[ARTICLE] 5
[MULTIPLIER] 1
CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential
treatment has been requested. Confidential portions
omitted have been filed separately with the Commission.
GENERAL PARTNERSHIP AGREEMENT (this "Agreement"), dated
as of _____ __, 1996, between ATOR Corp., a New York corporation
(the "AT&T Partner"), and Ciror, Inc., a California corporation
(the "Cirrus Partner"). The AT&T Partner and the Cirrus Partner
are sometimes referred to herein as the "Partners" or individually
as a "Partner."
WHEREAS, the parties hereto desire to enter into a
cooperative arrangement with respect to the expansion and operation
of certain wafer fabrication facilities for the purpose of
processing silicon wafers; and
WHEREAS, the parties hereto consider it mutually
beneficial to establish a partnership (the "Partnership") and the
parties hereto are parties to a Joint Venture Formation Agreement,
dated as of October __,1995 (the "Joint Venture Agreement").
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, representations, warranties and agreements
hereinafter set forth, and intending to be legally bound hereby,
the parties hereto agree, subject to the conditions contained
herein, as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. For the purpose hereof, the
following terms will have the following meanings:
"Additional Capital Contributions" will have the meaning
set forth in Section 3.05 hereof.
"Adjusted Capital Account Deficit" means, with respect to
any Partner, the deficit balance, if any, in the Capital Account
(as hereinafter defined) of such Partner as of the end of the
relevant Fiscal Year (as hereinafter defined), after giving effect
to the following adjustments:
(a) credit to such Capital Account any amounts
which such Partner is obligated to restore pursuant to
any provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate
sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of
the Regulations (as hereinafter defined); and
(b) debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)
of the Regulations and will be interpreted consistently therewith.
"Affiliate" means any Person, directly or indirectly
controlled by, controlling or under common control with (as
hereinafter defined) another Person (as hereinafter defined);
"controlled by, controlling or under common control with" means the
power to direct the management and policies of a Person, whether
through the ownership of voting securities, by agreement or
otherwise.
"Board of Governors" will have the meaning set forth in
Section 6.01 hereof.
"Capital Account" means, with respect to each Partner,
the account maintained for each Partner on the books of account for
the Partnership in accordance with the provisions of Section 3.02
hereof (which Capital Account will be adjusted as otherwise
required by Section 1.704-1(b) of the Regulations).
"Chairman of the Board of Governors" has the meaning set
forth in Section 7.01 hereof.
"Code" means the United States Internal Revenue Code of
1986, codified at Title 26 of the United States Code, as amended
from time to time (or any corresponding provisions of succeeding
law).
"Depreciation" means for each Fiscal Year (as hereinafter
defined) of the Partnership, 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 (as hereinafter defined) of an asset differs from its
adjusted basis for federal income tax purposes at the beginning of
such Fiscal Year, Depreciation will be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal
income tax depreciation, amortization, or other cost recovery
deduction for such Fiscal Year bears to such beginning adjusted tax
basis; provided, however, that if the adjusted basis for federal
income tax purposes of an asset at the beginning of such Fiscal
Year is zero, Depreciation will be determined with reference to
such beginning Gross Asset Value using any reasonable method
selected by the Partners.
"Extended Term" will have the meaning set forth in
Article XI hereof.
"Fiscal Year" means (i) the period commencing on the
effective date of this Agreement and ending on December 31, (ii)
any subsequent twelve (12) month period commencing on January 1,
and (iii) any portion of the period described in the immediately
preceding clause (ii) for which the Partnership is required to
allocate Profits (as hereinafter defined), Losses (as hereinafter
defined) and other items of Partnership income, gain, loss,
deduction or credit pursuant to Article VIII hereof.
"GPL" will have the meaning set forth in Section 2.01
hereof.
