an
instrument of transfer of such Interest in form and substance reasonably
satisfactory to the Managing Member;
(iii) the execution by the transferee of the Interest (the
"Assignee") of a written agreement, in form and substance satisfactory to the
Managing Member, to assume all of the duties and obligations of the transferring
Member under this Agreement and the agreement by such Assignee to be bound by
and subject to all the terms and conditions contained herein;
(iv) the execution by the transferring Member and the
Assignee of a written agreement, in form and substance reasonably satisfactory
to the Managing Member, to indemnify and hold harmless the Company and the
non-transferring Members from and against any expense, loss or liability arising
out of such Transfer;
(v) the execution by the transferring Member of a written
agreement, in form and substance reasonably satisfactory to the Managing Member,
acknowledging the termination of all the transferring Member's rights and
interests as a Member of the Company, effective immediately upon such Transfer;
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(vi) if requested by the Managing Member, a written
opinion, delivered by and at the expense of the transferring Member, of counsel
for the Company, or other counsel reasonably satisfactory to the Managing
Member, that the Transfer will not result in (i) a violation of applicable law
or this Agreement; (ii) the Company being classified as an association or
taxable as a corporation for federal income tax purposes; (iii) the Company
being deemed terminated pursuant to Section 708(b)(1)(B) of the Code; or (iv) a
requirement for a registration of the transaction or the Interest under
applicable federal and state securities laws; and
(vii) unless otherwise waived by the Managing Member, the
payment of the Assignee or the transferring Member of all expenses incurred by
the Company in connection with the Transfer and the admission of the Assignee to
the Company as a Member.
(b) Subject to compliance with non-waivable provisions of
applicable Law, any Class B Member may Transfer all or any portion of its Class
B Interest to any Person (whether one or more) at any time or from time to time,
with no need for any approval, consent or other action of the Managing Member,
the Class A Members, the Company or any other Person, provided that the
Transferee executes and delivers to the Transferor, the Managing Member and the
Administrative Agent (and receives a written acknowledgment from the
Administrative Agent of such delivery to the Administrative Agent) a written
instrument in substantially the form attached hereto as Exhibit 3 with the
blanks therein appropriately completed (the "Admission Agreement"). Upon
acquisition of all or any portion of the Class B Interest and execution and
delivery of the Admission Agreement and the Administrative Agent's
acknowledgment thereof, such Transferee shall, to the extent it was granted such
right by the terms of the Transfer by virtue of which such Transferee acquired
its Class B Interest, but with no need for any other approval, consent or other
action of the Managing Member, the Class A Members, the Company or any other
Person, be admitted to the Company as a Class B Member (unless it is already a
Class B Member at the time of such acquisition, execution and delivery). Any
attempt to transfer all or any portion of the Class B Interest without
compliance with the foregoing provisions shall be void ab initio.
8.02. REDEMPTION OF INTEREST OF CLASS B INTEREST.
(a) PERIODIC REDEMPTION PAYMENTS. Subject to the
limitations of Section 8.02(b), the Company shall redeem the Class B Interest
held by the Class B Member for an aggregate amount equal to Initial Class B
Balance plus the Class B Return, for cash, as follows:
(i) in quarterly installments, commencing on the
first business day after the six-month anniversary of the Closing Date
and thereafter on each successive three-month anniversary thereof, in
the maximum aggregate amount permitted under Section 8.02(b) up to (and
including) $33,000,000 per such installment (the "Maximum Quarterly
Class B Redemption"), until redeemed in full (as defined below); and
(ii) in any event, in full (as defined below), at
the earlier of (1) the date occurring six (6) months after the
Revolving Loan Commitment Termination Date, (2) a
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Change of Control of Newco, (3) Bankruptcy of Arris and (4)
acceleration of the Senior Credit Facilities in accordance with the
terms thereof.
For the purposes hereof, the Class B Interest shall be redeemed in full at such
time as the Class B Member has received cash redemption payments equal, in the
aggregate, to the sum of (i) Class B Unreturned Capital and (ii) the aggregate
Class B Return that has not been added to Class B Unreturned Capital, calculated
through and including the date of such redemption in full. Redemption payments
shall be applied first to the payment of accrued Class B Return that has not
been paid or added to Class B Unreturned Capital, and then to payment of Class B
Unreturned Capital.
(b) CERTAIN LIMITATIONS. Until payment in full in cash of
all Senior Debt, the termination of any commitments to lend under the Senior
Credit Facilities and the cancellation or termination of any letters of credit
issued under the Senior Credit Facilities, no obligation to make redemption
payments shall arise, and no redemption payment shall be made, pursuant to
Section 8.02(a)(i), and no redemption payment shall be made pursuant to Section
8.02(a)(ii), unless and until:
(1) prior to the date on which such redemption
is made, the Borrowers have delivered to the Administrative Agent all
financial statements, compliance certificates and other documents
required to be delivered in connection with the most recent fiscal
quarter ending prior to such date pursuant to the Senior Credit
Agreement,
(2) both immediately before and after giving pro
forma effect to such redemption, no Event of Default shall have
occurred and be continuing,
(3) after giving pro forma effect to such
redemption, the Borrowers shall have Excess Availability of at least
$75 million, and
(4) the Borrowers shall have delivered an
officer's certificate of ANTEC signed by the chief financial officer of
ANTEC certifying as to the foregoing clauses (1)-(3) and attaching a
Borrowing Base Certificate demonstrating such Excess Availability, in
each case in form and substance satisfactory to Administrative Agent;
provided that, with respect to the fourth fiscal quarter of any fiscal
year, Borrowers shall be deemed to have satisfied the part of the
condition contained in clause (1) above requiring delivery of audited
financial statements for the fiscal year ended at the end of the
preceding fiscal quarter upon delivery of unaudited financial
statements for such fiscal year in lieu of audited financial statements
for such fiscal year and a certificate signed by the chief financial
officer of ANTEC certifying that, when delivered, the audited financial
statements shall not contain any material differences from the
unaudited financial statements.
(c) [Intentionally Omitted.]
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(d) COMPANY COVENANT. So as to enable the exercise of the
Class B Member's redemption rights in this Section 8.02, the Company shall, and
shall cause ANTEC to, comply with all reporting requirements and document
delivery requirements contained in the Senior Credit Facilities, make all
requisite certifications under the Senior Credit Facilities, and take all such
further actions as may be reasonably requested by the Class B Member to enable
the Company, to the fullest extent possible, to make all redemption payments
contemplated by this Section 8.02 timely and in full (provided, however, that in
no event shall the Company be required by any of the foregoing provisions of
this Section 8.02(d) to take any action prohibited by the terms of the Senior
Credit Facilities). The Company shall notify the Class B Member in writing of
any Default or Event of Default, any material breach by the Company of this
Section 8.02, or any amendment, restatement, amendment and restatement,
supplement to, or other modification thereof, in each case not later than five
(5) business days after occurrence thereof.
(e) CESSATION OF CLASS B RIGHTS UPON COMPLETE REDEMPTION.
Upon the redemption in full of the Class B Interest as set forth in this Section
8.02, the Class B Interest shall be completely extinguished (including, without
limitation, any preference or other claim with respect to the Class B Interest)
and neither Nortel, nor any transferee permitted pursuant to Section 8.01, shall
have any rights, claims, duties, liabilities or obligations whatsoever with
respect to the Company under the Class B Interest or otherwise as a Member of
the Company, and shall cease to be a Member for all purposes (provided that,
notwithstanding anything in this Agreement to the contrary, the complete
redemption of the Class B Interest as set forth in this Section 8.02 shall not
constitute or operate as a waiver or release of, or have any other effect on,
(i) any breach or violation of the provisions of this Agreement occurring prior
to such complete redemption, or (ii) any of the Class B Member's rights and
remedies (whether at law or in equity) with respect thereto).
(f) NO LIMITATION ON OTHER PAYMENTS. For the avoidance of
doubt, the foregoing limitations on the Company's redemption obligations with
respect to the Class B Interest shall not apply to any other payments to be made
by the Company or Newco (or any of their Affiliates) to Nortel Networks or any
of its Affiliates (including Nortel), whether pursuant to the Agreement and Plan
of Reorganization, any of the Ancillary Agreements, in connection with purchases
of goods and/or services or licenses of intellectual property rights as of and
after the date hereof, or otherwise (including payments with respect to the
Inventory and the German Inventory specified on Schedule 8.01(f) to the
Agreement and Plan of Reorganization).
