OPERATING AGREEMENT OF
INSIGHT COMMUNICATIONS OF INDIANA, LLC,
DATED AS OF
MAY 14, 1998
OPERATING AGREEMENT OF
INSIGHT COMMUNICATIONS OF INDIANA, LLC,
DATED AS OF
MAY 14, 1998
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TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in this Section................................... 1
1.2 Terms Defined Elsewhere in this Agreement.......................12
1.3 Terms Generally.................................................13
ARTICLE 2
FORMATION AND PURPOSE
2.1 Formation.......................................................13
2.2 Name............................................................13
2.3 Principal and Registered Office.................................14
2.4 Term............................................................14
2.5 Purposes of Company.............................................14
2.6 Actions of Company Prior to Closing.............................16
2.7 Certificate of Formation........................................16
2.8 Addresses of the Members........................................16
2.9 Foreign Qualification...........................................17
2.10 Tax Classification.............................................17
ARTICLE 3
COMPANY CAPITAL
3.1 Contributions...................................................17
3.2 Additional Capital Contributions................................18
3.3 Assumption of Liabilities.......................................18
3.4 Return of Contributions.........................................18
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ARTICLE 4
DISTRIBUTIONS; ALLOCATIONS OF PROFIT AND LOSS
4.1 Distributions of Cash...........................................19
4.2 Allocations of Net Profit and Net Loss..........................20
4.3 Special Provisions Regarding Allocations of Profit and Loss.....21
4.4 Tax Allocations: Code Section 704(c)............................23
4.5 Allocation in Event of Transfer.................................23
4.6 Alternative Allocations.........................................24
ARTICLE 5
AUTHORITY OF THE MANAGING MEMBER; OTHER MATTERS AFFECTING
MANAGING MEMBER
5.1 Authority of Managing Member....................................24
5.2 No Personal Liability...........................................24
5.3 Management Agreement............................................25
5.4 Resignation as Managing Member..................................25
5.5 Tax Matters Member..............................................26
ARTICLE 6
STATUS OF MEMBERS
6.1 No Management and Control.......................................28
6.2 Limited Liability...............................................28
6.3 Return of Distributions of Capital..............................28
6.4 Specific Limitations............................................29
ARTICLE 7
MANAGEMENT OF THE COMPANY
7.1 Management Committee Powers.....................................29
7.2 Appointment and Removal of Representatives......................29
7.3 Meetings of the Management Committee............................30
7.4 Procedural Matters..............................................30
7.5 Matters Requiring TCI Approval..................................31
7.6 Matters Requiring Insight and TCI Approval......................32
7.7 Member Consent Defined..........................................34
ARTICLE 8
TRANSFER OF MEMBERSHIP INTERESTS
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8.1 Limitations on Transfers........................................35
8.2 Transferees and Successors......................................36
8.3 Transfers of Interests in Members...............................36
8.4 Other Consents and Requirements.................................37
8.5 Assignment Not In Compliance....................................37
8.6 Division of Membership Interests................................38
8.7 Pledge of Membership Interests..................................38
8.8 Code Section 708(b)(1)(B).......................................38
ARTICLE 9
BUY/SELL RIGHTS
9.1 Commencement of Buy/Sell Process................................39
9.2 Non-Initiating Member's Option to Postpone the Buy/Sell Process.40
9.3 TCI's Options as Non-Initiating Member..........................40
9.4 Insight's Options as Non-Initiating Member......................41
9.5 TCI's Option to Negotiate Alternative Structure.................42
9.6 Insight's Option to Require TCI to Purchase Insight's
Membership Interest.............................................43
9.7 Default by Member...............................................43
9.8 Removal of Insight as Member....................................44
9.9 General Terms Applicable to Purchase and Sale of
Membership Interests............................................46
ARTICLE 10
OTHER BUSINESSES AND INVESTMENT OPPORTUNITIES
10.1 [Intentionally Deleted]........................................48
10.2 Limitations on Activities of the Company.......................48
10.3 Prohibited Cross-Interests.....................................49
10.4 Limitations on Other Activities of the Members.................51
10.5 No Other Restrictions..........................................52
ARTICLE 11
DISSOLUTION AND LIQUIDATION OF COMPANY
11.1 Events of Dissolution..........................................52
11.2 Liquidation....................................................53
11.3 Distribution in Kind...........................................54
11.4 No Action for Dissolution......................................55
11.5 No Further Claim...............................................55
ARTICLE 12
INDEMNIFICATION
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12.1 General........................................................55
12.2 Exculpation....................................................56
12.3 Persons Entitled to Indemnity..................................56
12.4 Procedure Agreements...........................................56
ARTICLE 13
BOOKS, RECORDS, ACCOUNTING, AND REPORTS
13.1 Books and Records..............................................56
13.2 Delivery to Member and Inspection..............................57
13.3 Annual Statements..............................................57
13.4 Quarterly Financial Statements.................................58
13.5 Monthly Statements.............................................59
13.6 Operating and Capital Expenditure Budgets......................59
13.7 Other Information..............................................59
13.8 Tax Matters....................................................59
13.9 Other Filings..................................................59
13.10 Non-Disclosure................................................60
ARTICLE 14
REPRESENTATIONS BY THE MEMBERS
14.1 Investment Intent..............................................61
14.2 Securities Regulation..........................................61
14.3 Knowledge and Experience.......................................61
14.4 Economic Risk..................................................62
14.5 Binding Agreement..............................................62
14.6 Tax Position...................................................62
14.7 Information....................................................62
ARTICLE 15
AMENDMENTS AND WAIVERS
15.1 Amendments to Operating Agreement..............................62
15.2 Waivers........................................................62
ARTICLE 16
MISCELLANEOUS
16.1 Programming and Discounts......................................63
16.2 Cost Sharing; Reimbursement....................................66
16.3 Additional Documents...........................................66
16.4 Inspection.....................................................66
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16.5 General........................................................66
16.6 Notices, Etc...................................................67
16.7 Execution of Papers............................................67
16.8 Attorneys' Fees................................................68
16.9 No Third-Party Beneficiaries...................................68
16.10 Headings......................................................68
16.11 Board Approval................................................68
EXHIBITS AND SCHEDULES
Exhibit A Management Agreement
Schedule I Addresses of the Members
Schedule II Capital Contributions; Capital Accounts; Percentage Interest
Schedule III Initial Members of the Management Committee
Schedule IV Map of the State of Indiana
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OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF INDIANA, LLC
THIS OPERATING AGREEMENT is made and entered into as of May 14, 1998,
by and between INSIGHT COMMUNICATIONS COMPANY, L.P., a Delaware limited
partnership, and TCI OF INDIANA HOLDINGS, LLC, a Colorado limited liability
company.
PRELIMINARY STATEMENT
TCI, together with certain of its Affiliates, owns and operates certain
cable television systems located in central Indiana.
Insight owns and operates certain cable television systems located in
Indiana and Kentucky.
Concurrently with the execution and delivery of this Agreement, the
Members are entering into the Contribution Agreement, pursuant to which TCI and
certain of its Affiliates have agreed to contribute or cause to be contributed
to the Company substantially all the assets of certain cable television systems,
subject to certain liabilities being assumed by the Company, and Insight has
agreed to contribute or cause to be contributed to the Company substantially all
the assets of certain cable television systems, subject to certain liabilities
being assumed by the Company.
The parties to this Agreement desire to enter into this Agreement to
provide for the formation of the Company, the allocation of profits and losses,
cash flow, and other proceeds of the Company between the Members, the respective
rights, obligations, and interests of the Members to each other and to the
Company, and certain other matters.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in this Section.
For purposes of this Agreement, the following terms shall have the
following meanings (all terms used in this Agreement that are not defined in
this Section 1.1 shall have the meanings set forth elsewhere in this Agreement
as indicated in Section 1.2, except as otherwise provided in this Agreement):
"@Home" means At Home Corporation, a Delaware corporation.
"@Home Distribution Agreement" means collectively, the Master
Distribution Agreement
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Term Sheet and the Term Sheet for Form of LCO Agreement, each of which are
exhibits to the letter agreement, dated as of May 15, 1997, among @Home and
Tele-Communications, Inc., Comcast Corporation, ▇▇▇ Enterprises, Inc., Kleiner,
Perkins, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ and certain of their respective Affiliates, as each
such term sheet has been amended by the letter agreement, dated as of October 2,
1997, as amended as of October 10, 1997, among the parties to the May 15, 1997
letter agreement and Cablevision Systems Corporation and certain of its
Affiliates; provided, that such term shall include any definitive agreements
entered into by such parties in respect of the distribution of the @Home Service
as contemplated by the May 15, 1997 letter agreement.
"@Home Service" has the meaning specified in the @Home Distribution
Agreement.
"Act" means the Delaware Limited Liability Company Act.
"Adjusted Capital Account Deficit" means with respect to either Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after:
(i) crediting to such Capital Account any amounts that such
Member is obligated to restore to the Company pursuant to Treasury Regulations
Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to
the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) debiting from such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this definition and the definition of "Controlled Affiliate," the
term "control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock or other equity interests, by contract, or
otherwise, and the terms "controlled by" and "under common control with" have
meanings corresponding to the meaning of "control."
"Agreement" means this Agreement, as it may be amended from time to
time.
"Asset Acquisition" shall mean (i) an investment by the Company or any
of its Subsidiaries in any other Person, pursuant to which such Person becomes a
Subsidiary of the Company or another Subsidiary of the Company or is merged,
consolidated, amalgamated with or into, or is liquidated into, the Company or
any of its Subsidiaries, or (ii) the acquisition by the Company or any of its
Subsidiaries of the assets of any Person (other than the Company or any of its
Subsidiaries) that
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constitute a division or line of business or operating business (even if not a
separate division or line of business) of such Person, including, without
limitation, the acquisition by the Company or any of its Subsidiaries of any
cable television system or other business.
"Asset Disposition" shall mean the sale, exchange or other disposition
by the Company or any of its Subsidiaries (other than to the Company or another
Subsidiary of the Company) (i) of all or substantially all of the capital stock
of any Subsidiary of the Company, or (ii) of the assets that constitute a
division or line of business or operating business (even if not a separate
division or line of business) of the Company or of any of its Subsidiaries,
including, without limitation, the sale, exchange or disposition by the Company
or any of its Subsidiaries of any cable television system or other business.
"Business Day" means any day (other than a day that is a Saturday or
Sunday) on which banks are permitted to be open for business in the State of New
York.
"Capital Account" means a separate account to be maintained for each
Member in accordance with the Code, which, subject to any contrary requirements
of the Code, shall equal such Member's initial Capital Account balance as of
immediately after the Closing as provided in Section 3.1(c), increased by: (i)
the amount of money contributed by such Member to the Company, if any (not
including payments for Closing Adjustments made by such Member pursuant to
Section 3 of the Contribution Agreement); (ii) the fair market value without
regard to Code Section 7701(g) of property, if any, contributed by such Member
to the Company (net of liabilities that are secured by such contributed property
or that the Company or any other Member is considered to assume or take subject
to under Code Section 752), but excluding contributions of property pursuant to
the Contribution Agreement; (iii) allocations to the Member of Net Profit and
items of income and gain pursuant to Article 4; and (iv) other additions made in
accordance with the Code; and decreased by (i) the amount of cash distributed to
such Member by the Company (not including payments for Closing Adjustments made
to such Member pursuant to Section 3 of the Contribution Agreement); (ii)
allocations to the Member of Net Loss and items of loss and deduction pursuant
to Article 4; (iii) the fair market value without regard to Code Section 7701(g)
of property distributed to such Member by the Company (net of liabilities that
are secured by such distributed property or that such Member is considered to
assume or take subject to under Code Section 752); and (iv) other deductions
made in accordance with the Code. Notwithstanding the foregoing, for purposes of
determining Capital Accounts, all of the adjustments, contributions or
distributions required pursuant to the Contribution Agreement to be made
subsequent to the Closing, including, without limitation, contributions of cash
or property pursuant to Section 7.24 of the Contribution Agreement, shall be
treated as if they had been made at the Closing, and such adjustments,
contributions and distributions shall not give rise to any adjustments to
Capital Account balances or redetermination of amounts contributed by or
distributed to any Member. The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with Treasury Regulations under Code Section 704(b) and, to the extent
not inconsistent with the provisions of this Agreement, shall be interpreted and
applied in a manner consistent with such Treasury Regulations.
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"Capital Contributions" means, with respect to either Member, the
amount of money and the net fair market value of property contributed by such
Member to the Company pursuant to this Agreement.
"Certificate of Formation" means the certificate of formation to be
filed with respect to the Company pursuant to the Act.
"Closing" means the Closing under the Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import, and, to the extent
applicable, the Treasury Regulations.
"Company" means the limited liability company created by this
Agreement.
"Company Minimum Gain" means the excess of the Company Nonrecourse
Liabilities over the adjusted tax basis of property securing such Company
Nonrecourse Liabilities. The amount of Company Minimum Gain shall be determined
in accordance with Treasury Regulations Section 1.704-2(d), which provides
generally that the amount of Company Minimum Gain shall be determined by first
computing for each Nonrecourse Liability any gain the Company would realize if
it disposed of the property subject to that Nonrecourse Liability for no
consideration other than full satisfaction of such Nonrecourse Liability, and
then aggregating the separately computed gains.
"Contribution Agreement" means the Asset Contribution Agreement, dated
as of May 4, 1998, among the Company, the Members and the other parties named
therein, as it may be amended from time to time in accordance with its terms.
"Controlled Affiliate" means (i) with respect to TCI, any Person that,
at such time, is controlled directly or indirectly by TCI or TCI Communications,
Inc., a Delaware corporation, but not including InterMedia Capital Partners VI,
L.P. or its Subsidiaries, (ii) with respect to Insight, any Person (other than
the Company or any Subsidiary) that, at such time, is controlled directly or
indirectly by Insight, and (iii) with respect to any other specified Person, any
Person that, at such time, is controlled directly or indirectly by such
specified Person.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be determined in the
manner described in Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) or
Treasury Regulations Section 1.704-3(d)(2), as applicable.
"Equity Value" means, with respect to any Membership Interest for
purposes of any provision of this Agreement that refers to the Equity Value of
such Membership Interest, the amount
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that would be distributed to the holder of such Membership Interest if the
Company's assets were sold on the date of closing the purchase and sale of such
Member's Membership Interest or the date of closing an Alternative Structure, as
applicable, pursuant to Article 9 for the Stated Value of the Company (except,
in the event of the purchase of Insight's Membership Interest by TCI pursuant to
Section 9.8, for the Fair Market Value of the Company) and the Company were then
liquidated in accordance with Article 11 of this Agreement on the date of said
closing, subject to the following sentences. In applying the provisions of
Section 11.2 to such hypothetical liquidation of the Company, (i) all current
assets and all liabilities of the Company, defined and determined in accordance
with generally accepted accounting principles, shall be calculated as of the
date of said closing, (ii) all costs that would customarily be incurred in
connection with such a purchase and sale (including attorneys' fees and broker
fees, but excluding taxes measured on the amount of income, gain or proceeds
realized by the selling Member or any governmental charges imposed in lieu of
such taxes) shall be treated as an expense of liquidation under Section
11.2(d)(1), and (iii) appropriate reserves shall be set up pursuant to Section
11.2(d)(2) for any contingent or unforeseen liabilities or obligations of the
Company that relate to the period prior to the date of such closing pursuant to
Article 9 or any obligation or liability that relates to the period prior to the
date of such closing pursuant to Article 9 not then due and payable (subject to
the last sentence of Section 9.9(f)). The current assets and liabilities
referred to in clause (i), the costs referred to in clause (ii), and the
reserves referred to in clause (iii) shall all be determined in accordance with
the procedures set forth in Section 9.9(d).
"Exclusive Internet Services" means Internet Services which would
constitute a Restricted Business (as defined in the @Home Distribution
Agreement) to the extent engaged in or distributed by TCI Cable Parent or their
Controlled Affiliates.
"FCC" means the Federal Communications Commission.
"Fiscal Year" means the fiscal year of the Company, which shall be the
calendar year.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such asset, as
determined in accordance with Section 3.1(d);
(ii) The Gross Asset Values of all assets of the Company shall
be adjusted to equal their respective gross fair market values, as determined by
the Management Committee by unanimous vote, as of the following times: (A) the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis Capital Contribution; (B) the
distribution by the Company to a Member of more than a de minimis amount of
property of the Company as consideration for an interest in the Company; and (C)
the liquidation of the Company within the meaning of Treasury Regulations
Section 1.704- 1(b)(2)(ii)(g); provided,
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however, that the adjustments pursuant to clauses (A) and (B) above shall be
made only if the Management Committee determines by unanimous vote that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any asset of the Company
distributed to either Member shall be the gross fair market value of such asset
on the date of distribution; and
(iv) The Gross Asset Value of the assets of the Company shall
be increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704- 1(b)(2)(iv)(m) and
Section 4.3(g); provided, however, that Gross Asset Value shall not be adjusted
pursuant to this paragraph (iv) to the extent that the Management Committee
determines by unanimous vote that an adjustment pursuant to paragraph (ii) of
this definition is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraph (i), (ii), or (iv) of this definition, the Gross Asset
Value of such asset shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Net Profit and Net
Loss.
"Indebtedness" means, as to any Person, (without duplication) (i) all
indebtedness of such Person for borrowed money; (ii) obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii)
obligations of such Person to pay the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of
business); (iv) all capitalized lease obligations of such Person; (v)
obligations of such Person in respect of letters of credit or other similar
forms of surety obligations to the extent treated as debt for purposes of
calculating applicable financial leverage covenants under the Insight Credit
Agreement, as in effect at the time of determination (but excluding any such
obligations under any cable television franchise, pole attachment agreement,
lease, or other similar agreement or license entered into in connection with the
day-to-day operations of a cable television system); and (vi) obligations of
such Person under guarantees in respect of, and obligations of such Person to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of other Persons (excluding any
obligations of any Subsidiary of the Company) of the kind referred to in clauses
(i) through (v) above; provided that the term guarantee shall not include
endorsements for collection or deposit in the ordinary course of business or
obligations under or related to cable television franchises, pole attachment
agreements, leases, or other similar agreements or licenses entered into in
connection with the day-to-day operations of a cable television system. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations or liabilities as
described in the foregoing sentence and shall be the amount that would appear as
a liability on the balance sheet of such Person prepared in accordance with
generally accepted accounting principles.
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"Initiating Member" means the Member that elects pursuant to Section
9.1(a) to commence the process described in Article 9.
"Insight" means Insight Communications Company, L.P., a Delaware
limited partnership, or any other Person that succeeds to its Membership
Interest and is admitted as a Member in accordance with the provisions of this
Agreement, provided that to the extent Insight transfers less than all of its
Membership Interest to any other Person(s) and such Person(s) is/are admitted as
a Member in accordance with the provisions of this Agreement, "Insight" shall
refer to Insight and such other Person(s) collectively.
"Insight Credit Agreement" means the Third Amended and Restated Credit
Agreement by and among Insight, the lenders party thereto, CIBC Inc., and Fleet
Bank, N.A., as Co-Agents, and The Bank of New York, as Issuing Bank and as
Agent, dated as of January 22, 1998, as such agreement may be amended from time
to time in accordance with its terms.
"Internet Backbone" means a network which: (i) can or does (A) assign
IP addresses or manage IP address assignments for machines or networks to which
it is connected, (B) accept or deliver IP datagrams from machines or networks to
which it is connected, or (C) maintain IP packet traffic to other machines or
networks; and (ii) provides IP connectivity on a regional, national or
international basis; provided, however, that such a network which provides
connectivity solely within a single metropolitan area shall not be deemed an
Internet Backbone.
"Internet Backbone Service" means a communications service provided
over an Internet Backbone.
"Internet Service" means a communications service provided over a
network which can or does (i) assign IP addresses or manage IP address
assignments for machines or networks to which it is connected, (ii) accept or
deliver IP datagrams from machines or networks to which it is connected, or
(iii) maintain IP package traffic to other machines or networks.
