2000 AMENDED AND RESTATED
OPERATING AGREEMENT
OF
TW HOLDINGS, L.L.C.
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TABLE OF CONTENTS
Page
ARTICLE 1: FORMATION AND DEFINITIONS......................................2
1.1 Formation....................................................2
1.2 Company Name.................................................2
1.3 Office and Agent.............................................2
1.4 Foreign Qualification........................................2
1.5 Term.........................................................2
1.6 Definitions..................................................2
ARTICLE 2: PURPOSES AND POWERS.............................................10
2.1 Purpose.....................................................10
2.2 Powers......................................................10
ARTICLE 3: MEMBERS; MANAGEMENT; VOTING.....................................11
3.1 Admission of Transferees as Members.........................11
3.2 Managing Directors..........................................12
3.3 Board Vote..................................................12
3.4 Unanimous Vote..............................................12
3.5 Expense Reimbursement; Indemnification......................12
3.6 No Resignation or Retirement................................13
ARTICLE 4: CAPITAL AND CAPITAL ACCOUNTS..................................13
4.1 Maintenance.................................................13
4.2 Revaluation.................................................14
4.3 Contributions; Ownership Interests..........................14
4.4 Additional Contributions....................................14
4.5 No Withdrawal of Capital....................................15
4.6 No Interest on Capital......................................15
4.7 No Drawing Accounts.........................................15
4.8 Transfers of Capital Accounts...............................15
ARTICLE 5: ALLOCATION OF PROFITS AND LOSSES............................15
5.1 Profits and Losses..........................................15
5.2 General Allocation Rule.....................................15
5.3 Exception...................................................16
5.4 Tax Allocations.............................................16
5.5 Transfer....................................................16
5.6 Contributed and Revalued Property...........................16
5.7 Tax Credits.................................................17
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ARTICLE 6: DISTRIBUTIONS...................................................17
6.1 Net Cash....................................................17
6.2 Liquidating Distributions...................................17
6.3 Payment.....................................................18
6.4 Withholding.................................................18
6.5 In Kind Distributions.......................................18
6.6 Distribution Limitation.....................................18
ARTICLE 7: MANAGING DIRECTORS..............................................18
7.1 Annual Meeting..............................................18
7.2 Special Meetings............................................19
7.3 Place.......................................................19
7.4 Notice......................................................19
7.5 Waiver of Notice............................................19
7.6 Meetings by Telephone.......................................19
7.7 Action Without a Meeting....................................19
7.8 Certain Conflicts...........................................19
7.9 Resolution of Disagreements.................................20
7.10 Termination of Voting Arrangements..........................20
ARTICLE 8: LIABILITY OF MEMBERS..........................................20
8.1 Limited Liability...........................................20
8.2 Capital Contribution........................................20
ARTICLE 9: Intentionally Omitted...........................................21
ARTICLE 10: ACCOUNTING AND REPORTING.....................................21
10.1 Fiscal Year.................................................21
10.2 Accounting Method...........................................21
10.3 Tax Returns.................................................21
10.4 Reports.....................................................21
10.5 Banking.....................................................21
ARTICLE 11: TRANSFER RESTRICTIONS..........................................21
11.1 General Restriction.........................................22
11.2 No Member Rights............................................22
11.3 Permitted Transferees.......................................22
11.4 Rights of First Refusal.....................................22
11.5 Change in Control of a Shareholder Group....................24
11.6 General Conditions on Transfers.............................25
11.7 Rights of Transferees.......................................26
11.8 Admission...................................................26
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11.9 Satisfaction of Legal Requirements..........................26
11.10 Closing.....................................................27
11.11 Events of Withdrawal........................................27
11.12 Obligation to Contribute Additional Shares to Company.......27
11.13 Covenant Relating to Rule 9 of City Code....................27
ARTICLE 12: DISSOLUTION OF THE COMPANY..................................28
12.1 Dissolution.................................................28
12.2 Exclusive Means of Dissolution..............................28
ARTICLE 13: LIQUIDATION....................................................28
13.1 Liquidation.................................................28
13.2 Priority of Payment.........................................29
13.3 Distribution to Members.....................................29
13.4 Deficit Capital Account.....................................30
13.5 Liquidating Reports.........................................30
13.6 Articles of Dissolution.....................................30
ARTICLE 14: GENERAL PROVISIONS............................................30
14.1 Amendment...................................................30
14.2 Unregistered Interests......................................31
14.3 Reliance....................................................31
14.4 Equitable Relief............................................31
14.5 Specific Performance........................................31
14.6 Counterparts................................................32
14.7 Notices.....................................................32
14.8 Deemed Notice...............................................32
14.9 Waivers Generally...........................................32
14.10 Partial Invalidity..........................................32
14.11 Entire Agreement............................................32
14.12 No Third Party Benefit......................................33
14.13 Binding Effect..............................................33
14.14 Further Assurances..........................................33
14.15 Headings....................................................33
14.16 Terms.......................................................33
14.17 Governing Law...............................................33
14.18 Restrictive Trade Practices Act.............................33
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2000 AMENDED AND RESTATED
OPERATING AGREEMENT
OF
TW HOLDINGS, L.L.C.
This 2000 AMENDED AND RESTATED OPERATING AGREEMENT is made as of July 7, 2000 by
the members of TW HOLDINGS, L.L.C., a Colorado limited liability company (the
"Company").
RECITALS
WHEREAS, Liberty UK, Inc., formerly named United Artists
Programming-Europe, Inc., MediaOne UK Cable, Inc., formerly named U S WEST UK
Cable, Inc. ("MediaOne UK"), and MediaOne Cable Partnership Holdings, Inc.,
formerly named U S WEST Cable Partnership Holdings, Inc. ("MediaOne Cable"), the
members of the Company (collectively, the "Members"), entered into an Operating
Agreement for the Company dated as of June 16, 1995 (the "Original Agreement");
WHEREAS, in September 1998 the Members made cash contributions to the
Company to fund the purchase by the Company of additional ordinary shares of
Telewest Communications plc ("Telewest"), purchased additional ordinary shares
of Telewest, the beneficial interests in which they contributed to the Company,
and entered into an Amended and Restated Operating Agreement dated as of
September 11, 1998 (the "Amended Agreement");
WHEREAS, on July 7, 2000 MediaOne Cable (renamed Microsoft Cable
Partnership Holdings, Inc.) and MediaOne UK (renamed Microsoft UK Cable, Inc.)
became wholly owned indirect subsidiaries of Microsoft Corporation pursuant to a
Merger Agreement, dated October 4, 1999, as amended (the "Microsoft/MediaOne
Merger Agreement"), between Microsoft Corporation, MediaOne UK, MediaOne Cable,
MediaOne Group, Inc. and the other parties thereto;
WHEREAS, Microsoft Corporation has entered into a Revised New
Relationship Agreement dated as of March 3, 2000 with Liberty UK Inc., Liberty
UK Holdings, Inc., Liberty Media International, Inc. and Telewest, which became
effective upon the occurrence of certain conditions, including the merging of
subsidiaries of Microsoft with MediaOne UK and MediaOne Cable pursuant to the
Microsoft/MediaOne Merger Agreement; and
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WHEREAS, the Members have determined that it is in their best interests
to amend and restate the Amended Agreement as set forth herein.
NOW, THEREFORE, in consideration of their mutual promises, the Members
agree as follows:
ARTICLE 1: FORMATION AND DEFINITIONS
1.1 FORMATION. The Company was formed on June 16, 1995 by filing Articles with
the Colorado Secretary of State pursuant to the Act.
1.2 COMPANY NAME. The business of the Company will be conducted under the name
"TW Holdings, L.L.C." or any other name determined from time to time by the
Board in accordance with applicable law.
1.3 OFFICE AND AGENT. The registered office of the Company in Colorado is at
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and its registered agent is
The ▇▇▇▇▇▇▇▇-▇▇▇▇ Corporation System, Inc. The Company may subsequently change
its registered office or registered agent in Colorado in accordance with the
Act.
1.4 FOREIGN QUALIFICATION. The Company will apply for a certificate of authority
to do business in any other jurisdiction where such authority is required.
1.5 TERM. The Company began on the date its Articles were filed with the
Colorado Secretary of State and will continue until its Dissolution.
1.6 DEFINITIONS. The following capitalized terms, when used in this Agreement,
have the meanings set forth below:
Act: the Colorado Limited Liability Company Act, as
amended from time to time.
Additional Contribution: a capital contribution (other than the Initial
Contributions) that a Member makes to the Company,
as described in Section 4.4.
Affiliate: with respect to any Person, any other Person
directly or indirectly Controlling, directly or
indirectly Controlled by or under direct or
indirect common Control with such Person.