8.03. MANDATORY EXCHANGE FOR NEW SECURITIES.
(a) Until payment in full in cash of all Senior Debt, the
termination of all commitments to lend under the Senior Credit Facilities, and
the cancellation or termination of all letters of credit issued under the Senior
Credit Facilities, in the event that (x) ANTEC, Newco or any of their
Affiliates, or any of their successors and assigns, enter into and consummate an
agreement to Transfer all or any portion of their Interests, or the Company
Transfers all or substantially all of its assets, in each case to one or more
persons other than Newco or any of its subsidiaries, (y) there is any
foreclosure on any of the Interests held by ANTEC or Newco (or any of their
successors or assigns) or a Transfer in lieu of foreclosure or an exercise of
any rights
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or remedies of a secured creditor with respect to such Interests, in each case
pursuant to the Senior Credit Facilities or otherwise, or (z) during the
continuance of an Event of Default, then upon either (I) written notice by the
Class B Member to the Company and Newco in the event of the circumstances
described in clause (y), (II) written notice by the Administrative Agent to the
Class B Member, the Company and Newco in the event of the circumstances
described in clause (y) or clause (z), or (III) simultaneously in the event of
the circumstances described in clause (x), the Class B Interest automatically
shall be exchanged (at such time as may be specified in the notice or
immediately if no time is specified in the notice or no notice is required) for
such of the following as may be selected by the Class B Member by notice to the
Company:
(i) Duly authorized, validly issued, fully paid
and non-assessable shares of Newco common stock with a Fair
Market Value as of the date of exchange equal to the
unredeemed portion of Initial Class B Balance plus the unpaid
Class B Return accrued to the date of exchange,
(ii) One hundred thousand (100,000) shares of
Newco Preferred Stock, constituting all of the authorized
shares of Newco Preferred Stock, all of which shares shall be
duly authorized, validly issued, fully paid and non-assessable
(provided, however, that the provisions of Section 6 of Annex
A to the Certificate of Designations, and any other provisions
thereof (including, without limitation, the designation of
Newco Preferred Stock) referencing convertibility of Newco
Preferred Stock shall be deleted from such Annex A and shall
not be part of the powers, designations, preferences and
rights of Newco Preferred Stock if the Class B Member so
elects, in writing),
(iii) a subordinated note of Newco with a maturity
date six months after the final maturity of the Senior Credit
Facilities in the principal amount equal to the unredeemed
portion of the Initial Class B Balance plus the Class B Return
accrued to the date of exchange, in the form of, and
containing the terms set forth in, Exhibit 2 hereto (provided,
however, that the provisions of Section 3 of such Exhibit 2,
and any other provisions thereof (including, without
limitation, the title of such subordinated note) referencing
convertibility of such subordinated note, shall be deleted
from such Exhibit 2 and shall not be part of such subordinated
note if the Class B Member so elects in writing), or
(iv) any combination of the foregoing yielding an
aggregate value consistent with the foregoing equal to the
unredeemed portion of the Initial Class B Balance plus the
Class B Return accrued to the date of exchange
(the securities or other instruments receivable by Class B Member in such
exchange, the "New Securities"); provided that:
(V) if the Class B Member elects to receive a
combination of New Securities as described in clause (iv)
above, the amount of "Maximum Quarterly Redemption" referenced
in Section 4(a)(ii)(A) of Annex A to the Certificate of
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Designations and the amount of "Maximum Quarterly Payment"
referenced in Section 1(a)(i) of the form of subordinated note
of Newco attached hereto as Exhibit 2 shall be reduced on a
pro rata basis to reflect the proportion allocated to each
such New Security of the unredeemed portion of the Class B
Unreturned Capital plus the Class B Return accrued to the date
of exchange that has not been paid or added to Class B
Unreturned Capital;
(W) if the Class B Member shall not have given
notice of its selection prior to the effective time of an
exchange, then (1) it shall be presumed to have selected to
receive a subordinated note as provided in clause (iii) above
that does not contain the references to convertibility of such
subordinated note, and (2) such subordinated note may be
exchanged by the Class B Member (notwithstanding its having
ceased to be a Member of the Company), by written notice to
Newco given not later than twenty (20) days after the
effective time of the exchange pursuant to clause (W)(1) of
this proviso, for any of the other New Securities described in
clauses (i) through (iii) above or, subject to clause (iv)
above, any combination of the same;
(X) the Class B Member, by notice to the
Company, may change its selection at any time prior to the
effective time of the exchange, and, in the event that the New
Securities can not be issued or are not promptly issued as a
result of inaction by Newco or otherwise, the Class B Member
shall be entitled to change its selection until the earlier of
when it receives the New Securities it selected and twenty
(20) days after such effective time (and for sixty (60) days
thereafter it may elect to add any convertibility provisions
contained in such New Securities);
(Y) if the Class B Member selects to receive
either the Newco common stock pursuant to clause (i) above or
the Newco Preferred Stock pursuant to clause (ii) above, and
the exchange occurs, or by its terms should occur, prior to
completion of any filings or corporate formalities necessary
for the issuance of such common stock or Newco Preferred Stock
(such as, by way of example but not limitation, any necessary
increase in the number of shares of Newco common stock or
preferred stock authorized for issuance; approval by the Board
of Directors of Newco of the Certificate of Designations and
filing of the same with the office of the Secretary of State
of the State of Delaware; and approval of the issuance of such
common stock or Newco Preferred Stock (as applicable) by the
Board of Directors of Newco) and the actual issuance thereof,
then (1) as part of the exchange, Newco shall, and the Company
shall cause Newco to, deliver to the Class B Member a
subordinated note as provided in clause (iii) above that does
not contain references to convertibility of such subordinated
note, and (2) within ten (10) days after the exchange, the
Company shall cause Newco to complete such filings and
formalities and issue and deliver such common stock or Newco
Preferred Stock (as applicable) against return of the
subordinated note (provided that, prior to such issuance and
delivery, the Class B Member (notwithstanding its
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having ceased to be a Member of the Company) shall be entitled
to exercise the rights set forth in clause (W)(2) above); and
(Z) the Class B Member shall not be entitled to
select the mix of New Securities which would result in a
Change of Control of Newco or a "Change in Control" as defined
in the Senior Credit Agreement.
Promptly upon receipt of any notice from the Class B Members pursuant to clause
(I) above, the Company and Newco shall cause a copy thereof to be delivered to
the Administrative Agent. The Company and Newco shall give each Class B Member
written notice of the occurrence of any event described in clause (x) or (y)
above not later than five (5) business days after the occurrence of such event.
(b) CESSATION OF CLASS B RIGHTS UPON MANDATORY EXCHANGE.
Upon the exchange of the Class B Interest for the New Securities as set forth
above in this Section 8.03, the Class B Interest shall be completely
extinguished (including, without limitation, any preference or other claim
relating thereto) and neither Nortel nor any transferee permitted pursuant to
Section 8.01 shall have any rights, claims, duties, liabilities or obligations
whatsoever with respect to the Company under the Class B Interest or otherwise
as a Member of the Company, and shall cease to be a Member for all purposes;
provided that, notwithstanding the foregoing, Nortel and each transferee
permitted pursuant to Section 8.01 shall remain entitled, after effectiveness of
such exchange, solely to exercise the rights of a Class B Member set forth in
clauses (W)(2), (X) and (Y) of the first sentence of Section 8.03(a).
ARTICLE IX
DISSOLUTION AND LIQUIDATION
9.01. EVENTS CAUSING DISSOLUTION. The Company shall be dissolved and
its affairs wound up upon the earlier of:
(a) Any transaction authorized by or subject to Section
18-209 of the Act as a result of which the Company is not the surviving entity;
(b) The election to dissolve the Company made by the
holders of a majority of the Class A Interests and the Class B Member;
(c) At any time there are no Members of the Company,
unless the business of the Company is continued pursuant to the Act; or
(d) The entry of a decree of judicial dissolution under
Section 18-802 of the Act.
9.02. PROCEDURES ON DISSOLUTION. Dissolution of the Company shall be
effective on the day on which occurs the event giving rise to the dissolution,
but the Company shall not
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terminate until the assets of the Company shall have been distributed as
provided herein and the Certificate shall have been canceled. Notwithstanding
the dissolution of the Company, prior to the termination of the Company, as
aforesaid, the business of the Company and the affairs of the Members, as such,
shall continue to be governed by this Agreement. The Managing Member or one or
more other Persons appointed as Liquidator by the Managing Member shall
liquidate the assets of the Company, apply and distribute the proceeds thereof
as contemplated by this Agreement and cause the cancellation of the Certificate.