"IP" means the Internet Protocols as defined by the document titled
RFC-791, by ▇▇▇▇ ▇▇▇▇▇▇▇ of the University of Southern California, dated 1981,
or subsequent revisions thereof.
"Lien" has the meaning specified in the Contribution Agreement.
"Management Agreement" means the Management Agreement attached as
Exhibit A to this Agreement, to be dated the date of the Closing, between the
Company and Insight (or its designated Affiliate), as it may be amended from
time to time in accordance with its terms.
"Management Committee" means the Management Committee established by
Article 7.
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"Management Incentive Plan" means the Management Incentive Plan to be
effective as of the date of Closing, as it may be amended from time to time in
accordance with its terms and the provisions of this Agreement.
"Managing Member" means Insight, and any new Managing Member appointed
as successor to Insight in accordance with the provisions of this Agreement.
"Member" means each of the signatories hereto in their respective
capacities as members of the Company, and any additional Person that is admitted
as a Member in accordance with the provisions of this Agreement.
"Member Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4), which generally defines "Member Nonrecourse
Debt" as any Company liability to the extent such liability is nonrecourse and a
Member (or related Person) bears the economic risk of loss pursuant to Treasury
Regulations Section 1.752-2.
"Member Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), which generally defines "Member
Nonrecourse Debt Minimum Gain" as the Company Minimum Gain attributable to
Member Nonrecourse Debt. The amount of Member Nonrecourse Debt Minimum Gain
shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(3).
"Member Nonrecourse Deductions" means losses, deductions, or Code
Section 705(a)(2)(B) expenditures attributable to Member Nonrecourse Debt. The
amount of Member Nonrecourse Deductions shall be determined pursuant to Treasury
Regulations Section 1.704- 2(i)(2), which provides generally that the amount of
Member Nonrecourse Deductions for a Fiscal Year shall equal the net increase, if
any, in Member Nonrecourse Debt Minimum Gain during that Fiscal Year, reduced
(but not below zero) by the proceeds of Member Nonrecourse Debt distributed
during the Fiscal Year to the Member bearing the economic risk of loss for such
Member Nonrecourse Debt that are both attributable to such Member Nonrecourse
Debt and allocable to an increase in Member Nonrecourse Debt Minimum Gain.
"Membership Interest" means the entire ownership interest of a Member
in the Company at any particular time, including all of its rights and
obligations hereunder and under the Act.
"Net Profit and Net Loss" means for each Fiscal Year or other period,
an amount equal to the Company's taxable income or loss for such Fiscal Year or
other period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
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(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profit or Net
Loss shall be added to such taxable income or loss;
(ii) Code Section 705(a)(2)(B) expenditures of the Company
that are not otherwise taken into account in computing Net Profit or Net Loss
shall be subtracted from such taxable income or loss;
(iii) If the Gross Asset Value of any asset of the Company is
adjusted pursuant to paragraph (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Net Profit or Net
Loss;
(iv) Gain or loss resulting from any disposition of property
of the Company with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or other
period;
(vi) Notwithstanding anything to the contrary in the
definition of the terms "Net Profit" and "Net Loss," any items that are
specially allocated pursuant to Section 4.3 of this Agreement shall not be taken
into account in computing Net Profit or Net Loss; and
(vii) For purposes of this Agreement, any deduction for a loss
on a sale or exchange of property of the Company that is disallowed to the
Company under Code Section 267(a)(1) or Code Section 707(b) shall be treated as
a Code Section 705(a)(2)(B) expenditure.
"Non-Initiating Member" means TCI, if Insight is the Initiating Member,
and Insight, if TCI is the Initiating Member.
"Nonrecourse Deductions" means losses, deductions, or Code Section
705(a)(2)(B) expenditures attributable to Company Nonrecourse Liabilities. The
amount of Nonrecourse Deductions shall be determined pursuant to Treasury
Regulations Section 1.704-2(c), which provides generally that the amount of
Nonrecourse Deductions for a Fiscal Year shall equal the net increase, if any,
in Company Minimum Gain during that Fiscal Year, reduced (but not below zero) by
the aggregate distributions made during that Fiscal Year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Company Minimum Gain.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulations Section 1.752- 1(a)(2).
- 9 -
"Operating Cash Flow" means, for any Person, for any period, an amount
equal to (i) the net income (or loss) of such Person (exclusive of any
non-recurring items and any extraordinary gain or loss and of any gain or loss
realized in such period upon an Asset Disposition), plus (ii) the sum of
depreciation, amortization, income tax expense (other than income tax expense
(either positive or negative) attributable to extraordinary or nonrecurring
gains or losses or sales of assets), interest expense, management fees paid or
payable under the Management Agreement or otherwise, the fees paid or payable to
SSI under the Programming Supply Agreement and other non-cash charges, in each
case to the extent deducted in determining such net income, all as determined on
a consolidated basis in accordance with generally accepted accounting principles
consistently applied.
"Operating Cash Flow Ratio" means, for the Company, on any applicable
date, the ratio of (i) the aggregate amount of Indebtedness of the Company and
its Subsidiaries on a consolidated basis on such date to (ii) four times the
Operating Cash Flow of the Company and its Subsidiaries on a consolidated basis
for the most recent fiscal quarter for which financial information in respect
thereof is available immediately prior to such date. In making the foregoing
calculation, (1) pro forma effect shall be given to any Asset Acquisition or
Asset Disposition to the extent that either the outstanding Indebtedness
incurred in connection therewith or income or loss generated therefrom were not
included for the whole period in computing the Operating Cash Flow Ratio and (2)
Operating Cash Flow shall be adjusted to give effect to any pro forma cost
reductions arising out of any such Asset Acquisition or Asset Disposition, in
such amount as Insight shall reasonably and in good faith determine.
"Ownership Restriction" means any provision of the Communications Act
of 1934, as amended, or any other law subsequently enacted, or any rule,
regulation, or policy of the FCC promulgated thereunder restricting the
ownership and control of communications properties (including cable television
systems, television broadcast stations, radio broadcast stations, telephone
companies, and newspapers), including those relating to multiple ownership,
cross-ownership and cross-interest, as those terms are commonly understood in
the communications industry.
"Percentage Interest" means initially, with respect to each Member, the
respective percentage specified on Schedule II hereto, subject to any
adjustments made in accordance with the provisions of this Agreement.
"Permitted Lien" has the meaning specified in the Contribution
Agreement.
"Person" means an individual, partnership, joint venture, association,
corporation, trust, estate, limited liability company, limited liability
partnership, or any other legal entity.
"Programming Agreement" means the Programming Supply Agreement
contemplated to be entered into on or before the Closing by the Company and SSI,
as it may be amended from time to time in accordance with its terms.
- 10 -
"Representative" means each of the individuals appointed by the Members
pursuant to Article 7 to serve as a representative of the appointing Member on
the Management Committee.
"Securities Act" means the Securities Act of 1933, as amended.
"Sprint PCS Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of Sprint Spectrum Holding Company L.P.
(formerly known as MajorCo., L.P.), dated January 31, 1996, among Sprint
Enterprises, L.P. (formerly known as Sprint Spectrum, L.P.), TCI Network
Services, Comcast Telephony Services and Cox Telephony Partnership, as such
agreement is in effect on the date hereof.
"SSI" means Satellite Services, Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of Tele-Communications, Inc.
"Subsidiary" means, at any time, any Person that is controlled by the
Company at such time.
"Tax Amount" means, subject to the last sentence of this definition,
the sum of Insight's tax liabilities for the current Fiscal Year and all
previous Fiscal Years. For this purpose, Insight's tax liability for any Fiscal
Year shall be the greater of Insight's "Regular Tax Liability" or its "AMT
Liability" for such Fiscal Year. "Regular Tax Liability" for a Fiscal Year shall
be determined separately for ordinary income and each character of capital gain
income to which separate federal income tax rates may apply, and for each such
type of income shall be computed as the product of (i) the excess of (A) the
aggregate amount of taxable income (if any) allocated to Insight with respect to
the Company in such Fiscal Year over (B) the aggregate amount of taxable losses
(if any) allocated to Insight with respect to the Company for all prior Fiscal
Years since the beginning of the Company and not previously taken into account
for purposes of computing Insight's Tax Amount, and (ii) the highest marginal
combined federal, state and local tax rate (taking into account the provisions
of Section 68 of the Tax Code) imposed on an individual resident in New York
City for income of such type. Insight's "AMT Liability" for a Fiscal Year shall
be computed as the product of (x) the aggregate amount of alternative minimum
taxable income (if any) allocated to Insight with respect to the Company in such
Fiscal Year (less any alternative minimum tax losses allocated to Insight with
respect to the Company for all prior Fiscal Years since the beginning of the
Company and not previously taken into account for purposes of computing
Insight's Tax Amount) and (y) the highest marginal combined federal, state and
local tax rate imposed on the alternative minimum taxable income of an
individual resident in New York City (taking into account the lack of
deductibility for state and local taxes under the federal alternative minimum
tax).
"TCI" means TCI of Indiana Holdings, LLC, a Colorado limited liability
company, or any other Person that succeeds to its Membership Interest and is
admitted as a Member in accordance with the provisions of this Agreement,
provided that to the extent TCI transfers less than all of its Membership
Interest to any other Person(s) and such Person(s) is/are admitted as a Member
in accordance with the provisions of this Agreement, "TCI" shall refer to TCI
and such other Person(s) collectively.
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"TCI Cable Parent" means TCI Internet Services, Inc., TCI NET, Inc.,
TCI Communications, Inc. and TCI Cable Investments, Inc., individually and
collectively as the context requires.
"TCI Systems" means (i) the cable television systems contributed to the
Company by TCI and (ii) any cable television system acquired by the Company upon
the disposition of a TCI System or an exchange of a TCI System (including an
acquisition by the Company using the proceeds of any disposition of a TCI
System).
"Transferee" means any Person (other than a Successor) that acquires a
Membership Interest from a Member in accordance with the provisions of this
Agreement.
"Treasury 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).
"Voting Stock" means ownership interests in a Person of any class or
kind ordinarily giving the holder the power to vote for the election of
directors, managers, or other members of the governing body of such Person or
(as may be the case with general partnership interests in a partnership) giving
the holder the power to exercise rights typically exercised by directors of a
corporation.
1.2 Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
Term Section
---- -------
Alternative Structure Section 9.3
Competitive Activities Section 10.2(a)
Exit Notice Section 9.1(a)
Fair Market Value of the Company Section 9.8(b)
Formal Determination Section 10.3(b)
Indemnified Persons Section 12.1
Initial Election Notice Section 9.3
Liquidator Section 11.2(b)
Parents' Agreement Section 10.2(b)
Regulatory Allocations Section 4.3(i)
Secretary Section 5.5(b)
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Term Section
---- -------
Stated Value of the Company Section 9.1(a)
Successor Section 8.1(b)(2)
Transfer Section 8.1(a)
Withholding Advance Section 4.1(c)(2)
1.3 Terms Generally.
The definitions in Section 1.1 and elsewhere in this Agreement shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context requires, any pronoun includes the corresponding masculine,
feminine, and neuter forms. The words "include," "includes," and "including" are
not limiting. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
ARTICLE 2
FORMATION AND PURPOSE
2.1 Formation.
The Members hereby form the Company as a limited liability company
pursuant to the Act. The rights and liabilities of the Members shall be
determined pursuant to the Act and this Agreement. To the extent that the rights
or obligations of either Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
2.2 Name.
(a) The name of the Company is Insight Communications of
Indiana, LLC. Except as provided in Section 2.2(b), the business of the Company
may be conducted under that name or, upon compliance with applicable laws, any
other name that the Management Committee deems appropriate or advisable. The
Company shall file any assumed name certificates and similar filings, and any
amendments thereto, that the Management Committee considers appropriate or
advisable. Such names and any trade or service names, marks, emblems or logos
used by the Company shall be exclusive property of the Company and no Person
shall have any right to use, and each Member agrees not to use, any of said
names, marks, emblems or logos other than on behalf of the Company (other than
any of the foregoing that incorporates the name "Insight" or any variant
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thereof, which shall remain the exclusive property of Insight and may be used by
Insight without limitation).
(b) The Company shall not conduct business under the name
"TeleCommunications, Inc.," "TCI," or any variation thereof without the approval
of TCI, except that any asset contributed to the Company by TCI may continue to
bear any name borne by such asset at the time of its contribution to the Company
for a period of 120 days after its contribution. The parties agree that
"Communications" is not a variation of "Tele-Communications, Inc." for purposes
of this Section 2.2(b).
2.3 Principal and Registered Office.
The office required to be maintained by the Company in the State of
Delaware pursuant to Section 18-104 of the Act shall initially be located at
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The resident
agent of the Company pursuant to Section 18-104 of the Act shall initially be
The Corporation Trust Company. The Company may, upon compliance with the
applicable provisions of the Act, change its principal office or resident agent
from time to time in the discretion of the Management Committee. The principal
office of the Company shall be located at ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, or at such other place as the Management Committee shall from time to
time designate by written notice to the Members. The Company may conduct
business at such additional places as the Management Committee shall deem
advisable.
2.4 Term.
The term of the Company shall commence on the date of the filing of the
Certificate of Formation with the Secretary of State of Delaware, and shall
continue until the date that is twelve years from the date of the Closing,
unless sooner terminated as provided in this Agreement.
2.5 Purposes of Company.
Subject to Sections 2.6, 10.1, 10.2, 10.4 and 16.1, the purposes of the
Company are:
(a) to engage in the business, directly or indirectly through
interests in one or more Subsidiaries, of acquiring, developing, owning,
operating, managing, and selling the cable television systems in the State of
Indiana and in the Commonwealth of Kentucky and other assets to be contributed
to the Company by the Members pursuant to the Contribution Agreement;
(b) to acquire, develop, own, operate, manage, and sell
additional cable television systems in the State of Indiana and the Commonwealth
of Kentucky and such other States as the Managing Member may determine (subject
to the provisions of Section 7.6(m));
(c) to acquire, develop, own, operate, manage, and sell, or
invest in, businesses related to and ancillary to the ownership and operation of
the cable television systems referred to
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above (including, but not limited to, high speed data service, Internet access,
telephony services and other telephony-related investments or businesses, and
video wireless services and wireless communications services and other
wireless-related investments or businesses but not including multipoint
distribution systems ("MDS"), multichannel multipoint distribution systems
("MMDS"), direct-to-home satellite systems ("DTH") or Internet Backbone
Services), it being agreed that the use of IP technology to provide telephone,
fax, video, video conferencing, telecommuting, virtual private networks,
security and energy management services to subscribers of the Company's cable
television systems does not constitute engaging in an Internet Backbone Service
and, subject to Section 16.1(b), is within the purposes of the Company;
(d) to conduct other businesses as determined by mutual
agreement of the Members;
(e) in connection with the businesses described in Section
2.5(a)-(d), to possess, transfer, mortgage, pledge, or otherwise deal in, and to
exercise all rights, powers, privileges, and other incidents of ownership or
possession with respect to securities or other assets held or owned by the
Company, and to hold securities or assets in the name of a nominee or nominees;
(f) in connection with the businesses described in Section
2.5(a)-(d), to borrow or raise money, and from time to time to issue, accept,
endorse, and execute promissory notes, loan agreements, options, stock purchase
agreements, contracts, documents, checks, drafts, bills of exchange, warrants,
bonds, debentures, and other negotiable or non-negotiable instruments and
evidences of indebtedness, and to secure the payment of any thereof and of the
interest thereon by mortgage upon or pledge, conveyance, or assignment in trust
of, the whole or any part of the property of the Company whether at the time
owned or thereafter acquired and to guarantee the obligations of others and to
sell, pledge, or otherwise dispose of such bonds or other obligations of the
Company for its purposes;
(g) in connection with the businesses described in Section
2.5(a)-(d), to guarantee the obligations of others in connection with the
purchase or acquisition by the Company of securities or assets;
(h) to maintain an office or offices in such place or places
as the Management Committee shall determine and in connection therewith to rent
or acquire office space, engage personnel, and do such other acts and things as
may be necessary or advisable in connection with the maintenance of such office,
and on behalf of and in the name of the Company to pay and incur reasonable
expenses and obligations for legal, accounting, investment advisory,
consultative and custodial services, and other reasonable expenses including
taxes, travel, insurance, rent, supplies, interest, salaries and wages of
employees, and all other reasonable costs and expenses incident to the operation
of the Company;
- 15 -
(i) to form and own one or more corporations, trusts,
partnerships or other entities (but no entity so formed or owned, while it is a
Subsidiary, may do what the Company is prohibited by this Agreement from doing);
and
(j) to own, lease, or otherwise acquire any and all assets and
services related to the foregoing purposes and to engage in such other
activities related either directly or indirectly to the foregoing purposes as
may be necessary, advisable, or appropriate, in the opinion of the Management
Committee, for the promotion or conduct of the business of the Company.
2.6 Actions of Company Prior to Closing.
Notwithstanding any other provisions hereof, until the Closing, the
sole activities of the Company shall be efforts to obtain the consents and
approvals required under the Contribution Agreement and to otherwise take
actions in accordance with the terms of the Contribution Agreement to consummate
the transactions contemplated thereby. Until the Closing shall occur, there
shall be no Management Committee and all actions undertaken by or on behalf of
the Company must be executed by authorized signatories of the Managing Member
and TCI; provided that actions to be taken by the Company prior to Closing will
be taken in accordance with the terms of the Contribution Agreement and the
Managing Member and TCI shall take such actions and execute such documents as
reasonably necessary to carry out such terms.
2.7 Certificate of Formation.
The Managing Member shall cause the Certificate of Formation to be
filed with the Secretary of State of Delaware and shall cause the Certificate of
Formation to be filed or recorded in any other public office where filing or
recording is required or is deemed by the Management Committee to be advisable.
2.8 Addresses of the Members.
The respective addresses of the Members are set forth on Schedule I.
2.9 Foreign Qualification.
The Managing Member shall take all necessary actions to cause the
Company to be authorized to conduct business legally in all appropriate
jurisdictions, including registration or qualification of the Company as a
foreign limited liability company in those jurisdictions that provide for
registration or qualification and the filing of a certificate of limited
liability company in the appropriate public offices of those jurisdictions that
do not provide for registration or qualification.
- 16 -
2.10 Tax Classification.
Notwithstanding any other provision of this Agreement, no Member or
employee of the Company may take any action (including the filing of a U.S.
Treasury Form 8832 Entity Classification Election) that would cause the Company
to be characterized as an entity other than a partnership for federal income tax
purposes without the affirmative unanimous consent of the Members. A
determination of whether any action will have the effect described in the
preceding sentence will be based upon a declaratory judgement or similar relief
obtained from a court of competent jurisdiction, a favorable ruling from the
Internal Revenue Service, or the receipt of an opinion of counsel reasonably
satisfactory to the Members.
ARTICLE 3
COMPANY CAPITAL
3.1 Contributions.
(a) Contributions at Formation. Simultaneously with the
execution of this Agreement, the Members shall each contribute to the Company
the capital contributions specified in Schedule II hereto.
(b) Contributions at Closing. At the Closing, and pursuant to
the terms of the Contribution Agreement:
(1) TCI will contribute or cause to be
contributed to the Company, free and clear of all Liens (other than Permitted
Liens), the assets specified in Section 2.1 of the Contribution Agreement; and
(2) Insight will contribute or cause to be
contributed to the Company, free and clear of all Liens (other than Permitted
Liens), the assets specified in Section 2.1 of the Contribution Agreement.
(c) Fair Market Value of Contributions; Capital Account
Balances, Applicable Percentages. Schedule II sets forth (1) the aggregate gross
fair market value of all assets as a group to be contributed to the Company by
Insight and TCI, respectively, pursuant to Section 3.1(b); (2) the Capital
Accounts of each Member immediately after the Closing; and (3) the Percentage
Interest of each Member immediately after the Closing.
(d) Determining Fair Market Value of Contributed Assets.
