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Redacted portions have been marked with asterisks (****). Confidential treatment
has been requested for the redacted portions. The confidential redacted portions
have been filed separately with the Securities and Exchange Commission.
CONFIDENTIAL TREATMENT
EXHIBIT 10.32
LIMITED LIABILITY COMPANY AGREEMENT
OF
WILTEL COMMUNICATIONS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
EXECUTION COPY
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TABLE OF CONTENTS
Page
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ARTICLE I
Construction and Definitions...........................................................................2
1.1 Construction................................................................................2
1.2 References..................................................................................2
1.3 Headings....................................................................................2
1.4 Definitions.................................................................................2
1.5 Accounting Terms...........................................................................14
ARTICLE II
Organization..........................................................................................14
2.1 Formation..................................................................................14
2.2 Qualification in Other Jurisdictions.......................................................14
ARTICLE III
Name..................................................................................................14
ARTICLE IV
Purpose and Powers....................................................................................15
4.1 Purposes...................................................................................15
4.2 Powers of the Company......................................................................15
ARTICLE V
Registered Office; Registered Agent;Principal Office; Other Offices...................................15
ARTICLE VI
Term..................................................................................................16
ARTICLE VII
No State Law Partnership..............................................................................16
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ARTICLE VIII
Capital Contributions; Capital Accounts...............................................................16
8.1 Capital Accounts...........................................................................16
8.2 Capital Contributions......................................................................17
8.3 Limitation on Liability of Members.........................................................17
8.4 Adjustment of Capital Accounts.............................................................18
8.5 Return of Contributions....................................................................18
8.6 Additional Capital Contributions...........................................................18
ARTICLE IX
Distributions; Repayment of Member Loans..............................................................19
9.1 Distributions..............................................................................19
9.2 No Interest on Unwithdrawn Share...........................................................20
9.3 Withholding................................................................................20
9.4 Limitations on Distributions...............................................................20
9.5 Repayment of Member Loans..................................................................20
ARTICLE X
Allocations of Income, Gains, Losses, Deductions and Credits..........................................21
10.1 General....................................................................................21
10.2 Allocations................................................................................22
10.3 Allocations for Income Tax Purposes........................................................24
10.4 Allocations for Financial Reporting........................................................24
10.5 Tax Matters Partner........................................................................24
10.6 Tax Elections..............................................................................26
ARTICLE XI
Books of Account, Records and Financial Information...................................................26
11.1 Books and Records..........................................................................26
11.2 Financial Information......................................................................26
11.3 1997 Provisional Operating Budget..........................................................27
ARTICLE XII
Fiscal Year...........................................................................................27
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ARTICLE XIII
Company Funds.........................................................................................27
ARTICLE XIV
Meetings of Members...................................................................................28
14.1 Annual Meeting.............................................................................28
14.2 Special Meetings...........................................................................28
14.3 Notice of Meeting..........................................................................28
14.4 Waiver of Notice...........................................................................29
14.5 Quorum.....................................................................................29
14.6 Voting.....................................................................................29
14.7 Proxies....................................................................................29
14.8 Action Without a Meeting...................................................................29
14.9 Member's Power.............................................................................29
14.10 Contracts. ................................................................................30
ARTICLE XV
Management; Management Committee......................................................................30
15.1 Management by Management Committee.........................................................30
15.2 Organization of Management Committee.......................................................31
15.3 Third Parties Dealing with the Company.....................................................31
15.4 Duties and Powers of Management Committee..................................................32
15.5 Duties of Representatives..................................................................32
15.6 Qualification of Representatives...........................................................33
15.7 Action by Management Committee.............................................................33
15.8 Meetings of the Management Committee.......................................................33
15.9 Quorum.....................................................................................33
15.10 Technology, Human Resources and Audit Committees...........................................34
15.11 Other Committees...........................................................................34
15.12 Supermajority Approval by the Representatives..............................................34
15.13 Affiliated Transactions....................................................................37
ARTICLE XVI
Officers..............................................................................................38
16.1 Appointment and Tenure.....................................................................38
16.2 Removal....................................................................................38
16.3 Chairman of the Management Committee.......................................................38
16.4 Chief Executive Officer....................................................................39
16.5 President..................................................................................39
16.6 Chief Financial Officer....................................................................40
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16.7 Vice Presidents............................................................................40
16.8 Secretary; Assistant Secretaries...........................................................40
16.9 Treasurer; Assistant Treasurers............................................................40
16.10 Vacancies..................................................................................41
ARTICLE XVII
Liability and Exculpation.............................................................................41
17.1 Liability..................................................................................41
17.2 Exculpation................................................................................41
17.3 Duties and Liabilities of Covered Persons..................................................42
ARTICLE XVIII
Indemnification.......................................................................................43
18.1 Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Company....................................................43
18.2 Power to Indemnify in Actions, Suits or Proceedings by or in the Right
of the Company.............................................................................43
18.3 Authorization of Indemnification...........................................................44
18.4 Good Faith Defined.........................................................................44
18.5 Indemnification by a Court.................................................................44
18.6 Expenses Payable in Advance................................................................45
18.7 Nonexclusivity of Indemnification and Advancement of Expenses..............................45
18.8 Insurance..................................................................................45
18.9 Meaning of "Company" and "Other Enterprises" for the Purposes of
Article XVIII..............................................................................45
18.10 Survival of Indemnification and Advancement of Expenses....................................46
ARTICLE XIX
Transfer of Interests by Members......................................................................46
19.1 Restrictions on Transfers..................................................................46
19.2 Prohibitions on Transfer by ▇▇▇▇▇▇▇▇ Member................................................47
19.3 Prohibitions on Transfer by Nortel Member..................................................47
19.4 Purchase and Sale Rights...................................................................49
19.5 Terms of Purchase and Sale.................................................................51
19.6 Right of First Refusal.....................................................................52
19.7 Recognition of Members.....................................................................54
19.8 Prohibited Transfers.......................................................................54
19.9 Admission of Substituted Members...........................................................55
19.10 Compliance with Securities Laws............................................................55
19.11 Representations Regarding Transfers; Legend................................................56
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19.12 Distributions and Allocations in Respect of Transferred
Membership Interest. ......................................................................57
ARTICLE XX
Distributorship Agreement.............................................................................58
20.1 Company Right of Renewal...................................................................58
20.2 Company Right of Renewal after Put or Call.................................................58
20.3 Company Right to Distribute Products Not Covered
by the Distributorship Agreement...........................................................59
ARTICLE XXI
Additional Members....................................................................................59
ARTICLE XXII
Dissolution...........................................................................................60
22.1 Liquidating Events.........................................................................60
22.2 Judicial Dissolution.......................................................................60
22.3 Continuation of Business...................................................................60
22.4 Covenants Concerning Early Dissolution; Remedies Upon Breach...............................60
22.5 Option to Purchase Membership Interest of Bankrupt Member..................................61
ARTICLE XXIII
Winding Up and Termination of the Company.............................................................61
23.1 Liquidator.................................................................................61
23.2 Liquidation Reserves.......................................................................62
23.3 Liquidating Distributions..................................................................62
23.4 Accounting.................................................................................63
23.5 Recourse to Company Assets.................................................................63
23.6 Cancellation of Certificate................................................................63
ARTICLE XXIV
Notices...............................................................................................64
ARTICLE XXV
Representations, Warranties and Covenants.............................................................65
25.1 Representations and Warranties ............................................................65
25.2 Nondisclosure of Proprietary Information...................................................66
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ARTICLE XXVI
Dispute Resolution....................................................................................66
ARTICLE XXVII
Miscellaneous.........................................................................................66
27.1 No Partition...............................................................................66
27.2 Entire Agreement...........................................................................66
27.3 Governing Law..............................................................................67
27.4 Binding Effect.............................................................................67
27.5 Effect of Invalid Provision................................................................67
27.6 Counterparts...............................................................................67
27.7 Negotiated Transaction.....................................................................67
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EXHIBITS
Exhibit A Agreed Value of Initial Capital Contributions (Section 1.4)
Exhibit B Nortel Member Merger Agreement (Section 1.4)
Exhibit C ▇▇▇▇▇▇▇▇ Member Merger Agreement (Section 1.4)
Exhibit D Percentage Interests (Section 1.4)
Exhibit E Illustration of Dilution Formula (Section 8.6(a))
Exhibit F 1997 Provisional Operating Budget (Section 11.3)
Exhibit G Representatives and Alternate Representatives (Section 15.2(b))
Exhibit H Functions and Scope of Technology Committee (Section 15.10(b))
Exhibit I Functions and Scope of Human Resources Committee (Section 15.10(c))
Exhibit J Functions and Scope of Audit Committee (Section 15.10(d))
Exhibit K Initial Scope of Business (Section 15.12(a)(ii))
Exhibit L Valuation Methodology (Section 19.3(a) Article XIX)
Exhibit M Registration Procedures for Delcorp Common Stock (Section 19.3(e))
Exhibit N Registration Procedures for Intended Listed Affiliate (Section 19.4(h))
Exhibit O Dispute Resolution Procedures (Article XXVI)
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THE MEMBERSHIP INTERESTS REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH
MEMBERSHIP INTERESTS MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED EXCEPT UPON DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE MEMBERS THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER
OR THE SUBMISSION TO THE MEMBERS OF SUCH OTHER EVIDENCE AS MAY BE SATISFACTORY
TO THE MEMBERS TO THE EFFECT THAT ANY SUCH TRANSFER SHALL NOT BE IN VIOLATION
OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS
OR ANY RULE OR REGULATION PROMULGATED THEREUNDER. THE SALE AND TRANSFER OF THE
MEMBERSHIP INTERESTS IS ALSO SUBJECT TO CERTAIN RESTRICTIONS WHICH ARE SET
FORTH IN THIS AGREEMENT.
LIMITED LIABILITY COMPANY AGREEMENT
OF
WILTEL COMMUNICATIONS, LLC,
a Delaware Limited Liability Company
This Limited Liability Company Agreement of WilTel Communications,
LLC, a Delaware limited liability company (the "Company"), dated this 30th day
of April, 1997 and effective as of 12:01 a.m. on April 1, 1997 (as amended or
modified from time to time in accordance with Section 14.9 hereof, this
"Agreement"), is entered into by and between Northern Telecom, Inc. a Delaware
corporation (the "Nortel Member") and ▇▇▇▇▇▇▇▇ Communications Group, Inc., a
Delaware corporation (the "▇▇▇▇▇▇▇▇ Member").
WHEREAS, the Nortel Member and the ▇▇▇▇▇▇▇▇ Member have formed a
limited liability company under the Delaware Limited Liability Company Act
known as "WilTel Communications, LLC";
WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
date hereof between Nortel Communications Systems Inc., a Delaware corporation
("NCS"), and the Company, NCS has merged with and into the Company, with the
Company being the surviving entity; and
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WHEREAS, pursuant to an Agreement and Plan of Merger dated as of the
date hereof between ▇▇▇▇▇▇▇▇ Telecommunications Systems, Inc., a Delaware
corporation ("WilTel"), and the Company, WilTel has merged with and into the
Company, with the Company being the surviving entity;
NOW, THEREFORE, in consideration of the premises and mutual
undertakings contained herein, the parties hereto agree as follows:
ARTICLE I
Construction and Definitions
1.1 Construction. Words used in this Agreement, regardless of the
number or gender specifically used, shall be deemed and construed to include
any other number, singular or plural, and any other gender, masculine, feminine
or neuter, as the context shall require.
1.2 References. As used in this Agreement, unless expressly stated
otherwise, references to "including" mean "including, without limitation."
Unless otherwise specified, all references in this Agreement to Articles,
Sections, Exhibits or paragraphs are deemed references to the corresponding
Articles, Sections, Exhibits or paragraphs in this Agreement.
1.3 Headings. The headings of the Articles, Sections and Exhibits of
this Agreement are included for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction or
interpretation hereof.
1.4 Definitions. The following definitions shall be applicable to the
terms set forth below as used in this Agreement:
"Accepting Offerees" shall have the meaning given that term in Section
19.6(d).
"Act" means the Delaware Limited Liability Company Act, Del. Code ▇▇▇.
tit. 6, Section 18-101, et seq. (1996), as amended from time to time (or any
corresponding provisions of any succeeding law).
"Adjusted Capital Account Deficit" means with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:
(a) Increase such Capital Account by any amounts which such
Member is obligated to restore pursuant to any provision of this Agreement or
is deemed to be obligated to restore pursuant to Regulations section
1.704-1(b)(2)(ii)(c)
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and the penultimate sentences of Regulations sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(b) Decrease such Capital Account by the items described in
Regulations sections 1.704-1(b)(2)(ii)(d)(4), (5), and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Regulations section 1.704-1(b)(2)(ii)(d) and
shall be interpreted consistently therewith.
"Affiliate" means, when used with respect to a specified Person, such
specified Person's Subsidiaries or other Persons which are or which could be
included on such Person's consolidated income statement for financial reporting
purposes pursuant to GAAP, and/or any third Person which does or which could
include such specified Person in such third Person's consolidated income
statement for financial reporting purposes pursuant to GAAP; provided that the
Company shall not be deemed to be an Affiliate of the Nortel Member, the
▇▇▇▇▇▇▇▇ Member or any of their respective Subsidiaries or Affiliates; and
provided further that NTL and BCE shall not be deemed to be Affiliates of the
Nortel Member.
"Agreed Allocation" shall have the meaning given that term in Section
10.2(i).
"Agreed Value" means, in the case of any contributions or
distributions of property, the fair market value of such property net of any
indebtedness or other liability either assumed or to which such property is
subject, as such fair market value is determined by the Members using such
reasonable method of valuation as they may mutually agree upon.
"Agreement" shall have the meaning given that term in the preamble
hereof.
"Audit Committee" shall have the meaning given that term in Section
15.10(a) hereof.
"Bankruptcy Code" means Title 11 of the United States Code, as now or
hereafter in effect, or any successor thereto.
"Bankruptcy Event" means, with respect to any Person, the occurrence
of any of the following events: such Person shall commence a voluntary case
concerning itself under the Bankruptcy Code; or an involuntary case under the
Bankruptcy Code is commenced against such Person and the petition is not
dismissed within 60 days after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of such Person; or such Person commences any
other proceeding under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or
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liquidation or similar law of any jurisdiction whether now or hereafter in
effect relating to such Person, or there is commenced against such Person any
such proceeding which remains undismissed for a period of 60 days or such
Person is adjudicated insolvent or bankrupt; or any order for relief or other
order approving any such case or proceeding is entered; or such Person suffers
the appointment of any custodian or the like for it or any substantial part of
its property to continue undischarged or unstayed for a period of 90 days; or
such Person makes a general assignment for the benefit of creditors; or any
corporate or similar action is taken by such Person for the purpose of
effecting any of the foregoing.
"BCE" means BCE Inc., a Canadian corporation.
"Built-In Gain" attributable to any Contributed Property means, as of
the date of contribution, the excess of the fair market value of such property
over its adjusted federal income tax basis.
"Built-In Loss" attributable to any Contributed Property means, as of
the date of contribution, the excess of the adjusted federal income tax basis
of such property over its fair market value.
"Business Day" means any day on which federal commercial banks are
open for business for the purpose of sending and receiving wire transfers in
Tulsa, Oklahoma and Houston, Texas.
"Call Closing Date" shall have the meaning given that term in Section
19.5(b).
"Call Notice" shall have the meaning given that term in Section
19.5(b).
"Call Purchase Price" shall have the meaning given that term in
Section 19.5(b).
"Capital Account" shall have the meaning given that term in Section
8.1(a).
"Capital Contribution" means, with respect to any Member, the
contribution of cash and other property with an aggregate Agreed Value as set
forth on Exhibit A, as contributed to the Company by such Member as of the
effective date of this Agreement, and all subsequent contributions of cash and
other property contributed to the capital of the Company.
"Capital Expenditures" means, with respect to any Person, all
expenditures made by such Person which should be capitalized in accordance with
GAAP, including all such expenditures with respect to fixed or capital assets
(including, expenditures for maintenance and repairs which should be
capitalized in accordance with GAAP) and, without duplication, the amount of
all rental obligations incurred by such Person which, under GAAP, are or will
be required to be capitalized on the books of such
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Person, in each case taken at the amount thereof accounted as indebtedness in
accordance with GAAP.
"Carrying Value" means with respect to any Contributed Property, the
Agreed Value of such property reduced as of the time of determination by all
book depreciation, cost recovery and amortization deductions charged to the
Capital Accounts (which reductions are to correspond with the requirements of
the Regulations promulgated from time to time under Section 704(b) of the Code
with respect to such property) and an appropriate amount to reflect any sales,
retirements or other dispositions of assets included in such property and, with
respect to any other Company property, the adjusted basis of such property for
federal income tax purposes as of the time of determination. The Carrying
Values shall be further adjusted as provided in Section 8.4.
"Certificate" means the Certificate of Formation of the Company filed
with the Secretary of State of Delaware in accordance with the Act, as such
Certificate may be amended, restated or corrected from time to time.
"Change of Control" means, with respect to any Member, a change of
control of such Member or of any Person which directly or indirectly controls
such Member (each such Person, a "Parent"), that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A, as in
effect on the date hereof, promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); provided that, without limitation, such
a Change of Control shall be deemed to have occurred if: (A) any "Person" (as
such term is used in section 13(d) and section 14(d) of the Exchange Act),
except for any employee benefit plan of such Member, any Parent or any
subsidiary or related corporation, or any entity holding voting securities of
such Member or any Parent for or pursuant to the terms of any such plan, is or
becomes the beneficial owner, directly or indirectly, of securities of any
Parent or of such Member representing 25% or more of the combined voting power
of such Parent's or such Member's then outstanding securities (except for, in
the case of any Member or any Parent (other than the Ultimate Parent of any
Member), its respective Parent and in the case of the Nortel Member, a Change
of Control of BCE shall not be deemed to be a Change of Control of the Nortel
Member and further, that for as long as BCE is the largest shareholder of NTL,
no Change of Control shall be deemed to have occurred unless a Person acquires
securities representing a greater share of the combined voting power of NTL
than BCE holds immediately prior to that time); (B) there occurs a contested
proxy solicitation of such Member's or any Parent's shareholders that results
in the contesting party obtaining the ability to vote securities representing
30% or more of the combined voting power of such Member's or such Parent's then
outstanding securities; (C) there occurs a sale, exchange, transfer or other
disposition of substantially all of the assets of such Member or any Parent to
another entity, except to an entity controlled directly or indirectly by such
Member or any Parent, or a merger, consolidation or other reorganization of
such Member or any
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Parent in which such Member or any Parent is not the surviving entity, or a
plan of liquidation or dissolution of such Member or any Parent other than
pursuant to bankruptcy or insolvency laws is adopted; or (D) during any period
of two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of such Member or any Parent cease for any
reason to constitute at least a majority thereof unless the election, or the
nomination for election by such Member's or such Parent's shareholders, of each
new director was approved by a vote of at least two-thirds (2/3rds) of the
directors then still in office who were directors at the beginning of the
period. For purposes of this definition "control", when used with respect to
any specified Person, means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract, by family relationship or otherwise; and the terms
"controlling" and "controlled" have the meanings correlative to the foregoing.