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Agreement: this 2000 Amended and Restated Operating
Agreement, as amended from time to time.
Articles: the articles of organization of the Company filed
under the Act, as amended from time to time.
Bankruptcy: of a Member will be deemed to occur when such
Member [a] files a voluntary petition in
bankruptcy, [b] is adjudged bankrupt or insolvent
or has entered against such Member an order for
relief in any bankruptcy or insolvency proceeding,
[c] files a petition or answer seeking for such
Member any reorganization, arrangement,
composition, readjustment, liquidation,
dissolution or similar relief under any statute,
law or regulation, [d] files an answer or other
pleading admitting or failing to contest the
material allegations of a petition filed against
such Member in any proceeding of that nature or
[e] seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator
of all or any substantial part of such Member's
property.
Board: as defined in Section 3.2.
Capital Account: the book capital account to be established and
maintained for each Member in accordance with this
Agreement.
Capital Contribution: any contribution by a Member to the Company which
is either an Initial Contribution or an Additional
Contribution.
Change in Control: [a] with respect to the Microsoft Shareholder
Group, the acquisition (whether by merger,
consolidation, sale, assignment, lease, transfer
or otherwise, in one transaction or any related
series of transactions) of beneficial ownership of
equity interests in Microsoft or any of its
Affiliates by any Person (except pursuant to a
distribution in specie, spinoff, share dividend,
demerger or similar transaction and other than any
acquisition of beneficial ownership by Microsoft
or
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any of its Affiliates) as a result of which such
Person has the power, directly or indirectly, to
direct the voting and disposition of Shares held
by Microsoft and its Affiliates representing at
least 15 percent of the outstanding Shares of
Telewest; provided that any change in the Control
of Microsoft will not be deemed a Change in
Control for purposes of this Agreement; and
[b] with respect to the Liberty Shareholder Group,
the acquisition (whether by merger, consolidation,
sale, assignment, lease, transfer or otherwise, in
one transaction or any related series of
transactions) of beneficial ownership of equity
interests in Liberty International or any of its
Affiliates by any Person (except pursuant to a
distribution in specie, spinoff, share dividend,
demerger or similar transaction and other than any
acquisition of beneficial ownership by Liberty
International or any of its Affiliates) as a
result of which such Person has the power,
directly or indirectly, to direct the voting and
disposition of Shares held by Liberty
International and its Affiliates representing at
least 15 percent of the outstanding Shares of
Telewest, provided that any change in the Control
of AT&T Corp., TCI, Liberty Media Corporation or
Liberty International will not be deemed a Change
in Control for purposes of this Agreement.
A Change in Control will be deemed voluntary if it
is the result of a transaction agreed to by
Liberty International or any of its Affiliates or
Microsoft or any of its Affiliates, as the case
may be. A Change in Control will be deemed
involuntary if it is the result of actions by
Persons other than Liberty International or any of
its Affiliates or Microsoft or any of its
Affiliates, as the case may be, taken without the
agreement or consent of Liberty International or
any of its Affiliates or of Microsoft or any of
its Affiliates, as the case may be.
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Closing Price: [a] with respect to Ordinary Shares to be offered
on the London Stock Exchange, will be the sale
price which appears on the relevant Reuters Screen
No. for Telewest as of 11:00 a.m. (London time) on
a Trading Day, provided that if such Ordinary
Shares do not appear on such Reuters Screen or
such Reuters Screen is temporarily unavailable,
the sale price with respect to the Ordinary Shares
will be the last reported sale price which appears
in the Official List of the London Stock Exchange
on a Trading Day and [b] with respect to Ordinary
Shares to be offered on the New York Stock
Exchange or another U.S. national securities
exchange in the form of ADSs, will be the last
reported sale price on a Trading Day on such
exchange or, if no such sale takes place on such
day, the average of the high and low sales prices
for such day as reported on the New York Stock
Exchange Composite Tape, or, if no such sales are
reported, the reported last sale price (or, if no
such sale takes place on such day, the average of
the reported closing bid and asked prices), on the
Nasdaq National Market, or if the ADSs are not
quoted on such National Market, the average of the
closing bid and asked prices in the
over-the-counter market as furnished by any New
York Stock Exchange member firm selected by the
Board for that purpose.
Code: the Internal Revenue Code of 1986, as amended from
time to time (including corresponding provisions
of subsequent revenue laws).
Control: with respect to any Person, the possession,
directly or indirectly, of the power to direct or
cause the direction of the management or policies
of the Controlled Person, whether through equity
ownership, by contract or otherwise, but a Person
shall not be deemed to Control another Person
solely by virtue of any veto rights granted to it
as a minority equity owner or by virtue of
super-majority voting rights.
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Dissolution: the change in the relationship of the Members
caused by the occurrence of an event described in
Section 12.1.
Distribution: a distribution of money or other property made by
the Company with respect to an Ownership Interest.
Event of Withdrawal: the occurrence of an event which terminates a
Member's membership in the Company, as provided in
Section 11.11.
Fair Market Value: as to any property, the price at which a willing
seller would sell and a willing buyer would buy
such property having full knowledge of the facts,
in an arm's-length transaction without time
constraints, and without being under any
compulsion to buy or sell.
Fiscal Year: the fiscal and taxable year of the Company as
determined under this Agreement, including both
12-month and short taxable years.
Initial Contribution: the initial capital contribution made by each
Member to the Company, as set forth on EXHIBIT A.
Liberty Directors: as defined in Section 3.2.
Liberty International: Liberty Media International, Inc., a Delaware
company, and its successors, whether by merger or
otherwise.
Liberty Shareholders: Liberty UK, Inc., formerly named United Artists
Programming - Europe, Inc., Liberty UK Holdings,
Inc. and Liberty Flex Holdings Ltd.
Liberty Shareholder Group: each Liberty Shareholder and any member of the
group consisting of Liberty International and its
Affiliates to whom Ownership Interests or Shares
originally issued to a Liberty Shareholder are
Transferred in accordance with this Agreement or
the Relationship Agreement.
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Limited Voting Share: a limited voting convertible ordinary share, 10p
par value, in the capital of Telewest, or any
other shares of capital stock issued in
substitution or replacement thereof in any merger,
share exchange, conversion, recapitalization or
other similar transaction.
Liquidation: the process of terminating the Company and winding
up its business under Article 13 after its
Dissolution.
Losses: the Company's net loss (including deductions) for
any Fiscal Year, determined under Section 5.1.
Managing Director: as defined in Section 3.2.
MediaOne: MediaOne Group, Inc., a Delaware corporation
formerly named U S WEST, Inc.
Member: a Person who is a Member on the date of this
Agreement or who is subsequently admitted as a
Member as provided in this Agreement.
Member Group: all of the Members included in any Shareholder
Group.
Microsoft: Microsoft Corporation, a Washington corporation,
and its successors, by merger or otherwise.
Microsoft Directors: as defined in Section 3.2.
Microsoft Shareholders: MediaOne UK, MediaOne Cable, Microsoft and any
other Affiliate of Microsoft that holds Shares as
of the date of this Agreement.
Microsoft Shareholder Group: each Microsoft Shareholder and any member of the
group consisting of Microsoft and its Affiliates
to whom Ownership Interests or Shares originally
issued to a Microsoft Shareholder are Transferred
in accordance with this Agreement or the
Relationship Agreement.
Net Cash: cash receipts of the Company less payment of, or
reasonable reserves for, operating expenses,
capital requirements, improvements, debt service,
and other
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cash requirements of the Company as determined by
the Board.
Ordinary Share: an ordinary share, 10p par value (including
ordinary shares represented by American Depository
Shares), in the capital of Telewest, or any other
shares of capital stock issued in substitution or
replacement thereof in any merger, share exchange,
recapitalization or other similar transaction.
Ownership Interest: with respect to each Person owning an interest in
the Company, all of the interests of such Person
in the Company (including, without limitation, an
interest in the Profits and Losses, a Capital
Account interest and all other rights and
obligations of such Person under this Agreement)
in the percentages set forth on EXHIBIT A, as the
same may be amended from time to time in
accordance with this Agreement.
Permitted Transferee: a Person described in Section 11.3 to whom an
Ownership Interest may be Transferred without the
Transferor offering the other Member Group a right
of first refusal under this Agreement.
Person: an individual, corporation, trust, partnership,
limited liability company, unincorporated
organization, association or other entity.
Pro Rata Shares: with respect to any Member, a portion of the
number of Shares owned by the Company attributable
to such Member's Ownership Interest, which will
equal the product of [x] the aggregate number of
Shares owned by the Company multiplied by [y] such
Member's percentage Ownership Interest in the
Company, expressed as a decimal. If any Member
contributes Limited Voting Shares to the Company,
all of such Shares shall be attributed to that
Member as part of its Pro Rata Shares.