"Governor" or "Governors" will have the meaning set forth
in Section 6.02 hereof.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as
follows:
(a) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership will be the
gross fair market value of such asset, as determined by
the Partners;
(b) The Gross Asset Values of all Partnership
assets will be adjusted to equal their respective gross
fair market values, as determined by the Partners, as of
the following times: (i) the acquisition of an additional
Partnership interest by any new or existing Partner in
exchange for more than a de minimis Capital Contribution;
(ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership property as
consideration for a Partnership interest; and (iii) the
liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations;
provided, however, that, except as otherwise provided
herein, adjustments pursuant to the immediately preceding
clauses (i) and (ii) will be made only if the Partners
reasonably determine that such adjustments are necessary
or appropriate to reflect the relative economic interests
of the Partners in the Partnership;
(c) The Gross Asset Value of any Partnership asset
distributed to any Partner will be adjusted to equal the
gross fair market value of such asset on the date of
distribution as determined by the Partners;
(d) The Gross Asset Values of Partnership assets
will be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant
to Section 734(b) or Section 743(b) of the Code, but only
to the extent that such adjustments are taken into
account in determining Capital Accounts pursuant to
Section 1.704-1(b)(2)(iv)(m) of the Regulations and
Section 7.04 hereof; provided, however, that Gross Asset
Values will not be adjusted pursuant to this paragraph
(d) to the extent the Partners determine that an
adjustment pursuant to paragraph (b) hereof is necessary
or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this
paragraph (d); and
(e) If the Gross Asset Value of an asset has been
determined or adjusted pursuant to the immediately
preceding subparagraph (a), (b) or (d), such Gross Asset
Value will thereafter be adjusted by the Depreciation
taken into account with respect to such asset for
purposes of computing Profits and Losses (as hereinafter
defined).
"Hedge/Swap Transaction" means any transaction which is a
rate hedge/swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, interest rate option, forward
foreign exchange transaction, cap transaction, floor transaction,
collar transaction, currency swap transaction, cross- currency rate
swap transaction, currency option or any other similar transaction
(including any option with respect to any of any of the foregoing)
or any combination of the foregoing.
"IRS" means the United States Internal Revenue Service.
"Initial Capital" will have the meaning set forth in
Section 3.01 hereof.
"Land" will have the meaning set forth in the Lease.
"Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b)(1) of the Regulations. The amount of
Nonrecourse Deductions for a Fiscal Year of the Partnership will be
determined according to the provisions of Section 1.704-2(c) of the
Regulations.
"Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount,
with respect to each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" has the meaning set
forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the
Regulations.
"Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interests" means the respective interests of
the Partners as shown on Schedule A attached hereto.
"Premises" will have the meaning set forth in the Lease.
"Profits and Losses" means, for each Fiscal Year, an
amount equal to the Partnership's taxable income or loss for such
Fiscal Year, determined in accordance with Section 703(a) of the
Code (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Section
703(a)(1) of the Code will be included in taxable income or loss),
with the following adjustments:
(a) Any income of the Partnership that is exempt
from federal income tax and not otherwise taken into
account in computing Profits or Losses pursuant to this
definition will be added to such taxable income or loss;
(b) Any expenditures of the Partnership described
in Section 705(a)(2)(B) of the Code or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(iv)(i) of the Regulations, and not otherwise
taken into account in computing Profits and Losses
pursuant to this definition, will be subtracted from such
taxable income or loss;
(c) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to paragraph (b)
or (c) of the definition of "Gross Asset Value", the
amount of such adjustment will be taken into account as
gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;
(d) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized
for federal income tax purposes will 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;
(e) In lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in
computing such taxable income or loss, there will be
taken into account Depreciation for such Fiscal Year or
other period;
(f) To the extent an adjustment to the adjusted tax
basis of any Partnership asset pursuant to Section 734(b)
or Section 743(b) of the Code is required pursuant to
Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to be
taken into account in determining Capital Accounts as a
result of a distribution other than in liquidation of a
Partner's interest in the Partnership, the amount of such
adjustment will be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if
the adjustment decreases the basis of the asset) from the
disposition of the asset and will be taken into account
for purposes of computing Profits or Losses; and
(g) Notwithstanding any other provision of this
definition, any items which are specially allocated
pursuant to Section 8.02 hereof will not be taken into
account in computing Profits and Losses.
The amounts of the items of Partnership income, gain, loss, or
deduction available to be specially allocated pursuant to Section
8.02 hereof will be determined by applying rules analogous to those
set forth in the immediately preceding subparagraphs (a) through
(f).
"Purchasing Partner or Partners" will have the meaning
set forth in Section 5.03 hereof.
"Regulations" means Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such
regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocation" will have the meaning set forth
in Section 8.02 hereof.
"Schedule of Authorizations" will have the meaning set
forth in Section 7.07 hereof.
"Selling Partner" will have the meaning set forth in
Section 5.03 hereof.
"Tax Matters Partner" will have the meaning set forth in
Section 10.03 hereof.
1.02. Capitalized Terms. Capitalized terms used but not
defined herein will have the respective meanings assigned to them
in the Joint Venture Agreement.