Except as otherwise agreed to between the Members, the fair market value of any
asset contributed by a Member to the Company shall be determined for purposes of
this Agreement as follows:
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(1) For purposes of this Agreement, other than
under Article 9 and other than with respect to the assets contributed by the
Members pursuant to Sections 3.1(a) and (b), which shall have the value
specified in this Agreement, the fair market value of an asset shall be that
value agreed to by the Management Committee by unanimous vote within ten days
after any party having an interest in the determination of such value requests
such determination.
(2) In the event the Management Committee is
unable to agree on a value during such ten-day period, fair market value shall
be determined within 20 days thereafter by an investment banker mutually
selected within five days of the end of such ten-day period by the parties in
interest and such determination shall be conclusive and binding on all such
parties. Each such party shall pay its pro rata portion of the expenses of the
investment banker. If the investment banker is only able to provide a range in
which fair market value would exist, fair market value shall be the average
value of the highest and lowest values of such range.
3.2 Additional Capital Contributions.
There shall be no further assessments for additional Capital
Contributions by the Members to the Company, provided that this section shall
not in any way limit either Member's obligations pursuant to the Contribution
Agreement to make any payment to the Company required thereunder.
3.3 Assumption of Liabilities.
In accordance with the terms and conditions of the Contribution
Agreement, the Company will, at the Closing, assume and undertake to pay,
discharge, and perform those obligations and liabilities of TCI, Insight, and
their respective Affiliates that are specified in Section 4.1 of the
Contribution Agreement.
3.4 Return of Contributions.
Neither Member shall have the right to demand a return of all or any
part of its Capital Contribution during the term of the Company, and any return
of the Capital Contribution of either Member shall be made solely from the
assets of the Company and only in accordance with the terms of this Agreement.
No interest shall be paid to either Member with respect to its Capital
Contribution to the Company.
ARTICLE 4
DISTRIBUTIONS; ALLOCATIONS OF PROFIT AND LOSS
4.1 Distributions of Cash.
(a) Amount and Timing of Distributions.
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(1) The Company shall, with respect to each
Fiscal Year (other than the fiscal quarter in which the Company is liquidated),
distribute to Insight, (i) at least 10 days prior to each quarterly due date for
individual estimated tax payments for the Fiscal Year, an amount equal to the
estimated Tax Amount for Insight for such quarter, computed on an annualized
basis and prorated for the cumulative number of months in the Fiscal Year that
have passed as of the end of the quarter for which such estimated Tax Amount is
being computed; and (ii) not later than 90 days after the end of such Fiscal
Year an aggregate amount equal to the Tax Amount for Insight for such Fiscal
Year (to the extent not previously distributed to Insight pursuant to the
preceding clause (i) with respect to such Fiscal Year). For purposes of making
the computation in Section 4.1(a)(1)(i) for the first, second, and third
quarters of each Fiscal Year, such computation shall be based upon the Company's
estimated taxable income for the first three, five and eight months of the
Fiscal Year, respectively. The Company shall make a pro rata distribution to TCI
in proportion to the Members' relative Percentage Interests in respect of each
distribution to Insight pursuant to the preceding sentence.
(2) No cash of the Company not required to be
distributed pursuant to Section 4.1(a)(1) or Section 11.2(d)(3) shall be
distributed except as the Members may approve pursuant to Section 7.6(p).
(b) Allocation of Distributions. All distributions of cash
pursuant to Section 4.1(a), Section 11.2(d)(3) or otherwise approved by the
Members shall be made to the Members in proportion to their Percentage
Interests.
(c) Tax Withholding.
(1) The Company shall seek to qualify for and
obtain exemptions from any provision of the Code or any provision of state,
local, or foreign tax law that would otherwise require the Company to withhold
amounts from payments or distributions to the Members. If the Company does not
obtain any such exemption, the Company is authorized to withhold from any
payment or distribution to either Member any amounts that are required to be
withheld pursuant to the Code or any provision of any state, local, or foreign
tax law that is binding on the Company.
(2) Any amount withheld with respect to any
payment or distribution to either Member shall be credited against the amount of
the payment or distribution to which the Member would otherwise be entitled. If
the Code or any provision of any state, local, or foreign tax law that is
binding on the Company requires that the Company remit to any taxing authority
any withholding tax with respect to, or for the account of, either Member in its
capacity as a Member, the Company shall, to the extent that Company funds are
available therefor, remit the full required amount of such withholding tax to
the taxing authority and shall notify such Member in writing of its obligation
to pay to the Company such withholding tax to the extent it exceeds the amount
of any payment or distribution to which such Member would otherwise then be
entitled. Each Member shall pay to the Company, within five Business Days after
its receipt of written notice from the Company that withholding is required with
respect to such Member, any amounts required to be
- 19 -
remitted by the Company to any taxing authority with respect to such Member that
are in excess of the amount of any payment or distribution to which such Member
would otherwise be entitled. If the Company is required to remit any withholding
tax with respect to, or for the account of, either Member prior to the Company's
receipt of any payment required to be made by such Member pursuant to the
preceding sentence, the amount of the payment required to be made by such Member
shall be treated as a loan (the "Withholding Advance") from the Company to the
Member, which shall accrue interest from the date the Company is required to
remit such withholding tax until paid by such Member or credited against
payments or distributions to which such Member would otherwise be entitled as
provided in Section 4.1(c)(3) at a rate of fifteen percent per year, compounded
semi-annually.
(3) Any Withholding Advance made to a Member and
any interest accrued thereon shall be credited against, and shall be offset by,
the amount of any later payment or distribution to which the Member would
otherwise be entitled (without duplication of the credit provided in the first
sentence of Section 4.1(c)(2)), with any credit for accrued and unpaid interest
as of the date such payment or distribution would otherwise have been made being
applied before any credit for the amount of the Withholding Advance. Any
Withholding Advance made to a Member and any interest accrued thereon, to the
extent it has not previously been paid by the Member in cash or fully credited
against payments or distributions to which the Member would otherwise be
entitled, shall be paid by the Member to the Company upon the earliest of (A)
the dissolution of the Company, (B) the date on which the Member ceases to be a
Member of the Company, or (C) demand for payment by the Company.
(4) All amounts that are credited against
payments or distributions to which a Member would otherwise be entitled pursuant
to this Section 4.1(c) shall be treated as amounts distributed to such Member
pursuant to Section 4.1(a) for all purposes of this Agreement.
4.2 Allocations of Net Profit and Net Loss.
(a) Allocations of Net Profit and Net Loss. Except as provided
in Section 4.2(b), Net Profit and Net Loss for each Fiscal Year (or portion
thereof) shall be allocated between the Members in proportion to their
Percentage Interests.
(b) Allocations of Net Profit and Net Loss Following
Dissolution. Notwithstanding Section 4.2(a), following the dissolution of the
Company pursuant to Section 11.1, beginning in the Fiscal Year in which such
dissolution occurs or beginning in any Fiscal Year prior to the Fiscal Year in
which such dissolution occurs if the Company's Federal income tax return for
such prior Fiscal Year has not yet been required to be filed (not including
extensions), items of income and gain, loss, and deduction shall be allocated
between the Members so as to cause the credit balances in the Members' Capital
Accounts to be in proportion to their Percentage Interests.
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4.3 Special Provisions Regarding Allocations of Profit and Loss.
(a) Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 4, if there is a net decrease in Company Minimum Gain
for any Fiscal Year, each Member shall be specially allocated items of Company
income and gain for such Fiscal Year (and if necessary for succeeding Fiscal
Years) in an amount equal to such Member's share of the net decrease in Company
Minimum Gain, determined in accordance with Treasury Regulations Section
1.704-2(g); provided, however, that this Section 4.3(a) shall not apply to the
extent the circumstances described in Treasury Regulations Sections
1.704-2(f)(2), 1.704-2(f)(3), 1.704- 2(f)(4), or 1.704-2(f)(5) exist.
Allocations made pursuant to the preceding sentence shall be made in proportion
to the respective amounts required to be allocated to each Member pursuant
thereto. The items of Company income and gain to be allocated pursuant to this
Section 4.3(a) shall be determined in accordance with Treasury Regulations
Section 1.704-2(f)(6). This Section 4.3(a) is intended to comply with the
minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f)
and shall be interpreted consistently therewith.
(b) Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article 4 except Section 4.3(a), if during any Fiscal Year
there is a net decrease in Member Nonrecourse Debt Minimum Gain, each Member
with a share of that Member Nonrecourse Debt Minimum Gain (determined in
accordance with Treasury Regulations Section 1.704-2(i)(5)) as of the beginning
of such Fiscal Year must be allocated items of Company income and gain for the
Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Member's share of the net decrease in the Member Nonrecourse Debt Minimum Gain
(determined in accordance with Treasury Regulations Section 1.704-2(i)(4));
provided, however, that this Section 4.3(b) shall not apply to the extent the
circumstances described in the third and fifth sentences of Treasury Regulations
Section 1.704-2(i)(4) exist. Allocations pursuant to the preceding sentence
shall be made in proportion to the respective amounts required to be allocated
to each Member pursuant thereto. The items of Company income and gain to be
allocated pursuant to this Section 4.3(b) shall be determined in accordance with
Treasury Regulations Section 1.704-2(i)(4). This Section 4.3(b) is intended to
comply with the minimum gain chargeback requirement in Treasury Regulations
Section 1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. If a Member unexpectedly receives
any adjustments, allocations, or distributions described in Treasury Regulations
Sections 1.704- 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Member as quickly as possible; provided, however, that an
allocation pursuant to this Section 4.3(c) shall be made if and only to the
extent that such Member would have an Adjusted Capital Account Deficit after all
other allocations provided for in this Article 4 have been tentatively made as
if this Section 4.3(c) were not in this Agreement. Allocations made pursuant to
the preceding sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto.
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(d) Gross Income Allocation. If a Member has a deficit Capital
Account at the end of any Fiscal Year that is in excess of the sum of (1) the
amount such Member is obligated to restore to the Company pursuant to Treasury
Regulations Section 1.704-1(b)(2)(ii)(c), (2) the amount such Member is deemed
to be obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Section 1.704-2(g)(1), and (3) the amount such Member is deemed to
be obligated to restore pursuant to the penultimate sentence of Treasury
Regulations Section 1.704-2(i)(5), such Member shall be specially allocated
items of Company income and gain in the amount of such excess as quickly as
possible; provided, however, that an allocation pursuant to this Section 4.3(d)
shall be made if and only to the extent that such Member would have a deficit
Capital Account in excess of such sum after all other allocations provided for
in this Article 4 have been tentatively made as if Section 4.3(c) and this
Section 4.3(d) were not in this Agreement. Allocations made pursuant to the
preceding sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated between the Members in
proportion to their Percentage Interests.
(f) Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member that bears the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with Treasury Regulations Section 1.704- 2(i).
(g) Section 754 Adjustment. To the extent any adjustment to
the adjusted tax basis of any asset of the Company pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such section of the Treasury
Regulations.
(h) Excess Nonrecourse Liabilities. For purposes of
determining a Member's proportionate share of the "excess nonrecourse
liabilities" of the Company within the meaning of Treasury Regulations Section
1.752-3(a)(3), each Member's interest in Company profits shall be deemed to be
equal to such Member's Percentage Interest.
(i) Curative Allocations. The allocations set forth in this
Article 4 (other than Section 4.3(g), Section 4.3(h), and this Section 4.3(i))
(the "Regulatory Allocations") are intended to comply with certain requirements
of the Treasury Regulations. The Members intend 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, gain,
loss, or deduction pursuant to
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this Section 4.3(i). Therefore, notwithstanding any other provision of this
Article 4 (other than the Regulatory Allocations), offsetting special
allocations of Company income, gain, loss, or deduction shall be made so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of this
Agreement and all Company items were allocated pursuant to Section 4.2. In
making such offsetting special allocations, future Regulatory Allocations under
Section 4.3(a) and Section 4.3(b) that, although not yet made, are likely to
offset Regulatory Allocations made under Section 4.3(e) and Section 4.3(f),
shall be taken into account.
4.4 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated between the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its initial Gross Asset Value using the traditional
allocation method described in Treasury Regulations Section 1.704-3(b).
(b) If the Gross Asset Value of any asset of the Company is
adjusted pursuant to paragraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Treasury Regulations thereunder.
(c) Allocations pursuant to this Section 4.4 are solely for
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, either Member's Capital Account or share of
Net Profit, Net Loss, other items, or distributions pursuant to any provision of
this Agreement.
4.5 Allocation in Event of Transfer.
If an interest in the Company is transferred in accordance with Article
8 or 9 of this Agreement, the Net Profit and Net Loss of the Company and each
item thereof, and all other items attributable to the transferred interest for
such Fiscal Year, shall be divided and allocated between the transferor and the
transferee pursuant to the interim closing of the Company books method set forth
in Treasury Regulation Section 1.706-1(c)(2)(ii) unless the parties otherwise
agree. This Section shall apply for purposes of computing a Member's Capital
Account and for federal income tax purposes.
4.6 Alternative Allocations.
The Management Committee is authorized and directed to allocate items
of income, gain, loss, or deduction arising in any Fiscal Year differently from
the manner that is otherwise provided
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for in this Agreement if, and to the extent that, the Management Committee
believes that the allocation of items of income, gain, loss, or deduction in the
manner otherwise provided for in this Agreement would cause the credit balances
in the Members' Capital Accounts not to be in proportion to their Percentage
Interests immediately prior to any distributions pursuant to Section 11.2(d)(3)
if the Company were dissolved and terminated on the last day of such Fiscal
Year. Any allocation that is made pursuant to this Section 4.6 shall be deemed
to be a complete substitute for any allocation that is otherwise provided for in
this Agreement and no amendment to this Agreement shall be required.
ARTICLE 5
AUTHORITY OF THE MANAGING MEMBER; OTHER
MATTERS AFFECTING MANAGING MEMBER
5.1 Authority of Managing Member.
The Managing Member agrees that, except for the designation and removal
of Representatives by the Managing Member pursuant to Section 7.2 hereof, or as
otherwise expressly provided herein (including as provided in Section 2.6) or in
the Management Agreement, the Managing Member acting alone shall not give any
consent on any matter or take any other action as the Managing Member,
including, without limitation, acting on behalf of or binding the Company with
respect to any matter in respect of which approval by the Management Committee
or the Members is required by the provisions of this Agreement or the Act,
unless such consent, matter or other action shall first have been adopted or
approved by the Management Committee or the Members, as the case may be, in
accordance with the provisions of this Agreement or the Act as applicable.
5.2 No Personal Liability.
The Managing Member shall not have any personal liability for the
repayment of the Capital Contributions of any other Member; provided that the
Managing Member shall promptly return to the Company or to the Member or Members
entitled thereto any distributions received by the Managing Member in excess of
those to which the Managing Member is entitled under this Agreement.
5.3 Management Agreement.
The Company and Insight (or its designated Affiliate) shall enter into
the Management Agreement effective as of the Closing. Insight shall be entitled
to the payments and reimbursements set forth therein.
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5.4 Resignation as Managing Member.
(a) Insight may not resign as the Managing Member without the
consent of TCI (subject to the rights of transfer set forth elsewhere in this
Agreement and it being understood that no transfer permitted by the terms of
this Agreement shall be deemed to be a resignation for any purpose), other than
upon the dissolution and winding up of the Company in accordance with the
provisions of Article 11. If TCI consents to such resignation, the Company shall
dissolve in accordance with the provisions of Article 11 unless, within ninety
days after the resignation of Insight as the Managing Member:
(1) TCI and Insight elect to continue the
business of the Company and TCI elects, effective as of the date of the
resignation of Insight as the Managing Member, to become the new Managing
Member; or
(2) TCI and Insight elect to continue the
business of the Company, TCI elects not to become the new Managing Member, and
TCI and Insight agree to the appointment, effective as of the date of the
resignation of Insight as the Managing Member, of one or more new Managing
Members.
For purposes of this Agreement, the term "resignation" does
not include the happening of any event described in Section 18-304(a) or (b) of
the Act, and no Member shall cease to be a Member solely upon the happening of
such event(s); provided, that upon the happening of any such event that results
in the appointment of a trustee, receiver or liquidator of the Member or of all
or substantially all of such Member's properties and the loss by the Member of
its management authority with respect to all or substantially all of its
properties, then (x) all Representatives of the affected Member shall be deemed
to have resigned from the Management Committee and such Member shall have no
further right to designate any Representatives; and (y) no consent of such
Member or its Representatives required under any provision of this Agreement
shall any longer be required and the other Member shall be entitled to grant all
such consents and take all actions relating to the Company and its business.
(b) If the Company is continued pursuant to Section 5.4(a)
following the resignation of Insight as the Managing Member, Insight shall
continue to be a Member of the Company, but not a Managing Member, and TCI shall
have the right to appoint three Representatives to the Management Committee and
Insight shall have the right to appoint two Representatives to the Management
Committee, provided that any such change in the identity of the Managing Member
and the composition of the Management Committee shall be subject to and
conditioned upon receipt of all necessary governmental approvals and other
material third party consents. The resignation of Insight as the Managing Member
shall not alter the allocations and distributions to be made to the Members
pursuant to this Agreement.
(c) Without limiting any other rights or remedies that the
Company or TCI may have at law or in equity, upon any resignation by Insight as
the Managing Member in violation of
- 25 -
this Agreement (it being understood and agreed that no transfer permitted by the
terms of this Agreement shall be deemed to be a resignation for any purpose),
then, notwithstanding any other provision of this Agreement to the contrary (1)
all representatives of the Managing Member shall be deemed to have resigned from
the Management Committee and the Managing Member shall have no further right to
designate any representatives; and (2) no consent of the Managing Member or its
representatives required under any provision of this Agreement shall any longer
be required and TCI shall be entitled to grant all such consents and take all
actions relating to the Company and its business.
5.5 Tax Matters Member.
(a) The Managing Member is hereby designated as the Tax
Matters Member of the Company, as provided in Treasury Regulations pursuant to
Code Section 6231 and analogous provisions of state law. Each Member, by the
execution of this Agreement, consents to such designation of the Tax Matters
Member and agrees to execute, certify, acknowledge, deliver, swear to, file, and
record at the appropriate public offices such documents as may be necessary or
appropriate to evidence such consent.
(b) To the extent and in the manner provided by applicable law
and Treasury Regulations, the Tax Matters Member shall furnish the name,
address, profits interest, and taxpayer identification number of each Member and
any Transferee to the Secretary of the Treasury or his delegate (the
"Secretary").
(c) The Tax Matters Member shall notify each Member of any
audit that is brought to the attention of the Tax Matters Member by notice from
the Internal Revenue Service, and shall forward to each Member copies of any
written notices, correspondence, reports, or other documents received by the Tax
Matters Member in connection with such audit within ten Business Days following
its notification by the Internal Revenue Service or its receipt, as the case may
be. The Tax Matters Member shall provide TCI with reasonable advance notice of
administrative proceedings with the Internal Revenue Service, including any
closing conference with the examiner and any appeals conference.
(d) The Tax Matters Member shall give the Members written
notice of its intent to initiate judicial review, file a request for
administrative adjustment on behalf of the Company, extend the period of
limitations for making assessments of any tax against a Member with respect to
any Company item, or enter into any agreement with the Internal Revenue Service
that would result in the settlement of any alleged tax deficiency or other tax
matter, or to any adjustment of taxable income or loss or any item included
therein, affecting the Company or any Member. The Tax Matters Member shall not
take any such action if TCI elects within thirty days after its receipt of the
Tax Matters Member's notice to require that the Tax Matters Member refrain from
taking such action.