"Code" means the Internal Revenue Code of 1986, as amended, or any
amending or superseding tax laws of the United States of America.
"Company" shall have the meaning given that term in the preamble
hereof, and as the context requires for financial reporting or tax purposes
throughout this Agreement, the Company and its Subsidiaries on a consolidated
basis.
"Company Minimum Gain" shall have the meaning set forth with respect
to partnership minimum gain in Regulations sections 1.704-2(b)(2) and
1.704-2(d).
"Competitive Products" means telecommunications products manufactured
or produced by a Person other than the Nortel Member, any Affiliate of the
Nortel Member or NTL which are both like products of, and functionally
equivalent to, Existing Products or Emerging Products.
"Contributed Property" means any property contributed to the capital
of the Company other than cash.
"Covered Person" means any Member, an Affiliate of a Member or any
officer, Representative, director or shareholder of the Company or of a Member
or their respective Affiliates.
"CPE Agreement" means NTI's Customer Premises Equipment
Distributorship Agreement in the form currently in effect, and its subsequent
renewal forms or replacements as offered at or prior to the end of a term to
all United States Distributors (which may not have uniform products or
territory authorizations for all Distributors), but which when applied to the
Company shall be deemed to include (i) all product lines available to any of
the Distributors and (ii) the geographic territories in the United States of
America available to WilTel immediately prior to the date hereof.
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"Current Market Price" means, in respect of any shares of common stock
of any Person on any date, the average of the daily market prices for the 20
consecutive Business Days immediately preceding such date determined as
follows: the daily market price for each such Business Day shall be (i) the
last sale price on such day on the principal stock exchange on which such
common stock is then listed or admitted to trading, (ii) if no sales take place
on such day on any such exchange, the last reported sale price as officially
quoted on any such exchange, (iii) if such common stock is not then listed or
admitted to trading on any stock exchange, the last sale price on such day in
the over-the-counter market, as reported by the National Association of
Securities Dealers Automatic Quotation System ("NASDAQ"), or if such sale price
is not available on such date, the average of the closing bid and ask prices on
such date as reported by NASDAQ, or if not so reported, then as reported by the
National Quotation Bureau, Inc., (iv) if neither such firm at the time is
engaged in the business of reporting such prices, as furnished by any similar
firm then engaged in such business, or (v) if there is no such firm, as
furnished by any member of the National Association of Securities Dealers (the
"NASD") selected mutually by the ▇▇▇▇▇▇▇▇ Member and the Nortel Member or, if
they cannot agree upon such selection, as selected by two such members of the
NASD, one of which shall be selected by the ▇▇▇▇▇▇▇▇ Member and one of which
shall be selected by the Nortel Member.
"Debt" means (i) any indebtedness for borrowed money or the deferred
purchase price of property as evidenced by a note, bonds, or other instruments,
(ii) obligations as lessee under capital leases, (iii) obligations secured by
any mortgage, pledge, security interest, encumbrance, lien, or charge of any
kind existing on any asset owned or held by the Company whether or not the
Company has assumed or becomes liable for the obligations secured thereby, (iv)
any obligation under any interest rate swap agreement, and (v) obligations
under direct or indirect guarantees of (including obligations (contingent or
otherwise) to assure a creditor against loss in respect of) indebtedness or
obligations of the kinds referred to in clauses (i), (ii), (iii), and (iv),
above; provided that Debt shall not include obligations in respect of any
accounts payable that are incurred in the ordinary course of the Company's
business and are not delinquent nor being contested in good faith by
appropriate proceedings.
"Delcorp" shall have the meaning given that term in Section 19.3(e).
"Delcorp Common Stock" shall have the meaning given that term in
Section 19.3(e).
"Distributable Cash" means, at the time of determination, all cash
derived from the conduct of the Company's business activities, other than (i)
Capital Contributions, together with interest earned thereon pending
utilization thereof, (ii) financing proceeds, (iii) reserves for working
capital and (iv) other amounts that the
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Management Committee reasonably determines to be necessary for the proper
operation of the Company's business and its winding up and liquidation.
"Distribution" shall mean the sale of Existing Products by
Distributors under the CPE Agreement; provided, however, that "Distribution"
shall not include sales of such products by Distributors as a reseller or
systems integrator or under an agreement other than the CPE Agreement.
"Distributors" means NTI's authorized distributors which have executed
a CPE Agreement.
"EBIT" means, for any period, net income (or loss) before provision
for income taxes of the Company for such period (i) before the total interest
expense of the Company (calculated without regard to any limitations on the
payment thereof) plus, without duplication, that portion of rental obligations
of the Company which, under GAAP, are or will be required to be capitalized on
the books of the Company, (in each case taken at the amount thereof accounted
for as indebtedness in accordance with GAAP), representing the interest factor
for such period, and (ii) without giving effect to any extraordinary gains or
losses or gains or losses from sales of assets other than in the ordinary
course of business.
"EBITDA" means, for any period, (i) EBIT plus (ii) the amount of all
amortization of intangibles and depreciation which were deducted in arriving at
EBIT.
"Effective Date" means April 1, 1997.
"Emerging Products" means products of NTL or its Affiliates which (i)
are covered by the Systems Integrator Agreement between NTI and WilTel dated
January 1, 1997, or (ii) are, or are being developed to be, sold primarily in
the Enterprise Commercial Market, but have not been put in Distribution by NTL
or its Affiliates.
"Enterprise Commercial Market" means the market for sale of business
telecommunications systems to end-users consisting of commercial for-profit and
not-for-profit corporations, partnerships and companies, educational
institutions, governmental institutions and agencies, and other similar
commercial enterprises purchasing such systems for their internal use and not
for resale, but excluding the sale of systems utilized for or in public
networks or in connection with the public carriage or transmission of local,
interconnect or long distance telecommunications traffic or services as a
carrier or transmission services provider or contractor.
"Existing Products"shall mean the products that are available to be
sold by any or all of the Distributors pursuant to the then current CPE
Agreement (which may include products which were formerly Emerging Products or
Competitive Products),
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excluding such products not originating from NTL's Enterprise Networks Group,
terminals and low-end systems of less than 10 lines;
"Exit Offer" shall have the meaning given that term in Section
19.3(b).
"Exit Purchase Price" shall have the meaning given that term in
Section 19.3(a).
"Firm Offer" shall have the meaning given that term in Section
19.6(b).
"Formation Agreement" means that certain Formation Agreement dated as
of April 1, 1997, by and between the Nortel Member and the ▇▇▇▇▇▇▇▇ Member and
pertaining to the formation and operations of the Company.
"GAAP" shall mean generally accepted accounting principles in the
United States of America.
"Governmental Authority" means any entity of or pertaining to the
government, including any federal, state, local, other governmental or
administrative authority, agency, court, tribunal, arbitrator, commission,
board or bureau.
"Human Resources Committee" shall have the meaning given that term in
Section 15.10(a).
"Intended Listed Affiliate" shall have the meaning given that term in
Section 19.4(h).
"Intended Listed Affiliate Common Stock" shall have the meaning given
that term in Section 19.4(h).
"Leverage Ratio" means, at any time, the ratio of (A) all Long-Term
Debt of the Company (including the current portion thereof) to (B) the sum of
(x) all Long-Term Debt of the Company (including the current portion thereof)
and (y) Tangible Net Worth.
"Liquidating Events" shall have the meaning given that term in Section
22.1.
"Liquidator" shall have the meaning given to that term in Section 23.1.
"Long-Term Debt" means Debt with a remaining maturity of one year or
more.
"Majority in Interest of the Members" means, unless otherwise provided
in this Agreement, the Members whose aggregate Percentage Interest constitutes
more than fifty percent (50%) of the aggregate Percentage Interest of all
Members.
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"Management Committee" means the committee described in Section 15.2.
"Member" means each of the Nortel Member and the ▇▇▇▇▇▇▇▇ Member and
any Person hereafter admitted to the Company as a member as provided in this
Agreement, but does not include any Person who has ceased to be a member in the
Company.
"Member Nonrecourse Debt" shall have the meaning set forth with
respect to partner nonrecourse debt in Regulations section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means an amount, with respect
to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would
result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations section 1.704-2(i)(3).
"Member Nonrecourse Deductions" shall have the meaning set forth with
respect to partner nonrecourse deductions in Regulations sections 1.704-2(i)(1)
and 1.704-2(i)(2).
"Membership Interest" means the interest of a Member in the Company,
including the Member's rights to a share of the profits and losses of the
Company (in accordance with its Percentage Interest or as otherwise provided in
this Agreement), to receive distributions (liquidating or otherwise), to obtain
information and to consent to or approve actions by the Company.
"Merger Agreements" means the Agreement and Plan of Merger dated as of
the date hereof between the Company and NCS and the Agreement and Plan of
Merger dated as of the date hereof between WilTel and the Company, copies of
which are attached hereto as Exhibits B and C.
"Minimum Holding Period" shall have the meaning given that term in
Section 8.2(d).
"NCS" shall have the meaning given that term in the recitals hereto.
"NCS Business" shall have the meaning given that term in the Formation
Agreement.
"Net Purchase Price" means the price paid by the Company, or another
Distributor for purposes of Section 19.4(a), inclusive of all amounts paid to a
supplier or suppliers net of discounts and rebates, plus applicable freight,
duties and taxes.
"Non-Competition Agreement" means that certain Non-Competition
Agreement dated April 30, 1997 by and between The ▇▇▇▇▇▇▇▇ Companies, Inc. and
NTL.
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"Nonrecourse Deductions" shall have the meaning set forth in
Regulations section 1.704-2(b)(1).
"Nonrecourse Liability" shall have the meaning set forth in
Regulations section 1.704-2(b)(3).
"Non-contributing Member" shall have the meaning given that term in
Section 8.6(a).
"Nortel Member" shall have the meaning given that term in the preamble
hereof or any Affiliate transferee of such initial Nortel Member.
"NTI" means Northern Telecom Inc., a Delaware corporation.
"NTL" means Northern Telecom Limited, a Canadian corporation.
"Offered Interest" shall have the meaning given that term in Section
19.6.
"Offeree" shall have the meaning given that term in Section 19.6(b).
"Offer Notice" shall have the meaning given that term in Section
19.6(b).
"Offer Period" shall have the meaning given that term in Section
19.6(c).
"Offer Price" shall have the meaning given that term in Section
19.6(a).
"Operating Budget" shall have the meaning given that term in Section
11.3.
"Percentage Interest" means the percentage interest of a Member in the
distributions, income, gains, losses, deductions, and credits of the Company,
as set forth on Exhibit D, as such percentage may be adjusted from time to time
in accordance with this Agreement.
"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company, trust,
unincorporated organization, Governmental Authority or government (or agency or
political subdivision thereof).
"Product Mix" means, for any period, an amount, expressed as a
percentage, equal to a fraction, the numerator of which shall equal the
aggregate dollar amount of the Net Purchase Price paid to NTI and its
Affiliates during such period for Existing Products and Emerging Products and
the denominator of which shall equal the aggregate dollar amount of the Net
Purchase Price during such period for Existing Products, Emerging Products and
Competitive Products.
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"Product Mix Threshold" means, for any period, a Product Mix of 82.6%
unless the Members shall have agreed pursuant to Section 15.12 (a) (xiii) that
for a specified period the Product Mix Threshold shall be a percentage other
than 82.6% in which event the Product Mix Threshold for such period shall be
such other percentage.
"Purchase Offer" shall have the meaning given that term in Section
19.6(a).
"Purchaser" shall have the meaning given that term in Section 19.6(a).
"Put Closing Date" shall have the meaning given that term in Section
19.5(a).
"Put Notice" shall have the meaning given that term in Section
19.5(a).
"Put Purchase Price" shall have the meaning given that term in Section
19.5(a).
"Registration Notice" shall have the meaning given that term in
Section 19.3(e).
"Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such Regulations may be amended
from time to time (including corresponding provisions of succeeding
Regulations).
"Regulatory Allocations" shall have the meaning given that term in
Section 10.2(i).
"Representative" and "Representatives" shall have the meaning given
those terms in Section 15.2(b).
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations from time to time promulgated thereunder.
"Seller" shall have the meaning given that term in Section 19.6.
"Subsidiary" means, with respect to any Person, a corporation more
than 50% of the combined voting power of the outstanding stock of which is
owned, directly or indirectly, by such Person; provided that the Company shall
not be deemed to be a Subsidiary of The ▇▇▇▇▇▇▇▇ Companies, Inc. or any of its
Subsidiaries or Affiliates.
"Supermajority of the Representatives" means eighty percent (80%) or
more of the Representatives so long as the number of Representatives is ten
(10). If the number of Representatives changes, the number required to
constitute a supermajority shall be a number that assures that at least one
Representative of the Nortel Member is necessary to constitute a supermajority,
provided that the Nortel Member has at least a twenty percent (20%) Percentage
Interest in the Company.
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"Tangible Net Worth" means, at any time, the difference between the
assets (excluding all intangible assets inclusive of goodwill) and liabilities
of the Company, determined in accordance with GAAP, and as set forth in the
most recent audited balance sheet of the Company.
"Technology Committee" shall have the meaning given to that term in
Section 15.10(a).
"TMP" shall have the meaning given that term in Section 10.5(a).
"Transfer" means: (x) as a noun, any voluntary or involuntary
transfer, sale, pledge, hypothecation or other disposition or encumbrance; and
(y) as a verb, voluntarily or involuntarily to transfer, sell, pledge,
hypothecate or otherwise dispose of or encumber.
"TTS Agreement" means that certain Share Purchase Agreement dated
April 30, 1997, between NTL and the Company regarding the purchase of the
shares of TTS.
"Ultimate Parent" means, with respect to any Person, the Person that
directly or indirectly owns or controls such Person and all other Persons with
a direct or indirect controlling interest in such Person, which, on the date
hereof, in the case of the ▇▇▇▇▇▇▇▇ Member is The ▇▇▇▇▇▇▇▇ Companies, Inc. and
in the case of the Nortel Member is NTL.
"Unrealized Gain" attributable to an asset of the Company means, as of
the date of determination, the excess of the fair market value of such asset as
of such date of determination over the Carrying Value of such asset as of such
date of determination.
"Unrealized Loss" attributable to an asset of the Company means, as of
the date of determination, the excess of the Carrying Value of such asset as of
such date of determination over the fair market value of such asset as of such
date of determination.
"Valuation Methodology" shall have the meaning given to that term in
Section 19.3(a).
"▇▇▇▇▇▇▇▇ Member" shall have the meaning given that term in the
preamble hereof or any Affiliate transferee of such initial ▇▇▇▇▇▇▇▇ Member.
"WilTel" shall have the meaning given that term in the recitals hereto.
"WilTel Business" shall have the meaning given that term in the
Formation Agreement.
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" WilTel Distributorship Agreement" means the Customer Premises
Equipment Distributorship Agreement dated December 15, 1995 between NTI and
WilTel, as amended, restated, renewed, replaced or modified from time to time.
1.5 Accounting Terms. Any accounting terms used in this Agreement that
are not specifically defined herein shall have the meanings customarily given
to them in accordance with GAAP.
ARTICLE II
Organization
2.1 Formation. The Members hereby form a limited liability company
under and pursuant to the Act and agree that the rights, duties and liabilities
of the Members shall be as provided in the Act, except as otherwise provided
herein. The Certificate shall be filed in the office of the Secretary of State
of Delaware in accordance with the provisions of Act. The Management Committee
shall take any and all other action reasonably necessary to perfect and
maintain the status of the Company under the laws of the State of Delaware. The
Management Committee shall cause amendments to the Certificate to be filed
whenever required by the Act. Such amendments as have been agreed to by the
Management Committee may be executed by an officer of the Company.
2.2 Qualification in Other Jurisdictions. The Management Committee
shall cause the Company to be qualified, formed or registered in any
jurisdiction in the United States of America in which the Company transacts
business in which such qualification, formation or registration is required or
desirable including under any assumed or fictitious name statutes or similar
laws. Any member of the Management Committee may execute, deliver and file, or
cause the execution, delivery or filing of, any certificates (and any
amendments or restatements thereof) necessary for the Company to qualify to do
business in a jurisdiction in which the Company may wish to conduct business.
ARTICLE III
Name
The name of the Company is "WilTel Communications, LLC", and all
Company business may be conducted in that name or any other name that complies
with applicable law as the Management Committee may select from time to time.
The Company shall hold all of its property in the name of the Company and not
in the name of any Member.
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ARTICLE IV
Purpose and Powers
4.1 Purpose. The purpose of the Company is to carry on any lawful
business, purpose or activity for which limited liability companies may be
organized under the Act, except as otherwise provided in section 18-106 of the
Act.
4.2 Powers of the Company. Subject to the terms of this Agreement,
the Company shall have the power and authority to take any and all actions
necessary, appropriate, proper, advisable, convenient or incidental to or for
the furtherance of the purposes set forth in Section 4.1, including the power
to conduct the Company's business and to carry on the Company's operations. The
Company shall have and exercise the powers granted to a limited liability
company by the Act in any state, territory, district or possession of the
United States of America, or in any foreign country that may be necessary,
convenient or incidental to the accomplishment of the purposes of the Company.