ARTICLE II
FORMATION
2.01. Formation. The Partners hereby form the
Partnership pursuant to the provisions of the General Partnership
Law of the State of New York (the "GPL") and upon the terms and
subject to the conditions of this Agreement. The rights and
liabilities of the Partners will be, except as herein otherwise
expressly provided, as provided in the GPL. Neither Partner will
have the power or authority to bind the other Partner except as
specifically provided in this Agreement. Neither the Partnership
(in the case of either Partner) nor any Partner (in the case of any
other Partner) will be responsible or liable for any activity,
liability, indebtedness or obligation of any Partner incurred prior
to the execution of this Agreement or following the termination of
this Agreement, except as to the joint responsibilities,
liabilities, indebtedness and obligations incurred after the date
hereof, and only pursuant to, and as limited by, the terms of the
Joint Venture Agreement or the Material Agreements.
2.02. Name. The name of the Partnership will be
"[AT&T/Cirrus]".
ARTICLE III
CAPITAL
3.01. Initial Capital.
(a) The initial capital (the
"Initial Capital") of the Partnership will be the sums of cash or
the agreed fair market value of the property (or combination of
cash and property) contributed to the Partnership by the Partners
in such amounts or value as are set out opposite the name of each
of the Partners on Schedule A attached hereto and incorporated
herein by this reference.
3.02. Capital Accounts. A Capital Account will be
established for each Partner.
(a) To each Partner's Capital Account there will be
credited such Partner's capital contributions, such Partner's
distributive share of Profits and any items in the nature of income
or gain which are specially allocated pursuant to Section 8.02
hereof, and the amount of any Partnership liabilities assumed by
such Partner or which are secured by any Property distributed to
such Partner;
(b) To each Partner's Capital Account there will be
debited the amounts of cash and the Gross Asset Value of any
Property distributed to such Partner pursuant to any provision of
this Agreement, such Partner's distributive share of Losses and any
items in the nature of expenses or losses which are specially
allocated pursuant to Section 8.02 hereof and the amount of any
liabilities of such Partner assumed by the Partnership or which are
secured by any Property contributed by such Partner to the
Partnership;
(c) In the event any Partnership interest is
transferred in accordance with the terms of this Agreement, the
transferee will succeed to the Capital Account of the transferor to
the extent it relates to the transferred Partnership interest;
(d) In determining the amount of any liability for
purposes of paragraphs (a) and (b) hereof, there will be taken into
account Section 752(c) of the Code and any other applicable
provisions of the Code and Regulations; and
(e) The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Section 1.704-1(b) of the
Regulations, and will be interpreted and applied in a manner
consistent with such Regulations. In the event the Partners will
determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including,
without limitation, debits or credits relating to liabilities that
are secured by contributed or distributed Property or which are
assumed by the Partnership or one or more of the Partners), are
computed in order to comply with such Regulations, the Partners may
make such modification, provided that it is not likely to have a
material effect on the amounts distributable to any Partner
pursuant to Section 9.02 of the Agreement upon the dissolution of
the Partnership. The Partners also will (i) make any adjustments
that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed
for book purposes in accordance with Section 1.704-1(b)(2)(iv)(g)
of the Regulations, and (ii) make any appropriate modifications in
the event unanticipated events might otherwise cause this Agreement
not to comply with Section 1.704-1(b) of the Regulations.
3.03. Admissions of New Partners. New Partners may be
admitted to the Partnership as partners in the Partnership with the
unanimous written consent of the existing Partners. A new Partner
must agree to be bound by the terms and provisions of this
Agreement, as amended. Upon admission, a new Partner will have all
rights and duties of a Partner of the Partnership.
3.04. Interest. No interest will be paid or credited to
the Partners on their Capital Accounts or upon any undistributed
profits left on deposit with the Partnership.
3.05. Additional Capital Contributions.
(a) Except as
otherwise provided in this Section 3.05, no Partner will be
required to make additional capital contributions ("Additional
Capital Contributions") to the Partnership. However, the Partners
authorize the Partnership to receive additional capital
contributions from the Partners and the Partnership may solicit
Additional Capital Contributions from the Partners, in an amount
and in such proportions from the Partners as is authorized by the
unanimous vote of the Partners. The Partners acknowledge and agree
that they will vote in favor of such solicitation and receipt of
Additional Capital Contributions to the extent of the capital
requirements specified in the Annual Plan.