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(e) Subject to the foregoing provisions of this Section 5.5,
the Tax Matters Member is hereby authorized, but not required:
(1) to enter into any settlement with the
Internal Revenue Service or the Secretary with respect to any tax audit or
judicial review, in which agreement the Tax Matters Member may expressly state
that such agreement shall bind the other Members, except that such settlement
agreement shall not bind either Member that (within the time prescribed pursuant
to the Code and Treasury Regulations thereunder) files a statement with the
Secretary providing that the Tax Matters Member shall not have the authority to
enter into a settlement agreement on the behalf of such Member;
(2) if a notice of a final administrative
adjustment at the Company level of any item required to be taken into account by
a Member for tax purposes (a "final adjustment") is mailed to the Tax Matters
Member, to seek judicial review of such final adjustment, including the filing
of a petition for readjustment with the Tax Court, the District Court of the
United States for the district in which the Company's principal place of
business is located, or elsewhere as allowed by law, or the United States Claims
Court;
(3) to intervene in any action brought by any
other Member for judicial review of a final adjustment;
(4) to file a request for an administrative
adjustment with the Secretary at any time and, if any part of such request is
not allowed by the Secretary, to file a petition for judicial review with
respect to such request;
(5) to enter into an agreement with the Internal
Revenue Service to extend the period for assessing any tax that is attributable
to any item required to be taken into account by a Member for tax purposes, or
an item affected by such item; and
(6) to take any other action on behalf of the
Members (with respect to the Company) or the Company in connection with any
administrative or judicial tax proceeding to the extent permitted by applicable
law or Treasury Regulations.
(f) The Company shall indemnify and reimburse the Tax Matters
Member for all expenses (including legal and accounting fees) incurred pursuant
to this Section 5.5 in connection with any administrative or judicial proceeding
with respect to the tax liability of the Members. The payment of all such
reasonable expenses shall be made before any distributions are made to the
Members. The taking of any action and the incurring of any expense by the Tax
Matters Member in connection with any such proceeding, except to the extent
provided herein or required by law, is a matter in the sole discretion of the
Tax Matters Member and the provisions on limitations of liability of the
Managing Member and indemnification set forth in Article 12 shall be fully
applicable to Insight in its capacity as the Tax Matters Member.
- 27 -
(g) Any Member that receives a notice of an administrative
proceeding under Code Section 6233 relating to the Company shall promptly notify
the Tax Matters Member of the treatment of any Company item on such Member's
federal income tax return that is or may be inconsistent with the treatment of
that item on the Company's return.
(h) Either Member that enters into a settlement agreement with
the Secretary with respect to any Company item shall notify the Tax Matters
Member of such agreement and its terms within thirty days after its date, and
the Tax Matters Member shall notify the other Members of the settlement
agreement within thirty days of such notification.
ARTICLE 6
STATUS OF MEMBERS
6.1 No Management and Control.
Except as expressly provided in this Agreement, no Member (other than
the Managing Member) shall take part in or interfere in any manner with the
control, conduct, or operation of the Company or have any right or authority to
act for or bind the Company or to vote on matters relating to the Company.
6.2 Limited Liability.
No Member shall be bound by or personally liable for the expenses,
liabilities, or obligations of the Company. In no event shall any Member be
required to make up a deficiency in its Capital Account upon the dissolution and
termination of the Company.
6.3 Return of Distributions of Capital.
A Member may, under certain circumstances, be required by law to return
to the Company, for the benefit of the Company's creditors, amounts previously
distributed. No Member shall be obligated by this Agreement to pay those
distributions to or for the account of the Company or any creditor of the
Company. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, a Member must return or pay
over any part of those distributions, the obligation shall be that of such
Member alone and not of any other Member. Any payment returned to the Company by
a Member or made directly by a Member to a creditor of the Company shall be
deemed a Capital Contribution by such Member.
6.4 Specific Limitations.
No Member shall have the right or power to: (a) (i) resign as a Member
(subject to the rights of transfer set forth elsewhere in this Agreement and
subject to Section 5.4(a) with respect to the Managing Member) or (ii) reduce
its Capital Contribution except as a result of the dissolution of the
- 28 -
Company or as otherwise provided by law, (b) bring an action for partition
against the Company or any assets of the Company, (c) cause the termination and
dissolution of the Company, except as set forth in this Agreement, or (d) demand
or receive property other than cash in return for its Capital Contribution.
Except as otherwise set forth in this Agreement or in any agreement permitted to
be entered into under this Agreement with respect to the purchase, redemption,
retirement, or other acquisition of Membership Interests, no Member shall have
priority over any other Member either as to the return of its Capital
Contribution or as to Net Profit, Net Loss, or distributions. Other than upon
the termination and dissolution of the Company as provided by this Agreement,
there has been no time agreed upon when the Capital Contribution of any Member
will be returned.
ARTICLE 7
MANAGEMENT OF THE COMPANY
7.1 Management Committee Powers.
(a) Except as otherwise expressly provided for herein
(including as provided in Section 2.6 and Section 5.1) or in the Management
Agreement, the business of the Company shall be managed by the Management
Committee pursuant to the provisions of this Agreement. The Management Committee
shall have exclusive authority and full discretion with respect to the
management of the business of the Company, subject to the provisions of the
Management Agreement; provided, however, any power of the Management Committee
may also be exercised by the unanimous action of the Members.
(b) All decisions of the Management Committee shall be by
resolution duly adopted in accordance with the provisions of this Agreement. The
Management Committee may delegate such general or specific authority to the
Managing Member and the officers of the Company as it from time to time
considers desirable, and the Managing Member and the officers of the Company may
exercise the authority granted to them, subject to any restraints or limitations
imposed by the Management Committee and the provisions of Sections 7.5 and 7.6
and any other express provisions of this Agreement. The authority granted to the
Managing Member pursuant to the Management Agreement shall be deemed a
delegation of authority by the Management Committee pursuant to this Section.
7.2 Appointment and Removal of Representatives.
(a) The Management Committee shall consist of five
Representatives, three Representatives to be appointed by Insight and two
Representatives to be appointed by TCI. The initial Representatives are
specified in Schedule III. The Chairman and Secretary of the Management
Committee shall be chosen by the Management Committee.
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(b) Each Member shall use its good faith efforts to designate
its Representatives as promptly as is reasonably practicable so that the
Committee shall at all times contain the number of Representatives provided for
in Section 7.2(a).
(c) Either Member may at any time, by written notice to the
other Member, remove its Representatives, with or without cause, and substitute
Representatives to serve in their stead. No Representative shall be removed from
office, with or without cause, without the consent of the Member that designated
him.
(d) If any Representative is unwilling or unable to serve as
such or is removed from office by the Member that designated him, before the
transaction of any other business by the Management Committee, such Member shall
designate a successor to such Representative.
(e) The written notice of the Member appointing a
Representative shall in each case set forth such Representative's business
address and business telephone number.
(f) Each Member shall promptly give written notice to the
other Member of any change in the business address or business telephone number
of any of its Representatives.
(g) No compensation of, or expenses incurred by, the
Representatives incident to their duties and responsibilities as such under this
Agreement shall be paid by, or charged to, the Company.
7.3 Meetings of the Management Committee.
The Management Committee shall hold one regular meeting each quarter at
such time and place as shall be determined by the Management Committee. Special
meetings of the Management Committee may be called at any time by any
Representative upon not less than three Business Days' prior notice. Except as
otherwise determined by the Management Committee, all special and regular
meetings of the Management Committee shall be held at the principal office of
the Company.
7.4 Procedural Matters.
(a) Each Representative shall have one vote in all matters
presented to the Management Committee for decision or approval. At all meetings
of the Management Committee, except as otherwise expressly provided for in this
Agreement, the affirmative vote of a majority of the Representatives, present at
such meeting in person or by proxy, shall be required for all actions and
decisions of the Management Committee. If a majority of the Representatives are
not present in person or represented by proxy at any meeting, the
Representatives present may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a majority of the
Representatives shall be present or represented.
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(b) Unless waived in writing by all of the Representatives
(before or after a meeting) at least three Business Days' prior notice of any
meeting shall be given to each Representative. Such notice shall state the
purpose for which such meeting has been called.
(c) Each Representative entitled to vote at a meeting of the
Management Committee or to express consent to any action in writing without a
meeting or to express consent to any action pursuant to any other provision of
this Agreement may authorize another Representative or Person to act for him by
proxy. To be effective such proxy shall be presented at the meeting at which
such proxy is to be used or shall be presented with the writing pursuant to
which any action is taken or consent is given pursuant to such proxy, but no
proxy shall be valid after a period of three years from its date, unless the
proxy provides for a longer period.
(d) Any action required or permitted to be taken by the
Management Committee may be taken without a meeting if the number of
Representatives required hereunder to consent to such action, consent in writing
to such action. Such consent shall have the same effect as a vote of the
Management Committee. Prompt notice of any written action taken without the
consent of all Representatives shall be given to all non-consenting
Representatives following the taking of such action. Members of the Management
Committee shall have the right to participate in a meeting of the Management
Committee by means of a conference telephone or similar communications equipment
by means of which all Representatives participating in the meeting can hear each
other and be heard, and such participation shall constitute presence in person
at the meeting.
(e) The Management Committee shall cause to be kept a book of
minutes of all of its meetings in which there shall be recorded the time and
place of each such meeting, whether regular or special, and if special, by whom
called, the notice thereof given, the names of those present, and the
proceedings thereof.
7.5 Matters Requiring TCI Approval.
Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other consent or approval that may be required by the express
terms of this Agreement, without the consent of TCI, which may be withheld by
TCI in its sole discretion, the Company shall not take, and the Management
Committee shall have no authority to cause the Company to, or cause or permit
any Subsidiary to, consummate an Asset Disposition if such Asset Disposition
would result in the allocation of income or gain to TCI pursuant to Section 4.4
and Code Section 704(c), except upon the liquidation and dissolution of the
Company in accordance with Articles 9 and 11; provided, however, that the
limitations of this paragraph shall not apply to any pledging of assets by any
Person to secure any Indebtedness of such Person permitted by this Agreement or
to any disposition of assets upon the exercise of any rights granted by such a
pledge.
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7.6 Matters Requiring Insight and TCI Approval.
Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other consent or approval that may be required by the express
terms of this Agreement, the Company shall not take, and the Management
Committee shall have no authority to cause the Company to take, or cause or
permit any Subsidiary to take, any of the following actions without the consent
of Insight and TCI:
(a) incur any Indebtedness, or consummate any Asset
Acquisition, such that immediately after the incurrence of such Indebtedness or
consummation of such Asset Acquisition, the Company's Operating Cash Flow Ratio
would exceed 7.0 to 1; or
(b) consummate one or more Asset Dispositions, in any
consecutive twelve month period, having an aggregate value in excess of
$25,000,000, except upon the liquidation and dissolution of the Company in
accordance with Articles 9 and 11; provided, however, that the limitations of
this paragraph shall not apply to any pledging of assets by any Person to secure
any Indebtedness of such Person permitted by this Agreement, or to any
disposition of assets upon the exercise of any rights granted by such a pledge;
or
(c) merge with or consolidate into any Person or become a
party to any recapitalization or other form of reorganization, or cause or
permit any Subsidiary to merge with or consolidate into any Person or become a
party to any recapitalization or other form of reorganization (except that, with
approval of the Management Committee and without the separate consent of each of
Insight and TCI, (1) a Subsidiary may merge with another Subsidiary or with the
Company and the Company may merge with a Subsidiary; and (2) a Subsidiary may
merge with a Person other than a Subsidiary as a means of effecting any
acquisition or disposition of assets that is otherwise permitted by this
Agreement); or
(d) enter into any transaction with either Member or any
Affiliate of either Member unless the transaction is in the ordinary course of
the Company's business, is on terms that are no less favorable to the Company
than could have been obtained in a comparable arm's- length transaction with a
Person that is not a Member or an Affiliate of either Member, and contemplates
payments to or by the Company in any twelve month period not in excess of
$500,000, individually or in the aggregate (provided that (1) the Management
Agreement in the form attached hereto is hereby approved, and (2) transactions
described in the Contribution Agreement or in this Agreement, including without
limitation the transactions contemplated by Section 16.1(b) hereof, under the
circumstances specified therein or herein, and in accordance with the terms
provided therein or herein, are hereby approved), or enter into any transaction
with either Member or any Affiliate of either Member pursuant to which such
Member or any Affiliate of such Member would be authorized or permitted to use
the Company's cable television system distribution facilities in connection with
such Member engaging in any business (other than through the Company) that is
ancillary to the ownership or operation of cable television systems, including,
without limitation, those businesses described in Section 2.5(c); or
- 32 -
(e) elect to continue the business of the Company beyond
its initial 12 year term; or
(f) select a new Managing Member of the Company pursuant
to Section 5.4(b)(2); or
(g) liquidate or dissolve except in accordance with
Articles 9 and 11; or
(h) issue any Membership Interest or other equity interest in
the Company, or any option, warrant or other debt or equity interest convertible
into or evidencing the right to acquire (whether for not for additional
consideration) any Membership Interest or other equity interest in the Company,
except pursuant to the Management Incentive Plan; or
(i) admit any additional Members to the Company except in
accordance with Article 8; or
(j) convert the Company to corporate form or to any other
form or change the partnership tax classification of the Company; or
(k) commence any bankruptcy or insolvency proceeding,
acquiesce in the appointment of a receiver, trustee, custodian or liquidator or
admit to the material allegations of a petition filed against the Company in any
bankruptcy proceeding; or
(l) commence, institute, settle or release any claim or
lawsuit (or series of related claims and/or lawsuits) on behalf of the Company,
or the confession of a judgment against the Company or either Member in
connection with its relationship with the Company, for any amount in excess of
$3,000,000 or involving the potential granting of equitable relief that, if
granted, would have a material adverse effect on the business of the Company
(except that (1) the Management Committee may, without the separate consent of
each of Insight and TCI, cause the Company to take action pursuant to Section
7.19 of the Contribution Agreement subject to the terms and conditions thereof,
and (2) notwithstanding any other provision in this Agreement to the contrary,
TCI may, without the separate consent of Insight or Insight's Representatives,
cause the Company to make a good faith claim against Insight pursuant to the
indemnification provisions of the Contribution Agreement or against Insight
pursuant to the Management Agreement, and Insight may, without the separate
consent of TCI or TCI's Representatives, cause the Company to make a good faith
claim against TCI pursuant to the indemnification provisions of the Contribution
Agreement); or
(m) (1) engage in any line of business not described in
Section 2.5 or (2) acquire, operate or manage cable television systems or
otherwise conduct business (A) in any State other than the State of Indiana;
provided that the Company's operation in those portions of the Commonwealth of
Kentucky that are served (at the time of formation of the Company or thereafter)
by the cable television systems initially contributed to the Company by the
Members pursuant to Section 3.1(b)
- 33 -
shall not require any additional approval of the Members, or (B) in the
geographic portion of the State of Indiana that is located above the bold line
drawn on the map of the State of Indiana attached hereto as Schedule IV unless
in either case any such systems or businesses that relate to any other State or
to such geographic portion of the State of Indiana that is located above the
bold line drawn on such map were acquired in a transaction or series of
transactions in which any such systems or businesses did not constitute more
than twenty percent of the total assets (as determined by cash flow, the number
of subscribers or such other reasonable method, as determined by the Managing
Member in its reasonable discretion) acquired in such transaction or series of
transactions;
(n) make a call for additional Capital Contributions (other
than the Capital Contributions to be made pursuant to Sections 3.1(a) and (b));
or
(o) purchase, redeem, retire, or otherwise acquire any
Membership Interests or other equity interest in the Company, except for the
purchase, redemption, retirement, or other acquisition of any equity interest
where the terms of such interest, as approved in accordance with this Section
7.6, permit or require such purchase, redemption, retirement, or other
acquisition; or
(p) make any distribution to the Members other than
distributions permitted pursuant to Section 4.1(a)(1) or required by Section
11.2(d)(3);
(q) amend the Management Incentive Plan; or
(r) enter into, conduct, engage in or participate in the
business of providing or engaging in any Internet Backbone Service, or obtain or
acquire any record or beneficial equity interest in any Person which conducts,
engages in or participates in any Internet Backbone Service, it being agreed
that the use of IP technology to provide telephone, fax, video, video
conferencing, telecommuting, virtual private networks, security and energy
management services to subscribers of the Company's cable television systems
does not constitute such conducting, engaging in, or participating in an
Internet Backbone Service and does not, subject to Section 16.1(b), require the
consent or approval of the Members pursuant to this Section 7.6(r).
7.7 Member Consent Defined.
For purposes of this Agreement, including Sections 7.5 and 7.6, Insight
or TCI, as the case may be, shall be deemed to have approved any action or
proposed action by or on behalf of the Managing Member, the Company, or any
Subsidiary if: (A) Insight or TCI, as the case may be, has affirmatively
approved the taking of such action in writing or (B) all of the acting
Representatives appointed by Insight or TCI, as the case may be, have
affirmatively approved the taking of such action in person or in writing.
Insight and TCI may approve any such action or proposed action by either method
described in clauses (A) and (B).
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ARTICLE 8
TRANSFER OF MEMBERSHIP INTERESTS
8.1 Limitations on Transfers.
(a) Except as provided in Section 8.1(b) and 8.1(c), neither
Member may sell, assign, transfer or otherwise dispose of, or pledge,
hypothecate or otherwise encumber (any or all of the foregoing, a "Transfer")
all or any part of its Membership Interest, the profits, losses and
distributions therefrom, or any part thereof (whether voluntarily, involuntarily
or by operation of law) unless approved by the other Member, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the approval of the
non-transferring Member to any Transfer by a Member, the rights of any
Transferee shall be subject at all times to the limitations set forth in Section
8.2.
(b) The restrictions of Section 8.1(a) shall not apply and no
consent of the other Member shall be required for:
(1) a Transfer pursuant to Article 9; or
(2) a Transfer to an Affiliate of such Member
(a "Successor") so long as (A) such Transfer would not hinder or impair
consummation of any of the transactions contemplated by Article 9; (B) such
Successor, prior to such sale or transfer, becomes a party to this Agreement and
agrees to be bound by the terms and conditions hereof; and (C) in the case of a
Transfer by TCI, TCI Communications, Inc. holds and maintains, directly or
indirectly, an economic ownership in such Affiliate equal to at least 50.1% of
the economic interest in such Affiliate following such Transfer and has and
maintains, directly or indirectly, voting control of such Affiliate following
such Transfer; or
(3) a Transfer pursuant to Section 8.7.
(c) If Insight desires to effect a Transfer that is not
permitted by the terms of this Section 8.1 except with the approval of TCI, and
if TCI grants such approval upon Insight's request, TCI shall have the right,
effective upon the Transfer by Insight, to become the Managing Member and to
appoint three Representatives to the Management Committee, and the transferee of
Insight shall have the right to appoint two Representatives to the Management
Committee, provided that any such change in the identity of the Managing Member
and the composition of the Management Committee shall be subject to and
conditioned upon receipt of all necessary governmental approvals and other
material third party consents. TCI shall exercise such right, if at all, by
giving written notice to Insight at the same time TCI grants its approval to the
Transfer by Insight. If TCI exercises such right, the transferee of Insight,
upon becoming a Member, shall not be a Managing Member, and the allocations and
distributions to be made to the Members pursuant to this Agreement shall not be
altered.
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(d) Notwithstanding anything in this Agreement to the
contrary, without the consent of the other Member, neither Member shall effect,
or agree to effect, any Transfer that will adversely affect or change, or is
reasonably likely to adversely affect or change, the partnership tax
classification of the Company.
8.2 Transferees and Successors.
(a) Notwithstanding any provision to the contrary contained
herein, no Membership Interest may be transferred unless the Transferee or
Successor becomes a party to this Agreement, assumes all of the obligations
hereunder of its transferor and agrees to be bound by the terms and conditions
hereof in the same manner as the transferor. Upon becoming a party to this
Agreement in compliance with the terms hereof, except as otherwise provided
herein, any Transferee or Successor shall be substituted fully for, and shall
enjoy the same rights and be subject to the same obligations as, its predecessor
as a Member and/or a Managing Member hereunder as the case may be.