ARTICLE V
Registered Office; Registered Agent;
Principal Office; Other Offices
The registered office of the Company required by the Act shall be c/o
The Corporation Trust Company, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or any other office (which need
not be a place of business of the Company) as the Management Committee may
designate from time to time in the manner provided by law. The name and address
of the registered agent of the Company in the State of Delaware shall be The
Corporation Trust Company, Corporation Trust Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The principal office of the
Company shall be at such place as the Management Committee may designate from
time to time, which need not be in the State of Delaware, and the Company shall
maintain records there as required by the Act. The Company may have such other
offices as the Management Committee may designate from time to time.
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ARTICLE VI
Term
The term of the Company shall be deemed to have commenced on April 1,
1997, and shall terminate when dissolved pursuant to Article XXII.
ARTICLE VII
No State Law Partnership
The Members intend that the Company not be a partnership (including a
limited partnership) or joint venture, and that no Member be a partner or joint
venturer of any other Member, for any purposes other than federal, state and
local tax purposes, and this Agreement shall not be construed to suggest
otherwise.
ARTICLE VIII
Capital Contributions; Capital Accounts
8.1 Capital Accounts.
(a) A capital account ("Capital Account") shall be established
for each Member and shall be maintained in such a manner as to correspond with
the requirements of the Regulations promulgated from time to time under section
704(b) of the Code. Subject to the provisions of Section 8.2(a) with respect to
the initial Capital Contribution of each Member, a Member's Capital Account
shall be credited with the amounts of cash and Agreed Value of property
contributed to the Company by such Member and with the amount of any Company
liabilities assumed by such Member or secured by any Company assets distributed
to such Member. A Member's Capital Account shall also be credited or charged,
as the case may be, with such Member's distributive share of Company items of
income, gains, losses, deductions, and credits for each fiscal year of the
Company determined pursuant to Article X below. Each Member's Capital Account
shall be charged with the amount of cash or Agreed Value of property
distributed to it and with the amount of any liabilities of such Member assumed
by the Company.
(b) In the event a Member transfers its Membership Interest in
the Company (or portion thereof) in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of such Member
to the extent such Capital Account relates to the transferred interest (or
portion thereof).
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8.2 Capital Contributions.
(a) Concurrently with the execution of this Agreement, the
Company and the Members are entering into the Merger Agreements. The Company
and the Members shall cause the transactions contemplated by the Merger
Agreements to be consummated as of the Effective Date in accordance with the
terms of the Merger Agreements in order to effectuate the contribution of the
NCS Business and the WilTel Business to the Company. Upon the consummation of
such transactions, the respective Capital Accounts of the Nortel Member and the
▇▇▇▇▇▇▇▇ Member shall be credited in the amounts of 30% and 70%, respectively,
of the aggregate Agreed Value of the Company (including TTS Meridian Systems,
Inc., which will be purchased by the Company pursuant to the TTS Agreement),
thus reflecting the Agreed Value of the respective initial Capital
Contributions of each Member.
(b) Subject to the provisions of Section 8.2(d), each Member
shall be required during each calendar year to make the additional Capital
Contributions (i) provided for in the Operating Budget for such calendar year
or any amendment thereto, in either case as approved by the Management
Committee pursuant to this Agreement or (ii) otherwise required by the
Management Committee. Unless otherwise provided in the approved Operating
Budget, each such contribution shall be made in cash within ten Business Days
after notice from the Company requesting that such contribution be made.
(c) Except as otherwise agreed to by the Members, any additional
Capital Contributions shall be made in accordance with the then applicable
Percentage Interest of each Member.
(d) The Nortel Member may elect not to participate in all or a
portion of any Capital Contribution that may otherwise be required so long as
after giving effect to the dilution required by Section 8.6(a)(i) the Nortel
Member's Percentage Interest would not fall below 20% during a period of five
(5) years following the earlier of: (i) December 31, 1999 or (ii) the date that
Nortel Member's Percentage Interest first is reduced to 20% (the "Minimum
Holding Period").
8.3 Limitation on Liability of Members. Except as provided in the
Formation Agreement or any other specific agreement between the Company and a
Member, the liability of each Member to the Company shall be limited to the
amount of its Capital Contribution made and required to be made pursuant to
Section 8.2 (subject to the exceptions stated therein) and no Member shall have
any further personal liability to contribute money to, or in respect of, the
liabilities or the obligations of the Company unless it agrees in writing to
make additional Capital Contributions to the Company, nor shall any Member be
personally liable for any obligations of the Company, except as may be provided
in the Act.
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8.4 Adjustment of Capital Accounts. If any additional Membership
Interests are to be issued in consideration for a contribution of property or
cash or if any Company property is to be distributed in liquidation of the
Company or a Membership Interest, the Capital Accounts of the Members (and the
amounts at which all Company properties are carried on its books and records)
shall, immediately prior to such issuance or distribution, as the case may be,
be adjusted (consistent with the provisions of section 704(b) of the Code and
the Regulations promulgated thereunder) upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to all Company properties (as
if such Unrealized Gain or Unrealized Loss had been recognized upon actual sale
of such properties upon a liquidation of the Company immediately prior to such
issuance). If the Carrying Value of any property of the Company is properly
reflected on the books of the Company at a value that differs from the adjusted
tax basis of such property, this Section 8.4 shall be applied with reference to
such Carrying Value.
8.5 Return of Contributions. No Member shall be entitled to the return
of any part of its Capital Contribution or to be paid interest in respect of
either its Capital Account or any Capital Contribution made by such Member
except as provided in Section 23.3. No unrepaid Capital Contribution shall be
deemed or considered to be a liability of the Company or any Member. No Member
shall be required to contribute or lend any cash or property to the Company to
enable the Company to return any Member's Capital Contributions to the Member.
8.6 Additional Capital Contributions.
(a) In the event that the Members are required to make
additional Capital Contributions after the Effective Date pursuant to Section
8.2, and any Member (the "Non-contributing Member") does not contribute all or
a portion of such required additional Capital Contribution within the time
specified in Section 8.2:
(i) the Percentage Interests immediately following
the Capital Contribution will be determined for each of the Members by
the following formula, an illustration of the application of which is
set forth on Exhibit E:
R = (P x V + M) / (V + T)
where:
R = such Member's revised Percentage Interest
P = such Member's Percentage Interest as of the last day of the preceding fiscal
quarter
M = the Agreed Value of the Capital Contributions made by such Member since the
last day of the preceding fiscal quarter
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T = the Agreed Value of the Capital Contributions made by all Members
since the last day of the preceding fiscal quarter
V = (0.615 A + 8.53 B + 11.1 C) / 3 - D
where:
A = Total Revenue for the Company for the preceding four (4) fiscal
quarters
B = EBITDA for the preceding four (4) fiscal quarters
C = EBIT for the preceding four (4) fiscal quarters
D = The Debt of the Company as of the last day of the preceding fiscal
quarter.
(ii) the other Member may, without the consent of
the Non-contributing Member or the Management Committee, elect to
advance the portion of the additional Capital Contribution payable by
the Non-contributing Member, which advance shall (1) constitute a loan
by such other Member to the Company in a principal amount equal to the
sum advanced, (2) be due and payable in full (together with all
accrued unpaid interest thereon) upon demand, and (3) bear interest at
a rate per annum equal to the base rate of Citibank, NA as announced
from time to time from the date of the making of such advance to the
date such advance is paid in full.
(b) Notwithstanding subsection 8.6(a), in the event that
after giving effect to the adjustments in the Members' Percentage Interests
provided in subsection 8.6(a) in respect of any additional Capital
Contribution, the Percentage Interest of the Nortel Member shall be less than
20%, the ▇▇▇▇▇▇▇▇ Member may, provided that the Nortel Member has received
adequate notice and the effective opportunity to re-establish its Membership
Interest to 20%, purchase the Nortel Member's Member Interest pursuant to
Section 19.5(b).
ARTICLE IX
Distributions; Repayment of Member Loans
9.1 Distributions. Except as approved by the Management Committee in
accordance with Section 15.12(a)(vi) or as provided in Section 23.3, all
Distributable Cash shall be distributed to the Members in proportion to their
respective Percentage Interests, at such times as the Management Committee may
determine to be appropriate; provided however, subject to availability, the
Management Committee
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shall by March 15 of each year, declare a cash distribution in proportion to
their respective Percentage Interests of 40% of an amount equal to the sum
total of all Members' estimated taxable income for federal income tax purposes
that would result from their allocated shares of estimated income, gains,
losses and deductions (such amount shall be reduced by credits, if any) of the
Company as furnished by the national accounting firm pursuant to Section
10.5(f)(i).
9.2 No Interest on Unwithdrawn Share. If any Member does not withdraw
the whole or any part of his share of any cash distribution made pursuant to
Section 9.1, such Member shall not be entitled to receive any interest thereon.
9.3 Withholding. All amounts withheld pursuant to the Code or any
provision of any state or local law with respect to any payment, distribution
or allocation to the Company or the Members shall be treated as amounts
distributed to the Members pursuant to Section 9.1 for all purposes of this
Agreement. The TMP is authorized to withhold from distributions to the Members
and to pay over to any federal, state or local government any amounts required
to be so withheld pursuant to the Code or any provision of any other federal,
state or local law and shall allocate such amounts to those Members with
respect to which such amounts were withheld.
9.4 Limitations on Distributions. Notwithstanding any provision to the
contrary contained in this Agreement, the Company shall not make a distribution
to a Member to the extent that, at the time of the distribution, after giving
effect to the distribution, all liabilities of the Company, other than
liabilities to Members on account of their Membership Interests and liabilities
for which recourse of creditors is limited to specified property of the
Company, exceed the fair market value of the assets of the Company, provided
that the fair market value of property that is subject to a liability for which
the recourse of creditors is limited shall be included in the assets of the
Company only to the extent that the fair market value of such property exceeds
such liability. A Member who receives a distribution in violation of this
Section 9.4, and who (or whose Representatives) knew at the time of
distribution that the distribution violated this Section 9.4, shall be liable
to the Company for the amount of the distribution. A Member who receives a
distribution in violation of this Section 9.4, and who (or whose
Representatives) did not know at the time of the distribution that the
distribution violated this Section 9.4, shall not be liable for the amount of
the distribution.
9.5 Repayment of Member Loans. After Distributions are made under
Section 9.1, if, with the consent of the Management Committee in accordance
with Section 15.7 or pursuant to Section 8.6(a)(ii), any Member makes a loan to
or on behalf of the Company other than pursuant to the line of credit agreement
contemplated in section 10.1 of the Formation Agreement, all Distributable Cash
shall first be used to repay such loans, together with interest thereon and,
thereafter, any remaining Distributable Cash, if any, shall be distributed in
accordance with the terms
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of Section 9.1. If Distributable Cash is insufficient to repay in full all such
Member loans, the funds available for distribution from time to time shall
first be applied to repay and retire the loan with the highest interest rate
first and, if any funds thereafter remain available, such funds shall be
applied in a similar manner to remaining loans; provided, however, if two or
more loans have the same interest rate, such funds will be applied in
accordance with the order of the dates on which they were made.
ARTICLE X
Allocations of Income, Gains,
Losses, Deductions and Credits
10.1 General. Except as otherwise provided herein or unless another
allocation is required by the Regulations issued under section 704(b) of the
Code, all items of Company income, gains, losses, deductions and credits shall
be allocated among the Members as provided in Section 10.2, provided, however,
that such allocations shall not impact distributions or Membership Interests
except as provided in Section 23.3 or in connection with liquidations
generally. For purposes of computing the amount of each item of income, gains,
losses, deductions or credits to be charged or allocated to the Capital
Accounts of the Members, the determination, recognition and classification of
such item shall be the same as its determination, recognition and
classification for federal income tax purposes, provided that:
(a) Any deductions for depreciation, cost recovery, or
amortization attributable to any Company property shall be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property. Upon an adjustment to the Carrying Value of any Company property
subject to depreciation, cost recovery, or amortization pursuant to Section
8.4, any further deductions for such depreciation, cost recovery, or
amortization attributable to such property shall be determined as if the
adjusted basis of such property were equal to the Carrying Value of such
property immediately following such adjustment.
(b) Any income, gains, losses, deductions, and credits
attributable to the taxable disposition of any Company property shall be
determined by the Company as if the adjusted basis of such property as of such
date of disposition were equal in amount to the Carrying Value of such property
as of such date.
(c) All fees and other expenses incurred by the Company to
promote the sale of a Membership Interest that can neither be deducted nor
amortized under section 709 of the Code shall be treated as an item of
deduction.
(d) Computation of all items of income, gains, losses,
deductions, and credits shall be made without regard to any election under
section 754 of the Code which may be made by the Company and, as to those items
described in
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section 705(a)(1)(B) or section 705(a)(2)(B) of the Code, without regard to the
fact that such items are not includable in gross income or are neither
currently deductible nor capitalizable for federal income tax purposes.
10.2 Allocations.
(a) The provision of this Section 10.2 shall apply for the
purposes of (i) allocating the income, gains, losses, deductions, and credits
of the Company; (ii) maintaining the Members' Capital Accounts; and (iii)
determining the Members' interests in the liquidation proceeds of the Company.
All income, gains, losses, deductions, and credits of the Company, other than
gain or loss upon the sale of all or substantially all the assets in
dissolution and liquidation of the Company, shall be allocated to the Members
in proportion to their Percentage Interests.
(b) On the sale or distribution of all, or substantially all,
of the assets in connection with the dissolution and liquidation of the Company
or upon dilution as provided in Section 8.6(a) hereof, the gains and losses
resulting therefrom shall be allocated among the Members in the manner
necessary to cause, to the maximum extent possible, the credit balances in
their respective Capital Accounts to equal the respective amounts of
Distributable Cash that would be distributed to the Members under Section 9.1
if that Section applied to distributions in liquidation of the Company.
(c) Notwithstanding any provision set forth in this Section
10.2, no item of loss shall be allocated to a Member to the extent the
allocation would cause a Member to have an Adjusted Capital Account Deficit at
the end of any fiscal year. In the event some but not all of the Members would
have Adjusted Capital Account Deficits as a consequence of an allocation of
loss pursuant to this Section 10.2, the limitation set forth in this Section
10.2(c) shall be applied on a Member by Member basis and items of loss not
allocable to a Member as a result of such limitation shall be allocated to the
other Member in accordance with the positive balance in such Member's Capital
Account so as to allocate the maximum permissible loss to such Member under
Regulations section 1.702-1(b)(2)(ii)(d). In the event any loss shall be
specially allocated to a Member pursuant to either of the two preceding
sentences, an equal amount of income of the Company shall be specially
allocated to such Member prior to any allocation pursuant to Sections 10.2(a)
or (b).
(d) Except as otherwise provided in Regulations section
1.704-2(f), notwithstanding any other provision of this Section 10.2, if there
is a net decrease in Company Minimum Gain during any fiscal year, each Member
shall be specially allocated items of Company income and gain for such fiscal
year (and, if necessary, subsequent fiscal years) in an amount equal to such
Member's share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member
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pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations sections 1.704-2(f)(6) and 1.704-2(j)(2). This
Section 10.2(d) is intended to comply with the minimum gain chargeback
requirement in Regulations section 1.704-2(f) and shall be interpreted
consistently therewith.
(e) Except as otherwise provided in Regulations section
1.704-2(i)(4), notwithstanding any other provision of this Section 10.2 (other
than Section 10.2(d)) if there is a net decrease in Member Nonrecourse Debt
Minimum Gain attributable to a Member Nonrecourse Debt during any fiscal year,
each Member who has a share of the Member Nonrecourse Debt Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations section 1.704-2(i)(5), shall be specially allocated items of
Company income and gain for such fiscal year (and, if necessary, subsequent
fiscal years) in an amount equal to such Member's share of the net decrease in
Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt determined in accordance with Regulations section 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance with
Regulations sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 10.2(e) is
intended to comply with the minimum gain chargeback requirement in Regulations
section 1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(f) Notwithstanding anything herein to the contrary, in the
event any Member unexpectedly receives any adjustments, allocations or
distributions described in paragraphs (b)(2)(ii)(d)(4), (5) or (6) of
Regulations section 1.704-1, there shall be specially allocated to such Member
such items of Company income and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of its Adjusted Capital
Account Deficit caused or increased by such adjustments, allocations or
distributions, provided that an allocation pursuant to this Section 10.2(f)
shall be made only if and to the extent that there would be a deficit in such
Member's Capital Account after all other allocations provided in this Section
10.2 have been tentatively made as if this Section 10.2(f) were not in the
Agreement.
(g) Nonrecourse Deductions for any fiscal year or other
period shall be specially allocated among the Members in proportion to their
Percentage Interests.
(h) Any Member Nonrecourse Deductions for any fiscal year
shall be specially allocated to the Member who bears the economic risk of loss
with respect to the Member Nonrecourse Debt to which such Member Nonrecourse
Deductions are attributable in accordance with Regulations section
1.704-2(i)(1).
(i) The allocations set forth in paragraphs (c) through (h)
of this Section 10.2 shall be referred to as the "Regulatory Allocations" and
paragraphs (a)
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and (b) shall be referred to as the "Agreed Allocations." The Regulatory
Allocations are intended to comply with certain requirements of Regulations
section 1.704-1(b). It is the intent of the Members that, to the extent
possible, all Regulatory Allocations shall be offset either with other
Regulatory Allocations or with special allocations of other items of Company
income, gains, losses, deductions, and credits pursuant to this paragraph.
Notwithstanding any other provisions of this Section 10.2, any Regulatory
Allocations that have taken place shall be taken into account in allocating
other items of income, gains, losses, deductions, and credits, so that, to the
extent possible, the net amount of such other allocations and the Regulatory
Allocations to each Member shall equal the net amount that would have been
allocated to each Member pursuant to the Agreed Allocation if the Regulatory
Allocation had not occurred.
10.3 Allocations for Income Tax Purposes.
(a) The Company shall, except to the extent such item is
subject to allocation pursuant to subsection 10.3(b), allocate each item of
income, gains, losses, deductions, and credits, as determined for federal and
other income tax purposes, in the same manner as such item was allocated under
Sections 10.1 and 10.2.