(b) Notwithstanding the provisions of paragraph (a)
of this Section 3.05, upon receipt of at least five (5) business
days written notice from the Board of Governors, [*] will make
Additional Capital Contributions from time to time [ * ]
, up to an aggregate amount equal
to the lesser of: (i)[*]; or (ii)[*].
ARTICLE IV
PARTNERS
4.01. Matters Requiring the Consent of the Partners;
Restrictions on Actions by the Partners.
(a) Matters Requiring
the Consent of the Partners. No action may be taken by or on
behalf of the Partnership in connection with any of the following
matters without the prior written consent of each Partner:
(i) approval of the initial Annual Plan;
(ii) any amendments, waivers or other changes
to this Agreement;
(iii) changes to the composition of the Board
of Governors (i.e., the number of Governors to be nominated by each
Partner);
(iv) a change in fiscal year of the
Partnership;
(v) the incurrence of any indebtedness that
increases the total indebtedness of the Partnership above the level
existing at the end of the prior fiscal year, excluding
indebtedness for short-term trade financing, unless included in the
Annual Plan;
(vi) the winding up, dissolution or liquidation
of the Partnership in a manner other than as contemplated by the
terms of this Agreement;
(vii) the extension of the term of the
Partnership's existence beyond its initial or any extended term;
(viii) the merger, reorganization,
consolidation of the Partnership or other form of business
combination with respect to the Partnership;
(ix) any change in the objects or purposes of
the Partnership or the scope of its activities;
(x) the approval of any transactions between
the Partnership and any Partners not specifically provided for in
the Annual Plan;
(xi) with respect to the Partnership, (a) the
acquisition of or investment in any corporation, partnership, or
joint venture with any person, (b) the creation of any direct or
indirect subsidiary of the Partnership, or (c) the acquisition or
sale of assets in a single transaction or series of transactions
(other than as set forth in the Preliminary Implementation Plan,
the Implementation Plan or the Annual Plan);
(xii) with respect to the Partnership, (a) the
voluntary commencement of any proceeding or the voluntary filing of
any petition seeking relief under Title 11 of the United States
Code, as amended from time to time, or any other Federal, state or
foreign bankruptcy, insolvency, receivership or similar law, (b)
the consent to the institution of, or the failure to contest in a
timely and appropriate manner, any involuntary proceeding or any
involuntary filing of any petition of the type described in the
immediately preceding clause (a), (c) the application for or
consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for it or for a
substantial portion of its property or assets, (d) the filing of an
answer admitting the material allegations of a petition filed
against it in any such proceeding, (f) the making of a general
assignment for the benefit of creditors, (g) the admission in
writing of its inability to, or the failure generally, to pay its
debts as they become due, or (h) the taking of any action for the
purpose of effecting any of the foregoing;
(xiii) the admission of another partner to the
Partnership; and
(xiv) any other matters with respect to which
applicable law requires the approval of more than a majority vote
of the Partners.
(b) Restrictions on Actions by the Partners.
Neither Partner may without the prior written consent of the other
Partner:
(i) confess a judgment against the
Partnership;
(ii) except as otherwise provided by this
Agreement, the Joint Venture Agreement or the Material Agreements,
make any agreement on behalf of or otherwise purport to bind the
other Partner or the Partnership;
(iii) do any act, or fail to take any act, in
contravention of this Agreement, the Joint Venture Agreement or the
Material Agreements;
(iv) except as contemplated by this Agreement,
the Joint Venture Agreement, or the Material Agreements, dispose of
the Business;
(v) assign the property of the Partnership in
trust for creditors or on the assignee's promise to pay any
indebtedness of the Partnership;
(vi) submit a Partnership claim or liability to
arbitration or reference, except as contemplated by this Agreement,
the Joint Venture Agreement, or the Material Agreements;
(vii) settle, waive, release or initiate any
claim, demand, action, suit, or other proceeding by or against the
Partnership; or
(viii) incur any indebtedness in connection
with, or otherwise engage in, any Hedge/Swap Transaction; provided,
however, if the AT&T Partner consents to incurring any indebtedness
in connection with, or otherwise engaging in, a Hedge/Swap
Transaction, the Partnership must also receive the written consent
of the Treasurer of AT&T Corp., an Assistant Treasurer of AT&T
Corp., or a Treasury Manager of AT&T Corp. designated by the
Treasurer of AT&T Corp., prior to incurring any such indebtedness
or engaging in any such Hedge/Swap Transaction; and further
provided that if the Cirrus Partner consents to incurring any
indebtedness in connection with, or otherwise engaging in, a
Hedge/Swap Transaction, the Partnership must also receive such
consents, if any, as may be required by applicable Cirrus financing
policies then in existence, prior to incurring any such
indebtedness or engaging in any such Hedge/Swap Transaction.