Profits: the Company's net profit (including income and
gains) for any Fiscal Year, determined under
Section 5.1.
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Related Transfer: a Transfer by means of a distribution, spin-off,
stock dividend or other transaction as a result of
which one or more Affiliates of the transferor
beneficially own 80% or more of the Pro Rata
Shares that immediately prior to such Transfer
were beneficially owned by the Shareholder Group
of which the transferor is a member.
Relationship Agreement: the Revised New Relationship Agreement dated as of
March 3, 2000 among Telewest, Liberty Media
International, Inc., the Liberty Shareholders and
Microsoft.
Shareholder: each Liberty Shareholder, each Microsoft
Shareholder and any other Person who acquires
Shares in accordance with this Agreement or the
Relationship Agreement and becomes a party to, or
otherwise agrees to be bound by, the Relationship
Agreement subsequent to the date hereof by signing
a counterpart of the Relationship Agreement or
another document to the same effect.
Shareholder Group: the Liberty Shareholder Group or the Microsoft
Shareholder Group.
Shares: Ordinary Shares or Limited Voting Shares of
Telewest (or any other shares of capital stock
issued in substitution or replacement thereof in
any merger, share exchange, recapitalization,
scheme of arrangement or other similar
transaction).
TCI: AT&T Broadband LLC, formerly Tele-Communications,
Inc., a Delaware corporation.
Telewest: Telewest Communications plc, a public limited
company organized under the laws of England and
Wales, and its successors and assigns, whether by
merger, scheme of arrangement or otherwise.
Third Party: with respect to any Member, a Person other than an
Affiliate of such Member.
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Trading Day: each Monday, Tuesday, Wednesday, Thursday and
Friday, other than any day on which securities are
not traded on the applicable exchange or market.
Transfer: a sale, exchange, assignment, transfer, pledge or
other disposition, whether voluntary or by
operation of law.
Transferee: a Person to whom an Ownership Interest is
Transferred in compliance with this Agreement.
Transferor: a Person who Transfers an Ownership Interest in
compliance with this Agreement.
Vote: the action of the Company by its Members or the
Board, either in meeting assembled or by written
consent without a meeting.
ARTICLE 2: PURPOSES AND POWERS
2.1 PURPOSE. The purpose of the Company shall be to own the Shares contributed
to it by the Members, to acquire further Shares in accordance with the terms of
this Agreement and to vote, dispose and otherwise take actions in respect of the
Shares owned by the Company in accordance with the terms of this Agreement. The
Company shall be permitted to conduct such lawful business [a] as may be
necessary or appropriate to give full effect to the foregoing purpose and to all
of the provisions of this Agreement and [b] as may be consented to by the
unanimous Vote of the Members.
2.2 POWERS. The Company shall have any and all powers necessary or desirable to
carry out the purpose and business of the Company to the extent the same may be
legally exercised by limited liability companies under the Act. Without limiting
the foregoing, and subject to the other provisions of this Agreement, the
purposes of the Company may be accomplished through the following powers (which
are not exclusive):
[a] to acquire, hold, transfer, distribute, or otherwise dispose of Company
assets (or rights or interests in such property);
[b] to enter into any contracts or agreements concerning the assets of the
Company;
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[c] to execute and deliver all instruments, including proxies, assignments, and
other documents of transfer, as may be necessary or advisable for the
administration of the Company;
[d] to hold the assets of the Company in the name of a nominee;
[e] to vote securities, exercise rights, and pay calls and assessments;
[f] to settle claims and take or defend judicial and administrative
proceedings:
[g] to employ agents and independent contractors as may be necessary or
advisable for the administration of the Company;
[h] to establish reserves for taxes, assessments, insurance premiums, repairs,
maintenance, improvements, depreciation, depletion and obsolescence out of
the rents, profits or other income received;
[i] to pay all expenses reasonably incurred in the administration of the
Company; and
[j] to do such other things and engage in such other activities related
directly or indirectly to the foregoing as may be necessary, convenient or
advisable to the conduct of the business of the Company.
ARTICLE 3: MEMBERS; MANAGEMENT; VOTING
3.1 ADMISSION OF TRANSFEREES AS MEMBERS. A Transferee shall be admitted as a
Member of the Company only upon the affirmative unanimous Vote of Members,
except that a Transferee which is an Affiliate of a Member shall automatically
be admitted as a Member, subject to compliance with Section 11.6, without any
action on the part of the other Members.
3.2 MANAGING DIRECTORS. Except as specifically set forth in Section 3.4, the
management and policy-making functions of the Company shall reside in a board
(the "Board") composed of four individuals (each, a "Managing Director") to be
elected annually and who shall serve until their successors are elected and
qualified. Such Managing Directors shall be elected by unanimous Vote of the
Members. Members included in the Liberty Shareholder Group shall be entitled to
nominate two Managing Directors ("Liberty Directors") and Members included in
the Microsoft Shareholder Group shall be entitled to nominate the other two
Managing Directors ("Microsoft Directors"). Each Member agrees to Vote all of
its Ownership Interest in any election
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of Managing Directors in favor of the Persons nominated in accordance with the
preceding sentence. Upon the occurrence of a vacancy in the Board, the Member
who nominated the Managing Director in respect of whom such vacancy exists may
nominate a replacement, and the Members shall Vote in favor of such replacement,
who shall serve until such replacement Managing Director's successor is elected.
3.3 BOARD VOTE. Except as set forth in Section 7.9 and except as provided in
Section 3.4 relating to a unanimous Vote of Members, all decisions by the
Company (including the incurrence of any liabilities by the Company other than
those related solely to the ownership of the Shares) will be made by the
affirmative Vote of a majority of the Managing Directors without regard to
vacancies.
3.4 UNANIMOUS VOTE. The following decisions or actions will require the
unanimous Vote of the Members: [a] the payment of compensation to any Member or
any Affiliate of a Member for services rendered to the Company, other than such
Member's share of Profits; [b] the approval of any voluntary Additional
Contribution as provided in Section 4.4 (except those required by Section
11.12); [c] the making of any curative or remedial ss. 704(c) allocation under
Section 5.6; [d] the voluntary Dissolution of the Company under Section 12.1;
[e] any amendment of this Agreement; [f] the sale, exchange or other disposition
of any of the Shares, other than a Transfer permitted under Article 11 or a
distribution of Pro Rata Shares to a Member as permitted by Section 6.5 and [g]
the admission of any new or substitute Member except pursuant to the last
sentence of Section 11.8.
3.5 EXPENSE REIMBURSEMENT; INDEMNIFICATION. Except as otherwise provided in this
Agreement, upon compliance with such policies and procedures as the Company may
from time to time adopt, the Members and the Managing Directors will be
reimbursed by the Company for all reasonable expenses incurred on behalf of the
Company in connection with its business. The Company will indemnify its Managing
Directors against liability incurred in any proceeding in which such Managing
Director is made a party because he or she is or was a manager of the Company to
the maximum extent permitted by the Act.
3.6 NO RESIGNATION OR RETIREMENT. Each Member agrees not to voluntarily resign
or retire from the Company, except for permissible Transfers as provided in
Article 11 and in connection with Pro Rata Share Distributions permitted by
Section 6.5. However, if such voluntary resignation or retirement occurs in
contravention of this Agreement, the withdrawing Member will, without further
act, become a Transferee of its entire Ownership Interest with the limited
rights of a Transferee who has not been admitted as a Member in accordance with
this Agreement, as set forth in Section 11.7.
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ARTICLE 4: CAPITAL AND CAPITAL ACCOUNTS
4.1 MAINTENANCE. A Capital Account will be maintained for each Member and
credited, charged and otherwise adjusted as follows:
[a] Credited with [i] the amount of money contributed by the Member as an
Initial Contribution or Additional Contribution, [ii] the Fair Market Value
of Shares and other property contributed by the Member as an Initial
Contribution or Additional Contribution (net of liabilities secured by such
property that the Company takes subject to or assumes), [iii] the Member's
allocable share of Profits and [iv] all other items properly credited to
its Capital Account in accordance with U.S. generally accepted accounting
principles consistently applied; and
[b] Charged with [i] the amount of money distributed to the Member by the
Company, [ii] the Fair Market Value of Shares and other property
distributed to the Member by the Company (net of liabilities secured by
such property that the Member takes subject to or assumes), [iii] the
Member's allocable share of Losses and [iv] all other items properly
charged to its Capital Account in accordance with U. S. generally accepted
accounting principles consistently applied.