9.03. DISTRIBUTIONS UPON LIQUIDATION.
(a) Upon dissolution, the Company, by and through the
Liquidator, shall satisfy liabilities owing to creditors (including creating
such reserves as may be required by non-waivable provisions of Section 18-804(b)
of the Act or as the Liquidator otherwise deems reasonably necessary for any
contingent liabilities or obligations of the Company). Said reserves may be paid
over by the Liquidator to a bank, to be held in escrow for the purpose of
complying with any such provisions of Section 18-804(b) of the Act or paying any
such contingent liabilities or obligations and, at the expiration of such period
as may be required by non-waivable provisions of Section 18-804(b) of the Act or
as the Liquidator may deem advisable, such reserves shall be distributed to the
Members or their assigns in the manner set forth in Section 9.03(b).
(b) After satisfying such liabilities (including the
creation of reserves) as set forth in Section 9.03(a), the Liquidator shall
cause the remaining net assets of the Company to be distributed: first, to the
Members to the extent of any unpaid principal of and interest on any Member
Loans; second, subject to Section 8.02(b), to the Class B Member to the extent
of the Class B Unreturned Capital and Class B Return; and then to the Members
pro rata in proportion to the positive balances in their respective Capital
Accounts (after such Capital Accounts have been adjusted to reflect any Net
Profit or Net Loss or any items of income, gain, loss or deduction to be
allocated to the Members through the time of the dissolution and liquidation of
the Company pursuant to Article V hereof and the distributions made pursuant to
the previous clauses of this sentence). Distributions pursuant to this Section
9.03(b) shall be made by the end of the Fiscal Year during which the dissolution
of the Company occurs (or, if later, within ninety (90) days of such
dissolution). In the event that any part of such net assets consists of notes or
accounts receivable or other noncash assets, the Liquidator may take whatever
steps it deems appropriate to convert such assets into cash or into any other
form which would facilitate the distribution thereof. If any assets of the
Company are to be distributed in kind, such assets shall be distributed on the
basis of their fair market value net of any liabilities; provided, however,
that, unless Class B Members holding a majority of the Class B Interests
otherwise consent in writing prior to such distribution, all distributions to
the Class B Members pursuant to this Section 9.03(b) shall be made solely in
cash.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.01. APPLICABLE LAW. This Agreement shall be construed and enforced
in accordance with the laws of the State of Delaware, including the Act, as
interpreted by the courts of the State of Delaware, notwithstanding any rules
regarding choice of law to the contrary.
10.02. COUNTERPARTS. This Agreement may be executed in several
counterparts and as so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all of the parties have not signed the same
counterpart.
10.03. SEPARABILITY OF PROVISIONS. Each provision of this Agreement
shall be considered separable. To the extent that any provision of this
Agreement is prohibited or ineffective under the Act, this Agreement shall be
considered amended to the smallest degree possible in order to make the
Agreement effective under the Act (and, if the Act is subsequently amended or
interpreted in such manner as to make effective any provision of this Agreement
that was formerly rendered invalid, such provision shall automatically be
considered to be valid from the effective date of such amendment or
interpretation).
10.04. ARTICLE AND SECTION TITLES. Article and section titles are
included herein for descriptive purposes only and shall not control or alter the
meaning of this Agreement as set forth in the text.
10.05. AMENDMENTS. Except as otherwise expressly provided herein,
this Agreement and the Certificate shall be amended only if such amendment is
(i) adopted by the Managing Member, (ii) approved by Class A Members
representing more than fifty percent (50%) of the Class A Sharing Ratios, and
(iii) approved by the Class B Member, if any.
10.06. NO THIRD PARTY BENEFICIARIES. The beneficiaries under the
Subordination Agreement and the parties to the Secured Credit Facilities shall
be third party beneficiaries of this Agreement. Otherwise, the provisions of
this Agreement are not intended to be for the benefit of any other creditor
(other than a Member who is a creditor) or other Person (other than a Member or
an Officer of the Company in his capacity as such) to whom any debts,
liabilities or obligations are owed by (or who otherwise has any claim against)
the Company or any of the Members. Moreover, except as provided in the first
sentence of this Section 10.06 but notwithstanding anything contained in this
Agreement, no such creditor or other Person shall obtain any rights under this
Agreement or shall, by reason of this Agreement, make any claim in respect of
any debt, liability or obligation (or otherwise) against the Company or any
Member. Notwithstanding the foregoing, any Person entitled to indemnification
hereunder shall be deemed a third party beneficiary hereof with respect to all
matters relating to such indemnification, and shall be entitled to enforce any
and all such Person's rights relating to such indemnification as if such Person
were a party hereto.
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40
10.07. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the parties hereto and their respective successors, executors, administrators,
legal representatives, heirs and legal assigns and shall inure to the benefit of
the parties hereto and, except as otherwise provided herein, their respective
successors, executors, administrators, legal representatives, heirs and legal
assigns. Except for the beneficiaries under the Subordination Agreement and the
parties to the Secured Credit Facilities, no Person other than the parties
hereto and their respective successors, executors, administrators, legal
representatives, heirs and permitted assigns shall have any rights or claims
under this Agreement.
10.08. NOTICE. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or three Business Days after being
mailed by registered or certified mail (return receipt requested) or one
Business Day after being delivered by overnight courier to such party at its
address set forth below or such other address as such party may specify by
notice to the parties hereto.
If to Nortel to:
Nortel Networks LLC
▇▇▇ ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
With a copy to:
Nortel Networks Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
If to ANTEC or Newco, to:
ANTEC Corporation
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Duluth, Georgia 30097
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company, to:
Arris Interactive L.L.C.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Jr.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
If to the Administrative Agent, as specified in the Senior Credit
Agreement.
10.09. SUBORDINATION. All obligations to the Class B Member under
this Agreement and all amounts payable to the Class B Member under this
Agreement (including without limitation under or in respect to the Class B
Interest, the New Securities, if any, the redemption obligations under Section
8.02, the distribution obligations under Sections 4.01 and 4.02, the dissolution
obligations under Section 9.02, the liquidation obligations under Section 9.03,
any indemnification payments under this Agreement, or otherwise) are
subordinated to the extent and in the manner set forth in the Subordination
Agreement. Each of this Section 10.09 and the Subordination Agreement shall
constitute a continuing offer to all persons who, in reliance upon such
provisions, become holders of, or continue to hold, Senior Debt, and such
provisions are
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42
made for the benefit of the holders of the Senior Debt, and such holders are
made obligees hereunder and any one or more of them may enforce such provisions.
38
43
IN WITNESS WHEREOF, the Members have executed this Agreement effective
as of the Closing Date.
ARRIS GROUP, INC.
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
ANTEC CORPORATION,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
NORTEL NETWORKS LLC,
a Delaware limited liability company
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
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Schedule A
Effective as of the Closing Date
CLASS A MEMBERS
Capital
Name of Member Sharing Ratio Account Balance
-------------- ------------- ---------------
Arris Group, Inc. 84.26% [To be determined]
ANTEC Corporation 15.74% [To be determined]
CLASS B MEMBER
Capital
Name of Member Account Balance
-------------- ---------------
Nortel Networks LLC $100,000,000
45
EXHIBIT 1
ARRIS GROUP, INC.
CERTIFICATE OF DESIGNATIONS
SETTING FORTH THE PREFERENCES,
RIGHTS AND LIMITATIONS OF
SERIES A CONVERTIBLE SUBORDINATED PREFERRED STOCK
Arris Group, Inc., a Delaware corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article FIFTH of its
Amended and Restated Certificate of Incorporation, and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, its Board of Directors, by the unanimous written consent of its
members, filed with its records, has adopted the following resolution creating a
series of its Preferred Stock, par value $1.00 per share, designated as the
Series A Convertible Subordinated Preferred Stock:
RESOLVED, by the Board of Directors of Arris Group,
Inc., that, pursuant to the authority expressly granted to and
vested in the Board of Directors of this Corporation by
Article FIFTH of the Amended and Restated Certificate of
Incorporation of the Corporation and pursuant to Section 151
of the General Corporation Law of the State of Delaware, the
Board of Directors hereby creates and establishes a series of
the Preferred Stock of the Corporation, such series to consist
of one hundred thousand (100,000) shares of the Corporation's
authorized and unissued Preferred Stock, each share having a
par value of $1.00 (the "Series A Convertible Subordinated
Preferred Stock"), and said Board of Directors hereby fixes
the designation and the powers, preferences and rights, and
the qualifications, limitations and restrictions of the shares
of such series as set forth in Annex A hereto.