(b) The Company, for federal and other income tax purposes
shall, in the case of Contributed Properties, allocate items of income, gains,
losses, deductions, and credits, including, without limitation, depreciation
and cost recovery deductions, attributable to those properties with a Built-In
Gain or Built-In Loss pursuant to section 704(c) of the Code utilizing the
traditional method described in Regulations section 1.704-3(b).
10.4 Allocations for Financial Reporting. For purposes of reporting
the financial results of the Company by the Members in accordance with GAAP,
net income or loss shall be allocated in proportion to the Member's Percentage
Interest.
10.5 Tax Matters Partner.
(a) The ▇▇▇▇▇▇▇▇ Member is designated tax matters partner
("TMP") as defined in section 6231(a)(7) of the Code. The TMP and the other
Member shall use their reasonable best efforts to comply with the
responsibilities outlined in this Section 10.5 and in sections 6222 through
6232 of the Code (including any Regulations promulgated thereunder) and in
doing so the TMP shall incur no liability to any other Member except for
instances of gross negligence or willful misconduct.
(b) If any Member intends to file a notice of inconsistent
treatment under section 6222(b) of the Code, such Member shall, prior to the
filing of such notice, notify the TMP of such intent and the manner in which
the Member's intended
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treatment of a partnership item is (or may be) inconsistent with the treatment
of that item by the Company.
(c) No Member other than the TMP shall file a request
pursuant to section 6227 of the Code for an administrative adjustment of
partnership items for any Company taxable year.
(d) No Member other than the TMP shall file a petition under
Code sections 6226, 6228 or other Code sections with respect to any partnership
item, or other tax matters involving the Company provided, however, that if the
TMP fails to file a petition under Code section 6226 within the time provided
in Code section 6226(a), then the Nortel Member may file a petition pursuant to
Code section 6226(b). In the case where the TMP files such a petition, it shall
determine the forum in which such petition will be filed. In carrying out its
duties, the TMP will act in the best interests of both Members and the Company.
(e) Without the prior written consent of the Nortel Member,
the TMP will:(i) not extend any federal statute of limitations with respect to
income taxation of a "partnership item," as defined in Code section 6231(a)(3)
and the Regulations thereunder, or (ii) not agree to the settlement of a tax
controversy concerning a partnership item with any federal, state, or local
taxing authority. At the request of the Nortel Member, the TMP will provide
information concerning federal, state, or local tax audits, appeals or
litigation of the Company.
(f) The TMP shall employ a national public accounting firm,
to be mutually agreed upon by the Nortel Member and the ▇▇▇▇▇▇▇▇ Member to
prepare at the Company's expense the Federal income tax return of the Company.
The TMP shall further cause the accounting firm to:
(i) provide its best estimate of each Member's
distributive share of all income, gains, losses, deductions, and
credits of the Company for each taxable year within sixty (60) days
following the close of each taxable year, and
(ii) prepare and deliver to each Member within 150
days following the close of each taxable year, as set forth in Section
11.2(b), an information reporting return (Form 1065 K-1) reflecting
each Member's distributive share of all income, gains, losses,
deductions, and credits of the Company for each taxable year.
(g) No later than thirty (30) days prior to the filing of the
Company's federal income tax return (Form 1065), the TMP will furnish a draft
of such return and a list of all elections made on such return for which a
specific declaration is not required to the Nortel Member. Within fifteen (15)
days after receipt of the draft, the Nortel Member will provide notice to the
TMP as to whether the Nortel Member
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consents to the filing of the return consistent with the draft or objects to
the manner in which one or more partnership items are reflected in the return.
The ▇▇▇▇▇▇▇▇ Member and the Nortel Member will jointly resolve any differences.
10.6 Tax Elections.
(a) The Company shall elect to use the calendar year as its
taxable year, and to report profit and loss under the accrual method of
accounting.
(b) The Company shall elect to deduct expenses incurred in
organizing the Company ratably over a sixty-month period as provided in section
709 of the Code.
(c) If requested by any Member, the TMP shall cause the
Company at the time and in the manner provided in Regulations section
1.754-1(b) (or any like statute or regulation then in effect), to make an
election to adjust the basis of the Company's property in the manner provided
in sections 734(b) and 743(b) of the Code (or any like statute or regulation
then in effect).
ARTICLE XI
Books of Account, Records and Financial Information
11.1 Books and Records. Proper and complete records and books of
account (including those required by the Act) shall be kept by the Company in
which shall be entered all transactions and other matters relative to the
Company's business as are usually entered into records and books of account
maintained by persons engaged in businesses of like character. The Company
books and records shall be maintained in accordance with GAAP, and shall be
kept on the accrual basis. The books and records shall at all times be made
available and shall be open to the reasonable inspection and examination by the
Members or their duly authorized representatives during the business hours of
the Company for any purpose reasonably related to the interest of such Member
as a Member in the Company.
11.2 Financial Information. The following financial information shall
be transmitted to each Member:
(a) as soon as available, but in any event within 60 days
after the end of each fiscal year of the Company, a copy of the balance sheet
of the Company as at the end of such fiscal year and the related statements of
income and cash flow and Members' capital and changes in Members' capital for
such fiscal year, setting forth, after fiscal year 1996, in each case in
comparative form, the figures for the previous
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year, reported on without qualification, or exception, as to the scope of the
audit, by the Company's auditors;
(b) as soon as available, but in any event not later than 10
Business Days after the end of each calendar month a report setting forth the
year-to-date revenues, operating expenses, general and administrative expenses,
Capital Expenditures of the Company, together with a comparison of the
Operating Budget for such period, and a projection of revenues and expenses for
the remainder of the Company's fiscal year, the unaudited balance sheet of the
Company as at the end of each such month and the related unaudited statements
of income and cash flow and Members' capital and changes in Members' capital of
the Company for such month and the portion of the fiscal year through such
date, setting forth, after fiscal year 1996, in each case in comparative form,
the figures for the previous year;
(c) not later than 30 days prior to the end of each fiscal
year of the Company, a copy of the preliminary annual operating plan (the
"Operating Budget") for the next fiscal year. Such plan shall contain, but not
be limited to, a complete set of financial statements including a balance
sheet, statements of income and cash flow and changes in Member's capital by
month in appropriate detail for Member review, a summary of Capital
Expenditures, the Product Mix, a human resources discussion summarizing
staffing level assumptions and an overall management summary addressing the
business operations and related strategic business assumptions;
(d) within a reasonable time, any other financial information
that may be reasonably requested from time to time by a Member.
11.3 1997 Provisional Operating Budget. The Provisional Operating
Budget for the Company's 1997 fiscal year is attached as Exhibit F.
ARTICLE XII
Fiscal Year
The fiscal year of the Company shall end on the thirty-first (3lst)
day of December in each calendar year.
ARTICLE XIII
Company Funds
The funds of the Company shall be deposited in such bank accounts, or
invested in such interest-bearing or non-interest-bearing accounts, as shall be
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designated by the Management Committee. All withdrawals from any such bank
accounts shall be made by the officers or other agent or agents duly authorized
by the Management Committee. Company funds shall not be commingled with those
of any other Person.
ARTICLE XIV
Meetings of Members
14.1 Annual Meeting. The annual meeting of the Members shall be held
each year at the place, time and date, as may be fixed by the Management
Committee. Members of the Company may participate in a meeting by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such
participation shall constitute presence in person at such meeting. At the
annual meeting the Members will ratify the appointment of a national public
accounting firm as the Company's independent auditor to serve until the next
annual meeting. The initial independent auditors shall be Ernst & Young, LLP.
14.2 Special Meetings. A meeting of the Members for any purpose or
purposes may be called at any time by the Management Committee and shall be
called at any time by the Management Committee upon the written request of any
Member entitled to vote at such meeting. Such request shall state the purpose
for which such meeting is to be called.
14.3 Notice of Meeting. Every Member shall furnish the Company through
the Management Committee an address at which notices of meetings and all other
notices may be served on or mailed to it. Notice of each meeting of the Members
shall be given to each Member entitled to vote at such meeting not less than
ten (10) nor more than sixty (60) days before the date on which the meeting is
to be held, either by facsimile or by delivering written notice thereof by
mailing such notice in a first-class postage prepaid envelope addressed to such
member at its facsimile number or post-office address furnished by it to the
Company, or if it shall not have furnished to the Company its address, then at
its post-office address last known to the Company, or, in the absence of
knowledge on the part of the Company of any such post-office address, then at
the office of the Company. Notice of a meeting of the Members shall provide the
place, date and hour of the meeting, indicate that it is being issued by or at
the direction of the Person or Persons calling the meeting, and provide an
agenda which describes in detail the matters proposed to be considered at such
meeting. An affidavit of any Representative that notice has been given shall,
in the absence of fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another time and place, it shall not be
necessary to give any notice, except for twenty-four hours notice to any absent
Member, of the adjourned meeting if the time and place to which the meeting is
adjourned are announced at the meeting
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at which the adjournment is taken, and at the adjourned meeting any business
may be transacted that might have been transacted at the original date of the
meeting but shall be limited to the items listed with specificity on the agenda
for the original date.
14.4 Waiver of Notice. Notice of a meeting need not be given to any
Member who submits a signed waiver of notice, in person or by proxy, whether
before or after the meeting. The attendance of any Member at a meeting, in
person or by proxy, without protesting prior to the conclusion of the meeting
the lack of notice of such meeting, shall constitute a waiver of notice by it.
14.5 Quorum. A Majority in Interest of the Members of the Company
entitled to vote at a meeting shall constitute a quorum for the transaction of
business when present at such meeting either in person or by proxy, provided
that for a meeting to be validly convened, at least one Representative of each
of the Members must be present at such meeting. If a Representative of one or
more of the Members is not present, a second meeting for which due notice has
been given may be validly held to address the same matters of business in which
a Majority in Interest of the Members of the Company entitled to vote at the
meeting shall constitute a quorum when present at such meeting either in person
or by proxy, irrespective of whether or not each Member is represented.
14.6 Voting.
(a) When voting on any matter that requires the vote at a
meeting of the Members pursuant to the Act, the Certificate or this Agreement,
each Member shall vote in proportion to such Member's Percentage Interest.
(b) Whenever any action is to be taken under the Act by the
Members, such action shall be authorized by a vote of the Majority in Interest
of the Members cast at a meeting of Members entitled to vote thereon.
14.7 Proxies. Each Member entitled to vote at any meeting of Members
may authorize another Person or Persons to act as its proxy by an instrument in
writing signed by such Member or its attorney-in-fact.
14.8 Action Without a Meeting. Whenever Members of the Company are
required or permitted to take any action by vote, such action may be taken
without a meeting, without prior notice and without a vote, if consent or
consents in writing, setting forth the action so taken shall be signed by all
the Members and shall be delivered to the office of the Company by hand or by
certified or registered mail, return receipt requested.
14.9 Member's Power. A Majority in Interest of the Members may amend
or modify this Agreement from time to time by a written agreement signed by
them, and
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any such action shall be binding on all Members and be as effective as if taken
by all Members, except that:
(a) at any time the Nortel Member, the ▇▇▇▇▇▇▇▇ Member or an
Affiliate of either of them is a Member, this Agreement may not be amended or
modified without the consent of such Member or Members, as the case may be, but
the foregoing requirement shall not inure to the benefit of an assignee of
either the Nortel Member's or the ▇▇▇▇▇▇▇▇ Member's Membership Interest other
than an Affiliate of the assignor;
(b) Articles VII, XIV, XV, and XX and Sections 2.1, 8.3, 9.1,
17.1, 19.2, 19.3, 19.4, 19.5 and 23.3 may be amended only if recommended for
approval by the affirmative vote of a Supermajority of the Representatives; and
(c) no amendment or modification of this Agreement shall
adversely affect any payments accrued and due or to be come due to any Member
or to the legal representative of a former Member or of its estate or
successor-in-interest, without the consent of such Member or such legal
representative.
The effective date of an amendment or modification, unless otherwise specified
therein, shall be the first day of the fiscal year in which such amendment or
modification was adopted.
14.10 Contracts. No Member will have the right to enter into contracts
or other commitments binding upon the Company.
ARTICLE XV
Management; Management Committee
15.1 Management by Management Committee. The business and affairs of
the Company shall be managed under the direction of the Management Committee in
accordance with the terms and provisions of this Agreement. Approval by or
action taken by the Management Committee in accordance with this Agreement
shall constitute approval or action by the Company and shall be binding on the
Members. No Member shall bind the Company or otherwise act on its behalf and no
Representative shall bind the Company or otherwise act on its behalf without
the prior authorization of the Management Committee to take such action. If any
Member breaches or threatens to breach the covenant provided in the preceding
sentence, the Company and the other Member may exercise any remedies available
to them in law or in equity, including seeking an injunction restraining such
Member from breaching such covenant.
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15.2 Organization of Management Committee.
(a) The Management Committee shall be composed of ten (10)
individuals.
(b) Each Member shall have the right to appoint an individual
or individuals to represent it on the Management Committee (individually, such
Member's "Representative" and collectively, such Member's "Representatives") in
accordance with this Section 15.2(b). The Nortel Member shall have the right to
appoint to the Management Committee three (3) Representatives so long as its
Percentage Interest is 20.0% or more, two (2) Representatives so long as its
Percentage Interest is equal to or more than 15.0% and one (1) Representative
so long as its Percentage Interest is equal to or more than 5.0%. The ▇▇▇▇▇▇▇▇
Member shall have the right to appoint the remaining Representatives of the
Management Committee. No individual may serve as the Representative of more
than one Member. As of the date hereof, each Member's Representatives are those
individuals listed on Exhibit G.
(c) Each Member reserves the right to remove any one or more
of its Representatives and to appoint successors and substitutes therefor, from
time to time, and any such change shall be effective upon such Member
delivering a written notice of such change to the other Member. Unless
otherwise removed in accordance with this Section 15.2(c), each Representative
shall serve until the earliest of such Representative's resignation, death, or
inability to serve. Any Representative may resign upon ten (10) business days
written notice to the Company.
(d) The individual serving as the Chairman of the
Management Committee of the Company shall be a member of the Management
Committee.
15.3 Third Parties Dealing with the Company
(a) To expedite the handling of Company business, it is
understood and agreed that any document executed by a Representative of a
Member shall, as to any third parties, be deemed to be the action of the Member
appointing such Representative. Further, any Person dealing with the Company
may rely upon a certificate signed by a Representative of each Member as to:
(b) the identity of the Members and their Representatives;
(c) the existence or nonexistence of any fact or facts that
constitute conditions precedent to acts by the Company or are in any other
manner related to the affairs of the Company;
(d) the Persons who are authorized to execute and deliver any
instrument or document of the Company;
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(e) any act or failure to act by the Company or the Management
Committee; or
(f) any other matter whatsoever involving the Company or the
Management Committee.
15.4 Duties and Powers of Management Committee. Subject to the terms
of this Agreement, the property, business and affairs of the Company will be
managed, and the conduct of its business will be controlled by, the Management
Committee. Except as otherwise provided hereunder, the Management Committee
shall have all of the rights, powers and obligations of a class of managers as
provided in the Act and as otherwise provided by law. Without limiting the
generality of the foregoing, the Management Committee shall have the following
powers and the Representatives are authorized on behalf of the Company to do or
cause to be done the following:
(a) to supervise the property, business and affairs of the
Company and hire, on behalf of the Company, such professionals or other experts
as may be necessary or desirable in connection therewith;
(b) to determine, in their sole judgment, the amount, manner
of payment and date of any distributions to be made to the Members hereunder
subject to the provisions of Article IX hereof;
(c) to approve the annual Operating Budget; and,
(d) to make the elections requested by a Member pursuant to
Section 10.6(c).
15.5 Duties of Representatives.
(a) Each Representative shall perform his duties in good faith
and with that degree of care that an ordinarily prudent person in a like
position would use under similar circumstances. In performing his duties, each
Representative shall be entitled to rely on information, opinions, reports or
statements, including financial statements and other financial data, in each
case prepared or presented by: (1) one or more agents or employees of the
Company, or (2) counsel, accountants or other Persons as the matters that such
Representative believes to be within such Person's professional or expert
competence, provided such Representative has no knowledge concerning the matter
in questions that would cause such reliance to be unwarranted. A Person who so
performs his duties in accordance with this Section 15.5(a) shall have no
liability by reason of being or having been a Representative of the Company.
(b) Notwithstanding Section 15.5(a), the liability of a
Representative shall not be eliminated or limited if a judgment or other final
adjudication adverse to
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him establishes that his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law or that he personally
gained in fact a financial profit or similar advantage to which he was not
legally entitled.
(c) The Representatives do not in any way guarantee the return
of any Member's Capital Contribution or a profit for the Members from the
Company's business.
15.6 Qualification of Representatives. Each Representative shall be an
employee, officer or director of a Member or of an Affiliate thereof or an
employee or officer of the Company.
15.7 Action by Management Committee. Except as otherwise provided in
this Agreement, the Management Committee shall manage the Company by the
affirmative vote of a majority of the Representatives. Any action required or
permitted to be taken by the Management Committee may be taken without a vote
if all of the Representatives consent thereto in writing and such writings are
filed with the records of the Company. The Representatives may participate in a
meeting by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting hear each other. Such
participation shall constitute presence in person at such meeting.
15.8 Meetings of the Management Committee. Regular meetings of the
Management Committee shall be held periodically, but no less frequently than
every second month, on such dates, at such times and at such locations as the
Management Committee shall from time to time determine, taking into account the
convenience of all parties. The individual then serving as the Chairman of the
Management Committee or any Representative may call a special meeting of the
Management Committee. Notice of any meeting shall include an agenda which
describes in detail the matters proposed to be considered at such meeting
(including, without limitation, whether such matters require the approval of a
Supermajority of the Representatives in accordance with Section 15.12(a))and
shall be given to all participants by the Person calling the meeting, under
normal circumstances at least ten (10) days prior to the meeting, although
shorter notice of a meeting (but not less than seventy-two hours) may be given
if the circumstances of urgency so require provided, however, that when a vote
of a Supermajority of the Representatives is required, ten (10) days notice
must be given. All notices of Management Committee meetings shall be given
either in writing, or by telephone if immediately followed by written
confirmation. Each Member agrees to use reasonable efforts to cause at least
one of its Representatives to attend, in the manner provided for herein, all
Management Committee meetings.