Any unrealized appreciation or depreciation with respect to any asset
distributed in kind will be allocated among the Members in accordance with the
provisions of Article 5 as though such asset had been sold for its Fair Market
Value on the date of Distribution, and the Members' Capital Accounts will be
adjusted to reflect both the deemed realization of such appreciation or
depreciation and the Distribution of such property.
4.2 REVALUATION. Upon a contribution of money, Shares or other property to the
Company by a new or continuing Member as consideration for an Ownership Interest
in the Company, and upon a Distribution of money, Shares or other property to a
retiring or existing Member in consideration of an Ownership Interest in the
Company that is being redeemed by the Company, the Capital Accounts of the
Members will be increased or decreased to reflect the Fair Market Value of the
assets of the Company as of the date of such contribution or Distribution.
Adjustments made pursuant to the preceding sentence will reflect the manner in
which any unrealized appreciation or depreciation with respect to the assets of
the Company (which appreciation or depreciation is not reflected in the Capital
Accounts as of the adjustment date) would be allocated among the Members if such
assets were sold at Fair Market Value on the adjustment date. Following any
adjustment under this Section 4.2, for purposes of computing Profits or Losses
of the Company, items of depreciation, amortization, depletion, gain or loss
relating to revalued property will be determined based upon the Fair Market
Value of
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such property at the adjustment date. For purposes of making any adjustment
pursuant to this Section 4.2, Fair Market Value shall be determined by agreement
of the Members or, if they cannot so agree within 7 days following the date on
which a contribution or Distribution is made, by following the procedure set
forth in Section 11.5[d].
4.3 CONTRIBUTIONS; OWNERSHIP INTERESTS. Each Member has made the Initial
Contribution and the Additional Contributions to the Company as set forth
opposite such Member's name on the attached EXHIBIT A. The Ownership Interests
of the Members as of the date of this Agreement are as set forth on EXHIBIT A.
4.4 ADDITIONAL CONTRIBUTIONS. Except as required by Section 11.12 or upon the
unanimous Vote of the Members, no Additional Contribution by any Member will be
required or permitted unless otherwise required by law. If any Additional
Contribution is made after the date of this Agreement, EXHIBIT A will be amended
to reflect the Additional Contribution and any resulting change in the Ownership
Interests of the Members. Upon the making of an Additional Contribution by any
Member or Members, the percentage Ownership Interest of each Member will be
adjusted (or, in the case of a Shareholder admitted as a new Member under
Section 11.12, determined) to equal the percentage obtained by dividing the sum
of [a] the Fair Market Value of the assets of the Company less the liabilities
of the Company immediately prior to the Additional Contribution(s)
("Pre-Contribution Company Value"), multiplied by that Member's percentage
Ownership Interest in the Company immediately prior to the Additional
Contribution(s), plus [b] the Fair Market Value of that Member's Additional
Contribution, if any, on that date, by the sum of [y] the Pre-Contribution
Company Value plus [z] the Fair Market Value of all Members' Additional
Contributions on that date. For purposes of this Section 4.4, any Shares
contributed by a Shareholder admitted as a new Member under Section 11.12 shall
be treated as an Additional Contribution by such Shareholder. In adjusting or
determining Ownership Interests pursuant to this Section 4.4, Fair Market Value
shall be determined by agreement of the Members or, if they cannot so agree
within 7 days following the date on which an Additional Contribution is made to
the Company, by following the procedure set forth in Section 11.5[d].
4.5 NO WITHDRAWAL OF CAPITAL. Except as specifically provided in Section 6.5, no
Member will be entitled to withdraw all or any part of such Member's capital
from the Company or, when such withdrawal of capital is permitted, to demand a
Distribution of property other than money.
4.6 NO INTEREST ON CAPITAL. No Member will be entitled to receive interest on
such Member's Capital Contributions or Capital Account.
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4.7 NO DRAWING ACCOUNTS. The Company will not maintain a drawing account for any
Member. All Distributions to Members will be governed by Article 6 (relating to
Distributions) and by Article 13 (relating to Liquidation).
4.8 TRANSFERS OF CAPITAL ACCOUNTS. If all or any part of an Ownership Interest
is Transferred in accordance with this Agreement, the Capital Account of the
Transferor that is attributable to the Transferred Ownership Interest will carry
over to the Transferee.
ARTICLE 5: ALLOCATION OF PROFITS AND LOSSES
5.1 PROFITS AND LOSSES. For each Fiscal Year, Profits or Losses of the Company
will be an amount equal to the Company's income or loss determined in accordance
with the accrual method of accounting and U.S. generally accepted accounting
principles consistently applied, except as otherwise provided in the last
sentence of Section 4.2.
5.2 GENERAL ALLOCATION RULE. Except as otherwise provided in (or until changed
pursuant to) this Agreement, the Profits or Losses of the Company, including
items of income, gain, loss and deduction for each Fiscal Year, will be
allocated to the Members in proportion to their respective Ownership Interests.
5.3 EXCEPTION. Notwithstanding the general rule on allocation of Losses stated
in Section 5.2, Losses of the Company attributable to any Member nonrecourse
liability (which is nonrecourse to the Company, but for which one or more
Members or a related party bears the economic risk of loss) will be allocated to
the Member or Members bearing the economic risk of loss for the liability. The
determination and allocation of deductions attributable to any Member
nonrecourse liability will be made in accordance with regulations promulgated
under ss. 752 of the Code and regulations promulgated under ss. 704(b) of the
Code. Similarly, notwithstanding the general rule on allocation of Profits, any
Profits of the Company will be determined and allocated to the Members in
accordance with the chargeback rules promulgated under ss. 704(b) of the Code
applying to nonrecourse debt minimum gain.
5.4 TAX ALLOCATIONS. Except as otherwise provided in Section 5.6, allocation of
items of income, gain, loss and deduction of the Company for federal income tax
purposes for a Fiscal Year will be allocated, as nearly as is practicable, in
accordance with the manner in which such items are reflected in the allocations
of Profits and Losses among the Members for such Fiscal Year. To the extent
possible, principles identical to those that apply to allocations for federal
income tax purposes will apply for state and local income tax purposes.
- 15 -
5.5 TRANSFER. If any Transfer of an Ownership Interest occurs during any Fiscal
Year, the books of the Company will be closed as of the effective date of the
Transfer. The Profits or Losses attributed to the period from the first day of
such Fiscal Year through the effective date of Transfer will be allocated to the
Transferor, and the Profits or Losses attributed to the period commencing on the
effective date of Transfer will be allocated to the Transferee. In lieu of an
interim closing of the books of the Company and with the agreement of the
Transferor and Transferee, the Company may agree to allocate Profits and Losses
for such Fiscal Year between the Transferor and Transferee based on a daily
proration of items for such Fiscal Year or any other reasonable method of
allocation (including an allocation of extraordinary Company items, as
determined by the Company, based on when such items are recognized for federal
income tax purposes).
5.6 CONTRIBUTED AND REVALUED PROPERTY. All items of income, gain, loss and
deduction with respect to property contributed (or deemed contributed) to the
Company or revalued under Section 4.2 will, solely for tax purposes, be
allocated among the Members so as to take into account the variation between the
tax basis of the property and its Fair Market Value at the time of contribution
or revaluation. For example, if there is built-in gain with respect to
contributed property, upon the Company's sale of that property the
pre-contribution taxable gain (as subsequently adjusted under the ss. 704(c)
Regulations during the period such property was held by the Company) would be
allocated to the contributing Member (and such pre-contribution gain would not
again create a Capital Account adjustment since the property was credited to
Capital Account upon contribution at its Fair Market Value). Except as limited
by the following sentence, the allocation of tax items with respect to ss.
704(c) property to Members not contributing such property will, to the extent
possible, be equal to the allocation of the corresponding book items made to
such noncontributing Members with respect to such property. If book allocations
of cost recovery deductions (such as amortization or depreciation) exceed the
tax allocations of those items so that the ceiling rule of the ss. 704(c)
Regulations applies, the Company will make curative allocations or remedial
allocations of tax items only upon the affirmative Vote of all Members. All tax
allocations made under this Section 5.6 will be made in accordance with ss.
704(c) of the Code and the ss. 704(c) Regulations.
5.7 TAX CREDITS. To the extent that the federal income tax basis of an asset is
allocated to the Members in accordance with the Regulations promulgated under
ss. 46 of the Code, any tax credit attributable to such tax basis will be
allocated to the Members in the same ratio as such tax basis. With respect to
any other tax credit, to the extent that a Company expenditure gives rise to an
allocation of loss or deduction, any tax credit attributable to such expenditure
will be allocated to the Members in the same ratio as such loss or deduction.
Consistent principles will apply in determining the Members' interests in tax
credits that arise from taxable or non-taxable receipts of the Company. All
allocations
- 16 -
of tax credits will be made as of the time such credit arises. Any recapture of
a tax credit will, to the extent possible, be allocated to the Members in the
same manner as the tax credit was allocated to them.