IN WITNESS WHEREOF, Arris Group, Inc. has caused this Certificate to be
executed by its President, and attested to by its Secretary, this ___ day of
_________, 200_.
ARRIS GROUP, INC.
By:
---------------------------------
Name:
Title: President
ATTEST:
By:
-------------------------------
Name:
Title: Secretary
2
46
ANNEX A
SERIES A CONVERTIBLE SUBORDINATED PREFERRED STOCK
Section 1. Designation and Rank. A total of one hundred thousand
(100,000) shares of Preferred Stock of the Corporation are hereby designated as
Series A Convertible Subordinated Preferred Stock. All shares of Series A
Convertible Subordinated Preferred Stock shall rank equally and be identical in
all respects. The Corporation shall not be restricted from issuing additional
securities of any kind, including shares of Preferred Stock of any class, series
or designation (including, without limitation, Preferred Stock ranking senior to
or in parity with, as to rights and preferences, the Series A Convertible
Subordinated Preferred Stock). The Series A Convertible Subordinated Preferred
Stock shall, with respect to rights upon liquidation, dissolution or winding up
of the affairs of the Corporation, rank senior and prior to the Corporation's
common stock, par value $0.01 per share (the "Common Stock").
Section 2. Dividends. The Series A Convertible Subordinated Preferred
Stock shall accrue dividends commencing on the date of issuance at the rate of
ten percent per annum based upon the Liquidation Preference thereof. Such
dividends shall not be paid currently, but shall be added annually on the first
day of each calendar to the Liquidation Preference.
Section 3. Voting Rights. Except as otherwise specifically required by
applicable law, the holders of Series A Convertible Subordinated Preferred Stock
shall not be entitled to vote or give a consent to or on any matters required or
permitted to be submitted to the shareholders of the Corporation for their
approval. Notwithstanding the foregoing, for so long as any shares of Series A
Convertible Subordinated Preferred Stock remain outstanding, the Corporation
shall not, without the prior written consent of holders of at least two-thirds
(2/3) of the then outstanding shares of Series A Convertible Subordinated
Preferred Stock, declare, pay or set aside any dividends on shares of Common
Stock (other than dividends payable in shares of Common Stock).
Section 4. Redemption. (a) General. Subject to Sections 4(b) and 4(i)
hereof, shares of the Series A Convertible Subordinated Preferred Stock shall be
redeemable by the Corporation as follows:
(i) Optional Redemption. The Corporation may, at any time
and from time to time at the option of the Corporation, redeem shares of Series
A Convertible Subordinated Preferred Stock, in whole or in part, in the sole
discretion of the Board of Directors, to the extent it has funds legally
available therefor, at the redemption price of 100% of the Liquidation
Preference thereof plus accrued dividends with respect thereto that have not
previously been added to the Liquidation Preference.
(ii) Mandatory Redemption. The Corporation shall redeem
the Series A Convertible Subordinated Preferred Stock at the redemption price of
100% of the Liquidation Preference thereof plus accrued dividends with respect
thereto that have not previously been
47
added to the Liquidation Preference, as follows:
(A) in quarterly installments, commencing on the
first business day after the six-month anniversary of the Closing Date
and thereafter on each successive three-month anniversary thereof, in
the maximum aggregate amount permitted under Section 4(b) up to (and
including) $[33,000,000] per such installment (the "Maximum Quarterly
Redemption"), until all outstanding shares of Series A Convertible
Subordinated Preferred Stock are redeemed in full (as defined below);
and
(B) in any event, in full (as defined below), at
the earlier of (1) the date occurring six (6) months after the
Revolving Loan Commitment Termination Date, (2) a Change of Control of
the Corporation, (3) Bankruptcy and (4) acceleration of the Senior
Credit Facilities in accordance with the terms thereof.
For the purposes hereof, the shares of Series A Convertible Subordinated
Preferred Stock shall be redeemed in full at such time as the holders have
received cash redemption payments equal, in the aggregate, to the sum of 100% of
the Liquidation Preference thereof plus accrued dividends with respect thereto
that have not previously been added to the Liquidation Preference. Redemption
payments shall be applied first, to accrued dividends that previously have not
been added to the Liquidation Preference, and second, to the Liquidation
Preference.
(b) Certain Limitations. Until payment in full in cash of all
Senior Debt, the termination of any commitments to lend under the Senior Credit
Facilities and the cancellation or termination of any letters of credit issued
under the Senior Credit Facilities, no obligations to make redemption payments
shall arise, and no redemption payment shall be made, pursuant to Section
4(a)(ii)(A), and no redemption payment shall be made pursuant to Section 4(a)(i)
or Section 4(a)(ii)(B), unless and until:
(1) prior to the date on which such redemption is made,
the Borrowers have delivered to the Administrative Agent all financial
statements, compliance certificates and other documents required to be
delivered in connection with the most recent fiscal quarter ending
prior to such date pursuant to the Senior Credit Agreement,
(2) both immediately before and after giving pro forma
effect to such redemption, no Event of Default shall have occurred and
be continuing,
(3) after giving pro forma effect to such redemption, the
Borrowers shall have Excess Availability of at least $75 million, and
(4) the Borrowers shall have delivered an officer's
certificate of ANTEC signed by the chief financial officer of ANTEC
certifying as to the foregoing clauses (1)-(3) and attaching a
Borrowing Base Certificate demonstrating such Excess Availability, in
each case in form and substance satisfactory to Administrative Agent
under the Senior Credit Agreement;
48
provided that, with respect to the fourth fiscal quarter of any fiscal
year, Borrowers shall be deemed to have satisfied the part of the
condition contained in clause (1) above requiring delivery of audited
financial statements upon delivery of unaudited financial statements
for such fiscal year in lieu of audited financial statements for such
fiscal year and a certificate signed by the chief financial officer of
ANTEC certifying that, when delivered, the audited financial statements
shall not contain any material differences from the unaudited financial
statements.
(c) Corporation Covenant. So as to enable the exercise of the
redemption rights of the holders of shares of Series A Convertible Preferred
Stock in this Section 4, the Corporation shall, and shall cause its subsidiaries
to, comply with all reporting requirements and document delivery requirements
contained in the Senior Credit Facilities, make all requisite certifications
under the Senior Credit Facilities, and take all such further actions as may be
reasonably requested by the holders of shares of Series A Convertible Preferred
Stock to enable the Corporation, to the fullest extent possible, to make all
redemption payments contemplated by Section 4(a)(ii) timely and in full
(provided, however, that in no event shall the Corporation be required by any of
the foregoing provisions of this Section 4(c) to take any action prohibited by
the terms of the Senior Credit Facilities). The Corporation shall notify the
holders in writing of any Default or Event of Default or any material breach by
the Corporation of this Section 4(c), in each case not later than five (5)
business days after occurrence thereof.
(d) Payment of Redemption Price. The amount of the redemption
price on any shares of Series A Convertible Subordinated Preferred Stock
redeemed, on any redemption provided for herein, shall be paid in cash.
(e) Defined Terms. Capitalized terms used herein and not defined
herein shall have the meanings specified in the Second Amended and Restated
Limited Liability Operating Agreement of Arris Interactive L.L.C. dated as of
August 3, 2001, regardless of any subsequent amendment, modification or
termination thereof (the "LLC Agreement").