(b) If there is a permitted Transfer of a Membership Interest
under this Agreement:
(1) A Transferee's or Successor's Percentage
Interest shall equal the Percentage Interest transferred to it by the
transferring Member;
(2) A Transferee's or Successor's Capital
Account shall initially be equal to the Capital Account balance transferred to
it by the transferring Member;
(3) If requested to do so by any transferring
Member or by the Transferee or Successor by notice given to the Members, the
Company shall make an election under Section 754 of the Code (and a
corresponding election under applicable state and local law). Upon the request
of either Member, the Company shall also make a timely election under Section
754 of the Code upon a distribution of property or money to a Member.
8.3 Transfers of Interests in Members.
(a) Except as provided in Section 8.3(b), TCI Communications,
Inc. agrees that it will not Transfer (whether voluntarily, involuntarily or by
operation of law) all or any part of its direct or indirect ownership interests
in TCI, without the consent of Insight.
(b) The restriction of Section 8.3(a) shall not apply and no
consent of Insight shall be required for a Transfer directly or indirectly by
TCI Communications, Inc. to an Affiliate of TCI Communications, Inc. so long as
(1) such Transfer would not hinder or impair consummation of any of the
transactions contemplated by Article 9; (2) such transferee, prior to such sale
or transfer, becomes a party to this Agreement and agrees to be bound by the
terms and conditions hereof; and
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(3) TCI Communications, Inc. holds and maintains, directly or indirectly, an
economic ownership in such Affiliate equal to at least 50.1% of the economic
interest in such Affiliate following such Transfer and has and maintains,
directly or indirectly, voting control of such Affiliate following such
Transfer.
(c) It is understood and agreed that nothing in this Section
8.3 shall be deemed to require any consent of Insight to any proposed or actual
transfer of control (however such transfer is effected, by sale of stock or
assets, merger or consolidation or otherwise) of TeleCommunications, Inc. or TCI
Communications, Inc. or to any proposed or actual distribution to the
stockholders of Tele-Communications, Inc. of direct or indirect equity interests
in TeleCommunications, Inc.
(d) It is understood and agreed that nothing in this Agreement
shall be deemed to require any consent of TCI to any proposed or actual transfer
of control (however such transfer is effected, by sale of stock or assets,
merger or consolidation or otherwise) of Insight, provided, however, in the
event of such a transfer of control, TCI shall have the right, effective upon
such transfer, to become the Managing Member and to appoint three
Representatives to the Management Committee, and Insight shall have the right to
appoint two Representatives to the Management Committee, provided that any such
change in the identity of the Managing Member and the composition of the
Management Committee shall be subject to and conditioned upon receipt of all
necessary governmental approvals and other material third party consents. TCI
shall exercise such right, if at all, by giving written notice to Insight within
ten Business Days of TCI's receipt of notice that such a transfer of control is
contemplated. If TCI exercises such right, Insight, effective upon such transfer
of control, shall no longer be a Managing Member, and the allocations and
distributions to be made to the Members pursuant to this Agreement shall not be
altered.
(e) By executing this Agreement, TCI Communications, Inc.
represents and warrants to Insight and the Company that as of the date of this
Agreement it owns, directly or indirectly, all of the outstanding equity
interests in TCI.
8.4 Other Consents and Requirements.
Any Transfer must be in compliance with all requirements imposed by any
state securities administrator having jurisdiction over the Transfer and the
United States Securities and Exchange Commission and must not cause the Company
or any Subsidiary to be in violation of any Ownership Restriction.
8.5 Assignment Not In Compliance.
Any Transfer in contravention of any of the provisions of this Article
8 (whether voluntarily, involuntarily or by operation of law) shall be void and
of no effect, and shall neither bind nor be recognized by the Company.
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8.6 Division of Membership Interests.
The several rights and obligations inherent in the Capital Account and
Percentage Interest attributable to a Member's Membership Interest are
indivisible except in equal proportions, such that the assignment of a specified
percentage of a Member's Membership Interest may only represent an equal
percentage of the total Capital Account and Percentage Interest that were
attributable to such Member's Membership Interest prior to the assignment.
8.7 Pledge of Membership Interests.
At the request of the Management Committee, each Member agrees to
pledge its Membership Interest to secure any Indebtedness of the Company that is
permitted under this Agreement, on terms determined by the Management Committee,
so long as all Members are required to pledge their Membership Interests and the
terms of the pledge do not impose any personal liability on any Member. In
negotiating the terms of any such pledge, the Management Committee will require
that the secured party agree to enforce its rights against the Membership
Interests of the Members proportionately (based on the Percentage Interest of
each Member). If the secured party under any such pledge enforces its rights
against the Membership Interests of the Members other than proportionately, the
Members will afford each other such rights of contribution and indemnity as are
necessary to cause all liabilities, losses, and damages suffered by the Members
as a result of the exercise by the secured party of its rights under such pledge
to be borne by the Members proportionately.
8.8 Code Section 708(b)(1)(B).
(a) If a Transfer by a Member of all or any portion of its
Membership Interest (other than a Transfer pursuant to Article 9) results in a
termination of the Company pursuant to Section 708(b)(1)(B) of the Code, the
transferring Member will indemnify the other Member for any additional income
tax paid by such other Member as a result of such termination (including income
tax attributable to Code Section 704(c) allocations), whether required to be
paid in or for the taxable year in which such termination occurs or in or for
any subsequent taxable year, as offset by any income tax savings to be realized
by the other Member as a result of such termination (including income tax
savings attributable to Code Section 704(c) allocations), whether realized in or
for the taxable year in which such termination occurs or in or for any
subsequent taxable year.
(b) If a Member desires to assign all or part of its
Membership Interest in a transaction that, if consummated at one time, would
result in the termination of the Company within the meaning of Code Section
708(b)(1)(B), such Member may elect (1) to assign immediately as much of its
Membership Interest as may then be assigned without resulting in the termination
of the Company within the meaning of Code Section 708(b)(1)(B) and (2) to assign
the remaining portion of its Membership Interest that it desires to assign as
soon thereafter as such subsequent assignment would not result in the
termination of the Company within the meaning of Code Section 708(b)(1)(B). If a
Member notifies the other Member that it has elected to assign all or part of
its
- 38 -
Membership Interest in accordance with this Section 8.8(b) specifying in its
notice the portion of its Membership Interest to be assigned immediately in
accordance with clause (1) of the preceding sentence and the portion of its
Membership Interest to be assigned subsequently in accordance with clause (2) of
the preceding sentence (the assignment of such portion, the "Deferred
Assignment"), then, if the other Member assigns all or any part of its
Membership Interest prior to the Deferred Assignment by the notifying Member and
the Deferred Assignment therefore results in the termination of the Company
within the meaning of Code Section 708(b)(1)(B), the other Member and not the
notifying Member shall be treated as the Member causing such termination for
purposes of Section 8.8(a).
ARTICLE 9
BUY/SELL RIGHTS
9.1 Commencement of Buy/Sell Process.
(a) At any time after the fifth anniversary of the Closing
(subject to Section 9.1(b)), either TCI or Insight may elect to commence the
process described in this Article 9 by giving written notice (the "Exit Notice")
of its election to commence the process described in this Article 9 to the
Non-Initiating Member. The Exit Notice shall also specify the Initiating
Member's determination of the fair market value of all of the assets of the
Company as of the date the Initiating Member delivers the Exit Notice (it being
understood and agreed that to the extent the Company has any Subsidiaries, in
making the determination of the value of the Company, the Subsidiaries shall be
taken into account) (such determination, the "Stated Value of the Company").
(b) A Member may not elect to commence the process
described in this Article 9:
(1) at any time within twelve months of
delivering a prior Exit Notice to the Non-Initiating Member pursuant to Section
9.1(a); or
(2) at any time within six months of the
effectiveness of a valid notice of postponement delivered by either Member
pursuant to Section 9.2; or
(3) at any time following the delivery of an
Exit Notice by the other Member pursuant to Section 9.1(a) and prior to such
time, if any, that (A) the Initiating Member and the Non-Initiating Member agree
to abandon the purchase and sale of Membership Interests commenced by such Exit
Notice pursuant to a subsequent election pursuant to Section 9.1(c), or (B) TCI
elects to terminate (or is deemed to have elected to terminate) the purchase and
sale of Membership Interests commenced by such Exit Notice pursuant to a
subsequent election pursuant to Section 9.3(c)(2) or Section 9.5(b), or (C) the
non-defaulting Member elects to terminate the purchase and sale of Membership
Interests commenced by such Exit Notice pursuant to a subsequent election
pursuant to Section 9.7(a)(3).
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(c) The purchase and sale of Membership Interests pursuant to
this Article 9 may be abandoned at any time following the delivery of an Exit
Notice pursuant to Section 9.1(a) and prior to the closing thereof by agreement
between the Initiating Member and the Non- Initiating Member.
9.2 Non-Initiating Member's Option to Postpone the Buy/Sell Process.
Upon receipt of a valid Exit Notice from the Initiating Member pursuant
to Section 9.1, the Non-Initiating Member may elect, by giving written notice to
the Initiating Member within five Business Days of the Non-Initiating Member's
receipt of such Exit Notice, to postpone for a period of six months the first
date on which either Member may commence the process described in this Article 9
by delivering an Exit Notice, provided that each Member may exercise this option
to postpone only once during the term of the Company. If the Non-Initiating
Member fails to give a timely written notice of its election to postpone
pursuant to the preceding sentence (or if the Non-Initiating Member has already
exercised its one election to postpone), the Non- Initiating Member shall be
deemed not to have made such an election to postpone. A timely and valid
election to postpone by the Non-Initiating Member shall become effective
immediately upon its delivery to the Initiating Member, at which time the
Initiating Member's Exit Notice shall automatically be rescinded and be of no
further force and effect and neither Member shall have any further obligations
in respect of such Exit Notice and such Exit Notice shall not count against the
Initiating Member for purposes of Section 9.1(b)(1).
9.3 TCI's Options as Non-Initiating Member.
If TCI receives an Exit Notice from Insight pursuant to Section 9.1 and
does not make (or is deemed not to have made) an election to postpone pursuant
to Section 9.2, TCI shall elect, by giving written notice (an "Initial Election
Notice") of its election to Insight within ninety days after its receipt of the
Exit Notice, either to (1) purchase Insight's Membership Interest, or (2) sell
its Membership Interest to Insight or to otherwise effect an exit from the
Company pursuant to an Alternative Structure. If TCI makes an election pursuant
to clause (2) of the preceding sentence, TCI's Initial Election Notice shall
also specify whether TCI desires to enter into negotiations with Insight to
restructure the sale of TCI's Membership Interest or its exit from the Company
in a manner that results in tax-deferred or tax-advantaged treatment to TCI (for
example, by the purchase by the Company of assets to distribute to TCI in
redemption of TCI's Membership Interest or the distribution by the Company of
certain of its then existing assets in redemption of TCI's Membership Interest)
(an "Alternative Structure").
(a) Election to Purchase. Upon the timely delivery by TCI of
an Initial Election Notice pursuant to this Section 9.3 specifying its election
to purchase Insight's Membership Interest, Insight shall be obligated to sell
and TCI shall be obligated to purchase, in accordance with this Article 9, all
of Insight's Membership Interest for a cash price equal to the Equity Value of
such Membership Interest. At TCI's option, TCI may designate a financially,
legally and technically
- 40 -
qualified third party to purchase Insight's Membership Interest, provided that
TCI shall not be relieved of its obligation under this Section 9.3(a) in the
event such third party does not perform.
(b) Election to Sell Without Election to Negotiate Alternative
Structure. Upon the timely delivery by TCI of an Initial Election Notice
pursuant to this Section 9.3 specifying TCI's election to sell its Membership
Interest to Insight without an election by TCI to negotiate an Alternative
Structure, TCI shall be obligated to sell and Insight shall be obligated to
purchase, in accordance with this Article 9, all of TCI's Membership Interest
for a cash price equal to the Equity Value of such Membership Interest.
(c) Election to Sell or Exit With an Election to Negotiate
Alternative Structure. Upon the timely delivery by TCI of an Initial Election
Notice pursuant to this Section 9.3 specifying TCI's election to sell its
Membership Interest to Insight or otherwise effect an exit from the Company and
specifying TCI's election to negotiate an Alternative Structure, the Members
will negotiate in good faith and use commercially reasonable efforts (taking
into account any tax, regulatory, or economic considerations) for a reasonable
period (not to exceed sixty days) to agree on an Alternative Structure.
(1) If the Members agree on an Alternative
Structure within such sixty day period, TCI and Insight shall be obligated to
effect TCI's exit from the Company, in accordance with this Article 9 and the
terms of the Alternative Structure.
(2) If the Members are unable to reach agreement
on an Alternative Structure within such sixty day period, then TCI shall elect,
by giving written notice to Insight within fifteen Business Days of the end of
such sixty day period, either to (1) sell its Membership Interest to Insight, in
which event TCI shall be obligated to sell and Insight shall be obligated to
purchase, in accordance with this Article 9, all of TCI's Membership Interest
for a cash price equal to the Equity Value of such Membership Interest, or (2)
terminate the purchase and sale process commenced pursuant to Insight's Exit
Notice, subject to Section 9.6. If TCI fails to give a timely notice to Insight
pursuant to the preceding sentence, TCI shall be deemed to have made an election
pursuant to clause (2) of the preceding sentence.
(d) Failure to Make a Timely Election. If TCI fails to give an
Initial Election Notice to Insight within ninety days after its receipt of
Insight's Exit Notice, TCI shall be deemed to have made an election pursuant to
either Section 9.3(a), 9.3(b) or 9.3(c) as Insight shall determine in its sole
discretion by giving written notice to TCI within five Business Days after the
end of such ninety day period.
9.4 Insight's Options as Non-Initiating Member.
If Insight receives an Exit Notice from TCI pursuant to Section 9.1 and
does not make (or is deemed not to have made) an election to postpone pursuant
to Section 9.2, Insight shall elect, by giving written notice (an "Initial
Election Notice") of its election to TCI within ninety days after its
- 41 -
receipt of the Exit Notice, either to (1) sell its Membership Interest to TCI,
or (2) purchase TCI's Membership Interest.
(a) Election to Sell. Upon the timely delivery by Insight of
an Initial Election Notice pursuant to this Section 9.4 specifying its election
to sell its Membership Interest to TCI, Insight shall be obligated to sell and
TCI shall be obligated to purchase, in accordance with this Article 9, all of
Insight's Membership Interest, for an amount in cash equal to the Equity Value
of such Membership Interest.
(b) Election to Purchase. Upon the timely delivery by Insight
of an Initial Election Notice pursuant to this Section 9.4 specifying its
election to purchase TCI's Membership Interest, and upon the failure (or deemed
failure) of TCI to make an election to negotiate an Alternative Structure
pursuant to Section 9.5, TCI shall be obligated to sell and Insight shall be
obligated to purchase, in accordance with this Article 9, all of TCI's
Membership Interest, for an amount in cash equal to the Equity Value of such
Membership Interest.
(c) Failure to Make a Timely Election If Insight fails to give
an Initial Election Notice to TCI within ninety days after its receipt of TCI's
Exit Notice, Insight shall be deemed to have made an election pursuant to either
Section 9.4(a) or 9.4(b) as TCI shall determine in its sole discretion by giving
written notice to Insight within five Business Days after the end of such ninety
day period.
9.5 TCI's Option to Negotiate Alternative Structure.
Upon its receipt of an Initial Election Notice from Insight pursuant to
Section 9.4 specifying Insight's election to purchase TCI's Membership Interest,
TCI may elect, by giving written notice to Insight within fifteen Business Days
of its receipt of Insight's Initial Election Notice, to enter into negotiations
with Insight to agree on an Alternative Structure. If TCI fails to give a timely
notice pursuant to the preceding sentence specifying such an election, TCI shall
be deemed not to have made such an election. Upon TCI's timely delivery of its
election to negotiate an Alternative Structure, the Members will negotiate in
good faith and use commercially reasonable efforts (taking into account any tax,
regulatory, or economic considerations) for a reasonable period (not to exceed
sixty days) to agree on an Alternative Structure.
(a) If the Members agree on an Alternative Structure within
such sixty day period, TCI and Insight shall be obligated to effect TCI's exit
from the Company in accordance with this Article 9 and the terms of the
Alternative Structure.
(b) If the Members are unable to reach agreement on an
Alternative Structure within such sixty day period, then TCI shall elect, by
giving written notice to Insight within fifteen Business Days of the end of such
sixty day period, either to (1) sell its Membership Interest to Insight, in
which event TCI shall be obligated to sell and Insight shall be obligated to
purchase, in accordance with this Article 9, all of TCI's Membership Interest
for a cash price equal to the Equity
- 42 -
Value of such Membership Interest, or (2) terminate the purchase and sale
process commenced pursuant to Insight's Exit Notice, subject to Section 9.6. If
TCI fails to give a timely notice to Insight pursuant to the preceding sentence,
TCI shall be deemed to have made an election pursuant to clause (2) of the
preceding sentence.
9.6 Insight's Option to Require TCI to Purchase Insight's Membership
Interest.
If TCI elects (or is deemed to have elected) to terminate the purchase
and sale process pursuant to Section 9.3(c)(2) or Section 9.5(b), Insight may
elect, by giving written notice to TCI within five Business Days of Insight's
receipt of TCI's election to terminate (or within five Business Days of TCI's
deemed election to terminate), to require TCI to purchase Insight's Membership
Interest. Upon the timely delivery by Insight of a notice pursuant to the
preceding sentence specifying Insight's election to require TCI to purchase
Insight's Membership Interest, Insight shall be obligated to sell and TCI shall
be obligated to purchase, in accordance with this Article 9, all of Insight's
Membership Interest for a cash price equal to the Equity Value of such
Membership Interest. If Insight fails to make a timely election pursuant to the
first sentence of this Section 9.6, Insight shall be deemed to have agreed to
the termination of the purchase and sale process commenced by the Initiating
Member's Exit Notice.
9.7 Default by Member.
(a) If either Member becomes obligated to purchase the other
Member's Membership Interest under this Article 9 pursuant to an Exit Notice, or
if Insight becomes obligated to effect an Alternative Structure under this
Article 9 pursuant to Section 9.3(c)(1) or Section 9.5(a), and such Member
defaults in its obligation to purchase the selling Member's Membership Interest
on the date specified in Section 9.9(a) for the closing of the purchase and sale
of the selling Member's Membership Interest or Insight defaults in its
obligation to effect an Alternative Structure, then the non-defaulting Member
may elect either:
(1) to purchase the Membership Interest of the
defaulting Member for a cash price equal to 95% of the Equity Value of such
Membership Interest and otherwise on the terms and subject to the conditions set
forth in this Article 9; or
(2) to cause the Company to be liquidated and
dissolved in accordance with Article 11; or
(3) to terminate the buy/sell process commenced
by the Initiating Member's Exit Notice and continue the Company.
(b) The three options that may be elected by the
non-defaulting Member pursuant to Section 9.7(a) are exclusive of each other and
are exclusive of all other rights and remedies that may otherwise have been
available to the non-defaulting Member at law or equity as a result of the
defaulting Member's default.
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(c) The non-defaulting Member may make an election pursuant to
Section 9.7(a) by giving written notice of its election to the defaulting Member
at any time within thirty days after the date specified in Section 9.9(a) for
the closing of the purchase and sale of the non-defaulting Member's Membership
Interest or the date scheduled for closing of an Alternative Structure and prior
to such time, if any, as the defaulting Member stands ready, willing, and able
to purchase the non-defaulting Member's Membership Interest in accordance with
this Article 9 or to consummate the Alternative Structure. If the non-defaulting
Member makes a timely election pursuant to Section 9.7(a)(1), the defaulting
Member shall be obligated to sell and the non-defaulting Member shall be
obligated to purchase, in accordance with this Article 9, all of the defaulting
Member's Membership Interest.
9.8 Removal of Insight as Member.
(a) The provisions of this Section 9.8 shall apply if:
(1) a court of competent jurisdiction finds that
Insight has engaged in conduct while acting as Managing Member that constitutes
either fraud against the Company or TCI or a felony involving moral turpitude
and that such conduct has resulted in material harm to the Company or TCI, and
(2) the finding described in Section 9.8(a)(1)
has not been reversed, stayed, enjoined, set aside, annulled, or suspended, and
is not the subject of any pending request for judicial review, reconsideration,
appeal, or stay, and
(3) the time for filing any further request for
judicial review, reconsideration, appeal, or stay of the finding described in
Section 9.8(a)(1) has expired.