15.9 Quorum. A majority of the Representatives of the Management
Committee including at least one Representative of each of the Members shall
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constitute a quorum for the transaction of business when present at a meeting
in person (including by means of telephone conference or similar equipment). If
a Representative of one or more of the Members is not present, a second meeting
for which forty-eight hours notice has been given may be validly held to
address the same matters of business in which a majority of the Representatives
of the Management Committee shall constitute a quorum when present at such
meeting either in person (including by means of telephone conference or similar
equipment) or by proxy, irrespective of whether or not each Member is
represented.
15.10 Technology, Human Resources and Audit Committees.
(a) The Management Committee shall establish a Technology
Committee (the "Technology Committee"), a Human Resources Committee (the "Human
Resources Committee") and an Audit Committee (the "Audit Committee"). The
Technology Committee and Human Resources Committee both shall have four (4)
members, two of which shall be appointed by the ▇▇▇▇▇▇▇▇ Member and two of
which shall be appointed by the Nortel Member. The Audit Committee shall have
four (4) members, two of which shall be appointed by the ▇▇▇▇▇▇▇▇ Member and
two of which shall be appointed by the Nortel Member.
(b) The functions and scope of the Technology Committee shall
be as set forth on Exhibit H.
(c) The functions and scope of the Human Resources Committee
shall be as set forth on Exhibit I.
(d) The functions and scope of the Audit Committee shall be as
set forth on Exhibit J.
15.11 Other Committees. The Management Committee may establish other
committees from time to time as may be required by the operation of the
business of the Company whose functions shall be set forth in the resolutions
establishing such committees. The number of members of any such committee shall
be determined by the Management Committee and the individual members shall be
designated by the Management Committee from time to time.
15.12 Supermajority Approval by the Representatives.
(a) Notwithstanding any other provisions of this Agreement to
the contrary, for so long as either the Nortel Member's or the ▇▇▇▇▇▇▇▇
Member's Percentage Interest is not less than 20%, as the case may be, the
affirmative vote or written consent of a Supermajority of the Representatives,
shall be required to do or permit to be done any of the following acts with
respect to the Company, its business or assets:
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(i) Approve the first Annual Budget;
(ii) Approve or authorize any material act or
material activity of the Company not consistent with or outside the
scope of the business of the Company as described on Exhibit K hereto;
(iii) Dissolve or liquidate the Company or appoint a
Liquidator other than the Members; cause the Company to commence a
voluntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or of any
other voluntary case or proceeding to be adjudicated a bankrupt or
insolvent; cause the Company to make an assignment for the benefit of
creditors, or admit in writing its inability to pay its debts
generally as they become due, or to take action in furtherance of any
such action; cause the Company to consent to (1) the entry of a decree
or order for relief against the Company in an involuntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law, (2) the commencement
of any bankruptcy or insolvency case or proceeding against the
Company, (3) the filing of a petition or answer or consent seeking
reorganization or relief under any applicable federal or state law,
(4) the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or similar official of any
substantial part of the Company's property; cause the Company to file
a petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or (5) fail to pursue or decide
not to pursue an indemnity against a Member or any of its respective
Affiliates.
(iv) (A) Approve a merger or consolidation of the
Company with or into another Person if the surviving entity of such
merger or consolidation is not the Company, or (B) if the surviving
entity is the Company and (x) the consideration for such merger or
consolidation is in excess of $20,000,000 and (y) such merger or
consolidation was not included in the Operating Budget for the then
current fiscal year;
(v) Except as provided in Section 19.3(e), approve a
recapitalization or any change in the legal structure of the Company;
(vi) Approve any distribution of cash to the Members
if such distribution is not to be made in proportion to their
Percentage Interests;
(vii) Approve any distribution of assets or property
of the Company, other than cash, to the Members;
(viii) Approve (A) the Capital Expenditures of the
Company and (B) the purchases, acquisitions or investments of the type
described in
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paragraph (ix) below, or the mergers or consolidations of the type
described in clause (B) of paragraph (iv) above, set forth in the
Operating Budget for any fiscal year of the Company if the aggregate
amount of such Capital Expenditures, purchases, acquisitions including
any Debt assumed as part of an acquisition and any investments
required to sustain operations where cash flow deficiencies are
anticipated on a go-forward basis over the next three (3) years,
investments (including, without limitation, joint ventures), mergers
and consolidations for such fiscal year, as set forth in the Operating
Budget, is to be greater than EBITDA of the Company as set forth in
the most recent audited financial statements of the Company;
(ix) Purchase or otherwise acquire, or agree to
purchase or otherwise acquire, all or any part of the property, assets
or capital stock of any Person (other than purchases or other
acquisitions of inventory, materials, equipment and intangible assets
in the ordinary course of business) in one or a series of related
transactions, or make any investment (including, without limitation,
joint ventures) in any Person, or incur any other obligations (e.g.
guarantees) excluding those arising from the incurrence of Debt, in
each case involving in excess of $20,000,000, if such purchase,
acquisition, investment or obligation, as the case may be, was not
included in the Operating Budget for the then current fiscal year;
(x) Make or agree to make any individual Capital
Expenditure in excess of $5,000,000 if such Capital Expenditure was
not included in the Operating Budget for the then current fiscal year;
(xi) Sell or otherwise dispose of, or agree to sell
or otherwise dispose of, any of the assets of the Company (other than
sales of inventory, materials, equipment and intangible assets in the
ordinary course of business) in one or a series of related
transactions the aggregate of the greater of book or fair market value
of which is greater than $20,000,000, if such sale or other
disposition was not specifically identified in the Operating Budget
for the then current fiscal year;
(xii) Incur additional Long-Term Debt if, after
giving affect to such incurrence, the Leverage Ratio would be greater
than 1:2 for a period of greater than 30 days;
(xiii) Approve the Product Mix set forth in the
Operating Budget if it is less than the Product Mix Threshold; or
(xiv) Cause the Company to enter into any contract
to do any of the foregoing.
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The supermajority items set forth above shall apply individually, each one
irrespective of the other.
(b) Notwithstanding any other provisions of this Agreement to
the contrary and without prejudice to Sections 19.2, 19.3, and 19.6 hereof, for
so long as the Nortel Member's Percentage Interest or the ▇▇▇▇▇▇▇▇ Member's
Percentage Interest is not less than 10%, the consent of the Nortel Member or
the ▇▇▇▇▇▇▇▇ Member, as the case may be, shall be required to accept any
additional Members pursuant to Articles XIX or XXI, such consent not to be
unreasonably withheld; provided however, that (i) the Nortel Member may
withhold its consent in its sole discretion in the event that such proposed
additional Member is a competitor in the primary line(s) of business of the
Nortel Member or its Ultimate Parent, and (ii) the ▇▇▇▇▇▇▇▇ Member may withhold
its consent in its sole discretion in the event that such proposed additional
Member is a competitor in the primary line(s) of business of the ▇▇▇▇▇▇▇▇
Member or its Ultimate Parent. The foregoing provision shall not inure to the
benefit of any assignee of the Nortel Member's Membership Interest other than
the Nortel Member, NTL or their Affiliates or any assignee of the ▇▇▇▇▇▇▇▇
Member's Percentage Interest other than an Affiliate of the ▇▇▇▇▇▇▇▇ Member.
15.13 Affiliated Transactions. The Members agree that the Management
Committee may, from time to time, enter into arm's-length transactions on
behalf of the Company with the ▇▇▇▇▇▇▇▇ Member, the Nortel Member, a new
Member, any substituted Member, and their respective Affiliates. "Arms-length
transaction" for purposes of this section shall mean market conditions or
better from the Company's perspective for services or products of the same or
better quality with a Member having the right to match any offer from a third
party vendor. The ▇▇▇▇▇▇▇▇ Member or the Nortel Member shall be entitled to
charge the Company prices for those operating, management, and administrative
services utilized by the Company which are competitive with what the Company
could have obtained in similar transactions with unrelated third parties. In
addition, the ▇▇▇▇▇▇▇▇ Member or the Nortel Member shall be entitled to charge
the Company for reasonable allocations of overhead from its parent company
directly applicable to the provision of operating, management, and
administrative services to the Company. Subject to the foregoing provisions of
this Section 15.13, the terms of any such arrangement and of other transactions
with the ▇▇▇▇▇▇▇▇ Member, the Nortel Member, or their Affiliates, shall be as
determined by the Company, acting through the Management Committee, and the
other party. The ▇▇▇▇▇▇▇▇ Member shall, not more than 30 days after the end of
each fiscal year of the Company, provide to the Audit Committee a description,
in reasonable detail, of the terms of each transaction between the ▇▇▇▇▇▇▇▇
Member or any of its Affiliates and the Company if the expenditure by the
Company related thereto will be in excess of $1,000,000 in any fiscal year. All
such transactions shall be reviewed as to appropriateness by the Audit
Committee, though such review may take place after the transaction has
occurred. The Audit Committee shall provide a summary report to the Management
Committee of all such transactions.
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ARTICLE XVI
Officers
16.1 Appointment and Tenure.
(a) Subject to the provisions hereof, the Management
Committee, shall from time to time designate officers of the Company to carry
out the day-to-day business of the Company.
(b) Subject to the provisions of Section 16.1(c), the officers
of the Company shall be comprised of one or more individuals designated from
time to time by the Management Committee. No officer need be a resident of the
State of Delaware. Each officer shall hold his offices for such terms and shall
have such authority and exercise such powers and perform such duties as shall
be determined from time to time by the Management Committee. Any number of
offices may be held by the same individual. The salaries or other compensation,
if any, of the officers and agents of the Company shall be fixed from time to
time by the Management Committee.
(c) The officers of the Company will include a Chairman of the
Management Committee, a Chief Executive Officer, a President, a Chief Financial
Officer, and a Secretary. The officers may also include a Treasurer, one or
more Vice Presidents, Assistant Secretaries and Assistant Treasurers. The
Management Committee may designate such other officers and assistant officers
and agents as the Management Committee shall deem necessary.
16.2 Removal. Any officer may be removed as such at any time by the
Management Committee, either with or without cause, in the discretion of the
Management Committee; provided, that such removal shall be without prejudice to
the contract rights, if any, of the Person so removed. Designation of an
officer shall not of itself create contract rights.
16.3 Chairman of the Management Committee. The Chairman of the
Management Committee shall direct the policy of the Company, subject, however,
to the control of the Management Committee. The Chairman shall, if present,
preside at all meetings of the Management Committee and of the Members. The
Chairman may sign and execute in the name of the Company deeds, mortgages,
bonds, contracts and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Management Committee to
some other officer or agent of the Company, or shall be required by law
otherwise to be signed or executed. The Chairman shall have the power to
appoint, determine the duties and fix the compensation of such agents and
employees as in the Chairman's judgment may be
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necessary or proper for the transaction of the business of the Company,
including the right of removal of any officer, with or without cause, and the
termination of employment of any employee. In general, the Chairman shall
perform all duties incident to the office of Chairman of the Management
Committee, and such other duties as may from time to time be assigned by the
Management Committee. The initial Chairman of the Management Committee shall be
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ who shall serve until his successor is appointed by the
Management Committee or until his earlier resignation or removal.
16.4 Chief Executive Officer. The Chief Executive Officer may sign
and execute in the name of the Company deeds, mortgages, bonds, contracts and
other instruments, except in cases where the signing and execution thereof
shall be expressly delegated by the Management Committee to some other officer
or agent of the Company, or shall be required by law otherwise to be signed or
executed. The Chief Executive Officer shall have the power to appoint,
determine the duties and fix the compensation of such agents and employees as
in the judgment of the Chief Executive Officer may be necessary or proper for
the transaction of the business of the Company, including the right of removal
of any officer (other than the Chairman of the Management Committee), with or
without cause, and the termination of employment of any employee. In general,
the Chief Executive Officer shall perform all duties incident to the office and
such other duties as may from time to time be assigned by the Management
Committee or the Chairman of the Management Committee. The initial Chief
Executive Officer shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ who shall serve until his successor
is appointed by the Management Committee or until his earlier resignation or
removal.
16.5 President. The President shall have general supervision of the
business of the Company. During the absence or disability of the Chairman of
the Management Committee and the Chief Executive Officer, the President shall
exercise all the powers and discharge all the duties of the Chairman of the
Management Committee and the Chief Executive Officer. The President may sign
and execute in the name of the Company deeds, mortgages, bonds, contracts and
other instruments, except in cases where the signing and execution thereof
shall be expressly delegated by the Management Committee to some other officer
or agent of the Company, or shall be required by law otherwise to be signed or
executed. The President shall have the power to appoint, determine the duties
and fix the compensation of such agents and employees as in the judgment of the
President may be necessary or proper for the transaction of the business of the
Company, including the right of removal of any officer (other than the Chairman
of the Management Committee and the Chief Executive Officer), with or without
cause, and the termination of employment of any employee. In general, the
President shall perform all duties incident to the office of President, and
such other duties as may from time to time be assigned by the Management
Committee or the Chairman of the Management Committee. The initial
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President shall be ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ who shall serve until his successor is
appointed by the Management Committee or until his earlier resignation or
removal.
16.6 Chief Financial Officer. The Chief Financial Officer shall
perform such duties and have such authority and powers as the Management
Committee may from time to time prescribe.
16.7 Vice Presidents. The Vice Presidents, if any are designated, in
the order of their seniority, unless otherwise determined by the Management
Committee, shall, in the absence or disability of the President, perform the
duties and have the authority and exercise the powers of the President. They
shall perform such other duties and have such other authority and powers as the
Management Committee may from time to time prescribe.
16.8 Secretary; Assistant Secretaries. The Secretary, if one is
designated, shall attend all meetings of the Management Committee and record
all of the proceedings of the meetings in a minute book to be kept for that
purpose and shall perform like duties for any committees that might be formed
by the Management Committee. The Secretary shall perform such other duties and
have such other powers as the Management Committee may from time to time
prescribe. The Assistant Secretaries, if any are designated, in the order of
their seniority, unless otherwise determined by the Management Committee,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. They shall perform such other duties and
have such other powers as the Management Committee may from time to time
prescribe.
16.9 Treasurer; Assistant Treasurers. The Treasurer, if one is
designated, shall have custody of the Company's funds and securities and shall
keep full and accurate accounts and records of receipts, disbursements and
other transactions in books belonging to the Company, and shall deposit all
moneys and other valuable effects in the name and to the credit of the Company
in such depositories as may be designated from time to time by the Management
Committee. The Treasurer shall disburse the funds of the Company as may be
ordered by the Management Committee, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer, the President
and the Members, when so directed, an account of all his transactions as
Treasurer and of the financial condition of the Company. The Treasurer shall
perform such other duties and have such other powers as the Management
Committee may from time to time prescribe. If required by the Management
Committee, the Treasurer shall give the Company a bond of such type, character
and amount as the Management Committee may require. The Assistant Treasurers,
if any are designated, in the order of their seniority, unless otherwise
determined by the Management Committee, shall, in the absence or disability of
the Treasurer, perform the duties and exercise the powers of the Treasurer.
They shall
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perform such other duties and have such other powers as the Management
Committee may from time to time prescribe.
16.10 Vacancies. In case of a vacancy in any of the offices set forth
in Sections 16.3, 16.4 and 16.5, a successor officer shall be elected by the
Management Committee. The Management Committee may also elect a successor to
any other vacant office.
ARTICLE XVII
Liability and Exculpation
17.1 Liability.
(a) To the fullest extent permitted under the Act or any other
applicable law in effect on the date of this Agreement or hereafter in effect,
no Member or any agent acting on behalf of such Member or the Company
(including a Person having more than one such capacity) shall be liable for any
debts, obligations or liabilities of the Company or of each other, whether
arising in tort, contract or otherwise, solely by reason of being a Member or
agent or acting (or omitting to act) in such capacities or participating (as an
employee, consultant, contractor or otherwise) in the conduct of the business
of the Company. Each of the Members shall be liable only to make payment of its
respective initial Capital Contribution hereunder and other payments as
expressly provided in this Agreement. No Member shall be required to lend any
funds to the Company or, after such Member's initial Capital Contribution has
been made, except as provided by the provisions of section 18-607 of the Act
and Section 8.2(b), to make any further Capital Contribution or pay any
assessment or payment to the Company.
(b) No Member shall be liable for the return of any portion of
the Capital Contribution of any other Member. The return of Capital
Contributions shall be made solely from the assets of the Company. No Member
shall be required to pay the Company or any other Member any deficit in any
Member's Capital Account upon dissolution or otherwise.
17.2 Exculpation.
(a) No Covered Person shall be liable to the Company or any
Member under any theory of law, including tort, contract or otherwise,
including a Covered Person's own negligence, for any loss, damage or claim
incurred by reason of any act or omission (including decisions to vote for or
against any matter) performed or omitted by such Covered Person in good faith
on behalf of the Company and in a manner reasonably believed to be within the
scope of authority conferred on such
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Covered Person by this Agreement, except that a Covered Person shall be liable
for any such loss, damage or claim incurred by reason of such Covered Person's
gross negligence or willful misconduct.
(b) A Covered Person shall be fully protected in relying in
good faith upon the records of the Company and upon such information, opinions,
reports or statements presented to the Company by any Person as to matters the
Covered Person reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of the Company, including information, opinions, reports or statements
as to the value and amount of the assets, liabilities, profits, losses, or any
other facts pertinent to the existence and amount of assets from which
distributions to Members might properly be paid.
17.3 Duties and Liabilities of Covered Persons.
(a) To the extent that, at law or in equity, a Covered Person
has duties (including fiduciary duties) and liabilities relating thereto to the
Company or to any other Covered Person arising under this Agreement, a Covered
Person acting under this Agreement shall not be liable to the Company or to any
other Covered Person for actions (including decisions to vote for or against
any matter) taken by it in good faith reliance on the provisions of this
Agreement. The provisions of this Agreement, to the extent that they restrict
the duties and liabilities of a Covered Person otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and
liabilities of such Covered Person.