4.02. Actions by the Partners; Meetings; Quorum;
Majority. Each Partner will designate one person who will be
authorized to act on behalf of such Partner in connection with the
consents or approvals required pursuant to Section 4.01, provided
that all such acts on behalf of a Partner will be in writing. Each
Partner will notify the other Partner or Partners of the identity
of such person, or any replacement thereof, pursuant to the terms
of Section 14.01 of the Joint Venture Agreement. Each Partner
agrees to provide any consent or approval required under Section
4.01 hereof, or to indicate that such consent or approval will not
be provided, within twenty (20) days of written request of the
other Partner of the Partnership.
4.03. Other Ventures. The parties hereto acknowledge
and agree that the Partners, or any of them, may engage in other
flows.
======
any rights in and to any independent venture or activity or the
income or profits derived therefrom.
ARTICLE V
TRANSFER OF PARTNERS' INTERESTS
5.01. Personal Property; Transferee's Interest. Subject
to the provisions of the Joint Venture Agreement with respect to
disposal of a Partner's interest in the Partnership, the interest
of each Partner is personal property and may be transferred only in
accordance with the terms of Section 5.02 hereof. If all the
Partners other than the Partner proposing to dispose of its
interest agree to a proposed transfer by unanimous written consent,
but do not agree by unanimous written consent to admit the
transferee as a Partner such transferee will have no right to
participate in the management of the business and affairs of the
Partnership or to become a Partner and will only be entitled to
receive the share of profits or other compensation by way of income
and the return of contributions, to which the transferor Partner
would otherwise be entitled. If the transfer is approved by the
other Partners by unanimous written consent and the admission of
the transferee as a Partner is also approved by unanimous written
consent, such transferee will have all the rights and powers and be
subject to all the restrictions and liabilities of its assignor,
will have the right to participate in the management of the
business and affairs of the Partnership and will become a
substituted Partner.
5.02. Restrictions on Transfer. Unless the non-transferring
Partner agrees, or the Partners agree by unanimous written consent,
to the contrary, no Partner may transfer, assign,pledge or otherwise
dispose of its interest in the Partnership, except to such other Partner
or Partners.
5.03. Buy/Sell.
(a) In the event a Partner wishes to
dispose of its interest pursuant to Section 5.02 hereof or upon
termination of this Agreement, the Partner wishing to dispose of
its interest in the Partnership will notify the non-transferring
Partner or Partners who will be under no obligation to acquire the
interest, nor to permit the sale to a third party who is not then a
Partner. In the event a Partner wishes or Partners wish to
purchase the interest of another Partner it or they will notify
such other Partner who will be under no obligation to sell such
interest. If a Partner wishes to dispose of its interest and the
other Partner or Partners wishes to purchase the interest (the
"Purchasing Partner or Partners"), the Purchasing Partner or
Partners will acquire the interest from the transferring Partner
(the "Selling Partner") at an agreed upon price, or if no price can
be agreed upon, the fair market value of such interest as
determined by an independent qualified appraiser appointed by the
Purchasing Partner or Partners and the Selling Partner. If they
cannot agree on an appraiser, the Purchasing Partner or Partners,
on the one hand, and the Selling Partner, on the other hand, will
each choose an appraiser and the two appraisers will choose one
additional appraiser. The fair market value of the interest of the
Selling Partner will be determined by the three appraisers or, if
they cannot agree, will be the average of the three appraisers'
valuation. At the consummation of the sale of the interest in the
Partnership of the Selling Partner, the fair market value of the
Selling Partner's interest will be paid in cash or in the form of a
promissory note with such terms, interest rates, payment amounts
and other terms as will be mutually agreed upon by the Selling
Partner and the Purchasing Partner or Partners.
(b) The Partners hereby agree that in the event of
a sale pursuant to this Section 5.03:
(i) for purposes of this Section 5.03 only,
the interest in the Partnership of the AT&T Partner will be deemed
to include the AT&T Assets, the other assets of AT&T Corp. and the
AT&T Partner comprising OR2, OR1, and the Premises and the Land;
(ii) for purposes of this Section 5.03 only,
the interest in the Partnership of the Cirrus Partner will be
deemed to include the Cirrus Assets and the other assets of Cirrus
and the Cirrus Partner comprising OR2; and
(iii) such sale will be consummated as soon as
reasonably practicable.