(b) If each of the conditions specified in Section 9.8(a) is
satisfied, then (1) TCI shall have the power to appoint three of the five
Representatives of the Management Committee and the Managing Member shall have
the power to appoint two of the five Representatives; provided, that such change
in composition of the Management Committee shall be subject to and conditioned
upon receipt of all necessary governmental approvals and other material third
party consents and (2) TCI shall have the option to purchase all of the Managing
Member's Membership Interest in accordance with the process described in this
Section 9.8(b) and Section 9.8(c). TCI may elect to commence such process by
giving written notice of its election to Insight within ten Business Days after
the condition specified in Section 9.8(a)(3) is satisfied. Upon Insight's
receipt of TCI's notice pursuant to the preceding sentence, Insight and TCI
shall, within thirty Business Days of such receipt, negotiate in good faith to
determine the fair market value of all of the assets of the Company as of the
date TCI delivers notice to Insight pursuant to the first sentence of this
Section 9.8(b) (it being understood and agreed that to the extent the Company
has any Subsidiaries, in making the determination of the value of the Company,
the Subsidiaries shall be taken into account) (the "Fair Market Value of the
Company").
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(1) If Insight and TCI fail to agree upon the
Fair Market Value of the Company within such period, then each of Insight and
TCI will select a nationally recognized investment banking firm or nationally
recognized qualified appraisal firm who will determine the Fair Market Value of
the Company within sixty days of engagement. If the average of the two
appraisals is within 1.5% of the lower of the appraisals, then the Fair Market
Value of the Company will be the average of the two appraisals. If such average
is not within 1.5% of the lower of the two appraisals, the two appraisers
selected by Insight and TCI will select a third nationally recognized investment
banking firm or a nationally recognized qualified appraisal firm who will
conduct a third appraisal, and the Fair Market Value of the Company will be
equal to the average of the two appraisals that are closest to one another,
provided that if the highest and lowest appraisals are equidistant from the
middle appraisal, then the Fair Market Value of the Company will be equal to the
middle appraisal. Each of Insight and TCI shall have the right to submit to all
appraisers a position paper with respect to valuation. Each of Insight and TCI
will bear the expenses of the firm investment banking firm or appraisal firm
that they select, and if a third investment banking firm or appraisal firm is
used, Insight and TCI will share equally the expenses of the third firm. In
conducting the appraisals, the appraisers shall assume that the value of any
business is the price at which the assets of such business as a going concern
would change hands between a willing buyer and a willing seller, on terms and
subject to conditions and costs applicable in the cable television industry
(and, if and to the extent applicable, any other industry in which the Company
or any of its Subsidiaries is engaged) and otherwise use valuation techniques
then prevailing in the cable television industry or such other industry.
(2) If at the time the Fair Market Value of the
Company is being determined pursuant to this Section 9.8 any Retained Franchises
or Exchange Retained Franchises (as defined in the Contribution Agreement) that
are required to be contributed to the Company have not been contributed to the
Company pursuant to the Contribution Agreement, then the Fair Market Value of
the Company shall be determined and calculated as if such Retained Franchises
and Exchange Retained Franchises were then owned by the Company; and if TCI
purchases Insight's Membership Interest pursuant to this Article 9, all
obligations of Insight under the Contribution Agreement with respect to any such
Retained Franchises that are Insight Retained Franchises (including obligations
to contribute the Exchange Retained Franchises to the Company upon transfer from
TCI) shall survive the removal of Insight from the Company upon the sale of its
Membership Interest subject to any conditions on such obligations.
(c) TCI may elect to purchase all of Insight's Membership
Interest and, upon the consummation of such purchase, to remove Insight as a
Member, by giving written notice of its election to Insight within ten Business
Days after the final determination of the Fair Market Value of the Company. Upon
the timely delivery by TCI of notice pursuant to the preceding sentence
specifying its election to purchase Insight's Membership Interest, Insight shall
be obligated to sell and TCI shall be obligated to purchase, in accordance with
this Article 9, all of Insight's Membership Interest for a cash price equal to
the Equity Value of Insight's Membership Interest. If TCI fails to give a timely
notice to Insight pursuant to the first sentence of this Section 9.8(c)
specifying its
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election to purchase Insight's Membership Interest, TCI shall be deemed to have
made an election not to purchase Insight's Membership Interest pursuant to this
Section 9.8, in which event, subject to Sections 9.8(b) and (d), Insight shall
continue as the Managing Member.
(d) The rights of TCI under this Section 9.8 are in addition
to any other rights and remedies available to TCI at law or equity as a result
of any conduct by Insight described in Section 9.8(a).
9.9 General Terms Applicable to Purchase and Sale of Membership
Interests.
(a) The closing of the purchase and sale of a Member's
Membership Interest or of an Alternative Structure in accordance with this
Article 9 shall occur not later than twenty Business Days after the receipt of
all material governmental consents and approvals required in connection with the
sale of the selling Member's Membership Interest in connection with such
Alternative Structure.
(b) The closing of the purchase and sale of the selling
Member's Membership Interest or of the Alternative Structure in accordance with
this Article 9 shall take place at the principal office of the Company or at any
other location agreed to by Insight and TCI.
(c) At the closing of any purchase and sale of the selling
Member's Membership Interest or of any Alternative Structure pursuant to this
Article 9, the purchasing Member or the Company or other buyer in an Alternative
Structure shall pay or cause to be paid to the selling Member, by cash or other
immediately available funds or any other form of consideration mutually agreed
to by the selling Member and the purchasing Member or the consideration agreed
to as part of the Alternative Structure, the purchase price for the Membership
Interest being purchased and the selling Member shall deliver to the purchasing
Member (or its permitted assignee or the Company or other buyer in an
Alternative Structure) good title, free and clear of any liens (other than those
created by this Agreement and those securing financing obtained by the Company
or any Subsidiary), to the Membership Interest being sold.
(d) With respect to the current assets and liabilities of the
Company, the transaction costs and the reserves to be determined as part of the
Equity Value of the Membership Interest to be sold at the closing pursuant to
this Article 9, such current assets and liabilities, costs and reserves shall be
determined by mutual agreement of Insight and TCI at least five days in advance
of the date scheduled for said closing, but to the extent that as of such date
there is a good faith disagreement between the parties as to any portion of such
current assets, liabilities, costs or reserves the parties shall proceed to
closing of such purchase and sale, with closing based on matters not in dispute.
Thereafter, all matters in dispute shall be immediately referred to an
independent public accountant mutually acceptable to Insight and TCI who shall
make such determination as promptly as practicable and whose determination shall
be final and binding upon the parties. If the accountant determines that either
party is entitled to payment from the other party, the party which owes such
payment shall make it to the entitled party in cash (or in the same form of
consideration
- 46 -
as is being paid in such transaction if the parties have agreed to an
Alternative Structure) in accordance with the accountant's determination.
(e) The Members will cooperate in good faith and use their
respective commercially reasonable efforts to obtain as quickly as practicable
all governmental consents and approvals required in connection with the purchase
and sale of a Member's Membership Interest or an Alternative Structure pursuant
to this Article 9.
(f) From and after the closing, the purchasing Member will be
entitled to indemnification from the selling Member (or another creditworthy
entity reasonably acceptable to the purchasing Member) against any liabilities
of the selling Member as a Member (including without limitation, tax liabilities
of the selling Member for periods prior to the closing) for periods prior to
closing not taken into account in determining the Equity Value of the Membership
Interest purchased by the purchasing Member. The other indemnification
obligations of the selling Member to the purchasing Member shall be
substantially equivalent to its indemnification obligations to the Company
pursuant to the Contribution Agreement. On the date that is one year after the
closing under this Article 9, the selling Member shall be entitled to its
distributable share of any reserves set up pursuant to Section 11.2(d)(2) that
had not yet been used to pay any obligation or liability that relates to the
period prior to the date of closing pursuant to this Article 9 and that would
not be required to be maintained in accordance with generally accepted
accounting principles with respect to the period prior to the date of closing
pursuant to this Article 9.
(g) Each Member agrees that, from and after the date on which
the respective obligations of the Members to purchase and sell the selling
Member's Membership Interest or to effect an Alternative Structure become
effective in accordance with this Article 9, it will negotiate in good faith and
use commercially reasonable efforts to enter into an appropriate purchase
agreement or other agreements on reasonable terms and conditions that are
consistent with the other provisions of this Article 9 and that are otherwise
standard and customary at the time for similar transactions. The Members
recognize that the sixty day period specified in Sections 9.3(c) and 9.5 to
agree on an Alternative Structure relates to agreement on the form and material
terms of the structure and a timetable for entering into the purchase agreement
or other agreements necessary to effect the Alternative Structure, but that
additional time may be required to negotiate and enter into such agreements.
(h) Each Member hereby agrees that the other Member shall be
entitled to an injunction or injunctions to prevent breaches by such Member of
its obligations under this Article 9 and to enforce specifically the terms and
provisions of this Article 9 in any court of the United States or any state
having jurisdiction, in addition to any other remedy to which it is entitled at
law or in equity. If an action is brought by either Member pursuant to this
Section 9.9(h), the other Member shall waive the defense that there is an
adequate remedy at law.
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ARTICLE 10
OTHER BUSINESSES AND INVESTMENT OPPORTUNITIES
10.1 [Intentionally Deleted].
10.2 Limitations on Activities of the Company.
(a) Prior to January 31, 1999, or for such shorter period as
TCI (or its Affiliates) is bound by a similar requirement (as such requirement
is in effect on the date hereof) under that certain Parents Agreement dated as
of January 31, 1996 between TeleCommunications, Inc. and Sprint Corporation (the
"Parents Agreement"), whichever occurs first, the Company will not offer (or
promote or package any of its products or services with or act as a sales agent
for) wireline services (local or long distance) under the brand name of any ▇▇▇▇
Operating Company or any of GTE Corporation, AT&T Corporation, MCI
Communications Corporation, British Telecommunications, plc, WorldCom, Inc.,
Cable & Wireless plc, LCI International Inc. or Frontier Corporation or any of
their respective Affiliates; provided, however, that in no event shall this
restriction apply (1) to the extent that a Controlled Affiliate (as defined in
the Parents Agreement) of Tele-Communications, Inc. would not be subject to a
similar requirement under the Parents Agreement (as a result of any exceptions
in the Parents Agreement to the covenants of Tele-Communications, Inc. and its
Controlled Affiliates thereunder or otherwise) or (2) following the termination
of the Parents Agreement.
(b) Prior to January 31, 1999, or for such shorter period as
TCI (or its Affiliates) is bound by a similar requirement (as such requirement
is in effect on the date hereof) under the Parents Agreement, whichever occurs
first, the Company will not make its distribution facilities available to a
third party in connection with offering local phone service to residential
customers without making the facilities similarly available to Sprint
Corporation; provided, however, (1) the Company itself may offer local phone
service (subject to the restrictions in Section 10.2(a)) without offering its
distribution facilities to Sprint Corporation, and (2) in no event shall this
restriction apply (A) to the extent that a Controlled Affiliate (as defined in
the Parents Agreement) of Tele-Communications, Inc. would not be subject to a
similar requirement under the Parents Agreement (as a result of any exceptions
in the Parents Agreement to the covenants of Tele-Communications, Inc. and its
Controlled Affiliates thereunder or otherwise) or (B) following the termination
of the Parents Agreement.
(c) Prior to January 31, 1999, or for such shorter period as
TCI (or its Affiliates) is bound by a similar requirement (as such requirement
is in effect on the date hereof) under the Parents Agreement, whichever occurs
first, the Company will not make its distribution facilities available to any
▇▇▇▇ Operating Company or any of GTE Corporation, AT&T Corporation, MCI
Communications Corporation, British Telecommunications, plc, WorldCom, Inc.,
Cable & Wireless plc, LCI International Inc. or Frontier Corporation or any of
their respective Affiliates for high speed
- 48 -
data services without making its facilities similarly available to Sprint
Corporation; provided, however, (1) such facilities may be made available to
other third parties, including @Home, without such facilities being made
available to Sprint Corporation, and (2) in no event shall this requirement
apply (A) to the extent that a Controlled Affiliate (as defined in the Parents
Agreement) of Tele-Communications, Inc. would not be subject to a similar
restriction under the Parents Agreement (as a result of any exceptions in the
Parents Agreement to the covenants of Tele-Communications, Inc. and its
Controlled Affiliates thereunder or otherwise) or (B) following the termination
of the Parents Agreement.
(d) TCI represents and warrants to, and agrees with, Insight
that none of the foregoing restrictions will (1) subject to Section 10.4,
restrict the ability of Insight or its Affiliates (other than the Company) from
engaging in any of the activities specified in Sections 10.2(a), (b) and (c)
other than through the Company; or (2) restrict the Company or its Subsidiaries
from providing wireline backhaul and wireline transport of wireless
communications signals on arms length and customary terms.
10.3 Prohibited Cross-Interests.
(a) Each Member agrees that, during the term of this
Agreement, neither such Member nor any Affiliate of such Member shall, directly
or indirectly, acquire any interest in any business or in any Person if the
acquisition of such interest would cause the Company or any Subsidiary to be in
violation of any Ownership Restriction.
(b) If, during the term of this Agreement, there is a Formal
Determination that either Member's holding of a Membership Interest causes the
Company or any Subsidiary to be in violation of any Ownership Restriction, then
the following provisions of this Section 10.3(b) shall apply. For purposes of
this Section 10.3(b), a "Formal Determination" means (i) an agreement between
Insight and TCI, (ii) a written determination by the FCC (including a
determination by staff employees of the FCC acting under delegated authority),
regardless of whether such determination is subject to administrative or
judicial review, reconsideration, or appeal (except to the extent that, so long
as a stay of any enforcement action by the FCC against the Company or any
Subsidiary as a result of any such violation of an Ownership Restriction is
effective, the Member that caused the violation specifies that any such
determination will not constitute a Formal Determination during the pendency of
any review, reconsideration, or appeal), or (iii) a decision of any court of
competent jurisdiction, regardless of whether such decision is subject to
administrative or judicial review, reconsideration, or appeal (except to the
extent that, so long as a stay of any enforcement action by the FCC against the
Company or any Subsidiary as a result of any such violation of an Ownership
Restriction is effective, the Member that caused the violation specifies that
any such decision will not constitute a Formal Determination during the pendency
of any review, reconsideration, or appeal). Insight and TCI will use their
respective good faith efforts, after consultation with legal counsel, to reach
an agreement as to whether either Member's holding of a Membership Interest
causes the Company or any Subsidiary to be in violation of any Ownership
Restriction.
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(1) The Company will use reasonable efforts to
obtain a stay of any enforcement action by the FCC against the Company or any
Subsidiary as a result of any such violation of an Ownership Restriction (and
the unanimous vote of the Members shall be required for the Company to act
otherwise), and the Members will cooperate reasonably with the Company in such
efforts, to the extent necessary to prevent such violation from having a
material adverse effect on the Company and the Subsidiaries before it is cured.
For purposes of this Section 10.3(b), a material adverse effect on the Company
and the Subsidiaries includes the loss of any license or licenses issued by the
FCC that, in the aggregate, are material to the conduct of the business of the
Company and the Subsidiaries, the imposition of any fines or forfeitures that,
in the aggregate, are material in amount, and limitations on the ability of the
Company or any Subsidiary to conduct its business in the ordinary course
consistent with its past practices.
(2) The Company and the Members will cooperate
reasonably with each other and negotiate in good faith with the FCC to obtain a
determination by the FCC (including a determination by staff employees of the
FCC acting under delegated authority) that certain actions proposed to be taken
by a Member or its Affiliates would cure any such violation of an Ownership
Restriction. The actions proposed to be taken by a Member or its Affiliates to
cure such violation may be those that, in such Member's judgment, are least
detrimental to such Member and its Affiliates, and may include the divestiture
of any asset or the restructuring of any investment.
(3) If there is a Formal Determination that a
Member's holding of a Membership Interest causes the Company or any Subsidiary
to be in violation of any Ownership Restriction, (such Member, the "Curing
Member") agrees to take all actions reasonably necessary to cure any such
violation of an Ownership Restriction; provided, however, that:
(A) if the Company and the Members
receive a determination by the FCC (including a determination by staff employees
of the FCC acting under delegated authority) that certain actions proposed to be
taken by the Curing Member or its Affiliates would cure such violation, then, if
the Curing Member and its Affiliates take such actions, the Curing Member shall
not be required to take any other action under this Section 10.3(b) to cure such
violation until such time, if any, that there is a subsequent Formal
Determination that such actions did not cure such violation;
(B) The Curing Member shall not be required
to take any action to cure such violation prior to the time that such violation
would have a material adverse effect on the Company and the Subsidiaries; and
(C) The Curing Member shall not be required
to take any action to cure any violation that arose from any acquisition made by
the Company or any Subsidiary in violation of Section 10.3(c).
(4) The actions that the Curing Member may be
required to take pursuant to Section 10.3(b)(3), subject to the limitations
therein, shall include, to the extent necessary to cure
- 50 -
such violation, executing amendments to this Agreement to eliminate any right of
the Curing Member under this Agreement (other than its right to allocations of
income, its right to distributions, its rights under Section 7.5 in the case of
TCI as the Curing Member, its rights under Section 7.6, and its right to approve
any other action by the Company and the Subsidiaries if such action (A) in the
case of an action that does not uniquely affect either Member, such as an
acquisition or disposition of assets or a financing, would have a material
adverse economic effect on the Curing Member or (B) in the case of an action
that uniquely affects either Member, such as a transaction between the Company
and a Member or an Affiliate of a Member, would have an adverse economic effect
on the Curing Member).
(c) Neither Member will approve the acquisition, directly or
indirectly, by the Company or any Subsidiary of any interest in any business or
in any Person if such Member has actual knowledge that consummating such
acquisition would cause either Member or any Affiliate of either Member to be in
violation of any Ownership Restriction; provided that if the Managing Member
desires to cause the Company or a Subsidiary to acquire assets or an interest in
a business or any Person, and the Managing Member does not have actual knowledge
that such acquisition would cause the Company or a Subsidiary, either Member or
any Affiliate of either Member to be in violation of any Ownership Restriction,
then the Managing Member shall provide prior written notice to TCI of such
proposed acquisition at least 30 days prior to entering into a binding agreement
to effect such acquisition and if TCI notifies the Managing Member within
fifteen days of receiving such notice that such acquisition would cause the
Company or a Subsidiary or TCI to be in violation of any Ownership Restriction,
the Managing Member shall not proceed with such acquisition without first
complying with this Section 10.3(c) again, it being understood that if TCI does
not so notify the Managing Member within such fifteen day period then the
Managing Member shall be presumed not to have knowledge that such acquisition
would cause the Company or a Subsidiary, either Member or any Affiliate of
either Member to be in violation of any Ownership Restriction.
10.4 Limitations on Other Activities of the Members.
To the extent that Insight or a Controlled Affiliate of Insight
engages within the geographic portion of the State of Indiana that is located
below the bold line drawn on the map of the State of Indiana attached hereto as
Schedule IV in any of the activities specified in Sections 10.2(a), (b) or (c)
at a time when the Company is prohibited from engaging in such activity, other
than through the Company, for a reasonable period of time (not to exceed 120
days), after TCI (or its Affiliates) are no longer bound by the restrictive
terms of the Sprint PCS Partnership Agreement or the Parents Agreement, as
applicable to the restricted activity at issue, Insight (upon receipt of notice
from TCI of such fact and TCI's election on behalf of the Company in accordance
with this Section 10.4 to exercise its rights under this Section 10.4) and TCI
shall negotiate in good faith to provide the Company the opportunity to acquire
the business related to such activity from Insight or its appropriate Affiliate;
provided that if at such time such business has been discontinued or such assets
(or the equity interests in such Affiliate) have been sold or otherwise disposed
of, none of the parties shall have any further obligation to each other with
respect to any such acquisition opportunity. It is understood and agreed by
Insight and TCI that without limiting any other considerations
- 51 -
(including any necessary governmental or third party approvals), any such
acquisition by the Company shall be based upon the fair market value of the
business. To the extent Insight and TCI are unable for any reason to reach
agreement within such 120 day period referred to above, none of the parties
shall have any further obligation to each other with respect to any such
acquisition opportunity. TCI shall determine, acting in the best interests of
the Company, whether the Company shall exercise its rights under this Section
10.4 provided that TCI and Insight as part of reaching an agreement for the
Company to make such acquisition, shall also agree on any necessary capital
contributions and/or debt financing necessary to fund such acquisition by the
Company or any Subsidiary pursuant to this Section 10.4.