ARTICLE 6: DISTRIBUTIONS
6.1 NET CASH. Net Cash will be allocated and paid to the Members in proportion
to their Ownership Interests. Distributions of Net Cash will be made to the
Members at such times as the Members by unanimous Vote approve.
6.2 LIQUIDATING DISTRIBUTIONS. Upon the Liquidation of the Company following its
Dissolution, liquidating Distributions will be made to the Members as provided
in Article 13.
6.3 PAYMENT. Any Distribution will be made to a Member only if such Person owns
an Ownership Interest on the date of Distribution, as reflected on the books of
the Company.
6.4 WITHHOLDING. If required by the Code or by state or local law, the Company
will withhold any required amount from Distributions to a Member for payment to
the appropriate taxing authority. Any amount so withheld from a Member will be
treated as a Distribution by the Company to such Member. Each Member agrees to
timely file any agreement that is required by any taxing authority in order to
avoid any withholding obligation that otherwise would be imposed on the Company.
6.5 IN KIND DISTRIBUTIONS. Each Member is entitled to require the Company to
distribute such Member's Pro Rata Shares to it in whole or in part at any time
if such Member so elects, without the consent of any other Person. If the
Company distributes Shares to any Member who contributed Shares to the Company
within seven years preceding the date of such Distribution, the Company will, to
the extent of any such Shares then owned by the Company, distribute to such
Member those Shares originally contributed by such Member. The Company will
maintain records relating to contributed Shares in a manner sufficient to enable
the Company to identify the Member who contributed such Shares.
6.6 DISTRIBUTION LIMITATION. Notwithstanding any other provision of this
Agreement, the Company will not make any Distribution to the Members if, after
the Distribution, the liabilities of the Company (other than liabilities to
Members on account of their Ownership Interests) would exceed the Fair Market
Value of the Company's assets. With respect to any property subject to a
liability for which the recourse of creditors is limited to the specific
property, such property will be included in assets only to the extent
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the property's Fair Market Value exceeds its associated liability, and such
liability will be excluded from the Company's liabilities.
ARTICLE 7: MANAGING DIRECTORS
7.1 ANNUAL MEETING. The annual meeting of the Board will be held on the second
Tuesday of April in each year at 9:00 a.m. (local time) or at such other time as
determined by resolution of a majority of the Managing Directors (without regard
to any vacancies). The purpose of the annual meeting is to review the Company's
operations for the preceding Fiscal Year and to transact such business as may
come before the meeting.
7.2 SPECIAL MEETINGS. Special meetings of the Board, for any purpose or
purposes, may be called by any Managing Director.
7.3 PLACE. Unless otherwise agreed by the Board, or if no designation is made,
the place of meeting will be the Company's registered office in Colorado.
7.4 NOTICE. Notice of any meeting must be given not less than 5 days nor more
than 30 days before the date of the meeting. Such notice must state the place,
day and hour of the meeting and, in the case of a special meeting, the purpose
for which the meeting is called.
7.5 WAIVER OF NOTICE. Any Managing Director may waive, in writing, any notice
required to be given to such Managing Director, whether before or after the time
stated in such notice. Any Managing Director who signs minutes of action (or
written consent or agreement to action) will be deemed to have waived any
required notice with respect to such action.
7.6 MEETINGS BY TELEPHONE. The Managing Directors may participate in a meeting
by means of conference telephone or similar communications equipment by which
all Managing Directors participating in the meeting can hear each other at the
same time. Such participation will constitute presence in person at the meeting
and waiver of any required notice.
7.7 ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a
meeting of the Board may be taken without a meeting if the action is evidenced
by one or more written consents describing the action taken, signed by at least
a majority of all of the Managing Directors (without regard to any vacancies).
Action so taken is effective when sufficient Managing Directors approving the
action have signed the consent, unless the consent specifies a later effective
date.
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7.8 CERTAIN CONFLICTS. If any Member or any Affiliate of a Member has a conflict
of interest with respect to any matter on which the Company is to vote its
Shares, the Shares held by the Company shall be voted as follows: the Pro Rata
Shares of any Member who has such conflict, or of any Member which is an
Affiliate of such conflicted Person, shall be voted "abstain," and the remainder
of the Shares held by the Company shall be voted as designated by the Managing
Directors nominated by the Member that is not subject to such conflict. In
addition, the Company shall vote all its Shares in favor of candidates for
director of Telewest (or the removal of such director) which any Shareholder
Group is entitled to nominate (or remove) in accordance with Telewest's Articles
of Association or the Relationship Agreement.
7.9 RESOLUTION OF DISAGREEMENTS. All Shares shall be voted as the Liberty
Directors and the Microsoft Directors agree. If the Liberty Directors and the
Microsoft Directors cannot agree on any matter requiring a vote of the Shares
within a period of 10 days after the matter is first presented for decision, the
matter in dispute shall be referred to the Chief Executive Officers of Liberty
International and of Microsoft (or other representatives designated by the
Liberty Shareholders and the Microsoft Shareholders, respectively) and the
Shares shall be voted on such matter in accordance with the joint decision of
such officers. If those officers cannot agree on any matter presented to them
prior to the earlier of the date the vote is to be taken or five days after the
matter is first submitted to them, the Shares shall be voted in such manner that
would be most likely to continue the status quo, without materially increasing
Telewest's financial obligations or materially deviating from its approved
budget and business plan.
7.10 TERMINATION OF VOTING ARRANGEMENTS. If after March 3, 2000, the Liberty
Member Group or the Microsoft Member Group Transfers, in one or more
transactions (other than as a result of a Transfer permitted by Section 11.3 or
as a result of a Related Transfer), more than 59,000,000 Ordinary Shares, the
other Member Group may elect, by notice to the Member Group whose Pro Rata
Shares have been so Transferred, to terminate the provisions of Section 7.9.
After any such termination the members of the Microsoft Member Group and the
Liberty Member Group may direct the Board as to the manner in which their
respective Pro Rata Shares are to be voted in their sole discretion, and any
Shares owned by the Company that are not Pro Rata Shares of any Member shall be
voted in the same way as the Pro Rata Shares of the Members are voted, in
proportion to the Members' respective Ownership Interests.
ARTICLE 8: LIABILITY OF MEMBERS
8.1 LIMITED LIABILITY. Except as otherwise provided in the Act, the debts,
obligations and liabilities of the Company (whether arising in contract, tort or
otherwise) will be
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solely the debts, obligations and liabilities of the Company, and no Member of
the Company (including any Person who formerly held such status) is liable or
will be obligated personally for any such debt, obligation or liability of the
Company solely by reason of such status.
8.2 CAPITAL CONTRIBUTION. Each Member is liable to the Company for [a] the
Initial Contribution made under Section 4.3 and any Additional Contribution
required or agreed to be made under Section 4.4 and 11.12 and [b] any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
made to such Member in violation of the Act, the Articles or this Agreement.
ARTICLE 9: INTENTIONALLY OMITTED
ARTICLE 10: ACCOUNTING AND REPORTING
10.1 FISCAL YEAR. For income tax and accounting purposes, the Fiscal Year of the
Company will end on December 31 in each year (unless subsequently changed as
provided in the Code).
10.2 ACCOUNTING METHOD. For income tax and accounting purposes, the Company will
use the accrual method of accounting (unless otherwise required by the Code).
10.3 TAX RETURNS. The Company will cause the preparation and timely filing of
all tax returns required to be filed by the Company pursuant to the Code, as
well as all other tax returns required in any jurisdiction in which the Company
does business.
10.4 REPORTS. The Company books will be closed at the end of each Fiscal Year
and statements prepared showing the financial condition of the Company and its
Profits or Losses from operations. Copies of these statements will be given to
each Member. In addition, as soon as is practicable after the close of each
Fiscal Year, and in any event by March 31 following the end of each Fiscal Year,
the Company will provide each Member with all necessary tax reporting
information.
10.5 BANKING. The Company may establish one or more bank or financial accounts
and safe deposit boxes. The Company may authorize one or more individuals to
sign checks on and withdraw funds from such bank or financial accounts and to
have access to such safe deposit boxes, and may place such limitations and
restrictions on such authority as the Company deems advisable.
- 20 -
ARTICLE 11: TRANSFER RESTRICTIONS
11.1 GENERAL RESTRICTION. No Person may Transfer all or any part of such
Person's Ownership Interest in any manner whatsoever except as permitted by this
Article 11, and in any case only if the requirements of Section 11.6 have been
satisfied. Any other Transfer of all or any part of an Ownership Interest is
null and void. The rights and obligations of any resigning Member or of any
Transferee of an Ownership Interest will be governed by the other provisions of
this Agreement.