(b) Unless otherwise expressly provided herein, whenever a
conflict of interest exists or arises between a Covered Person and the Company
or a Member, the Covered Person shall disclose such conflict to the Management
Committee and shall resolve such conflict of interest, taking such action or
providing such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable generally accepted
accounting practices or principles. In the absence of bad faith by the Covered
Person and subject to such disclosure, the resolution, action or term so made,
taken or provided by the Covered Person shall not constitute a breach of this
Agreement or any other agreement contemplated herein or of any duty or
obligation of the Covered Person at law or in equity or otherwise.
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ARTICLE XVIII
Indemnification
18.1 Power to Indemnify in Actions, Suits or Proceedings Other Than
Those by or in the Right of the Company. Subject to Section 18.3 of this
Agreement, the Company shall 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
(other than an action by or in the right of the Company) by reason of the fact
that such person is or was a Representative, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
conduct was unlawful.
18.2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Company. Subject to Section 18.3 of this Agreement, the Company
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Company to procure a judgment in its favor by reason of the fact that
such person is or was a Representative, officer, employee or agent of the
Company, or is or was serving at the request of the Company as a
Representative, officer, employee or agent of another Company, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred in connection with the defense or
settlement of such action or suit if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Company; except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the Court of Chancery of the State of Delaware or such other court shall
deem proper.
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18.3. Authorization of Indemnification. Any indemnification under this
Agreement (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 Representative, officer, employee or agent is proper in the circumstances
because such person has met the applicable standard of conduct set forth in
Section 18.1 or Section 18.2 of this Agreement, as the case may be. Such
determination shall be made (a) by the Management Committee by a majority vote
of a quorum consisting of Representatives who were not parties to or
financially interested in such action, suit or proceeding, or (b) if such a
quorum is not obtainable, or, even if obtainable a quorum of disinterested
Representatives so directs, by independent legal counsel in a written opinion,
or (c) by the Members. To the extent, however, that a Representative, officer,
employee or agent of the Company has been successful on the merits or otherwise
in defense of any action, suit or proceeding described above, or in defense of
any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith, without the necessity of authorization in the specific
case.
18.4. Good Faith Defined. For purposes of any determination under
Section 18.3 of this Agreement, a person shall be deemed to have acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Company, or, with respect to any criminal action
or proceeding, to have had no reasonable cause to believe such person's conduct
was unlawful, if such person's action is based on the records or books of
account of the Company or another enterprise, or on information supplied to
such person by the officers of the Company or another enterprise in the course
of their duties, or on the advice of legal counsel for the Company or another
enterprise or on information or records given or reports made to the Company or
another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Company or
another enterprise. The term "another enterprise" as used in this Section 18.4
shall mean any other Company or any partnership, joint venture, trust or other
enterprise of which such person is or was serving at the request of the Company
as a Representative, officer, employee or agent. The provision of this Section
18.4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections 18.1 or 18.2 of this Agreement, as
the case may be.
18.5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 18.3 of this Agreement, and
notwithstanding the absence of any determination thereunder, any
Representative, officer, employee or agent may apply to any court of competent
jurisdiction in the State of Delaware for indemnification to the extent
otherwise permissible under Sections 18.1 and 18.2 of this Agreement. The basis
of such indemnification by a court shall be a determination by such court that
indemnification of the Representative, officer, employee or agent is proper in
the circumstances because such person has met the applicable standards
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of conduct set forth in Sections 18.1 or 18.2 of this Agreement, as the case
may be. Notice of any application for indemnification pursuant to this Section
18.5 shall be given to the Company promptly upon the filing of such
application.
18.6. Expenses Payable in Advance. Expenses incurred by an officer or
Representative in defending a civil or criminal action, suit or proceeding may
be paid by the Company in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of the
Representative or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the Company as
authorized in this Article XVIII. Such expenses incurred by other employees and
agents shall be so paid upon such terms and conditions, if any, as the
Management Committee deems appropriate.
18.7. Nonexclusivity of Indemnification and Advancement of Expenses.
The indemnification and advancement of expenses provided by or granted pursuant
to this Agreement shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any By-law, agreement, contract, vote of Members or disinterested
Representatives or otherwise, both as to action in such person's official
capacity and as to action in another capacity while holding such office, it
being the policy of the Company that indemnification of the persons specified
in Sections 18.1 and 18.2 of this Agreement shall be made to the fullest extent
permitted by law. The provisions of this Agreement shall not be deemed to
preclude the indemnification of any person who is not specified in Sections
18.1 and 18.2 of this Agreement but whom the Company has the power or
obligation to indemnify under the provisions of the General Company Law of the
State of Delaware, or otherwise.
18.8. Insurance. The Company may purchase and maintain insurance on
behalf of any person who is or was a Representative, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another Company, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Company would have the power or the
obligation to indemnify such person against such liability under the provisions
of this Article XVIII.
18.9. Meaning of "Company" and "Other Enterprises" for the Purposes of
Article XVIII. For purposes of this Article XVIII, references to "the Company"
shall include, in addition to the resulting Company, any constituent Company
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its Representatives, officers, employees or agents so
that any person who is or was a director, officer, employee
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or agent of such constituent Company, or is or was serving at the request of
such constituent Company as a director, officer, employee or agent of another
Company, partnership, joint venture, trust or other enterprise, shall stand in
the same position under the provisions of this Article XVIII with respect to
the resulting or surviving Company as such person would have with respect to
such constituent Company if its separate existence had continued.
For purposes of this Article XVIII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Company" shall include any service
as a Representative, officer, employee or agent of the Company which imposes
duties on, or involves services by, such Representative, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Company" as referred to in this Article
XVIII.
18.10. Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant
to, this Article XVIII shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a Representative,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person.
ARTICLE XIX
Transfer of Interests by Members
19.1 Restrictions on Transfers.
(a) Without prejudice to Section 15.12(b), no Member shall
have the right, directly or indirectly, to Transfer its interest in the
Company, or any portion thereof, without the prior written consent of the other
Member except as specifically provided in this Article XIX; provided however,
that no Member may unreasonably withhold its consent as to a proposed
transferee so long as Section 19.6 has been complied with and the terms of
Sections 19.2 and 19.3 would not be breached; and, provided further, that (i)
the Nortel Member may withhold its consent in its sole discretion in the event
that such proposed transferee is a competitor in the primary line(s) of
business of the Nortel Member or its Ultimate Parent, and (ii) the ▇▇▇▇▇▇▇▇
Member may withhold its consent in its sole discretion in the event that such
proposed transferee is a competitor in the primary line(s) of business of the
▇▇▇▇▇▇▇▇ Member or its Ultimate Parent. Any attempted transfer or assignment of
any interest in the Company in violation of the provisions of this Article XIX
shall be void and of no force and effect. Any permitted transferee of a
Membership Interest shall agree, prior to any sale, transfer, assignment or
conveyance, to become a party to this Agreement and agree to be bound by all
applicable terms and conditions, including this Article
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XIX. Upon becoming a party to this Agreement, each such purchaser or transferee
shall be substituted fully for, and shall enjoy the same rights and be subject
to the same duties and obligations as its predecessor hereunder.
(b) Either Member may Transfer all, but not less than all, of
its Membership Interest, and each Member's Ultimate Parent may Transfer, or
cause to be Transferred, all, but not less than all, of the capital stock of
such Member, to an Affiliate of such Member provided that (i) all the capital
stock or other equity interest of such Affiliate is owned, directly or
indirectly, by such Members' Ultimate Parent and (ii) each such purchaser or
transferee, prior to such sale, assignment or transfer, becomes a party to this
Agreement and agrees to be bound by all applicable terms and conditions,
including this Article XIX.
19.2 Prohibitions on Transfer by ▇▇▇▇▇▇▇▇ Member. Subject to Section
19.4, the ▇▇▇▇▇▇▇▇ Member shall not, during the Minimum Holding Period, but
only for so long as the Nortel Member's Percentage Interest is not less than
20%, Transfer all or a portion of its Membership Interest, if, after giving
effect to such Transfer, the ▇▇▇▇▇▇▇▇ Member's Percentage Interest shall be 50%
or less.
19.3 Prohibitions on Transfer by Nortel Member.
(a) Subject to Section 19.4, the Nortel Member shall not
Transfer all or a portion of its Membership Interest other than pursuant to
Section 19.1(b) if, after giving effect to such Transfer, the Nortel Member's
Percentage Interest shall be less than 20%; provided, however, in the event
that the Nortel Member's Percentage Interest shall have been reduced to 20%,
the Nortel Member may, subject to the terms and conditions of this Article XIX,
Transfer all but not less than all of its Membership Interest at any time after
the date that is five (5) years after the date its Percentage Interest shall
have been reduced to 20%, to the ▇▇▇▇▇▇▇▇ Member (or, in the sole discretion of
the ▇▇▇▇▇▇▇▇ Member, an Affiliate of the ▇▇▇▇▇▇▇▇ Member or the Company), for a
purchase price (the "Exit Purchase Price") equal to the fair market value of
such Membership Interest as determined by an investment banking firm of
international reputation mutually agreed upon by the ▇▇▇▇▇▇▇▇ Member and the
Nortel Member using the valuation methodology set forth on Exhibit L (the
"Valuation Methodology"). The cost incurred by the engagement of such
investment banking firm shall be divided equally between the ▇▇▇▇▇▇▇▇ Member
and the Nortel Member.
(b) If the Nortel Member shall determine to sell its
Membership Interest pursuant to Section 19.3(a), the Nortel Member shall
provide the ▇▇▇▇▇▇▇▇ Member with a written offer (the "Exit Offer") to purchase
such Membership Interest on the terms and conditions set forth in this Section
19.3. The ▇▇▇▇▇▇▇▇ Member shall, within sixty (60) days of receipt of the Exit
Offer, deliver written notice to the Nortel Member of its intention to accept
or reject the Exit Offer. Failure by the ▇▇▇▇▇▇▇▇ Member to
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accept or reject the Exit Offer within such sixty-day period shall be deemed a
rejection of such offer.
(c) In the event that the ▇▇▇▇▇▇▇▇ Member shall accept the
Exit Offer, the closing of the purchase by the ▇▇▇▇▇▇▇▇ Member of the Nortel
Member's Membership Interest shall take place on the date that is ninety (90)
days after the date of such acceptance. At such closing, the Nortel Member
shall deliver to the ▇▇▇▇▇▇▇▇ Member such instruments, documents and agreements
to evidence such Transfer as the ▇▇▇▇▇▇▇▇ Member may reasonably request and the
▇▇▇▇▇▇▇▇ Member shall pay to the Nortel Member the Exit Purchase Price by, at
the sole option of the ▇▇▇▇▇▇▇▇ Member, (x) wire transfer to the Nortel Member
of immediately available funds in an amount equal to the Exit Purchase Price or
(y) delivery to the Nortel Member of that number of shares of common stock, of
the class currently outstanding, of the ▇▇▇▇▇▇▇▇ Member's Ultimate Parent (or
any Affiliate of the ▇▇▇▇▇▇▇▇ Member's Ultimate Parent) the common stock of
which is unrestricted (subject to compliance with the Securities Act and
applicable state securities laws), actively traded on a national securities
exchange and registered under the Securities Act, the aggregate Current Market
Price of which shall equal the Exit Purchase Price, together with such
instruments of transfer or conveyance as the Nortel Member may reasonably
request.
(d) In the event that the ▇▇▇▇▇▇▇▇ Member rejects the Exit
Offer, the Nortel Member may, at its sole option, (x) sell its Membership
Interest without regard to the restrictions set forth in this Section 19.3 (but
subject to the terms and conditions of this Article XIX, including Section
19.6, but only if the ▇▇▇▇▇▇▇▇ Member reimburses the Nortel Member for all of
its expenses incurred in connection with the proposed sale pursuant to Section
19.6) or (y) cause the Company to convert to corporate form and register the
Nortel Member's resulting equity interest under the Securities Act as set out
in Section 19.3(e).
(e) If the Nortel Member elects to cause the Company to
convert to corporate form and register the Nortel Member's resulting equity
interest under the Securities Act pursuant to Section 19.3(d), the Nortel
Member shall provide written notice of such election (a "Registration Notice")
to the ▇▇▇▇▇▇▇▇ Member and the Company. Within ninety (90) days of receipt of
the Registration Notice, the Company shall, and each Member shall cause the
Company to, organize under the Delaware General Corporation Law a wholly-owned
subsidiary ("Delcorp") and merge with and into Delcorp pursuant to Section 264
of the Delaware General Corporation Law and Section 18-209 of the Act, with
Delcorp being the surviving entity of such merger. Immediately upon the
consummation of such merger, the Members' Membership Interest shall be
converted into shares of common stock (the "Delcorp Common Stock") in such
amounts as shall reflect each Member's Percentage Interest immediately prior to
the consummation of such merger. The Members shall cause Delcorp to effect
registration under the Securities Act of the Delcorp Common Stock
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held by the Nortel Member as expeditiously as possible after such merger in
accordance with the registration procedures set forth on Exhibit M.
19.4 Purchase and Sale Rights.
(a) In the event that the Product Mix for any two (2)
consecutive fiscal years of the Company (the "Reference Period") shall be less
than the Product Mix Threshold by more than 5%, then, at any time during the
period commencing on the first day after the Product Mix numbers first become
available of the fiscal year immediately succeeding the second of such fiscal
years and ending on the date that is six (6) months thereafter, (i) the
▇▇▇▇▇▇▇▇ Member or the Company may purchase the Nortel Member's Membership
Interest in accordance with Section 19.5(b); or (ii) the Nortel Member may sell
its Membership Interest to the ▇▇▇▇▇▇▇▇ Member or the Company in accordance
with Section 19.5(a); provided however, that the provisions of this Section
19.4(a) shall not apply in the event that the rate of growth for the Reference
Period, of the aggregate Net Purchase Price paid by the Company to NTI and its
Affiliates for Nortel's PBX and Key system products only of the Existing
Products (the "Voice Product Purchases"), is equal to or greater than (x) the
rate of growth for the Reference Period, of the aggregate Voice Product
Purchases by each and every Distributor which has a territory under its CPE
Agreement encompassing the entire United States of America whose Voice Product
Purchases per annum are greater than $50,000,000 and (y) the rate of growth for
the Reference Period of the aggregate Voice Product Purchases by all
non-national territory, regional Distributors measured as a whole; provided
further that both (x) and (y) in the preceding proviso will be subject to
certification at the request of the Company by the independent auditors of NTI.
(b) In the event of a Change of Control of the ▇▇▇▇▇▇▇▇
Member, the Nortel Member may sell its Membership Interest to the ▇▇▇▇▇▇▇▇
Member at any time during the period commencing on the date of such Change of
Control and ending on the date that is 180 days after such date in accordance
with the terms of Section 19.5(a).
(c) In the event of a Change of Control of the Nortel Member,
the ▇▇▇▇▇▇▇▇ Member may purchase the Membership Interest of the Nortel Member
at any time during the period commencing on the date of such Change of Control
and ending on the date that is 180 days after such date in accordance with the
terms of Section 19.5(b).
(d) In the event that the ▇▇▇▇▇▇▇▇ Member or any of its
Affiliates shall fail to perform or observe any material agreement contained in
the Formation Agreement or the Non-Competition Agreement or in the event that
the Company shall fail to perform or observe any material agreement contained
in the WilTel Distributorship Agreement or its then current successor
agreement, the guarantee
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given pursuant to Section 6.3(p) of the Formation Agreement, or this Agreement
which failure shall remain unremedied for a period of 60 days after notice
thereto shall have been given to the ▇▇▇▇▇▇▇▇ Member by the Nortel Member, the
Nortel Member may sell its Membership Interest to the ▇▇▇▇▇▇▇▇ Member at any
time during the period commencing on the date that is 61 days after the giving
of such notice and ending on the date that is 30 days thereafter in accordance
with Section 19.5(a).
(e) In the event that the Nortel Member or any of its
Affiliates shall fail to perform or observe any material agreement of the
Nortel Member contained in the Formation Agreement, the TTS Share Purchase
Agreement, the WilTel Distributorship Agreement, the Non-Competition Agreement,
or this Agreement, which failure shall remain unremedied for a period of 60
days after notice thereof shall have been given to the Nortel Member by the
▇▇▇▇▇▇▇▇ Member, the ▇▇▇▇▇▇▇▇ Member may purchase the Nortel Member's
Membership Interest at any time during the period commencing on the date that
is 61 days after the giving of such notice and ending on the date that is 30
days thereafter in accordance with Section 19.5(b).
(f) At any time after the Nortel Member's Percentage Interest
shall be less than 20%, the ▇▇▇▇▇▇▇▇ Member may purchase the Nortel Member's
Membership Interest in accordance with Section 19.5(b).
(g) On or after December 31, 1999, the Nortel Member will
have the right to sell to the ▇▇▇▇▇▇▇▇ Member, the portion of the Nortel
Member's Membership Interest in the Company necessary to reduce the Nortel
Member's Percentage Interest down to 20% in accordance with the terms of
Section 19.5(a).
(h) In the event that registration and, if applicable,
admission to listing on a stock exchange, is planned for the common stock of an
Affiliate of the ▇▇▇▇▇▇▇▇ Member, fifty percent (50%) or more of the value of
which consists of an interest in the Company (such Affiliate hereinafter
referred to as the "Intended Listed Affiliate"), the Nortel Member shall be
given the opportunity to exchange its interest in the Company for shares of
common stock of the Intended Listed Affiliate ("Intended Listed Affiliate
Common Stock"), and to have the Nortel Member's ensuing interest in the
Intended Listed Affiliate included in such registration and, if applicable,
listing application and, as the case may be, public offering, subject to any
statutory or reasonably agreed restrictions, provided, that the exchange
involved shall be carried through on the basis of (a) the fair market valuation
of the Company, as determined by an investment banking firm mutually agreed
upon by the ▇▇▇▇▇▇▇▇ Member and the Nortel Member using the Valuation
Methodology (the cost of such valuation to be borne by the Nortel Member), and
(b) the initial public offering price (giving full effect to any discounts on a
pro rata basis) of the shares of common stock of the Intended Listed
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Affiliate. Upon the consummation of such exchange, this Agreement shall
terminate except for Article XVII, Article XVIII, Article XX, and Section 25.2
herein. The ▇▇▇▇▇▇▇▇ Member shall use its reasonable best efforts to cause the
Intended Listed Affiliate to effect registration under the Securities Act of
the Intended Listed Affiliate Common Stock held by the Nortel Member as
expeditiously as possible after such exchange in accordance with the
registration procedures set forth in Exhibit N. In the event that (i) such
registration is not effected within a reasonable time after such exchange shall
have occurred; or (ii) after such exchange shall have occurred, the Intended
Listed Affiliate elects, in its sole discretion, not to effect such
registration; then the Nortel Member shall be entitled to return its Intended
Affiliate Common Stock in exchange for the interest in the Company previously
exchanged therefor, and this Agreement shall continue in full force and effect
as if the exchange provided for in this Section 19.4(h) had never occurred.