10.5 No Other Restrictions.
Except as specifically provided above in this Article 10, nothing in
this Agreement shall limit the ability of either Member, or any partner, member,
Affiliate, Controlled Affiliate, agent, or representative of either Member, to
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter created and whether or not competitive with or advanced by the
business of the Company. Neither the Company nor the other Member shall have any
rights in or to the income or profits derived therefrom, nor shall either Member
have any obligation to the other Member with respect to any such enterprise or
related transaction.
ARTICLE 11
DISSOLUTION AND LIQUIDATION OF COMPANY
11.1 Events of Dissolution.
The Company shall be dissolved upon the happening of any of the
following events:
(a) the failure of the Members to continue the Company in
accordance with the provisions of Section 5.4(a) after the resignation of the
Managing Member with the consent of TCI (it being confirmed, with reference to
Section 5.4(c), that the resignation of the Managing Member in violation of this
Agreement shall not cause a dissolution);
(b) the expiration of the term of the Company as set forth in
Section 2.4;
(c) an election to liquidate and dissolve the Company made by
a non-defaulting Member pursuant to Section 9.7(a)(2);
(d) the sale, exchange, involuntary conversion, or other
disposition or transfer of all or substantially all of the assets of the
Company;
(e) upon agreement of Insight and TCI;
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(f) the termination of the Contribution Agreement in
accordance with its terms prior to the Closing (including, without limitation,
pursuant to Section 10.1(e) of the Contribution Agreement); or
(g) subject to any provision of this Agreement that limits or
prevents dissolution, the happening of any event that, under applicable law,
causes the dissolution of a limited liability company.
11.2 Liquidation.
(a) Upon dissolution of the Company for any reason, the
Company shall immediately commence to wind up its affairs. A reasonable period
of time shall be allowed for the orderly termination of the Company business,
discharge of its liabilities, and distribution or liquidation of the remaining
assets so as to enable the Company to minimize the normal losses attendant to
the liquidation process.
(b) Liquidation of the assets of the Company shall be managed
on behalf of the Company by the "Liquidator," which shall be (1) if the Company
is being liquidated pursuant to Section 11.1(c), the non-defaulting Member, and
(2) in all other events, Insight or a liquidating trustee selected by Insight.
The Liquidator shall be responsible for soliciting offers to purchase the
entirety of the Company's assets (including equity interests in other Persons)
or portions or clusters of assets of the Company. The Liquidator shall afford
each Member an opportunity to offer to purchase any assets of the Company that
are offered for sale in connection with the liquidation of the Company to the
extent doing so would be consistent with the orderly liquidation of the Company.
(c) The Liquidator shall cause a full accounting of the assets
and liabilities of the Company to be taken and a statement thereof to be
furnished to each Member within thirty days after the distribution of all of the
assets of the Company.
(d) The property and assets of the Company and the proceeds
from the liquidation thereof shall be applied in the following order of
priority:
(1) first, to payment of the debts and
liabilities of the Company, in the order of priority provided by law (including
any loans by either Member to the Company) and payment of the expenses of
liquidation;
(2) second, to setting up of such reserves as
the Liquidator may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company or any obligation or liability not
then due and payable; provided, however, that any such reserve shall be paid
over by the Liquidator into a Company account or a liquidating trust account
established for such purpose, to be held in such account for the purpose of
disbursing such reserves in payment of
- 53 -
such liabilities, and, at the expiration of such holdback period as the
Liquidator shall deem advisable, to distribute the balance thereafter remaining
in the manner hereinafter provided; and
(3) finally, to payment to the Members, in
accordance with Section 4.1(b). The distributions pursuant to this Section
11.2(d)(3) shall, to the extent possible, be made prior to the later of the end
of the Fiscal Year in which the dissolution occurs or the ninetieth day after
the date of dissolution, or such other time period which may be permitted under
Treasury Regulations Section 1.704-1(b)(2)(ii)(b).
(e) If in the course of the liquidation and dissolution of the
Company pursuant to this Article 11, the Liquidator determines that a sale by
all the Members to any Person of their Membership Interests, instead of a sale
by the Company and the Subsidiaries of their respective assets, would more
efficiently effect the liquidation of the Members' economic interests in the
Company or would reduce negative tax consequences to the Members and the
Company, but would not adversely affect the rights and obligations of either
Member (including the tax consequences to either Member), then each Member
agrees to sell its Membership Interest to such Person, and the Liquidator shall
have the authority, pursuant to the power of attorney granted in Section
16.7(b), to execute, acknowledge, deliver, swear to, file, and record all
agreements, instruments, and other documents that may be necessary or
appropriate to effect the sale of such Member's Membership Interest.
(f) Following the dissolution of the Company pursuant to
Section 11.1, the Members will use commercially reasonable efforts to structure
the liquidation of the Company in a manner that minimizes negative tax
consequences to the Members and the Company to the extent doing so would not
materially adversely affect either Member (except to the extent such Member is
adequately compensated by the other Member for such adverse effect). Any
structure agreed to by the Members pursuant to this Section 11.2(f) shall
supersede the other provisions of this Article 11 to the extent it is
inconsistent with such other provisions, but nothing in this Section 11.2(f)
shall modify or otherwise affect the other provisions of this Article 11 if the
Members are unable to agree on such a structure.
11.3 Distribution in Kind.
The Company shall not distribute any non-cash asset to either Member
without the consent of each Member. Any asset distributed in kind to one or more
Members shall first be valued at its fair market value to determine the gain or
loss used in determining Net Profit or Net Loss that would have resulted if such
asset were sold for such value, such gain or loss shall then be allocated
pursuant to Article 4, and the Members' Capital Accounts shall be adjusted to
reflect such gain or loss. The amount distributed and charged to the Capital
Account of each Member receiving an interest in such distributed asset shall be
the fair market value of such interest (net of any liability secured by such
asset that such Member assumes or takes subject to). The fair market value of
any asset distributed in kind in connection with the liquidation of the Company
shall be determined by an independent
- 54 -
appraiser (any such appraiser must be nationally recognized as an expert in
valuing the type of asset involved) selected by the Liquidator.
11.4 No Action for Dissolution.
The Members acknowledge that irreparable damage would be done to the
goodwill and reputation of the Company if either Member should bring an action
in court to dissolve the Company under circumstances where dissolution is not
required by Section 11.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of the
Membership Interests of both Members. Accordingly, except where liquidation and
dissolution are required by Section 11.1, each Member hereby waives and
renounces its right to initiate legal action to seek dissolution or to seek the
appointment of a receiver or trustee to liquidate the Company.
11.5 No Further Claim.
Upon dissolution, each Member shall look solely to the assets of the
Company for the return of its investment, and if the property of the Company
remaining after payment or discharge of the debts and liabilities of the
Company, including debts and liabilities owed to one or more of the Members, is
insufficient to return the aggregate capital contributions of a Member, no
Member shall have any recourse against any other Member.
ARTICLE 12
INDEMNIFICATION
12.1 General.
The Company shall indemnify, defend, and hold harmless each Member and
their respective members, partners, officers, directors, shareholders,
employees, and agents, the employees, officers, and agents of the Company, and
the members of the Management Committee (all indemnified persons being referred
to as "Indemnified Persons" for purposes of this Article 12), from any
liability, loss, or damage incurred by the Indemnified Person by reason of any
act performed or omitted to be performed by the Indemnified Person in connection
with the business of the Company, including costs and attorneys' fees (which
attorneys' fees may be paid as incurred) and any amounts expended in the
settlement of any claims of liability, loss, or damage; provided, however, that,
if the liability, loss, damage, or claim arises out of any action or inaction of
an Indemnified Person, indemnification under this Section 12.1 shall not be
available if the action or inaction is finally adjudicated to have constituted
fraud, gross negligence, breach of fiduciary duty (which shall not be construed
to encompass mistakes in judgment or any breach of any Indemnified Person's duty
of care that did not constitute gross negligence), or willful misconduct by the
Indemnified Person; and provided, further, however, that indemnification under
this Section 12.1 shall be recoverable only from the assets of the Company and
not from any assets of the Members. The Company may pay
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for insurance covering liability of the Indemnified Persons for negligence in
operation of the Company's affairs.
12.2 Exculpation.
No Indemnified Person shall be liable, in damages or otherwise, to the
Company or to either Member for any loss that arises out of any act performed or
omitted to be performed by it or him pursuant to the authority granted by this
Agreement unless the conduct of the Indemnified Person is finally adjudicated to
have constituted fraud, gross negligence, breach of fiduciary duty (which shall
not be construed to encompass mistakes in judgment or any breach of any
Indemnified Person's duty of care that did not constitute gross negligence), or
willful misconduct by such Indemnified Person.
12.3 Persons Entitled to Indemnity.
Any Person who is within the definition of "Indemnified Person" at the
time of any action or inaction in connection with the business of the Company
shall be entitled to the benefits of this Article 12 as an "Indemnified Person"
with respect thereto, regardless of whether such Person continues to be within
the definition of "Indemnified Person" at the time of his or its claim for
indemnification or exculpation hereunder.
12.4 Procedure Agreements.
The Company may enter into agreements with any of its Members,
employees, officers, and agents, any of the officers, directors, shareholders,
employees, and agents of the Managing Member, and any member of the Management
Committee or other Indemnified Person, setting forth procedures for implementing
the indemnities provided in this Article 12.
ARTICLE 13
BOOKS, RECORDS, ACCOUNTING, AND REPORTS
13.1 Books and Records.
The Company shall maintain at its principal office all of the
following:
(a) A current list of the full name and last known business or
residence address of each Member together with the Capital Contributions and
Membership Interest of each Member;
(b) A copy of the Certificate of Formation, this Agreement,
and any and all amendments to either thereof, together with executed copies of
any powers of attorney pursuant to which any certificate or amendment has been
executed;
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(c) Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the six most recent taxable
years;
(d) The audited financial statements of the Company for the
six most recent Fiscal Years; and
(e) The Company's books and records for at least the current
and past three Fiscal Years.
13.2 Delivery to Member and Inspection.
(a) Upon the request of a Member, the Company shall promptly
deliver to the requesting Member, at the expense of the Company, a copy of the
information required to be maintained by Section 13.1 except for Section
13.1(e).
(b) Each Member, or its duly authorized representative, has
the right, upon reasonable request, to inspect and copy during normal business
hours any of the Company records.
13.3 Annual Statements.
(a) The Company shall cause to be prepared for each Member at
least annually, at Company expense, audited financial statements of the Company
and a consolidated audited financial statement for the Company and the
Subsidiaries (other than any Subsidiary the financial statements of which
cannot, under generally accepted accounting principles, be consolidated with the
financial statements of the Company), along with supplemental information for
the Company and each Subsidiary included in the consolidated financial
statements, all prepared in accordance with generally accepted accounting
principles and accompanied by a report thereon containing the opinion of Ernst &
Young LLP or other nationally recognized accounting firm chosen by the
Management Committee. The financial statements will include a balance sheet,
statement of income or loss, statement of cash flows, and statement of Members'
equity. The supplemental information will consist of a consolidating balance
sheet and a consolidating statement of operations and Members' equity for the
preceding Fiscal Year. The Company shall distribute the financial statements or
portions thereof to each Member as follows:
(1) the Company shall distribute to each Member
a statement setting forth the net income or loss of the Company for each Fiscal
Year within forty-five days after the close of such Fiscal Year;
(2) the Company shall distribute to each Member
the balance sheet, statement of income or loss, statement of cash flows, and
statement of Members' equity to be included in the financial statements for each
Fiscal Year within forty-five days after the close of such Fiscal Year;
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(3) the Company shall distribute to each Member
the complete audited financial statements for each Fiscal Year as soon as
practicable after the close of such Fiscal Year and, in any event, by March 15
of the year following the close of such Fiscal Year.
(b) The Company shall have prepared at least annually, at
Company expense, Company information necessary for the preparation of each
Member's federal and state income tax returns. The Company shall send the
information described in this paragraph to each Member within ninety days after
the end of each Fiscal Year and shall use commercially reasonable efforts to
send such information to each Member within seventy-five days after the end of
each Fiscal Year.
(c) The Company shall also cause to be distributed to each
Member, within ten days after delivery to the Company, any audited financial
statements that are prepared with respect to any Subsidiary the financial
statements of which are not consolidated with the financial statements of the
Company.
(d) The Company, shall distribute to each Member, promptly
after they become available, copies of the Company's federal, state, and local
income tax or information returns for each taxable year.
13.4 Quarterly Financial Statements.
At the close of each of the first three quarters of any Fiscal Year,
the Company shall cause to be distributed to each Member a quarterly report
covering each calendar quarter of the operations of the Company and each
Subsidiary, consisting of unaudited financial statements (comprising a balance
sheet, a statement of income or loss, and a statement of cash flows), and a
statement of other pertinent information regarding the Company and each such
Subsidiary and their activities. The Company shall cause copies of the
statements and other pertinent information (including a summarized statement of
operations data of the Company that complies with the requirements of APB
Opinion No. 18 and Rule 4-08(g) of Regulation S-X under the Securities Act) to
be distributed to each Member within thirty days after the close of the calendar
quarter to which the statements relate. The Company shall distribute to each
Member (a) a preliminary draft of a statement setting forth the net income or
loss of the Company for each calendar quarter within twenty-one days after the
close of such calendar quarter, and (b) a final statement setting forth the net
income or loss of the Company for each calendar quarter within thirty days after
the close of such calendar quarter. The Company shall also cause to be
distributed to each Member, within ten days after delivery to the Company, any
quarterly report that is prepared with respect to any Subsidiary the operating
results of which are not included in the quarterly report of the Company.
13.5 Monthly Statements.
The Company shall cause to be distributed to each Member a monthly
report covering each calendar month of the operations of the Company and each
Subsidiary, consisting of unaudited statements of income and loss for the
Company and each Subsidiary. The Company shall cause
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copies of the statements to be distributed to each Member within thirty days
after the close of the calendar month covered by such report. The Company shall
also cause to be distributed to each Member, within ten days after delivery to
the Company, any monthly report that is prepared with respect to any Subsidiary
the operating results of which are not included in the monthly report of the
Company. In addition, the Company shall deliver to each Member within fifteen
calendar days after each month end, a report detailing the number of homes
passed by each cable television system owned by the Company, the number of
equivalent basic subscribers served by each such system and the number of
premium subscribers served by each such system (on a premium service-by-service
basis), together with such other operating statistics as may be reasonably
requested by a Member in reasonable advance.
13.6 Operating and Capital Expenditure Budgets.
After consultation with TCI, commencing with the first Fiscal Year
beginning after the Closing, Insight shall cause to be prepared and distributed
to each Member operating and capital expenditure budgets for the Company for
each Fiscal Year.
13.7 Other Information.
The Company shall provide to each Member any other information and
reports relating to any cable television systems or other businesses owned by,
and the financial condition of, the Company, each Subsidiary, and any other
Person in which the Company owns, directly or indirectly, an equity interest,
the Member may reasonably request. The Company shall distribute to each Member,
promptly after the receipt thereof by the Company, any financial or other
information with respect to any Person in which the Company owns, directly or
indirectly, an equity interest, but which is not a Subsidiary.
13.8 Tax Matters.
The Company shall be treated as a partnership for federal and state
income tax and franchise tax purposes. The Company, at Company expense, shall
prepare and timely file with the appropriate authorities all income tax returns
for the Company required to be filed by the Company.
13.9 Other Filings.
The Company, at Company expense, shall also prepare and timely file,
with appropriate federal and state regulatory and administrative bodies, all
reports required to be filed by the Company with those entities under then
current applicable laws, rules, and regulations. The reports shall be prepared
on the accounting or reporting basis required by the regulatory bodies. Upon
written request, each Member shall be provided with a copy of any of the reports
without expense to the requesting Member.
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13.10 Non-Disclosure.
Each Member agrees that, except as otherwise consented to by the other
Member, all non-public information furnished to it or to which it has access
pursuant to this Agreement will be kept confidential and will not be disclosed
by such Member (it being agreed that the standard each Member shall adhere to is
to use the same degree of care it would use for its own confidential
information), or by any of its agents, representatives, or employees, in any
manner whatsoever, in whole or in part, except that:
(a) each Member shall be permitted to disclose such
information to those of its agents, representatives, and employees who need to
be familiar with such information in connection with such Member's investment in
the Company,
(b) each Member shall be permitted to disclose such
information to its Affiliates,
(c) each Member shall be permitted to disclose information to
the extent required by law, including federal or state securities laws or
regulations, or by the rules and regulations of any stock exchange or
association on which securities of such Member or any of its Affiliates are
traded, so long as such Member shall have first afforded the Company with a
reasonable opportunity to contest the necessity of disclosing such information,
(d) each Member shall be permitted to disclose information to
the extent necessary for the enforcement of any right of such Member arising
under this Agreement,
(e) each Member shall be permitted to disclose information to
a permitted Transferee or Successor, so long as (1) such Member shall first have
provided to the other Member written notice thereof and of the identity of the
Person to whom the disclosure is to be made and (2) such Person agrees (in a
writing which provides the Company with an independent right of enforcement) to
be bound by the provisions of this Section 13.10,
(f) each Member shall be permitted to disclose information
that is or becomes generally available to the public other than as a result of a
disclosure by such Member, its agents, representatives, or employees, and
(g) each Member shall be permitted to disclose information
that becomes available to such Member on a nonconfidential basis from a source
(other than the Company, any other Member, or their respective agents,
representatives, and employees) that, to the best of such Member's knowledge, is
not prohibited from disclosing such information to such Member by a legal,
contractual, or fiduciary obligation to the Company or any other Member.
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ARTICLE 14
REPRESENTATIONS BY THE MEMBERS
Each Member represents and warrants to, and agrees with, the other
Member and the Company as follows:
14.1 Investment Intent.
It is acquiring its Membership Interest with the intent of holding the
same for investment for its own account and without the intent or a view to
participating directly or indirectly in, or for resale in connection with, any
distribution of such Membership Interest within the meaning of the Securities
Act or any applicable state securities laws, and it does not intend to divide
its participation with others, nor to resell, assign, or otherwise dispose of
all or any part of its Membership Interest. In making such representation, each
Member acknowledges that a purchase now with an intent to resell by reason of
any foreseeable specific contingency, some predetermined event, or an
anticipated change in market value or in the condition of the Company would
represent a purchase with an intent inconsistent with the foregoing
representation.
14.2 Securities Regulation.
(a) It acknowledges and agrees that the Membership Interest is
being issued and sold in reliance on the exemption from registration contained
in Section 4(2) of the Securities Act and exemptions contained in applicable
state securities laws, and that it cannot and will not be sold or transferred
except in a transaction that is exempt under the Securities Act and those state
acts or pursuant to an effective registration statement under those acts or in a
transaction that is otherwise in compliance with the Securities Act and those
state acts.
(b) It understands that it has no contract right for the
registration under the Securities Act of the Membership Interest for public sale
and that, unless such Membership Interest is registered or an exemption from
registration is available, such Membership Interest may be required to be held
indefinitely.
14.3 Knowledge and Experience.
It has such knowledge and experience in financial, tax, and business
matters as to enable it to evaluate the merits and risks of its investment in
the Company and to make an informed investment decision with respect thereto.