(f) Notice. Not less than fifteen (15) days nor more than
forty-five (45) days (such date as fixed by the Board of Directors is referred
to herein as the "Redemption Record Date") prior to the date fixed for any
mandatory or optional redemption of shares of the Series A Convertible
Subordinated Preferred Stock pursuant to this Section 4 (each such date, a
"Redemption Date"), a notice specifying the time and place of the redemption and
the number of shares to be redeemed shall be given by registered or certified
mail (return receipt requested) to the holders of record on the Redemption
Record Date of the shares of the Series A Convertible Subordinated Preferred
Stock to be redeemed at their respective addresses as the same shall appear on
the books of the Corporation, calling upon each holder of record to surrender to
the Corporation on the Redemption Date at the place designated in the notice
such holder's certificate or certificates representing the number of shares
specified in the notice of redemption. Neither failure to mail such notice, nor
any defect therein or in the mailing thereof, to any particular holder shall
affect the sufficiency of the notice or the validity of the proceedings for
redemption with respect to the other holders. Any notice mailed in the manner
herein provided shall be conclusively presumed to have been duly given effective
three (3) business days after the
49
date of mailing, whether or not the holder receives the notice. On or after the
Redemption Date, each holder of shares of Series A Convertible Subordinated
Preferred Stock to be redeemed shall present and surrender such holder's
certificate or certificates for such shares to the Corporation at the place
designated in the redemption notice and thereupon, subject to Sections 4(b) and
4(i), the redemption price of the shares, and any unpaid dividends thereon to
the Redemption Date, shall be paid to or on the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be canceled. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
(g) Termination of Rights. If a notice of redemption has been
given pursuant to this Section 4 and if, on or before the Redemption Date, the
funds necessary for such redemption shall have been set aside by the
Corporation, separate and apart from its other funds, in trust for the pro rata
benefit of the holders of the shares of Series A Convertible Subordinated
Preferred Stock so called for redemption, then, notwithstanding that any
certificates for such shares of Series A Convertible Subordinated Preferred
Stock have not been surrendered for cancellation, on the Redemption Date the
holders of such shares shall cease to be stockholders with respect to those
shares, shall have no interest in or claims against the Corporation by virtue
thereof, except, subject to Sections 4(b) and 4(i), the right to receive the
monies payable upon such redemption, without interest thereon, upon surrender
(and endorsement, if required by the Corporation) of their certificates, and the
shares of Series A Convertible Subordinated Preferred Stock evidenced thereby
shall no longer be outstanding. Subject to applicable escheat laws, any monies
so set aside by the Corporation and unclaimed at the end of one year from the
Redemption Date shall revert to the general funds of the Corporation, after
which reversion, subject to Sections 4(b) and 4(i), the holders of such shares
so called for redemption shall look only to the general funds of the Corporation
for the payment of the redemption price, without interest. Any interest accrued
on funds so deposited shall belong to the Corporation and be paid thereto from
time to time. Notwithstanding the foregoing, the Corporation will not set aside
funds for a redemption unless and until permitted by Sections 4(b) and 4(i).
(h) Selection of Shares. In every case of redemption of fewer than
all of the outstanding shares of the Series A Convertible Subordinated Preferred
Stock pursuant to this Section 4, the shares to be redeemed shall be selected
pro rata.
(i) Subordination. The obligations under the terms of the Series A
Convertible Subordinated Preferred Stock and all amounts payable thereunder are
subordinated to the extent and in the manner provided in the Subordination
Agreement dated as of August 3, 2001, among Nortel Networks, LLC, The CIT
Group/Business Credit, Inc., as Administrative Agent, the Corporation and Arris
Interactive L.L.C., as such Subordination Agreement may be amended, restated,
amended and restated, supplemented or otherwise modified from time to time (the
"Subordination Agreement"). Each of this Section 4(i) and the Subordination
Agreement shall constitute a continuing offer to all persons who, in reliance
upon such provisions, become holders of, or continue to hold Senior Debt (as
defined in the Subordination Agreement), and such provisions are made for the
benefit of such holders, and such holders are made obligees hereunder and any
one or more of them may enforce such provisions. Nothing in this Section
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4(i) shall be construed as limiting the obligations of the Corporation to the
holders of the shares of Series A Convertible Subordinated Preferred Stock,
which, as between the Corporation and the holder of the shares, are
unconditional and absolute. Any certificate evidencing the Series A Convertible
Preferred Stock shall contain such legends as are required by the Subordination
Agreement.
Section 5. Liquidation. The Series A Convertible Subordinated Preferred
Stock shall be preferred upon liquidation over the Common Stock and any other
class or classes of stock of the Corporation which by its terms expressly
provides that it ranks junior in rights and preferences to the Series A
Convertible Subordinated Preferred Stock upon liquidation, so that, subject to
Sections 4(b) and 4(i), holders of shares of Series A Convertible Subordinated
Preferred Stock shall be entitled to be paid, after full payment is made on any
stock ranking prior to the Series A Convertible Subordinated Preferred Stock as
to rights and preferences, but before any distribution is made to the holders of
the Common Stock and such junior stock upon the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation. Subject to Sections
4(b) and 4(i), the amount payable on each share of Series A Convertible
Subordinated Preferred Stock in the event of the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation shall be equal to the
Class B Unreturned Capital and the Class B Return, as of the date of issuance,
less any amount exchanged for common stock as provided in Section 8.03(a)(i) of
the LLC Agreement or a subordinated note as provided for in Section 8.03(a)(iii)
of the LLC Agreement or not exchanged, divided pro rata among the number of
outstanding Series A Convertible Preferred Shares on that date plus accrued
dividends with respect thereto (the "Liquidation Preference"). Subject to
Sections 4(b) and 4(i), if, upon any such liquidation, dissolution or winding up
of the Corporation, its net assets are insufficient to permit the payment in
full of the amounts to which the holders of all outstanding shares of Series A
Convertible Subordinated Preferred Stock are entitled as above provided, the
entire net assets of the Corporation remaining (after full payment is made on
any classes or series of stock ranking prior to the Series A Convertible
Subordinated Preferred Stock) shall be distributed among the holders of shares
of Series A Convertible Subordinated Preferred Stock in amounts proportionate to
the full preferential amounts to which they and holders of shares of Preferred
Stock ranking in parity with the Series A Convertible Subordinated Preferred
Stock are entitled. After such payment shall have been made in full to the
holders of the Series A Convertible Subordinated Preferred Stock, the holders of
the outstanding Series A Convertible Subordinated Preferred Stock shall be
entitled to no further participation in such distribution of the assets of the
Corporation and the remaining assets of the Corporation shall be divided and
distributed among the holders of the other classes of stock then outstanding
according to their respective rights and shares. For the purpose of this Section
4, the voluntary sale, lease, exchange or transfer, for cash, shares of stock,
securities or other consideration, of all or substantially all the Corporation's
property or assets to, or its consolidation or merger with, one or more
corporations shall not be deemed to be a liquidation, dissolution or winding up
of the Corporation, voluntary or involuntary.
Section 6. Conversion Provisions.
(a) Conversion Right. Unless previously redeemed as provided in
Section 4 hereof, shares of the Series A Convertible Subordinated Preferred
Stock may be converted prior to
51
redemption thereof at such time, in such manner and upon such terms and
conditions as hereinafter provided in this Section 6 into duly authorized,
validly issued, fully paid and non-assessable full shares of Common Stock. In
the event the Corporation shall call for redemption the shares of Series A
Convertible Subordinated Preferred Stock pursuant to Section 4 hereof, the
conversion right provided by this Section 6 shall terminate immediately upon the
setting aside by the Corporation, in the manner described in Section 4(g) above,
of funds sufficient for such redemption, but shall be reinstated in the event
that the Corporation fails to fulfill its redemption obligations on the relevant
Redemption Date. Subject to Sections 4(b) and 4(i), in case cash, securities or
property other than Common Stock shall be payable, deliverable or issuable upon
conversion as provided herein, then all references to Common Stock in this
Section 6 shall be deemed to apply, so far as appropriate and as nearly as may
be, to such cash, property or other securities.
(b) Conversion Date. Unless previously redeemed as provided in
Section 4 hereof and subject to Section 6(a), the Series A Convertible
Subordinated Preferred Stock shall be convertible at any time and from time to
time at the option of the holder(s) thereof.
(c) Conversion Price. Holders of shares of Series A Convertible
Subordinated Preferred Stock may convert shares of Series A Convertible
Subordinated Preferred Stock into a number of shares of Common Stock calculated
by dividing, for each share of Series A Convertible Subordinated Preferred Stock
to be converted, (1) the Liquidation Preference plus accrued dividends with
respect thereto that have not previously been added to the Liquidation
Preference by (2) the Fair Market Value per share of Common Stock (this price as
from time to time adjusted cumulatively pursuant to the provisions of this
Section 6 is hereinafter referred to as the "Conversion Price") as of the date
of conversion. "Fair Market Value" shall mean, with respect to the Common Stock
of the Corporation, the average closing price per share of Common Stock on The
Nasdaq Stock Market (or, if the Common Stock is not then trading thereon, such
other nationally recognized stock market or exchange, if any, on which the
Common Stock may then be actively traded) for the twenty (20) consecutive
trading days ending two (2) days prior to the date of determination. In the
absence of such trading markets, the Fair Market Value shall be as reasonably
determined by the board of directors of the Corporation based upon the written
valuation of an independent valuation firm of national reputation.