19.5 Terms of Purchase and Sale.
(a) In the event that the Nortel Member shall desire to sell
all of its Membership Interest to the ▇▇▇▇▇▇▇▇ Member pursuant to Sections
19.4(a), 19.4(b), 19.4(d), or a portion of its Membership Interest pursuant to
Section 19.4(g) the Nortel Member may, by written notice (the "Put Notice") to
the ▇▇▇▇▇▇▇▇ Member, demand that the ▇▇▇▇▇▇▇▇ Member purchase all, but not less
than all (except in the case of a sale pursuant to Section 19.4(g)) of the
Nortel Member's Membership Interest for a purchase price (the "Put Purchase
Price") equal to the fair market value of the Nortel Member's Membership
Interest or such portion of the Nortel Member's Interest, as the case may be,
as determined by an investment banking firm of international reputation
mutually agreed upon by the ▇▇▇▇▇▇▇▇ Member and the Nortel Member using the
Valuation Methodology the cost of such valuation to be borne by (i) the Company
if pursuant to Sections 19.4(a), (ii) the defaulting entity if pursuant to
Section 19.4(d), (iii) the ▇▇▇▇▇▇▇▇ Member if pursuant to Section 19.4(b), or
(iv) as provided by the last sentence of Section 19.3(a) if pursuant to Section
19.4(g). The Nortel Member may withdraw its Put Notice after the determination
of the Put Purchase Price; provided, however, that in such event the Nortel
Member will pay the fees and expenses of the investment banking firm; and
provided, further, that the Nortel Member may not make another Put Notice
arising from the same event or based on the same provision hereof until a
period of six months has elapsed from the time of giving the previous Put
Notice. The Put Notice shall set forth the date (the "Put Closing Date") on
which such purchase shall occur, which date shall be not less than 120 days
after the date of the Put Notice. On the Put Closing Date, the ▇▇▇▇▇▇▇▇ Member
(or in the sole discretion of the ▇▇▇▇▇▇▇▇ Member, an Affiliate of the ▇▇▇▇▇▇▇▇
Member or the Company) shall purchase all, but not less than all (except in the
case of a sale pursuant to Section 19.4(g)), the Nortel Member's Membership
Interest and shall pay to the Nortel Member the Put Purchase Price as provided
in Section 19.5(c) and the Nortel Member shall execute and deliver to the
▇▇▇▇▇▇▇▇ Member (or such Affiliate or the Company) such instruments, documents
and agreements as the ▇▇▇▇▇▇▇▇ Member may reasonably request to effectuate such
Transfer.
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(b) In the event that the ▇▇▇▇▇▇▇▇ Member shall desire to
purchase the Nortel Member's Membership Interest pursuant to Sections 8.6(b),
19.4(a), 19.4(c), 19.4(e) or 19.4(f), the ▇▇▇▇▇▇▇▇ Member may, by written
notice (the "Call Notice") to the Nortel Member, demand that the Nortel Member
sell all, but not less than all, of the Nortel Member's Membership Interest for
a purchase price (the "Call Purchase Price") equal to the fair market value of
the Nortel Member's Membership Interest as determined by an investment banking
firm of international reputation mutually agreed upon by the ▇▇▇▇▇▇▇▇ Member
and the Nortel Member using the Valuation Methodology, the cost of such
valuation to be borne by (i) the Company if pursuant to Sections 19.4(a), (ii)
the defaulting entity if pursuant to Section 19.4(e), (iii) the Nortel Member
if pursuant to Section 19.4(c), or (iv) as provided by the last sentence of
Section 19.3(a) if pursuant to Sections 8.6(b) or 19.4(f). The ▇▇▇▇▇▇▇▇ Member
may withdraw its Call Notice after the determination of the Call Purchase
Price; provided, however, that in such event the ▇▇▇▇▇▇▇▇ Member will pay the
fees and expenses of the investment banking firm; and provided, further, that
the ▇▇▇▇▇▇▇▇ Member may not make another Call Notice arising from the same
event or based on the same provision hereof until a period of six months has
elapsed from the time of giving the previous Call Notice. The Call Notice shall
set forth the date (the "Call Closing Date") on which such purchase shall
occur, which date shall be not less than 120 days after the date of the Call
Notice. On the Call Closing Date, the ▇▇▇▇▇▇▇▇ Member shall tender the Call
Purchase Price as provided in Section 19.5(c) and the Nortel Member shall sell
to the ▇▇▇▇▇▇▇▇ Member (or in the sole discretion of the ▇▇▇▇▇▇▇▇ Member an
Affiliate of the ▇▇▇▇▇▇▇▇ Member or the Company), all, but not less than all,
of the Nortel Membership Interest and shall execute and deliver to the ▇▇▇▇▇▇▇▇
Member (or such Affiliate or the Company), such instruments, documents and
agreements as the ▇▇▇▇▇▇▇▇ Member may reasonably require to effectuate such
Transfer.
(c) The payment of the Put Purchase Price under Section
19.5(a) or the Call Purchase Price under Section 19.5(b) may be, at the sole
option of the ▇▇▇▇▇▇▇▇ Member, paid in the same manner as the Exit Purchase
Price as provided in Section 19.3(c).
19.6 Right of First Refusal. Except as permitted by Section 19.1(b)
and without prejudice to Sections 19.2 or 19.3 hereof, no Member shall Transfer
its Membership Interest or any portion thereof (the "Offered Interest") to a
Person who is not a Member at the time of such proposed Transfer unless such
Member (the "Seller") first offers to sell the Offered Interest pursuant to the
terms of this Section 19.6.
(a) Limitation on Transfers. No Transfer may be made under
this Section 19.6 unless the Seller has received a bona fide written offer (the
"Purchase Offer") from a Person (the "Purchaser") to purchase the Offered
Interest for a purchase price (the "Offer Price"), which the Seller is prepared
to accept and which
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is denominated and payable in United States dollars at closing and which
requires the Purchaser to undertake no obligations nor assume any liabilities
other than payment of the Offer Price, the filing and prosecution of any
necessary notices to and applications for any necessary approvals of,
regulatory authorities, which offer shall be in writing signed by the Purchaser
and shall be irrevocable for a period ending no sooner than the Business Day
following the end of the Offer Period, as hereinafter defined.
(b) Offer Notice. Prior to making any Transfer that is
subject to the terms of this Section 19.6, the Seller shall give to the Company
and the other Member written notice (the "Offer Notice") which shall include a
copy of the Purchase Offer and an offer (the "Firm Offer") to sell the Offered
Interest to the Company or to the other Member (the "Offeree") for the Offer
Price, payable according to the same terms as those contained in the Purchase
Offer, provided that the Firm Offer shall be made without regard to the
requirement of any ▇▇▇▇▇▇▇ money or similar deposit required of the Purchaser
prior to closing and without regard to any security (other than the Offered
Interest) to be provided by the Purchaser for any deferred portion of the Offer
Price.
(c) Offer Period. The Firm Offer shall be irrevocable for a
period (the "Offer Period") ending at 11:59 p.m., local time at the Company's
principal place of business, on the forty-fifth (45th) day following the date
of the Offer Notice.
(d) Acceptance of Firm Offer. At any time during the Offer
Period, the Offeree may accept the Firm Offer as to all of the Offered
Interest, by giving written notice of such acceptance to the Seller and to the
Company or the other Member, as the case may be, which notice shall indicate
the Membership Interest or any portion thereof that such Offeree is willing to
purchase. In the event that the Offerees ("Accepting Offerees"), in the
aggregate, accept the Firm Offer with respect to all of the Offered Interest,
the Firm Offer shall be deemed to be accepted and the Offered Interest shall be
apportioned pro rata according to the Percentage Interests of the Accepting
Offerees. If the Offerees do not accept the Firm Offer as to all of the Offered
Interest during the Offer Period, the Firm Offer shall be deemed to be rejected
in its entirety.
(e) Closing of Purchase Pursuant to Firm Offer. In the event
that the Firm Offer is accepted, the closing of the sale of the Offered
Interest shall take place within thirty (30) days after the Firm Offer is
accepted or, if later, the date of closing set forth in the Purchase Offer. The
Seller and all Accepting Offerees shall execute such documents and instruments
as may be necessary or appropriate to effect the sale of the Offered Interest
pursuant to the terms of the Firm Offer and this Section 19.6.
(f) Sale Pursuant to Purchase Offer If Firm Offer Rejected.
If the Firm Offer is declined or is not accepted in the manner provided in
Section 19.6(d), the
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Seller may sell the Offered Interest to the Purchaser at any time within sixty
(60) days after the last day of the Offer Period, provided that such sale shall
be made at the price and on the terms contained in the Purchase Offer and
provided further that such sale complies with other terms, conditions, and
restrictions of this Agreement that are not expressly made inapplicable to
sales occurring under this Section 19.6, including the consent requirement of
Section 19.1(a). In the event that the Offered Interest are not sold in
accordance with the terms of the preceding sentence, the Offered Interest shall
again become subject to all of the conditions and restrictions of this Section
19.6.
19.7 Recognition of Members. The Company shall not recognize for any
purpose any purported Transfer of all or part of a Membership Interest unless
such Transfer is made pursuant to the provisions of this Article XIX or Article
XXI and unless and until the provisions of Section 19.9 have been satisfied and
the Management Committee has received, on behalf of the Company, a document
that:
(a) is executed by both the Member effecting the disposition
and the Person to whom the Membership Interest or part thereof is transferred;
(b) includes the notice address of any Person to be admitted
to the Company as a Member and its agreement to be bound by this Agreement; and
(c) contains a representation and warranty in favor of the
other Member that the disposition was made in accordance with all material and
applicable laws and regulations including the Regulations.
19.8 Prohibited Transfers. Any purported Transfer of a Membership
Interest that is not made in accordance with the terms of this Article XIX
shall be null and void and of no force or effect whatever; provided that, if
the Company is required to recognize any such Transfer that is not made in
accordance with the terms of this Article XIX, the Membership Interest or any
portion thereof Transferred shall be strictly limited to the transferor's
rights to allocations and distributions as provided by this Agreement with
respect to the transferred Membership Interest or any portion thereof, which
allocations and distributions may be applied (without limiting any other legal
or equitable rights of the Company) to satisfy any debts, obligations, or
liabilities for damages that the transferor or transferee of such interest may
have to the Company. In the case of a Transfer or attempted Transfer of
Membership Interest or any portion thereof that is not made in accordance with
the terms of this Article XIX, the parties engaging or attempting to engage in
such Transfer shall indemnify and hold harmless the Company and the other
Members against all claims, costs, liabilities, and damages that any of such
indemnified Members may incur (including, incremental tax liabilities,
reasonable lawyers' fees, and expenses) as incurred as a result of such
Transfer or attempted Transfer and efforts to enforce the indemnity granted
hereby.
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19.9 Admission of Substituted Members. Subject to the other provisions
of this Article XIX, a transferee of a Membership Interest or any portion
thereof may be admitted to the Company as a substituted Member only upon
satisfaction of the conditions set forth in this Section 19.9 and Section
15.12(b):
(a) the Membership Interest or any portion thereof with
respect to which the transferee is being admitted was acquired in compliance
with the provisions of this Article XIX;
(b) the transferee of a Membership Interest or any portion
thereof (other than, with respect to clauses (i) and (ii) below, a transferee
that was a Member prior to the Transfer) shall, by written instrument in form
and substance reasonably satisfactory to the Management Committee (and, in the
case of clause (iii) below, the transferor Member), (i) make representations
and warranties to each nontransferring Member equivalent to those set forth in
Article XXV hereof, (ii) accept and adopt the terms and provisions of this
Agreement, including this Article XIX, and (iii) assume the obligations of the
transferor Member under this Agreement with respect to the transferred
Membership Interest or any portion thereof.
(c) the transferee shall pay or reimburse the Company for all
reasonable legal, filing, and publication costs that the Company incurs in
connection with the admission of the transferee as a Member with respect to the
transferred Membership Interest or any portion thereof;
(d) except in the case of an involuntary Transfer by
operation of law, if required by the Management Committee, the transferee
(other than a transferee that was a Member prior to the Transfer) shall deliver
to the Company evidence of the authority of such Person to become a Member and
to be bound by all of the terms and conditions of this Agreement, and the
transferee and transferor shall each execute and deliver such other instruments
as Management Committee reasonably deems necessary or appropriate to effect,
and as a condition to, such Transfer, including amendments to the Certificate
of Formation or any other instrument filed with the state of Delaware or any
other state or governmental authority; and
(e) approval of all the other Members subject, always to
Sections 15.12(b) and 19.1(a) hereof.
19.10 Compliance with Securities Laws. All Members acknowledge that
the Membership Interests have not been registered under (i) the Securities Act,
in reliance on the exemptions afforded by Section 4(2) of the Securities Act,
or (ii) applicable state securities laws in reliance on exemptions under such
laws. Therefore, to preserve said exemptions and notwithstanding anything
contained herein to the contrary, the Members hereby agree that interests of
the Members shall be nontransferable and nonassignable, except in compliance
with the registration
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provisions of the Securities Act and applicable state securities laws, or an
exemption or exemptions therefrom, and any attempted or purported transfer or
assignment in violation of the foregoing shall be void and of no effect.
Accordingly, as an additional condition precedent to any assignment or other
transfer of any interest in the Company, the Company may require an opinion of
counsel satisfactory to the Company that such assignment or transfer will be
made in compliance with the registration provisions of the Securities Act and
applicable state securities laws or exemption(s) therefrom, and such transferor
or assignor shall be responsible for paying said counsel's fee for the opinion.
The foregoing shall not limit the restrictive legend set forth at the beginning
of this Agreement.
19.11 Representations Regarding Transfers; Legend.
(a) Each Member hereby covenants and agrees with the Company
for the benefit of the Company and all Members, that (i) it is not currently
making a market in Membership Interests or any portion thereof and will not in
the future make a market in Membership Interests or any portion thereof, (ii)
it will not Transfer its Membership Interest or any portion thereof on an
established securities market, a secondary market (or the substantial
equivalent thereof) within the meaning of Code section 7704(b) (and any
Regulations, revenue rulings, or other official pronouncements of the Internal
Revenue Service or Treasury Department that may be promulgated or published
thereunder), and (iii) in the event such Regulations, revenue rulings, or other
pronouncements treat any or all arrangements which facilitate the selling of
Company interests and which are commonly referred to as "matching services" as
being a secondary market or substantial equivalent thereof, it will not
Transfer any Membership Interest or any portion thereof through a matching
service that is not approved in advance by the Company. Each Member further
agrees that it will not Transfer any Membership Interest or any portion thereof
to any Person unless such Person agrees to be bound by this Section 19.11(a)
and to Transfer such Membership Interest or any portion thereof only to Persons
who agree to be similarly bound.
(b) Each Member hereby represents and warrants to the Company
and the Members that such Member's acquisition of Membership Interest hereunder
is made as principal for such Member's own account and not for resale or
distribution of such Membership Interest or any portion thereof. Each Member
further hereby agrees that the following legends may be placed upon any
counterpart of this Agreement and shall be placed on any document or instrument
evidencing Membership Interests or any portion thereof:
"The Membership Interest or any portion thereof represented
by this document has not been registered under any securities
laws and the transferability of such Membership Interest or
any portion thereof is restricted. Such Membership Interest
or any portion thereof may not be
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sold, assigned, or transferred, nor will any assignee,
vendee, transferee, or endorsee thereof be recognized as
having acquired any such Membership Interest or any portion
thereof by the issuer for any purposes, unless (1) a
registration statement under the Securities Act of 1933, as
amended, with respect to such Membership Interest or any
portion thereof shall then be in effect and such transfer has
been qualified under all applicable state securities laws, or
(2) the availability of an exemption from such registration
and qualification shall be established to the satisfaction of
counsel to the Company."
"The Membership Interest or any portion thereof represented
by this document are subject to further restriction as to
their sale, transfer, hypothecation, or assignment as set
forth in the Limited Liability Company Agreement between
Northern Telecom Inc. and ▇▇▇▇▇▇▇▇ Communications Group,
Inc., dated as of April 1, 1997, and agreed to by each
Member. Said restriction provides, among other things, that
no Membership Interest or any portion thereof may be
transferred without first offering such Membership Interest
or any portion thereof to the other Members, and that no
Membership Interest or any portion thereof may be transferred
except in accordance with the terms of said agreement."
19.12 Distributions and Allocations in Respect of Transferred
Membership Interest. If any Membership Interest or any portion thereof is
Transferred during any fiscal year in compliance with the provisions of this
Article XIX, items of income, gains, losses, deductions, and credits and all
other items attributable to the transferred Membership Interest or any portion
thereof for such fiscal year shall be divided and allocated between the
transferor and the transferee by taking into account their varying Membership
Interests during such fiscal year in accordance with Code section 706(d), using
any conventions permitted by law and selected by the Management Committee. All
distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the Company
shall recognize such Transfer not later than the end of the calendar month
during which it is given notice of such Transfer, provided that, if the Company
is given notice of Transfer at least ten (10) days prior to the Transfer, the
Company shall recognize such Transfer as of the date of such Transfer, and
provided further that if the Company does not receive a notice stating the date
such Membership Interest or any portion thereof was transferred and such other
information as the Management Committee may reasonably require within thirty
(30) days after the end of the fiscal year during which the Transfer occurs,
then all such items shall be allocated, and all distributions shall be made, to
the Person who, according to the books and records of the Company, was the owner
of such Membership Interest or any portion thereof on the last day of such
fiscal year. Neither the Company, the Management Committee, any
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other committee of the Company, nor any Member shall incur any liability for
making allocations and distributions in accordance with the provisions of this
Section 19.12, whether or not any member of the Management Committee, Member, or
the Company has knowledge of any Transfer of ownership of any Membership
Interest or any portion thereof.