11.2 NO MEMBER RIGHTS. Except as provided in Section 11.8, no Member has the
right or power to confer upon any Transferee the attributes of a Member in the
Company. Except as provided in Section 11.8, the Transferee of all or any part
of an Ownership Interest by operation of law does not, by virtue of such
Transfer, succeed to any rights as a Member in the Company.
11.3 PERMITTED TRANSFEREES. A Member may Transfer all or any part of such
Member's Ownership Interest at any time:
[a] to an Affiliate of such Member;
[b] to another Member; and
[c] to the Company.
11.4 RIGHTS OF FIRST REFUSAL.
[a] If a Member proposes to Transfer all or part of its Ownership Interests to
a Third Party or Parties (except pursuant to Section 11.3), the Member
desiring to make the Transfer (for purposes of this Section 11.4 only, the
"Offeror") shall prior to the entry into of an agreement for the transfer
of shares (except for an agreement conditional upon the non-transferring
party not exercising its right to purchase such shares under this Section
11.4) first make a written offer (for purposes of this Section 11.4 only,
the "Offer") to sell such Ownership Interest to the Members included in the
other Member Group (for purposes of this Section 11.4 only, the "Offerees")
on the same or materially similar terms and conditions on which the Offeror
proposes to Transfer the Ownership Interest to the Third Party or Parties.
Such offer shall state the price and the other terms and conditions of the
proposed Transfer and shall be accompanied by a copy of the offer from the
proposed Transferee. The price as so determined or stated in the Offeror's
notice shall be, for purposes of this Section 11.4 only, the "Offer Price."
The Offeror, for so long as the Offer shall remain outstanding, shall not
request, nor shall the Company be obligated to make, a distribution of
Shares in an amount in excess of the number
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of Pro Rata Shares that such Offeror shall have the right to receive in
respect of the Ownership Interest, if any, to be retained by such Offeror
after giving effect to such proposed Transfer.
[b] The Offerees shall have the right for a period of 30 days after receipt of
the Offer to elect to purchase all, but not less than all, of the Ownership
Interest offered at the Offer Price by giving written notice of acceptance
to the Offeror within that period. If the Offerees do not elect to purchase
all the Ownership Interest offered, the Offeror may Transfer the offered
Ownership Interest pursuant to the terms disclosed under Section 11.4[a].
If the offered Ownership Interest is not Transferred within 90 days after
the Offerees' option period expires, a new offer shall be made to the
Offerees before any such Transfer is made.
[c] If the Third Party's offer involves consideration other than immediate
payment of cash at closing, the Offerees may pay the Fair Market Value of
such other consideration, as determined by agreement between the Offeror
and the Offerees, in cash. If they cannot agree on such cash equivalent
within seven days after the Offerees give notice of the election to
purchase the offered Ownership Interest, the Offerees may, by written
notice to the Offeror, initiate appraisal proceedings under Section 11.4[d]
for determination of the Fair Market Value of such consideration. The Fair
Market Value shall be determined without regard to income tax consequences
to the Offeror as a result of receiving cash in lieu of other
consideration. Once the Fair Market Value is determined, (i) the Offerees,
in their sole discretion, may elect either to purchase the Ownership
Interest in cash by giving notice of such election to the Offeror within 10
days after receipt of the appraiser's decision or to withdraw its
acceptance of the Offer, and (ii) the Offeror may in its sole discretion
withdraw the Offer provided that in such case it may not Transfer such
Ownership Interests pursuant to the proposed Transfer.
[d] Any appraisal of the Fair Market Value of consideration shall be made by an
appraiser jointly appointed by the Members. If the Members fail to agree on
an appraiser within 20 days after receipt of the notice requiring or
permitting an appraisal of Fair Market Value, each Member Group shall
appoint one appraiser, which shall be an investment banking firm of
national repute. The two appraisers so selected shall each make an
appraisal of Fair Market Value within 30 days after their selection. If
such determinations vary by 20% or more of the higher determination, the
two appraisers shall select a third appraiser with similar qualifications
which shall make its determination of such Fair Market Value within 30 days
after its selection. Such third appraiser shall not be informed of or
otherwise consider the appraisals of the other two in reaching its
determination. The Fair Market Value shall be the average of the two
closest values if three appraisals are made or, if the determinations of
the first two appraisers vary by less
- 22 -
than 20% of the higher of such two determinations, the average of those two
determinations. If any Member Group fails to appoint an appraiser as
required hereunder, the other Member Group may refer the matter to the
American Arbitration Association, which shall promptly (and in any case
within 10 days) appoint an appraiser hereunder on behalf of the Member
Group failing to make such appointment. Appraisers appointed under this
Section 11.5[d] shall act as experts and not as arbitrators and absent
fraud or manifest error, the determination of an appraiser or appraisers
hereunder shall be binding on the parties.
[e] The closing of the purchase of an Ownership Interest by the Offerees shall
take place within 60 days following the timely delivery to the Offeror of a
written notice of acceptance pursuant to Section 11.4[b] or, if the
provisions of Section 11.4[c] apply, within 60 days following the delivery
to the Offeror of a written notice of election pursuant to clause (i) of
the last sentence of Section 11.4[c]. The Offeror shall give customary
representations and warranties regarding the title of such Ownership
Interests to the Offerees.
[f] The Offerees may rescind their notice of acceptance given pursuant to
Section 11.4[b] at any time on or prior to the 30th day following the date
of such notice of acceptance (but not thereafter) if (i) prior to the date
of such notice of acceptance the Offerees had sought in good faith a waiver
from the City Panel with respect to the application of any provision of
Rule 9 of the City Code on Takeovers and Mergers which absent such waiver
would require the Offerees to offer to purchase all of the outstanding
Ordinary Shares and (ii) such waiver or any shareholder approval required
by the City Panel has been denied (or has not been granted as of the last
day of such rescission period).
11.5 CHANGE IN CONTROL OF A SHAREHOLDER GROUP.
[a] If at any time there is an involuntary Change in Control with respect to
either the Liberty Shareholder Group or the Microsoft Shareholder Group,
the Member Group included in the Shareholder Group experiencing the Change
in Control (the "Subject Group") shall give notice to the other Member
Group promptly after the Subject Group becomes aware of the Change in
Control. If at any time either Shareholder Group experiences a voluntary
Change in Control, the Subject Group shall give notice to the other Member
Group promptly after the terms of the Change in Control are set forth in a
binding agreement. The Member Group not affected by such Change in Control
(the "Responding Group") must within 30 days after its receipt of such
notice give notice to the Subject Group either [a] consenting to the Change
in Control or [b] stating the price per percentage of Ownership Interest at
which the Responding Group is willing to sell all of its Ownership
Interests to the Subject Group or to buy all of the Subject Group's
- 23 -
Ownership Interests (the "Quoted Price"). Failure to give notice of such
election within the time permitted shall be deemed consent to the Change in
Control.
[b] If the Responding Group does not consent to the Change in Control, the
Subject Group must, within 30 days after its receipt of the Responding
Group's notice, give notice to the Responding Group of its election to sell
all of its Ownership Interests to the Responding Group or to buy all of the
Responding Group's Ownership Interests, in either case at the Quoted Price.
Following the giving of notice of a Change in Control pursuant to this
Section 11.5 and prior to (i) receipt by the Subject Group (or deemed
receipt) of consent to such Change of Control or (ii) the closing of the
sale of the Subject Group's or the Responding Group's Ownership Interests,
no Member shall request, nor shall the Company be obligated to make, any
voluntary Distribution of Shares. Any purchase of Ownership Interests
pursuant to this Section 11.5 may be made only by a Member.
11.6 GENERAL CONDITIONS ON TRANSFERS. No Transfer of an Ownership Interest will
be effective unless all of the conditions set forth below are satisfied:
[a] unless waived by the Company, the Transferor signs and delivers to the
Company an undertaking in form and substance reasonably satisfactory to the
Company to pay all reasonable expenses incurred by the Company in
connection with the Transfer (including, but not limited to, reasonable
fees of counsel and accountants and the costs to be incurred with any
additional accounting required in connection with the Transfer, and the
cost and fees attributable to preparing, filing and recording such
amendments to the Articles or other organizational documents or filings as
may be required by law);
[b] the Transferor signs and delivers to the Company a copy of the assignment
of the Ownership Interest to the Transferee in form and substance
reasonably satisfactory to the Company;
[c] the Transferee signs and delivers to the Company an agreement to be bound
by this Agreement if the Transferee is not a Member or the Company; and
[d] the Transfer is in compliance with the other provisions of this Article 11.