(d) Reclassification, Consolidation or Merger. In the case of (A)
any capital reorganization, reclassification or other change of outstanding
Common Stock (other than a change in par value), or (B) any consolidation of the
Corporation with any other corporation or any merger of the Corporation into
another corporation or of another corporation into the Corporation (other than a
consolidation or merger in which the Corporation is the continuing or surviving
corporation and which does not result in any reclassification of, or change
(other than a change in par value) in, the outstanding Common Stock or (C) any
sale or transfer to another corporation or entity (other than by mortgage or
pledge) of all or substantially all of the properties and assets of the
Corporation, the Corporation (or its successor in such consolidation or merger)
or the purchaser of such properties and assets shall make appropriate provision
so that the holder of each share of Series A Convertible Subordinated Preferred
Stock then outstanding shall have the right thereafter to convert such share
into the kind and amount of shares of stock or
52
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or transfer by a holder of the number of shares of
Common Stock into which such Series A Convertible Subordinated Preferred Stock
might have been converted immediately prior to such reclassification, change,
consolidation, merger, sale or transfer, and the holders of the Series A
Convertible Subordinated Preferred Stock shall have no other conversion rights
under these provisions; provided, that effective provision shall be made, in the
Articles or Certificate of Incorporation of the resulting or surviving
corporation or otherwise or in any contracts of sale or transfer, so that the
provisions set forth herein for the protection of the conversion rights of
Series A Convertible Subordinated Preferred Stock shall thereafter be made
applicable, as nearly as reasonably may be, to any such other shares of stock or
other securities and property deliverable upon conversion of the Series A
Preferred Stock remaining outstanding or other convertible preferred stock or
other securities received by the holders of Series A Convertible Subordinated
Preferred Stock in place thereof; and, provided further, that any such resulting
or surviving corporation or purchaser shall expressly assume the obligation to
deliver, upon the exercise of the conversion privilege, such shares, securities
or property as the holders of the Series A Preferred Stock remaining
outstanding, or other convertible preferred stock or other securities received
by the holders in place thereof, shall be entitled to receive pursuant to the
provisions hereof, and to make provisions for the protection of the conversion
rights as above provided.
(e) Method of Conversion. For any holder of Series A Convertible
Subordinated Preferred Stock to convert the same into Common Stock, it shall
give not less than sixty-one (61) days prior written notice to the Corporation
that it elects to convert all or a part of shares of Series A Convertible
Preferred Stock held by it and, prior to the expiration of the notice period as
specified in the notice (but not less than sixty-one (61) days), surrender the
certificate or certificates for such shares of Series A Convertible Subordinated
Preferred Stock at the office of the Corporation or at the office of the
transfer agent for the Series A Convertible Subordinated Preferred Stock, which
certificate or certificates, if the Corporation shall so request, shall be duly
endorsed to the Corporation or in blank or accompanied by proper instruments of
transfer to the Corporation or in blank (such endorsements or instruments of
transfer to be in form reasonably satisfactory to the Corporation), and shall
state in writing therein the name or names in which it wishes the certificate or
certificates for Common Stock to be issued. The Corporation will as soon as
practicable after the expiration of the notice period issue and deliver at the
office of the Corporation or of said transfer agent to the person for whose
account such Series A Convertible Subordinated Preferred Stock was so
surrendered, or to its nominee(s) or, subject to compliance with applicable law,
transferee(s), a certificate or certificates for the number of full shares of
Common Stock to which it shall be entitled, together with cash in lieu of any
fraction of a share as hereinafter provided. If surrendered certificates for
Series A Convertible Subordinated Preferred Stock are converted only in part,
the Corporation will issue and deliver to the holder, or to its nominee(s),
without charge therefor, a new certificate or certificates representing the
aggregate of the unconverted shares of Series A Convertible Subordinated
Preferred Stock. Such conversion shall be deemed to have been made as of the
date that (i) the notice period expires and (ii) the holder thereof has paid or
otherwise provided for all taxes, if any, payable in respect of any transfer
involved in the issuance or delivery of any certificate for Common Stock in a
name other than that of such holder; and the person or persons entitled to
receive the Common
53
Stock issuable upon conversion of such Series A Convertible Subordinated
Preferred Stock shall be treated for all purposes as the record holder or
holders of such Common Stock on such date.
The issuance of certificates for shares of Common Stock upon conversion
of shares of Series A Convertible Subordinated Preferred Stock shall be made
without charge for any issue, stamp or other similar tax in respect of such
issuance; provided, however, if any such certificate is to be issued in a name
other than that of the holder of the share or shares of Series A Convertible
Subordinated Preferred Stock converted, the person or persons requesting the
issuance thereof shall pay to the Corporation the amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall establish
to the reasonable satisfaction of the Corporation that such tax has been paid.
The Corporation shall not be required to convert Series A Convertible
Subordinated Preferred Stock, and no surrender of Series A Convertible
Subordinated Preferred Stock shall be effective for that purpose, while the
stock transfer books of the Corporation are closed for any purpose; but the
surrender of Series A Convertible Subordinated Preferred Stock for conversion
during any period while such books are so closed shall become effective for
conversion immediately upon the reopening of such books, as if the conversion
had been made on the date such Series A Convertible Subordinated Preferred Stock
was surrendered.
(f) Corporate Actions. In order that the Corporation may issue
shares of Common Stock upon conversion of the Series A Convertible Subordinated
Preferred Stock, the Corporation will use reasonable efforts to comply with all
applicable Federal and state securities laws and will use reasonable efforts to
list such shares to be issued upon conversion on such securities exchange on
which the Common Stock is listed. Subject to Sections 4(b) and 4(i), the
Corporation will not, by amendment of its Certificate of Incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issuance or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of its obligations
hereunder.
(g) Status of Shares Converted. In the event that any holder of
Series A Convertible Subordinated Preferred Stock converts its Series A
Convertible Subordinated Preferred Stock to Common Stock pursuant to this
Section 6, the right to preferential liquidation rights with respect to such
converted stock pursuant to Section 5 hereof shall be immediately terminated.
All shares of Series A Convertible Subordinated Preferred Stock received by the
Corporation upon conversion thereof into Common Stock shall be retired and be
restored to the status of authorized and unissued shares of Preferred Stock, and
may be reissued as part of another series of the Preferred Stock of the
Corporation, but such shares shall not be reissued as Series A Convertible
Subordinated Preferred Stock.
(h) Fractions upon Conversion. The Corporation shall not be
required to issue fractional shares of Common Stock or script upon conversion of
the Series A Convertible Subordinated Preferred Stock. As to any final fraction
of a share of Common Stock which a holder of one or more shares of Series A
Convertible Subordinated Preferred Stock would otherwise be entitled to receive
upon conversion of such shares in the same transaction, the
54
Corporation shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the market value of a full share of the
Common Stock. For purposes of this Section 6(h), the market value of a share of
the Common Stock shall be the closing price per share on the business day
immediately preceding the date of conversion.
Section 7. Notices to Holders of Series A Convertible Subordinated
Preferred Stock. In the event:
(a) that the Corporation shall authorize the issuance to
all holders of Common Stock of rights or warrants to subscribe for or
purchase capital stock of the Corporation or of any other subscription
rights or warrants; or
(b) that the Corporation shall authorize the distribution
to all holders of Common Stock of evidences of its indebtedness or
assets (including, without limitation, cash dividends or cash
distributions payable out of consolidated earnings or earned surplus or
dividends payable in Common Stock); or
(c) of any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of
the Corporation is required, or of the conveyance or transfer of the
properties and assets of the Corporation substantially as an entirety,
or of any capital reorganization or reclassification or change of the
Common Stock (other than a change in par value, or from par value to no
par value, or from no par value to par value, or as a result of a
subdivision or combination); or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation; or
(e) that the Corporation proposes to take any other
action which would require an adjustment in the number of shares of
Common Stock or other securities or assets issuable upon conversion of
shares of Series A Convertible Subordinated Preferred Stock pursuant to
Section 6;
then the Corporation shall cause to be given to each of the registered holders
of the Series A Convertible Subordinated Preferred Stock at its address
appearing on the register for the Series A Convertible Subordinated Preferred
Stock, at least twenty (20) calendar days prior to the applicable record date,
if any, hereinafter specified, or, if no such record date if specified, twenty
(20) calendar days prior to the taking of any action referred to in clauses (a)
through (e) above, by registered mail, postage prepaid, return receipt
requested, a written notice stating (i) the date as of which the holders of
record of Common Stock to be entitled to receive any such rights, warrants or
distribution are to be determined, or (ii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or (iii) the date on which such other action
is to be effected, and the date as of which it is expected that holders of
record of Common Stock shall be entitled to exchange their shares for securities
or other property, if any, deliverable upon such reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up or other action.