ARTICLE XX
Distributorship Agreement
20.1 Company Right of Renewal. For so long as the Nortel Member owns a
Membership Interest and subject to the condition that the Company shall not be
in material breach of any of its obligations under the WilTel Distributorship
Agreement or its then current successor agreement, the Nortel Member shall offer
to renew or cause to be renewed, and the Company shall renew, the WilTel
Distributorship Agreement or in the Nortel Member's discretion, offer such other
CPE Agreement as is offered to all other Distributors for successive terms of
years of as long a term as offered at the time to all other Distributors and on
terms and conditions such that the Company shall not be at a disadvantage to any
other Distributor; provided, however, that the Company shall not be deemed to be
at a disadvantage to any other Distributor solely by reason of differences in
treatment between Distributors (including the Company) arising out of the terms
and conditions of the CPE Agreement and the policies implemented pursuant
thereto so long as such agreement and policies are uniformly applied and made
available to all Distributors (including the Company) and so long as any and all
products that are made available to other Distributors have been offered to the
Company on a basis at least as favorable as offered to such other Distributors,
and the Territory provided for therein shall be the United States of America;
and provided further, that the Company shall not be deemed to be at a
disadvantage and shall derive no rights as a result of or in connection with the
****. The parties hereto acknowledge that the provisions of this Article XX are
not intended to be part of or an amendment or supplement to the CPE Agreement,
but are intended to be separate and distinct agreements between the parties.
20.2 Company Right of Renewal after Put or Call. In the event of a
Transfer of a Member's Membership Interest pursuant to Sections 8.6(b), 19.3,
19.4 or 19.5, the Nortel Member shall offer to renew or cause to be renewed the
WilTel Distributorship Agreement or in the Nortel Member's discretion, offer
such other CPE Agreement as is offered to all other Distributors for an
additional term of years of as
------
**** Confidential material has been omitted and filed separately with the
Securities and Exchange Commission.
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long a term as offered at the time to all other Distributors but such renewal
rights shall be extended for not less than three (3) years and on the expiration
of the then current term (or, in the event that the WilTel Distributorship
Agreement shall have been renewed prior to such Transfer but such renewal term
shall not have commenced, such additional term shall commence on the expiration
of such renewal term) on terms and conditions such that the Company shall not be
at a disadvantage to any other Distributor; provided, however, that the Company
shall not be deemed to be at a disadvantage to any other Distributor solely by
reason of differences in treatment between Distributors (including the Company)
arising out of the terms and conditions of the CPE Agreement and the policies
implemented pursuant thereto so long as such agreement and policies are
uniformly applied and made available to all Distributors (including the Company)
and so long as any and all products that are made available to other
Distributors have been offered to the Company on a basis at least as favorable
as offered to such other Distributors, and the Territory provided for therein
shall be the United States and Canada; and provided further, that the Company
shall not be in material breach of its obligations under the WilTel
Distributorship Agreement or its then current successor.
20.3 Company Right to Distribute Products Not Covered by the
Distributorship Agreement. For so long as both Parties are Members of the
Company, the Company, as a technology partner of NTI, will participate in the
technology (alpha) trials and field (beta) trials of any Emerging Products,
and will act as a reseller of such Emerging Products prior to Distribution
thereof upon such terms and conditions as NTI and the Company mutually agree,
the Parties having an obligation to negotiate in good faith toward commercially
reasonable terms and conditions.
ARTICLE XXI
Additional Members
No new Members having a Membership Interest or any portion thereof
shall be entitled to any retroactive allocation of any items of income, gains,
losses, deductions, and credits incurred by the Company. The TMP may, at the
time a Member is admitted, close the Company books (as though the Company's tax
year had ended) or make pro rata allocations of any items of income, gains,
losses, deductions, and credits to a new Member for that portion of the
Company's tax year in which a Member was admitted in accordance with the
provisions of section 706(d) of the Code and the Regulations promulgated
thereunder.
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ARTICLE XXII
Dissolution
22.1 Liquidating Events. The Company shall dissolve, without judicial
decree, upon the first to occur of any of the following ("Liquidating Events"):
(a) the sale of all or substantially all of the real and
personal property (tangible and intangible) of the
Company;
(b) the written consent of all Members;
(c) the happening of any event that makes it unlawful or
impossible to carry on the business of the Company; or
(d) the occurrence of a Bankruptcy Event with respect to any
Member.
22.2 Judicial Dissolution. On application by or for a Member or a
Representative, the Chancery Court of Delaware may decree dissolution of the
Company in accordance with section 18-802 of the Act.
22.3 Continuation of Business.
(a) In the event of the occurrence of any Liquidating Event
described in clauses (a) or (d) of Section 22.1, the Majority in Interest of
the Members and the Member(s) whose Capital Accounts constitute more than fifty
percent (50%) of the total combined Capital Accounts of the Company (in each
case excluding the Member involved in the Bankruptcy Event, if any), may
jointly decide to continue the business of the Company, in which event the
Company shall not dissolve upon the occurrence of the events specified in
clauses (a) or (d) of Section 22.1.
(b) Notwithstanding any provision of the Act, the Company
shall not dissolve prior to the occurrence of one or more Liquidating Events or
the entry by the Chancery Court of Delaware of a decree of dissolution.
22.4 Covenants Concerning Early Dissolution; Remedies Upon Breach. Each
Member agrees that without the prior written consent of all other Members it
shall not resign, retire or withdraw from the Company or voluntarily dissolve.
Any breach of this covenant shall be a material default under this Agreement.
The other Member may, as a result of such breach and without the consent of the
Management Committee, elect within 90 days of the occurrence of such breach to
continue the business of the Company and purchase the Membership Interest of
such breaching
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Member for a purchase price determined pursuant to the procedures set forth in
Section 19.5(a).
22.5 Option to Purchase Membership Interest of Bankrupt Member. If
within 60 days of the occurrence of a Bankruptcy Event with respect to any
Member, the other Member elects to continue the business of the Company, the
Bankruptcy Event shall be deemed to be an offer by the bankrupt Member of its
Membership Interest to the other Member at a price equal to the fair market
value of such bankrupt Member's Membership Interest determined by agreement
between the bankrupt Member (or its legal representative) and the other Member;
provided, however, if those Persons do not agree on the fair market value on or
before the 30th day following the election of the other Member to continue the
business of the Company, such value shall be determined pursuant to the
procedures set forth in Section 19.5(a).
ARTICLE XXIII
Winding Up and Termination of the Company
23.1 Liquidator. If the Company is dissolved for any reason, and the
business of the Company is not continued as provided in Sections 22.3, 22.4 and
22.5, a liquidator (the "Liquidator") shall commence to wind up the affairs of
the Company and to liquidate and sell its assets. The Members shall serve as the
Liquidator unless the dissolution occurred as a result of an event described in
subsection 22.1(d), in which case a Person designated by the Member who did not
cause the dissolution described in subsection 22.1(d) shall serve as the
Liquidator. The Liquidator shall have full right and discretion to determine the
time, manner and terms of sale or sales of Company property pursuant to such
liquidation having due regard to the activity and condition of the relevant
market and general financial and economic conditions. The Liquidator appointed
in the manner provided herein shall have and may exercise, without further
authorization or consent of any of the parties hereto or their legal
representatives or successors in interest, all of the powers conferred upon the
Members and the Management Committee under the terms of this Agreement to the
extent necessary or desirable in the good faith judgment of the Liquidator to
carry out the duties and functions of the Liquidator hereunder for and during
such period of time, not to exceed two (2) years after the date of dissolution
of the Company, as shall be reasonably required in the good faith judgment of
the Liquidator to complete the liquidation and dissolution of the Company as
provided for herein, including, without limitation, the following specific
powers:
(a) The power to continue to manage and operate any business
of the Company during the period of such liquidation or dissolution
proceedings, excluding, however, the power to make and enter into contracts
which may extend beyond the period of liquidation.
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(b) The power to make sales and incident thereto to make
deeds, bills of sale, assignments and transfers of assets and properties of the
Company; provided, that the Liquidator may not impose personal liability upon
any of the Members under any such instrument.
(c) The power to borrow funds as may, in the good faith
judgment of the Liquidator, be reasonably required to pay debts and obligations
of the Company or operating expenses, and to execute and/or grant deeds of
trust, mortgages, security agreements, pledges and collateral assignments upon
and encumbering any of the Company properties as security for repayment of such
loans or as security for payment of any other indebtedness of the Company;
provided, that the Liquidator shall not have the power to create any personal
obligation on any of the Members to repay such loans or indebtedness other than
out of available proceeds of foreclosure or sale of the properties or assets as
to which a lien or liens are granted as security for payment thereof.
(d) The power to settle, release, compromise or adjust any
claims asserted to be owing by or to the Company, and the right to file,
prosecute or defend lawsuits and legal proceedings in connection with any such
matters.
23.2 Liquidation Reserves. After making payment or provision for
payment of all debts and liabilities of the Company and all expenses of
liquidation, the Liquidator may set up, for a period not to exceed the aforesaid
two (2) years, such cash reserves as the Liquidator may deem reasonably
necessary for any contingent liabilities or obligations of the Company. Upon the
satisfaction or other discharge of such contingency, the amount of the reserves
not retired, if any, will be distributed in accordance with this Article XXIII.
23.3 Liquidating Distributions. Upon the winding up and termination of
the business and affairs of the Company, its assets (other than cash) shall be
sold as promptly as is consistent with obtaining the fair value thereof, and,
the net proceeds from such sales (after deducting all selling costs and expenses
in connection therewith), together with (at the expiration of the two (2) year
period referred to therein) the balance of the reserve account referred to in
Section 23.2, shall be applied and distributed:
(a) to creditors, including Members and Representatives who
are creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company (whether by payment or the making of reasonable
provision of payment thereof) other than liabilities for which reasonable
provision for payment has been made and liabilities for distributions to
Members and former Members under sections 18-601 or 18-604 of the Act;
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(b) unless otherwise provided in this Agreement, to Members
and former Members in satisfaction of liabilities for distributions under
sections 18-601 or 18-604 of the Act; and
(c) unless otherwise provided in this Agreement, to Members
in accordance with the Members' respective positive balances in their Capital
Accounts as maintained in accordance with Section 8.1 and adjusted pursuant to
Section 10.2.
23.4 Accounting. Within a reasonable time following the completion of
the liquidation of the Company's properties, the Liquidator shall supply to each
of the Members a statement prepared by the Company's accountants prepared in
accordance with GAAP which shall set forth the assets and the liabilities of the
Company as of the date of complete liquidation, each Members's pro rata portion
of distributions pursuant to Section 23.3, and the amount retained as reserves
by the Liquidator pursuant to Section 23.2.
23.5 Recourse to Company Assets. Upon liquidation, each holder of a
Membership Interest in the Company shall look solely to the assets of the
Company for all distributions with respect to the Company and its Capital
Contribution thereto (including the return thereof) and share of profits or
losses thereof, and shall have no recourse therefor (upon dissolution or
otherwise) against the Company, the Members or the Liquidator. Upon liquidation,
reasonable efforts will be made to return tangible and intangible assets to the
extent feasible to the Member which contributed such assets upon such Member's
election.
23.6 Cancellation of Certificate.
(a) The Certificate shall be canceled upon the dissolution
and the completion of winding up the Company, or at any other time there are no
Members, or pursuant to section 18-104(d) of the Act, if the Company fails to
obtain and designate a new registered agent within 120 days after the existing
registered agent files a certificate of resignation, or pursuant to section
18-1108 of the Act, the Company fails to pay the annual tax due under section
18-1107 of the Act for a period of three (3) years from the date it is due, or
upon the filing of a certificate of merger or consolidation if the Company is
not the surviving or resulting entity in a merger or consolidation.
(b) A certificate of cancellation shall be filed in the
office of the Secretary of State of Delaware to accomplish the cancellation of
the Certificate upon the dissolution and the completion of winding up the
Company or at any other time there are no members and shall set forth:
(i) the name of the Company,
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(ii) the date the Certificate was filed;
(iii) the reason for filing the certificate of
cancellation,
(iv) the future effective date or time (which shall
be a date or time certain) of cancellation if it is not to be effective
upon the filing of the certificate; and
(v) any other information the person filing the
certificate of cancellation determines.
ARTICLE XXIV
Notices
All notices, requests, demands and other communications required or
permitted to be given under this Agreement shall be deemed to have been duly
given if in writing and delivered personally or sent via first-class, postage
prepaid, registered or certified mail (return receipt requested), or by
overnight delivery service or facsimile transmission (with confirmation notice
by registered or certified mail or overnight delivery service) addressed as
follows:
If to the Company:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
and copy to:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Nortel Member:
Northern Telecom Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President)
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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and copy to:
Northern Telecom Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
(Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President,
Secretary and General-Counsel)
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the ▇▇▇▇▇▇▇▇ Member:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
and copy to:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, General Counsel
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Any Person may change the address to which the communications are to
be directed to it by giving notice to the other Persons listed above in the
manner provided in this Article XXIV. Notice by mail shall be deemed to have
been given and received on the third calendar day after posting. Notice by
overnight delivery service, facsimile transmission or personal delivery shall
be deemed given on the date of actual delivery.
ARTICLE XXV
Representations, Warranties and Covenants
25.1 Representations and Warranties. Each Member hereby respectively
represents and warrants to the other that (i) it is duly organized, validly
existing and in good standing under the jurisdiction of its organization, with
full power and authority to enter into and perform its obligations under this
Agreement; (ii) it has validly executed this Agreement, and upon delivery, this
Agreement shall be a binding obligation of such party, enforceable against such
party in accordance with its terms; and (iii) its entry into this Agreement and
the performance of its obligations hereunder will not require the approval of
any governmental body or regulatory authority and will
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not violate, conflict with or cause a default under, any of its organizational
documents, any contractual covenant or restriction by which such party is bound,
or any applicable law, regulation, rule, ordinance, order, judgment or decree.
25.2 Nondisclosure of Proprietary Information. Each of the Members
agrees that it and its Affiliates will apply the same standards and treat (i)
the Company's confidential or proprietary information and (ii) the terms and
conditions of this Agreement as it does its Affiliates' confidential or
proprietary information with respect to maintaining the confidentiality
thereof. Notwithstanding the foregoing, each Member and its Affiliates may
disclose information which (A) is required to be disclosed by applicable state
or federal tax or securities laws to the extent, and only to the extent, the
laws require the disclosure and such Member provides the Company and the other
Member prior written notice of its intent to provide the disclosure and the
general text of the disclosure, and the disclosure is consented to by the
Company and the other Member, which consent shall not be unreasonably withheld,
or (B) is required to be disclosed by a court or administrative body of
competent jurisdiction; provided that, if a Member or its Affiliates are served
or threatened with litigation that would require such Member or its Affiliate
to disclose the information, such Member or the Affiliate shall tender to the
Company or the other Member the opportunity to defend, at its cost, against the
disclosure.
ARTICLE XXVI
Dispute Resolution
Except as otherwise specifically provided in this Agreement, all
disputes under this Agreement shall be resolved in accordance with the
procedures set forth in Exhibit O hereto.
ARTICLE XXVII
Miscellaneous
27.1 No Partition. The Members agree that the Company properties are
not and will not be suitable for partition. Accordingly, each of the Members
hereby irrevocably waives any and all rights that he may have to maintain any
action for partition of any of the Company property.
27.2 Entire Agreement. This Agreement and the additional documents and
agreements referred to herein constitute the entire agreement among the parties.
It supersedes any prior agreement or understandings among them, and it may not
be modified or amended in any manner other than as set forth herein.
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27.3 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the laws of
the State of Delaware.
27.4 Binding Effect. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, heirs, administrators, executors, successors and
assigns.
27.5 Effect of Invalid Provision. If any provision of this Agreement,
or the application of such provision to any person or circumstance, shall be
held invalid, the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
27.6 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument. It shall not be necessary for all
Members to execute the same counterpart hereof.
27.7 Negotiated Transaction. The provisions of this Agreement were
negotiated by the parties hereto, and this Agreement shall be deemed to have
been drafted by all of the parties hereto.
SIGNATURE PAGE TO FOLLOW
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
April 30, 1997, to be effective as of the time, day and in the year first above
written.
▇▇▇▇▇▇▇▇ COMMUNICATIONS GROUP, INC.
By: /s/ S. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
Its: Senior Vice President
---------------------------------
NORTHERN TELECOM INC.
By: /s/
---------------------------------
Its: Vice President Distributor Sales
--------------------------------
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EXHIBIT K
INITIAL SCOPE OF BUSINESS
The Company will operate initially in the United States and Canada. The
Company's initial scope of business will include the businesses conducted by
WilTel and NCS and TTS today, which may include, without limitation, offering
its customers a full array of data, voice and video products and services
including digital key systems (generally designed for voice applications with
fewer than 100 lines), private branch exchange (PBX) systems (generally designed
for voice applications with greater than 100 lines), voice processing systems,
enterprise network monitoring and management systems, desktop video, routers,
channel banks, intelligent hubs and cabling and networks systems integration
activities. The Company shall focus on sales of Existing and Emerging Products
at or above the Product Mix Threshold as a key focus of its business. The
Company's services will also include the design, configuration and installation
of voice and data networks and the management of customers' telecommunications
operations and facilities. The Company's National Technical Resource Center may
provide customers with on-line order entry and trouble reporting services,
advanced technical assistance and training; other service capabilities of The
Company may include local area network remote monitoring, wide area network
remote monitoring and PBX remote monitoring and toll fraud detection and acting
as an agent for the sale of all forms of local, value added and long distance
telecommunications services. The Company will not enter into the
telecommunications product manufacturing business except that it may manufacture
voice and data application software only.