11.7 RIGHTS OF TRANSFEREES. Except as provided in Section 11.8, any Transferee
of an Ownership Interest will, on the effective date of the Transfer, have only
those rights of an assignee specified in the Act unless and until such
Transferee is admitted as a Member. This provision limiting the rights of a
Transferee will not apply if such Transferee is already a Member; provided that
any Member who resigns or retires from the Company in contravention of Section
3.6 will have only the rights of a Transferee
- 24 -
who has not been admitted as a Member in accordance with this Agreement. Any
Transferee of all or any part of an Ownership Interest who is not admitted as a
Member in accordance with this Agreement has no right [a] to participate or
interfere in the management or administration of the Company's business or
affairs, [b] to vote or agree on any matter affecting the Company or any Member,
[c] to require any information on account of Company transactions or [d] to
inspect the Company's books and records. The only right of a Transferee of all
or any part of an Ownership Interest who is not admitted as a Member in
accordance with this Agreement is to receive the allocations and Distributions
to which the Transferor was entitled (to the extent of the Ownership Interest
Transferred). However, each Transferee of all or any part of an Ownership
Interest (including both immediate and remote Transferees) will be subject to
all of the obligations, restrictions and other terms contained in this Agreement
as if such Transferee were a Member. With respect to any Ownership Interest
Transferred, the Transferor Member shall not possess any right or power as a
Member and may not exercise any such right or power directly or indirectly on
behalf of the Transferee. Neither the Company nor any Member will owe any
fiduciary duty to any Transferee who is not admitted as a Member.
11.8 ADMISSION. A Transferee of an Ownership Interest will become a Member of
the Company only upon the affirmative unanimous Vote of Members, effective upon
a date specified (which must be on or after the effective date of the Transfer,
as determined under Section 11.6). Notwithstanding the foregoing, upon
compliance with Section 11.6, a Transferee which is an Affiliate of a Member
shall automatically become and be admitted as a Member without any action on the
part of the other Members.
11.9 SATISFACTION OF LEGAL REQUIREMENTS. Notwithstanding any other provision of
this Article 11, no Member may Transfer any Shares or Ownership Interests unless
it has complied with all applicable legal requirements, including without
limitation applicable United States federal and state securities laws. Upon the
exercise of any option to acquire Shares or Ownership Interests hereunder, the
Members shall use commercially reasonable efforts to obtain any necessary
consents or approvals of any governmental authorities or other Third Parties
necessary to effect such Transfer.
11.10 CLOSING. The closing of the purchase of any Ownership Interests by a
Member pursuant to this Article 11 shall take place at the Company's principal
offices on a day specified by the purchaser (other than a Saturday, Sunday or
day on which banking institutions in New York are required by law to be closed)
which is no more than 90 days after the date of exercise of the applicable
purchase option (or within the period of time provided by Section 11.4[e], if
applicable) or, if later, the date on which all necessary consents to such
Transfer by governmental authorities shall have been obtained. At the closing
the selling Member shall deliver a written assignment of Ownership Interests to
be sold free and clear of any lien, charge or encumbrance, and such other
documents as
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may be reasonably necessary to effectuate the sale. The purchase price, to the
extent it consists of cash, shall be paid in U.S. dollars in immediately
available funds.
11.11 EVENTS OF WITHDRAWAL. An Event of Withdrawal of a Member occurs upon [a]
such Member's resignation from the Company, [b] such Member's Bankruptcy or [c]
the occurrence of any other event which terminates the continued membership of
such Member in the Company (including the dissolution of that Member). Within 10
days after the occurrence of any such event, the Member experiencing the Event
of Withdrawal (or such Member's legal representative or other successor in
interest) will give notice to the Company of the occurrence of the Event of
Withdrawal. Upon the occurrence of an Event of Withdrawal with respect to a
Member, such Member will cease to have any voting and consent rights under
Article 3 and will have only the limited rights of a Transferee who has not been
admitted as a Member in accordance with this Agreement, as set forth in Section
11.7.
11.12 OBLIGATION TO CONTRIBUTE ADDITIONAL SHARES TO COMPANY. Each Member agrees
that, unless waived by the other Member Group, if any Shareholder included in
its Member Group acquires additional Shares after the date of this Agreement and
before any Pro Rata Shares are distributed to any Member pursuant to Section
6.5, the beneficial interests in all of such Shares will be contributed to the
Company as an Additional Contribution, with a corresponding increase in the
Ownership Interest of such Member pursuant to Section 4.4 (or the issuance of an
Ownership Interest to such Shareholder, who shall be admitted as a Member, if
such Shareholder is not already a Member).
11.13 COVENANT RELATING TO RULE 9 OF CITY CODE. Each Member covenants to and
agrees with the other Member that, in the event it or any member of the
Shareholder Group in which it is included elects to purchase Shares or Ownership
Interests, or is deemed to have made such an election pursuant to this
Agreement, it shall fulfill all obligations arising pursuant to Rule 9 of the
City Code on Takeovers and Mergers and shall pay all consideration and expenses
attributable to the Shareholders, the Members and the Company (but not Telewest)
in connection therewith.
ARTICLE 12: DISSOLUTION OF THE COMPANY
12.1 DISSOLUTION. Dissolution of the Company will occur upon the happening of
any of the following events: [a] the sale or Distribution of all or
substantially all of the Company's assets; [b] the unanimous Vote of the
Members; [c] April 1, 2045, unless the Company is continued by the unanimous
Vote of the Members; [d] a sale of all or substantially all the assets of
Telewest (other than by merger, share exchange, scheme of arrangement,
recapitalization or similar transaction); [e] a merger or consolidation of
Telewest pursuant to which all the voting securities of the merged or
consolidated entity
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are held by Persons other than the Company and the Shareholders; or [f] a
reduction in the number of Shares in respect of which the Company and the
Liberty Shareholder Group and the Microsoft Shareholder Group in the aggregate
hold voting rights so that such Shares represent, for a period of 10 consecutive
days or longer, less than 50% of the voting power of all of Telewest's issued
and outstanding share capital at that time (for this purpose only treating
Limited Voting Shares as Ordinary Shares), unless the Members unanimously Vote
to continue the Company.
12.2 EXCLUSIVE MEANS OF DISSOLUTION. The exclusive means by which the Company
may be dissolved are set forth in Section 12.1. The Company will not be
dissolved upon the death, retirement, resignation, expulsion, Bankruptcy or
dissolution of any Member or upon the occurrence of any other event which
terminates the continued membership of any Member in the Company.
ARTICLE 13: LIQUIDATION
13.1 LIQUIDATION. Upon Dissolution of the Company, the Company promptly will
file a statement of intent to dissolve with the Colorado Secretary of State as
required by the Act and will thereafter wind up its affairs and liquidate. The
Member owning the largest Ownership Interest, or if such Member fails to act,
any Person appointed by unanimous Vote of the Members, will act as liquidating
trustee. The winding up and Liquidation of the Company will be accomplished in a
businesslike manner as determined by the liquidating trustee. A reasonable time
will be allowed for the orderly Liquidation of the Company and the discharge of
liabilities to creditors so as to enable the Company to minimize any losses
attendant upon Liquidation. Any gain or loss on disposition of any Company
assets in Liquidation will be allocated to Members and credited or charged to
Capital Accounts in accordance with the provisions of Articles 4 and 5. Any
liquidating trustee is entitled to reasonable compensation for services actually
performed, and may contract for such assistance in the liquidation process as
such Person deems necessary. Until the filing of articles of dissolution under
Section 13.6, the liquidating trustee may settle and close the Company's
business, prosecute and defend suits, dispose of its property, discharge or make
provision for its liabilities, and make distributions in accordance with the
priorities set forth in Section 13.2.
13.2 PRIORITY OF PAYMENT. The assets of the Company will be distributed in
Liquidation of the Company in the following order:
[a] Creditors. First, to creditors by the payment or provision for payment of
the debts and liabilities of the Company (other than any loans or advances
made by any Member or any of its Affiliates) and the expenses of
Liquidation.
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[b] Reserves. Second, to the setting up of any reserves that are reasonably
necessary for any contingent, conditional or unmatured liabilities or
obligations of the Company.
[c] Loans. Third, to the repayment of any loans or advances made by any Member
or any Affiliate of a Member (proportionately if the amount available for
such repayment is insufficient for payment in full).
[d] Capital Accounts. Fourth, to the payment to the Members of their respective
Capital Account balances as adjusted for their respective shares of
liquidating Profits and Losses.
[e] Balance. Fifth, the balance, if any, to the Members in the ratio of their
Ownership Interests.