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14.4 Economic Risk.
It is able to bear the economic risk of an investment in its
Membership Interest.
14.5 Binding Agreement.
This Agreement is and will remain its valid and binding agreement,
enforceable in accordance with its terms (subject, as to the enforcement of
remedies, to any applicable bankruptcy, insolvency, or other laws affecting the
enforcement of creditor's rights).
14.6 Tax Position.
Unless it provides prior written notice to the Company, it will not
take a position on its federal income tax return, on any claim for refund, or in
any administrative or legal proceedings that is inconsistent with any
information return filed by the Company or with the provisions of this
Agreement.
14.7 Information.
It has received all documents, books, and records pertaining to an
investment in the Company requested by it. It has had a reasonable opportunity
to ask questions of and receive answers concerning the Company, and all such
questions have been answered to its satisfaction.
ARTICLE 15
AMENDMENTS AND WAIVERS
15.1 Amendments to Operating Agreement.
(a) This Agreement may only be modified or amended with the
consent of Insight and TCI.
(b) The Company shall prepare and file any amendment to the
Certificate of Formation that may be required to be filed under the Act as a
consequence of any amendment to this Agreement.
15.2 Waivers.
The observance or performance of any term or provision of this
Agreement may be waived (either generally or in a particular instance, and
either retroactively or prospectively) by the party entitled to the benefits of
such term or provision.
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ARTICLE 16
MISCELLANEOUS
16.1 Programming and Discounts.
(a) General. Subject to Section 16.1(b) and any other
particular arrangements the Members may agree to with respect to the following,
each Member will use commercially reasonable efforts to make all of the
services, programming and equipment discounts available to such Member available
to the Company.
(b) @Home.
(1) The Members and the Company agree that,
subject to the other provisions of this Section 16.1(b) and only so long as
controlled affiliates (as used in this Section 16.1, "controlled affiliate" has
the meaning given to such term in the @Home Distribution Agreement) of a TCI
Cable Parent continue to be bound by a similar requirement, @Home will be the
exclusive provider of Exclusive Internet Services over the cable plant and
equipment of the TCI Systems and that the TCI Systems will continue to be bound
by the @Home Distribution Agreement as if such TCI Systems were "controlled
affiliates" of a TCI Cable Parent with respect to the distribution and delivery
of Exclusive Internet Services in accordance with the @Home Distribution
Agreement. In furtherance of the foregoing, subject to the other provisions of
this Section 16.1(b) and only so long as controlled affiliates of a TCI Cable
Parent continue to be bound by a similar requirement, the Company and the
Managing Member each agree that it will not provide or distribute, and will not
permit any Person other than @Home and its controlled affiliates to provide or
distribute, Exclusive Internet Services using the cable plant and equipment of
the TCI Systems, in each case without the prior written consent of TCI. The
Members and the Company acknowledge and agree that the foregoing limitations
will not be applicable to the Company's provision over the TCI Systems of other
Internet Services which do not constitute Exclusive Internet Services (including
all Internet Services which are listed as exceptions to the definition of the
term "Restricted Business" in the @Home Distribution Agreement), and with
respect to those Internet Services which do not constitute Exclusive Internet
Services, the Managing Member shall be entitled to make all determinations in
respect of the provision of such Internet Services, subject to the provisions of
this Agreement. The Members and the Company also acknowledge and agree that the
foregoing limitations are also not applicable to the Company's provision over
the Company's cable television systems other than the TCI Systems (such other
systems, the "Non-TCI Systems") of any Internet Services, whether or not they
would constitute Exclusive Internet Services with respect to the TCI Systems in
accordance with the @Home Distribution Agreement, and do not limit the right of
the Company and the Managing Member to manage and operate the Non-TCI Systems as
the Company and the Managing Member determine (but subject to the terms of this
Agreement and the Management Agreement). Without limiting the preceding
sentence, subject to the other provisions of this Section 16.1(b), the parties
agree as follows: (A) the Company and the Managing Member
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agree that they will: (1) manage and operate (and cause the manager under the
Management Agreement to manage and operate) the TCI Systems in accordance with
the terms and conditions set forth in the @Home Distribution Agreement and in
such a manner that the activities and businesses engaged in by the TCI Systems
will not violate or be in contravention of the Cable Parent Exclusivity
Provisions, or cause any TCI Cable Parent or any of its controlled affiliates to
be in violation of such Cable Parent Exclusivity Provisions, (2) provide to
@Home and its representatives such access to the cable plant and equipment of
the TCI Systems as is required in order to satisfy the TCI Cable Parents'
obligations under the @Home Distribution Agreement in respect of such TCI
Systems and as is reasonably necessary in order to distribute the @Home Service
over the cable plant and equipment of such TCI Systems, (3) cooperate with
@Home, TCI Cable Parent and their respective controlled affiliates in order to
schedule and coordinate @Home's roll-out of the @Home Service to the TCI Systems
with the upgrade of the physical cable plant and equipment of such TCI Systems,
including, without limitation, (x) providing the TCI Cable Parent and @Home with
information and periodic updates as to upgrade schedules, and (y) entering into
LCO Agreements (as defined in the @Home Distribution Agreement) in respect of
each TCI System upon the commencement of the offering of the @Home Service in
such TCI System, and (4) cooperate with the TCI Cable Parent and @Home with
respect to the operational matters relating to the distribution of the @Home
Service, including, without limitation, pricing, the programming of the Local
Area (as defined in the @Home Distribution Agreement), billing, customer service
and service offerings; and (B) (1) with respect to the timing and implementation
of Exclusive Internet Services over the TCI Systems, the Managing Member shall
consult and cooperate with the TCI Cable Parent in order to coordinate the
launch of the @Home Service over the TCI Systems as efficiently and
expeditiously as practical and (2) the TCI Cable Parent may disclose to @Home
information relating to the upgrade plans for the TCI Systems for the purpose of
coordinating the @Home build-out and the launch of the @Home Service in such
systems. Subject to the Company's and the Managing Member's compliance with the
foregoing, the TCI Cable Parent agrees that it will use its commercially
reasonable efforts to obtain for the benefit of the TCI Systems the economic and
other benefits available to a controlled affiliate of a TCI Cable Parent under
the @Home Distribution Agreement, on the same basis as, and for so long as, such
benefits are available to other controlled affiliates of the TCI Cable Parent,
including, but not limited to, the benefits available under the MFN Provision
(as defined in the @Home Distribution Agreement) and the ability to purchase
Ancillary Services (as defined in the @Home Distribution Agreement) from @Home
for the TCI Systems to the extent provided in the @Home Distribution Agreement
and as are reasonably necessary to the distribution of the Exclusive Internet
Services on the TCI Systems. TCI's obligations under the foregoing sentence will
terminate if the Company exercises its option set forth below to terminate its
obligation to manage the TCI Systems in accordance with the terms of the @Home
Distribution Agreement or if the Company enters into a separate distribution
agreement with @Home that covers the TCI Systems. In the event the
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@Home Distribution Agreement is amended or modified in such a way as would
reasonably be expected to cause the terms and conditions of the Company's
distribution of the @Home Service over the TCI Systems to be materially more
onerous to the Company than as provided in the @Home Distribution Agreement as
in effect on the date hereof, the TCI Cable Parent shall promptly notify the
Company and the Company shall then have the option to terminate its obligation
to manage the TCI Systems in accordance with the terms of the @Home Distribution
Agreement; provided that the Company's agreement not to provide or distribute,
or permit any Person to provide or distribute, any Exclusive Internet Services
using the cable plant and equipment of the TCI Systems, other than the @Home
Service, shall survive such termination. No amendment to the @Home Distribution
Agreement shall be deemed to cause the terms and conditions of the Company's
distribution of the @Home Service over the TCI Systems to be materially more
onerous to the Company (x) to the extent that such amendment or modification
does not result in such distribution being more onerous than that provided under
any separate agreement between the Company and @Home relating to the
distribution of the @Home Service to the Non-TCI Systems or (y) if the Company
consents to an amendment or modification of any separate agreement between the
Company and @Home in respect of the distribution of the @Home Service to the
Non-TCI Systems, which amendment or modification has substantially the same
effects as the proposed amendment or modification of the @Home Distribution
Agreement. For so long as the TCI Systems are included under the @Home
Distribution Agreement, to the extent the @Home Distribution Agreement is
modified in any respect (or any other event occurs) that would increase the
benefits available to (or reduces the obligations of) a controlled affiliate of
a TCI Cable Parent, the TCI Cable Parent will use its commercially reasonable
efforts to obtain for the benefit of the TCI Systems such increased benefits,
and to the extent the obligations are reduced, the TCI Cable Parent will use its
commercially reasonable efforts to cause such reduced obligations to be
applicable to the TCI Systems, in each case on the same basis as is applicable
to controlled affiliates of the TCI Cable Parent other than the TCI Systems. For
purposes of this Section 16.1(b), the TCI Systems shall, notwithstanding their
contribution to the Company, continue to be deemed to be controlled affiliates
of a TCI Cable Parent for purposes of determining the Company's satisfaction of
its obligations to operate and manage the TCI Systems in accordance with the
@Home Distribution Agreement.
(2) In addition, the Company and the Managing
Member agree to use their commercially reasonable efforts to enter into prior to
the Closing a distribution agreement for the @Home Service for the cable
television systems contributed to the Company by Insight; provided that such
obligation shall survive the Closing if such distribution agreement is not
entered into prior thereto. To the extent that TCI is not able to include the
TCI Systems under the @Home Distribution Agreement following the Closing, the
Company may enter into a distribution agreement with @Home that covers the TCI
Systems and terminate its obligation to manage the TCI Systems in accordance
with the @Home Distribution Agreement; provided, that such agreement shall be
approved by TCI as it relates to the TCI Systems and provided further that the
Company's obligations under this Section 16.1(b) to (i) have @Home be the
exclusive provider of Exclusive Internet Services over the cable plant and
equipment of the TCI Systems, (ii) not provide or distribute or permit any other
Person to provide or distribute Exclusive Internet Services using the cable
plant and equipment of the TCI Systems and (iii) manage the TCI Systems in such
a manner that the activities and business engaged in by them will not violate or
be in contravention of the Cable Parent Exclusivity Provisions will not cause
any TCI Cable Parent or its controlled affiliates to be in violation of such
provisions will continue notwithstanding such separate agreement being entered
into.
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16.2 Cost Sharing; Reimbursement.
If the Closing occurs, the Company shall reimburse each Member for the
out-of-pocket costs and expenses reasonably incurred by such Member (whether
incurred before or after the formation of the Company) in connection with the
formation, organization, and capitalization of the Company (including costs and
expenses incurred in arranging any proposed or consummated financing); provided,
however, such costs and expenses to be reimbursed by the Company do not include
legal fees or other expenses or costs of the Members incurred in connection with
the preparation, execution, delivery and performance of this Agreement, the
Contribution Agreement or any related agreements (other than the financing
agreements of the Company) and except as specifically provided for in the
Contribution Agreement. If the Contribution Agreement is terminated prior to the
Closing, the Company shall not reimburse either Member for any costs, which
shall be borne by the Members as provided in the Contribution Agreement.
16.3 Additional Documents.
At any time and from time to time after the date of this Agreement,
upon the request of the Company or the other Member, each Member shall do and
perform, or cause to be done and performed, all such additional acts and deeds,
and shall execute, acknowledge, and deliver, or cause to be executed,
acknowledged, and delivered, all such additional instruments and documents, as
may be required to best effectuate the purposes and intent of this Agreement.
16.4 Inspection.
Each Member shall have the right at reasonable times to inspect the
books and records of the Company.
16.5 General.
This Agreement: (a) shall be binding on the executors, administrators,
estates, heirs, and legal successors of the Members; (b) be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflicts of law principles thereunder; (c) may be executed in more than one
counterpart as of the day and year first above written; and (d) except for the
Contribution Agreement and the other agreements expressly referred to herein to
which the Members or their Affiliates are parties, contains the entire agreement
between the Members as to the subject matter of this Agreement. The waiver of
any of the provisions, terms, or conditions contained in this Agreement shall
not be considered as a waiver of any of the other provisions, terms, or
conditions of this Agreement.
16.6 Notices, Etc.
All notices and other communications required or permitted hereunder
shall be in writing and shall be deemed effectively given or delivered upon
personal delivery, confirmation of telex or
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telecopy, or receipt (which may be evidenced by a return receipt if sent by
registered mail), addressed (a) if to either Member, at the address of such
Member set forth on Schedule I or at such other address as such Member shall
have furnished to the Company in writing, (b) if to the Company, at ▇▇▇ ▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇.
16.7 Execution of Papers.
(a) The Members agree to execute such instruments, documents,
and papers as the Management Committee deems necessary or appropriate to carry
out the intent of this Agreement.
(b) Each Member, including each additional and substituted
Member, by the execution of this Agreement, irrevocably constitutes and appoints
the Liquidator its true and lawful attorney-in-fact with full power and
authority in its name, place, and stead to execute, acknowledge, deliver, swear
to, file, and record all agreements, instruments, and other documents that may
be necessary or appropriate to effect the sale of such Member's Membership
Interest pursuant to Section 11.2(e).
(c) The power of attorney granted pursuant to Section 16.7(b)
shall be deemed to be a power coupled with an interest, in recognition of the
fact that each of the Members under this Agreement will be relying upon the
power of the Liquidator to act as contemplated by this Agreement in any filing
and other action by it on behalf of the Company, and shall survive the
bankruptcy, death, adjudication of incompetence or insanity, or dissolution of
any Person hereby giving such powers and the transfer or assignment of all or
any part of such Person's Membership Interest; provided, however, that in the
event of a Transfer by a Member, the powers of attorney given by the transferor
shall survive such Transfer only until such time as the Transferee or Successor
shall have been admitted to the Company as a substituted Member and all required
documents and instruments shall have been duly executed, filed, and recorded to
effect such substitution.
(d) Each Member agrees to be bound by any actions taken by the
Liquidator acting in good faith pursuant to the power of attorney granted
pursuant to Section 16.7(b) that are consistent with and subject to the
provisions of this Agreement and hereby waives any and all defenses that may be
available to contest, negate, or disaffirm any action of the Liquidator taken in
good faith under the power of attorney granted pursuant to Section 16.7(b) that
are consistent with and subject to the provisions of this Agreement.
16.8 Attorneys' Fees.
In the event of commencement of suit or other action by either party
to enforce the provisions of this Agreement, the prevailing party shall be
entitled to receive such attorneys' fees and costs as the court or other forum
in which such suit or action is adjudicated may determine reasonable in addition
to all other relief granted.
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16.9 No Third-Party Beneficiaries.
This Agreement is not intended to, and shall not be construed to,
create any right enforceable by any Person not a party hereto, including any
partner or member of either Member or any creditor of the Company or of either
of the Members.
16.10 Headings.
The headings herein are included for ease of reference only and shall
not control or affect the meaning or construction of the provisions of this
Agreement.
16.11 Board Approval.
Subject to the other provisions of this Section 16.11, the obligations
of TCI and TCI Communications, Inc. under this Agreement are subject to each
obtaining membership, board of director or partnership approval, as applicable,
with respect to this Agreement. In this regard, reference is made to Section
10.1(e) of the Contribution Agreement and Insight's right to terminate the
Contribution Agreement as provided therein upon the failure of TCI and TCI
Communications, Inc. to obtain such approvals on or before the June 1, 1998, and
reference is also made to Section 11.1(f) of this Agreement in the event of any
such termination of the Contribution Agreement. Upon notification to Insight
prior to the dissolution of the Company that the obligations of TCI and TCI
Communications, Inc. under this Agreement are no longer subject to obtaining
such approvals, the first sentence of this Section 16.11 shall automatically be
of no further force and effect and the obligations of TCI and TCI Communications
under this Agreement shall no longer be subject to obtaining any such approvals.
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IN WITNESS WHEREOF, the Members have hereunto set their hands as of
the day first heretofore mentioned.
INSIGHT COMMUNICATIONS COMPANY,
L.P.
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general
partner
By:
-----------------------------------------------
Name:
Title:
TCI OF INDIANA HOLDINGS, LLC
By: TCI of Indiana, Inc., its managing member
By:
-----------------------------------------------
Name:
Title:
FOR PURPOSES OF SECTION 8.3, SECTION
10.4 AND SECTION 16.1(b) ONLY:
TCI Communications, Inc.
By:
-----------------------------------------------
Name:
Title:
DC01/169511-19 //
EXHIBIT A
TO
OPERATING AGREEMENT
MANAGEMENT AGREEMENT
SCHEDULE I
TO
OPERATING AGREEMENT
ADDRESSES OF THE MEMBERS
Insight Communications Company, L.P.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
TCI of Indiana Holdings, LLC
c/o Tele-Communications, Inc.
Terrace Tower II
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SCHEDULE II
TO
OPERATING AGREEMENT
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS; PERCENTAGE INTEREST
I. Formation Contributions Pursuant to Section 3.1(a):
Insight $100
TCI $100
II. Value of Assets Contributed Pursuant to Section 3.1(b):
The aggregate gross fair market value of the assets to be contributed by the
Members at Closing is as follows, which values are subject to adjustment as
specified below in paragraph IV:
Insight $ 327,851,078
TCI 310,851,078
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$ 638,702,156
TCI and Insight will negotiate in good faith to reach agreement prior to Closing
on the allocation of the aggregate gross fair market value among the assets to
be contributed by them to the Company. If TCI and Insight are unable to reach
such agreement prior to Closing, then promptly following Closing they will
mutually agree on an appraiser to be hired by the Company to allocate the
aggregate gross fair market values among the assets contributed by them. Neither
TCI nor Insight will take a position that is inconsistent with the allocations
determined by such appraiser. With respect to any of the assets contributed to
the Company by Insight pursuant to Section 3.1(b) that were acquired by Insight
from TCI pursuant to the Exchange Agreement entered into by Insight and TCI on
the date hereof, Insight and TCI agree to use the allocations determined by any
appraiser hired by Insight and TCI in connection with the Exchange Agreement.
III. Members' Debt Assumed by the Company:
The aggregate amount of indebtedness to be assumed by the Company from the
Members at Closing is as follows, which amounts are subject to adjustment as
specified below in paragraph IV:
Insight $ 234,500,000
TCI 217,500,000
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$ 452,000,000
IV. Adjustments to Value of Assets and Amount of Debt Assumed:
If at Closing the estimated TCI Closing Adjustment or Insight Closing Adjustment
(each as defined in the Contribution Agreement) is to be paid to the Company,
the aggregate gross fair market value of the assets to be contributed by the
Member(s) paying such adjustment as set forth above in paragraph II shall be
decreased by the amount of such Closing Adjustment and the amount of
indebtedness to be assumed by the Company from such Member(s) at Closing as set
forth above in paragraph III shall be decreased by the amount of such Closing
Adjustment.
If at Closing the estimated TCI Closing Adjustment or Insight Closing Adjustment
is to be paid by the Company, the aggregate gross fair market value of the
assets to be contributed by the Member(s) entitled to such adjustment as set
forth above in paragraph II shall be increased by the amount of such Closing
Adjustment and the amount of indebtedness to be assumed by the Company from such
Member(s) at Closing as set forth above in paragraph III shall be increased by
the amount of such Closing Adjustment.
V. Capital Accounts of Members Immediately After Closing:
The Capital Accounts of the Members immediately after the Closing, based on the
net fair market value of the assets contributed by the Members, are:
Insight $ 93,351,078
TCI 93,351,078
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$186,702,156
VI. Percentage Interests of Members:
The Percentage Interests of the Members immediately after the Closing are:
Insight 50%
TCI 50%
SCHEDULE III
TO
OPERATING AGREEMENT
INITIAL MEMBERS OF THE MANAGEMENT COMMITTEE
1. Members designated by Insight pursuant to Section 7.2(a):
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2. Members designated by TCI pursuant to Section 7.2(a):
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SCHEDULE IV
TO
OPERATING AGREEMENT
RESTRICTED SYSTEMS
See Attached Map.