55
Section 8. No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issuance or sale of securities
or any other voluntary action, avoid or seek to avoid the observance or
performance of any of its obligations hereunder, but, subject to Sections 4(b)
and 4(i), will at all times in good faith assist in the carrying out of the all
the provisions hereof and in the taking of all such actions as may be necessary
or appropriate to protect the rights of holders of Series A Convertible
Redeemable Preferred Stock granted herein against impairment.
Section 9. Transfer. Shares of Series A Convertible Subordinated
Preferred Stock shall be transferable only in compliance with applicable law,
including federal and state securities laws, and the delivery to the
Administrative Agent (and receipt of a written acknowledgment for such delivery)
of an instrument executed by or on behalf of the transferee to the effect that
the transferee agrees, upon acquisition of such shares by the transferee, that
it shall be bound by all of the terms and provisions of the Subordination
Agreement. Any attempt to transfer in violation of the foregoing shall be void
ab initio.
56
EXHIBIT 2
THIS SUBORDINATED CONVERTIBLE NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE LAWS OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND STATE LAWS.
ALL PAYMENTS UNDER THIS INSTRUMENT ARE SUBJECT TO THE TERMS OF THE SUBORDINATION
AGREEMENT DATED AS OF AUGUST 3, 2001, AMONG NORTEL NETWORKS LLC, THE CIT
GROUP/BUSINESS CREDIT, INC., ARRIS GROUP, INC. AND ARRIS INTERACTIVE L.L.C., AS
SUCH SUBORDINATION AGREEMENT MAY BE AMENDED, AMENDED AND RESTATED, SUPPLEMENTED
OR OTHERWISE MODIFIED.
ARRIS GROUP, INC.
SUBORDINATED CONVERTIBLE NOTE
Original Issue Date: __________, 200__
Principal
Amount: $[calculated pursuant to
ss. 8.03(a)(iii) or (iv) of the Agreement]
FOR VALUE RECEIVED, Arris Group, Inc., a Delaware corporation, (the
"Company"), hereby promises to pay to Nortel Networks LLC ("Nortel"), or its
permitted successors and assigns (the "Holder"), the principal sum of
_____________ Dollars ($__________), together with accrued interest and other
amounts as provided for in this Note.
This Note shall accrue interest at the rate of ten percent (10%) per
annum, compounded annually, determined on the basis of a 365 day year, on the
unpaid principal amount of this Note until paid in full.
Capitalized terms used herein but not otherwise defined shall have the
meanings specified in the Second Amended and Restated Limited Liability Company
Agreement of Arris Interactive L.L.C. dated as of August 3, 2001, regardless of
any subsequent amendment, modification or termination thereof.
Section 1. PAYMENTS. (a)Periodic Payments. Subject to the limitations
of Section 1(b), the Company shall pay the principal and interest on this Note,
in cash, as follows:
(i) in quarterly installments, commencing on the
first business day after the six-month anniversary of the Closing Date
and thereafter on each successive three-month anniversary thereof, in
the maximum aggregate amount permitted under Section 1(b) up to (and
including) $[33,000,000] per such installment (the "Maximum Quarterly
Payment"), until this Note is paid in full (as defined below); and
(ii) in any event, in full (as defined below), at
the earlier of (1) the date occurring six (6) months after the
Revolving Loan Commitment Termination Date, (2) a Change of Control of
Newco, (3) Bankruptcy and (4) acceleration of the Senior Credit
Facilities in accordance with the terms thereof.
For the purposes hereof, this Note shall be paid in full at such time as Holders
have received cash payments equal, in the aggregate, to the sum of all principal
(including all compound interest added to principal) plus accrued interest
calculated through and including the date of such payment in full. Payments
under this Note shall be applied first to accrued interest that has not been
added to principal, and second, to principal.
(b) Certain Limitations. Until payment in full in cash of all
Senior Debt, the termination of any commitments to lend under the Senior Credit
Facilities and the cancellation or termination of any letters of credit issued
under the Senior Credit Facilities, no obligation to make payments shall arise,
and no payment shall be made, pursuant to Section 1(a)(i), and no payment shall
be made pursuant to Section 1(a)(ii), unless and until:
(1) prior to the date on which such payment is
made, the Borrowers have delivered to the Administrative Agent all
financial statements, compliance certificates and other documents
required to be delivered in connection with the most recent fiscal
quarter ending prior to such date pursuant to the Senior Credit
Agreement,
57
(2) both immediately before and after giving pro
forma effect to such payment, no Event of Default shall have occurred
and be continuing,
(3) after giving pro forma effect to such
payment, the Borrowers shall have Excess Availability of at least $75
million, and
(4) the Borrowers shall have delivered an
officer's certificate of ANTEC signed by the chief financial officer of
ANTEC certifying as to the foregoing clauses (1)-(3) and attaching a
Borrowing Base Certificate demonstrating such Excess Availability, in
each case in form and substance satisfactory to Administrative Agent;
provided that, with respect to the fourth fiscal quarter of any fiscal year,
Borrowers shall be deemed to have satisfied the condition contained in clause
(1) above requiring delivery of audited financial statements upon delivery of
unaudited financial statements for such fiscal year in lieu of audited financial
statements for such fiscal year and a certificate signed by the chief financial
officer of ANTEC certifying that, when delivered, the audited financial
statements shall not contain any material differences from the unaudited
financial statements.
(c) Company Covenant. So as to enable the payments of principal
and interest provided for in this Section 1, the Company shall, and shall cause
its subsidiaries to, comply with all reporting requirements and document
delivery requirements contained in the Senior Credit Facilities, make all
requisite certifications under the Senior Credit Facilities, and take all such
further actions as may be reasonably requested by the Holder to enable the
Company, to the fullest extent possible, to make all redemption payments
contemplated by this Section 1 timely and in full (provided, however, that in no
event shall the Company be required by any of the foregoing provisions of this
Section 1 to take any action prohibited by the terms of the Senior Credit
Facilities). The Company shall notify the Holder in writing of any Default or
Event of Default, any material breach by the Company of this Section 1, or any
amendment, restatement, amendment and restatement, supplement to, or
modification of the Senior Credit Facilities, in each case not later than five
(5) business days after occurrence thereof.
(d) Payments. All payments in respect of this Note shall be made
in cash, or by wire transfer to such account as the Holder shall direct, in
immediately available funds and in lawful currency of the United States of
America. All payments by the Company shall be made without set-off ,
counterclaim or any deduction or withholding for any taxes or fees of any nature
except to the extent that the withholding of taxes is required by applicable
law.
Section 2. DEFAULT. A default shall occur under this Note if: (i) the
Company shall fail to make any payment under this Note in full within five (5)
days after the date when due in accordance with the terms of this Note, or (ii)
the Company shall fail to comply with any covenant or other obligation under
this Note within thirty (30) days of the date compliance is required hereunder.
Upon a default the Holder shall be entitled, subject to the Subordination
Agreement, to exercise all of its rights and remedies provided herein or under
applicable law. The Company agrees to pay all costs and expenses of the Holder,
including reasonable attorneys' fees, in connection with any collection,
enforcement or other action by the Holder following an
58
default (whether or not a lawsuit or other formal proceeding is instituted).
Section 3. CONVERSION.
(a) At any time after the Issue Date and while this Note
is outstanding, upon not less than sixty-one (61) days prior written notice to
the Company, the Holder may convert all or any portion of the principal amount
of this Note outstanding, and all or any portion of accrued and unpaid interest
on this Note, into such number of whole shares of Common Stock of the Company
("Common Stock") as the principal amount (and interest, if any) which the Holder
elects to convert will purchase at the Conversion Price, upon the terms and
subject to the conditions hereinafter specified. The "Conversion Price" shall be
equal to the Fair Market Value per share of Common Stock. "Fair Market Value"
shall mean, with respect to the Common Stock, the average closing price per
share of Common Stock on The Nasdaq Stock Market (or, if the Common Stock is not
then trading thereon, such other nationally recognized stock market or exchange,
if any, on which the Common Stock may then be actively traded) for the twenty
(20) consecutive trading days ending two (2) days prior to the date of
determination. In the absence of such trading markets, the Fair Market Value
shall be as reasonably determined by the board of directors of the Company based
upon a written valuation prepared by an independent valuation firm of national
reputation.