13.3 DISTRIBUTION TO MEMBERS. Distributions in Liquidation due to the Members
will be made by distributing the Company assets to the Members at their net Fair
Market Value in kind unless all Members unanimously agree in writing to the sale
of the Company's assets and the Distribution of the proceeds thereof. Any
liquidating Distribution in kind to the Members may be made either by a pro rata
Distribution of Shares (pursuant to Section 6.5, if applicable) or, with respect
to other assets, undivided interests in such assets or, if the Members
unanimously agree in writing, by non-pro rata Distribution of specific assets at
Fair Market Value on the effective date of Distribution. Any Distribution in
kind may be made subject to, or require assumption of, liabilities to which such
property may be subject, but in the case of any non-pro rata Distribution only
upon the express written agreement of the Member receiving the Distribution.
Each Member hereby agrees to save and hold harmless the other Members from such
Member's share of any and all such liabilities which are taken subject to or
assumed. Appropriate and customary prorations and adjustments shall be made
incident to any Distribution in kind.
13.4 DEFICIT CAPITAL ACCOUNT. Except as otherwise specifically provided in
Section 4.4, nothing contained in this Agreement imposes on any Member an
obligation to make an Additional Contribution in order to restore a deficit
Capital Account upon Liquidation of the Company. Each Member will look solely to
the assets of the Company for the return of such Member's Capital Contribution.
13.5 LIQUIDATING REPORTS. A report will be submitted by the liquidating trustee
with each liquidating Distribution to Members showing the collections,
disbursements and distributions during the period which is subsequent to any
previous report. A final report, showing cumulative collections, disbursements
and Distributions, will be submitted by the liquidating trustee upon completion
of the liquidation process.
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13.6 ARTICLES OF DISSOLUTION. Upon Dissolution of the Company and the completion
of the winding up of its business, the Company will file articles of dissolution
with the Colorado Secretary of State pursuant to the Act. At such time, the
Company also will file an application for withdrawal of its certificate of
authority in any jurisdiction where it is then qualified to do business.
ARTICLE 14: GENERAL PROVISIONS
14.1 AMENDMENT. This Agreement may be amended only by the unanimous Vote of the
Members. Any amendment will become effective upon such Vote, unless otherwise
provided. Written notice of any proposed amendment must be given at least 5 days
in advance of the meeting at which the amendment will be considered (unless the
Vote is evidenced by duly signed minutes of action). Any amendment to this
Agreement is binding upon, and inures to the benefit of, each Member who holds
an Ownership Interest at or after the time of such amendment, without the
requirement that such Member sign the amendment or any republication or
restatement of this Agreement.
14.2 UNREGISTERED INTERESTS. Each Member [a] acknowledges that the Ownership
Interests in the Company are being offered and sold without registration under
the Securities Act of 1933, as amended, or under similar provisions of state
law, [b] acknowledges that such Member is fully aware of the economic risks of
an investment in the Company, and that such risk must be borne for an indefinite
period of time, [c] represents and warrants that such Member is acquiring an
Ownership Interest for such Member's own account, for investment, and with no
view to the distribution of the Ownership Interest and [d] agrees not to
Transfer, or to attempt to Transfer, all or any part of such Ownership Interest
without registration under the Securities Act of 1933, as amended, and any
applicable state securities laws, unless the Transfer is exempt from such
registration requirements.
14.3 RELIANCE. Each Member will be fully protected in relying in good faith upon
the records of the Company and upon such information, opinions, reports or
statements by [a] any of the Company's other Members, employees or committees or
[b] any other Person who has been selected with reasonable care as to matters
such Member reasonably believes are within such other Person's professional or
expert competence. Matters as to which such reliance may be made include the
value and amount of assets, liabilities, Profits and Losses of the Company, as
well as other facts pertinent to the existence and amount of assets from which
Distributions to Members may properly be made.
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14.4 EQUITABLE RELIEF. If any Person proposes to Transfer all or any part of
such Person's Ownership Interest in violation of the terms of this Agreement,
the Company or any Member may apply to any court of competent jurisdiction for
an injunctive order prohibiting such proposed Transfer except upon compliance
with the terms of this Agreement, and the Company or any Member may institute
and maintain any action or proceeding against the Person proposing to make such
Transfer to compel the specific performance of this Agreement. Any attempted
Transfer in violation of this Agreement is null and void, and of no force and
effect. The Person against whom such action or proceeding is brought irrevocably
waives the claim or defense that an adequate remedy at law exists, and such
Person will not urge in any such action or proceeding the claim or defense that
an adequate remedy at law exists.
14.5 SPECIFIC PERFORMANCE. The Members agree that each would be irreparably
damaged if any Member failed to perform any obligation under this Agreement, and
that such Member would not have an adequate remedy at law for money damages in
such event. Accordingly, each Member will be entitled to specific performance
and injunctive and other equitable relief to enforce the performance of this
Agreement. This provision is without prejudice to any other rights that such
Member may have under this Agreement, at law or in equity.
14.6 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall constitute an original and all of which taken together will
constitute one agreement.
14.7 NOTICES. All notices under this Agreement will be in writing and will be
delivered or mailed addressed [a] if to the Company, at the Company's principal
business office, and [b] if to any Member, at such Person's address as then
appearing on the records of the Company.
14.8 DEEMED NOTICE. All notices given to any Person in accordance with this
Agreement will be deemed to have been duly given [a] on the date of receipt if
personally delivered, [b] three days after being sent by registered or certified
mail, postage prepaid, return receipt requested, [c] when sent by confirmed
electronic facsimile transfer or [d] one business day after having been sent by
a nationally recognized overnight courier service.
14.9 WAIVERS GENERALLY. No course of dealing will be deemed to amend or
discharge any provision of this Agreement. No delay in the exercise of any right
will operate as a waiver of such right. No single or partial exercise of any
right will preclude its further exercise. A waiver of any right on any one
occasion will not be construed as a bar to, or waiver of, any such right on any
other occasion.
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14.10 PARTIAL INVALIDITY. Wherever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect by a
court of competent jurisdiction, such holding will not affect any other
provision of this Agreement. In such event, this Agreement will continue in
force and will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.
14.11 ENTIRE AGREEMENT. This Agreement and the Relationship Agreement contain
the entire agreement and understanding of the Members with respect to their
subject matter, and supersede all prior and contemporaneous written and oral
agreements with respect thereto.
14.12 NO THIRD PARTY BENEFIT. The contribution obligations of each Member will
inure solely to the benefit of the other Members and the Company, without
conferring on any other Person any rights of enforcement or other rights.
14.13 BINDING EFFECT. This Agreement is binding upon, and inures to the benefit
of, the Members and their permitted Transferees.
14.14 FURTHER ASSURANCES. Each Member agrees, without further consideration, to
sign and deliver such other documents of further assurance as may reasonably be
necessary to effectuate the provisions of this Agreement.
14.15 HEADINGS. Article and Section titles have been inserted for convenience of
reference only. They are not intended to affect the meaning or interpretation of
this Agreement.
14.16 TERMS. Terms used with initial capital letters will have the meanings
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural include the other, as the context requires or permits. The
word "include" (and any variation) is used in an illustrative sense rather than
a limiting sense. The terms "shall" and "will" both refer to an obligation that
is mandatory.
14.17 GOVERNING LAW. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Colorado without considering any
conflicts of law principles. Any conflict or apparent conflict between this
Agreement and the Act will be resolved in favor of this Agreement except as
otherwise required by the Act.
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14.18 RESTRICTIVE TRADE PRACTICES ACT. Any provision contained in this Agreement
or in any arrangement of which this Agreement forms part by virtue of which this
Agreement or such arrangement is subject to registration under the Restrictive
Trade Practices Acts 1976 and 1977 of England will not come into effect until
the day following the date on which particulars of this Agreement and of any
such arrangement have been furnished to the Office of the Director General of
Fair Trading in accordance with the requirements of such Acts.
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In Witness Whereof, the Members have signed this 2000 AMENDED AND RESTATED
OPERATING AGREEMENT OF TW HOLDINGS, L.L.C. to be effective July 7, 2000.
LIBERTY UK, INC.
By:
--------------------------------
Its:
-------------------------------
MICROSOFT CABLE PARTNERSHIP
HOLDINGS, INC.
By:
--------------------------------
Its:
-------------------------------
MICROSOFT UK CABLE, INC.
By:
--------------------------------
Its:
-------------------------------
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EXHIBIT A
CAPITAL CONTRIBUTIONS
Initial Additional Ownership
Contribution Contributions Interest
------------ ------------- --------
Liberty UK, Inc. $1,000 plus
378,750,000 Shares 84,688,961 50%
Shares
Microsoft UK Cable, Inc. $912.90 plus
345,744,800 Shares 77,308,958 45.6%
Shares
Microsoft Cable
Partnership Holdings, Inc. $87.10 plus
33,005,200 Shares 7,380,002 4.4%
Shares