(b) Conversion of this Note shall be made upon surrender
of this Note to the Company at its principal place of business (or at such other
office as the Company shall designate by notice in writing to the Holder from
time to time), accompanied by written notice of the Holder's election to
convert. The Company agrees that, at the time of surrender and exercise of
conversion rights in compliance with the provisions hereof, the shares of Common
Stock issuable pursuant to such exercise shall be and be deemed to be issued to
the Holder (or, subject to compliance with applicable law, the Holder's
permitted designee or designees which may include the Holder for which the
Holder is acting as agent hereunder) as the record owner of such shares as of
the close of business of the Company on the date on which conversion rights
under this Note shall have been exercised as aforesaid, and that all such shares
shall be duly authorized, validly issued, fully paid and non-assessable.
(c) Upon conversion of this Note in full, the Company
shall be forever released from all its obligations and liabilities under this
Note. Upon any conversion of this Note in part, the conversion of such converted
portion shall be recorded by Holder and endorsed by the Holder and the Company,
and the Company shall be forever released from all obligations and liabilities
under this Note with respect to such converted portion of this Note.
Notwithstanding Section 1(d), payments in respect of this Note shall not be made
in cash or wire transfer to the extent of any amount payable under this Note
that has been converted to Common Stock pursuant to this Section 3.
(d) The issuance of certificates for shares of Common
Stock upon conversion of this Note shall be made without charge for any issue,
stamp or similar tax in respect of such issuance; provided, however, if any such
certificate is to be issued in a name other than that of the Holder, the person
or persons requesting the issuance thereof shall pay to the Company the
59
amount of any tax which may be payable in respect of any transfer involved in
such issuance or shall establish to the reasonable satisfaction of the Company
that such tax has been paid.
(e) In order that the Company may issue shares of Common
Stock upon conversion of the Note, the Company will use reasonable best efforts
to comply with all applicable federal and state securities laws and will use
reasonable best efforts to list such shares to be issued upon conversion on such
securities exchange on which the Common Stock is listed.
Section 4. SUBORDINATION. The indebtedness evidenced by this Note is
subordinated to the extent and in the manner set forth in the Subordination
Agreement dated as of August 3, 2001 among Nortel Networks LLC, The CIT
Group/Business Credit, Inc., as Administrative Agent, the Company and Arris
Interactive L.L.C., as such Subordination Agreement may be amended, restated,
amended and restated, supplemented or otherwise modified from time to time (the
"Subordination Agreement"). Each of this Section 4 and the Subordination
Agreement shall constitute a continuing offer to all persons who, in reliance
upon such provision, become holders of, or continue to hold, the Senior Debt (as
defined in the Subordination Agreement), and such provisions are made for the
benefit of the holders of Senior Debt, and such holders are made obligees
hereunder and any one or more of them may enforce such provisions. Nothing in
this Section 4 shall be construed as limiting the obligations of the Company to
the Holder, which, as between the Company and the Holder, are unconditional and
absolute.
Section 5. COVENANTS. For as long as any amount in respect of this Note
remains unpaid, the Company shall:
(a) Permit any representative(s) of the Holder, upon
reasonable advance notice, during normal business hours, and without undue
disruption of the business of the Company, to visit, and inspect any of the
properties, corporate books and financial records of the Company, to make copies
of such books and records, and to discuss the affairs, finances, and accounts of
the Company with the principal officers of the Company;
(b) Use its reasonable best efforts to obtain all
consents or approvals, if any, of governmental departments, agencies,
authorities or commissions which are required by applicable law to be obtained
prior to the conversion of this Note and the issuance of Common Stock thereupon
and to take all such other and further action as the Holder shall reasonably
request to enable such conversion and such issuance of Common Stock; and
(c) Refrain from declaring, paying or setting aside any
dividend payments on account of any shares of any class of stock of the Company
(other than Series A Convertible Subordinated Preferred Stock), now or hereafter
outstanding.
Section 6. WAIVER OR ALTERATION. None of the provisions hereof may be
waived, altered or amended, except by a written instrument signed by the Company
and the Holder and expressly referring to his Note and setting forth the
provision so waived, altered or amended; provided, however, that Section 4
hereof may not be amended.
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Section 7. REMEDIES CUMULATIVE; WAIVERS. No failure by Holder to
exercise or delay in exercising any right, remedy, power or privilege hereunder
or any course of dealing shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided to the Holder are cumulative and not exclusive of any rights, remedies,
powers and privileges provided to the Holder by law. The Company and any
endorser or guarantor hereof, regardless of the time, order or place of signing,
waives presentment, demand, protest and notices of every kind (except as
expressly provided for herein) and assents to any extension or postponement of
the time of payment or any other indulgence and to the addition or release of
any other party or person primarily or secondarily liable. The Company and the
Holder hereby waives any right to a trial by jury with respect to any claim or
action arising out of or based upon this Note.
Section 8. GOVERNING LAW. This Note shall be governed by and construed
in accordance with the internal laws of the State of Delaware without giving
effect to its principles of conflicts of law.
Section 9. SEVERABILITY. Whenever possible, each provision of this Note
shall be interpreted in such manner as to be effective and valid, but if any
provision of this Note is held to be invalid or unenforceable in any respect,
such invalidity or unenforceability shall not render invalid or unenforceable
any other provision of this Note.
Section 10. MAXIMUM INTEREST RATE. Notwithstanding anything to the
contrary contained in this Note, in no event shall the total of all interest or
other charges payable or collected under this Note exceed the maximum rate
permitted by applicable law.
Section 11. SUCCESSORS AND ASSIGNS; TRANSFERABILITY. This Note shall be
binding upon the Company and its successors and assigns; provided, however, that
the Company may not transfer any of its obligations hereunder without the prior
written consent of the Holder. This Note shall inure to the benefit of Nortel
and its permitted successors and assigns. This Note shall not be transferable,
directly or indirectly, except upon delivery to the Company of a written opinion
of counsel for the Company, or counsel reasonably satisfactory to the Company,
that the transfer will not result in a registration of the transaction under
applicable federal and state securities law, provided that the transferee
delivers to the Administrative Agent (and receives a written acknowledgment from
the Administrative Agent of such delivery to the Administrative Agent) an
instrument executed by or on behalf of the transferee to the effect that the
transferee agrees, upon acquisition of this Note by the transferee, that it
shall be bound by all of the terms and provisions of the Subordination
Agreement. Any attempted transfer in violation of the foregoing shall be void ab
initio.
Section 12. NOTICE. All notices or other communications to be provided
to the Company hereunder shall be deemed given if personally delivered,
telecopied (with confirmation) or three business days after being mailed by
registered or certified mail (return receipt requested) or one
61
business day after being delivered by overnight courier at its address set forth
below:
Arris Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 13. REPLACEMENT OF NOTE. On receipt by the Company of an
affidavit of an officer of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Note, together with a bond or indemnity
from an insurance company or bank reasonably acceptable to the Company and
containing such terms as are customary for bonds and indemnities regularly
accepted within the securities transfer industry, the Company, at the reasonable
expense of the Holder, will promptly execute and deliver, in lieu thereof, a new
Note of like tenor.
ARRIS GROUP, INC.
By:
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Name:
Title:
62
EXHIBIT 3
ADMISSION AGREEMENT
Reference is made to the Second Amended and Restated Limited Liability
Company Agreement (the "LLC Agreement") of Arris Interactive L.L.C. (the "LLC"),
dated and effective as of ___________, 2001, as amended, by and among ANTEC
Corporation, a Delaware corporation that was, as of such date, in the process of
changing its name to Arris International, Inc., Arris Group, Inc., a Delaware
corporation, and Nortel Networks LLC, a Delaware limited liability company.
Capitalized terms used but not defined herein shall have their respective
meanings set forth in the LLC Agreement.
1. The undersigned, being a Transferee of all or a portion of the
Class B Interest, hereby agrees that, upon acquisition by such Transferee of the
Transferred Class B Interest, the undersigned shall be bound by all of the terms
and provisions of the LLC Agreement and the Subordination Agreement (a copy of
which is attached hereto), to the same extent that such terms and provisions
were applicable to the Class B Member that is the Transferor of such Transferred
Class B Interest (provided that, if the Transferee was not granted the right to
become a Member by the terms of the Transfer by virtue of which the undersigned
acquired the Class B Interest, or a portion thereof, then the undersigned shall
be bound by the terms and provisions of the LLC Agreement and the Subordination
Agreement to the extent they are applicable to an assignee of the Class B
Interest that is not a Member) as of immediately prior to effectiveness of such
acquisition.
2. The undersigned hereby acknowledges receipt and sufficiency of
consideration in connection with this Admission Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Admission Agreement
to be duly executed and delivered effective as of __________________, 200_.
[Name of Transferee]
By:
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Name:
Title:
Received:
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Administrative Agent