In the event of any such sale, the Selling Partner will use its
reasonable best efforts to cause all leases and other agreements
covering the AT&T Assets, if the AT&T Partner is the Selling
Partner, or the Cirrus Assets, if the Cirrus Partner is the Selling
Partner, to be assigned to the Purchasing Partner or the third-party
purchaser, as the case may be, and the Purchasing Partner or
the third-party purchaser, as the case may be, will assume all
obligations under any such leases and other agreements. The
parties hereto acknowledge and agree that AT&T and its Affiliates
may, in its or their sole discretion, enter into transactions,
agreements, understandings or arrangements with respect to the
Premises and/or the Land , including but not limited to those which
may give rise to sales, over-leases, mortgages, security interests,
liens or encumbrances; provided, however, that in the event of any
such transactions, agreements, understandings or arrangements, the
Lease will not be terminated other than in accordance with the
terms thereof.
ARTICLE VI
GOVERNORS
6.01. The Board of Governors.
(a) Upon the terms and
subject to the conditions of this Agreement and the provisions of
the GPL, the Partners acknowledge and agree that complete and
exclusive power to direct and control the Partnership is delegated
hereby to the governing committee of five persons appointed as
provided in this Article VI (the "Board of Governors"). The
Partnership will be operated on a day to day basis by its officers
and employees, governed by the Board of Governors.
(b) The Governors may exercise all powers of the
Partnership and do all such lawful acts and things as are not by
the GPL or this Agreement directed or required to be exercised or
done by the Partners. Following proper notice therefor, a vote of
the Board of Governors will be required with respect to the
following matters and will be conducted in accordance with the
terms of this Agreement:
(i) amendments to the Annual Plan, including
periodic updates and amendments thereto (as set forth in Section
3.02 of the Joint Venture Agreement) and approval of the annual
operating and capital budgets of the Partnership;
(ii) expenditures which, in the aggregate, for
any transaction or series of related transactions, are in excess of
[ * ] if such expenditures were not approved in the Annual
Plan;
(iii) execution of any agreement involving
payments in excess of [ * ] over its term or having a term
longer than one (1) year if such agreement was not approved in the
Annual Plan;
(iv) approval of limits of authority for
officers of the Partnership if such limits were not set forth in
the Annual Plan;
(v) borrowing (including the provision of any
guarantee) in excess of borrowings authorized pursuant to the
Annual Plan and any encumbering of assets of the Partnership not
provided for in the Annual Plan;
(vi) the amendment or modification of the Bonus
Plan; and
(vii) any other matters which by the terms
hereof are reserved to the Board of Governors.
(c) Each Governor will be obliged to devote only as
much of his or her time to the Partnership's business as will be
reasonably required in light of the Partnership's business and
objectives. A Governor will perform his or her duties as a
Governor in good faith, in a manner he or she reasonably believes
to be in the best interests of the Partnership, and with such care
as an ordinarily prudent person in a like position would use under
similar circumstances.
(d) Subject to the provisions of this Agreement,
the Board of Governors is authorized and directed, as soon as
practicable, to delegate to the President and Chief Executive
Officer responsibility for the day to day operation of the
Business.
6.02. Members of the Board of Governors; Voting; etc.
(a) The AT&T Partner will nominate three persons to serve on the
Board of Governors, which nominees will be reasonably acceptable to
Cirrus. The Cirrus Partner will nominate two persons to serve on
the Board of Governors, which nominees will be reasonably
acceptable to AT&T. Neither Partner will unreasonably withhold its
consent to the election of the nominees of the other Partner or
Partners. All such persons elected by the Partners to serve on the
Board of Governors are referred to in this Agreement collectively
as the "Governors" and individually as a "Governor." Each Governor
will, at all times, be an employee or officer of his or her
nominating Partner or of its Affiliates. The Partners hereby elect
those persons identified on Schedule B attached hereto to be the
initial Governors.
(b) Each Partner will be entitled to name an
alternate person (who will be reasonably satisfactory to the other
Partner) to serve in the place of any Governor appointed by such
Partner should any such Governor not be able to attend a meeting or
meetings.
(c) Each Governor or alternate person will serve at
the pleasure of the appointing Partner and may be removed as such,
with or without cause, and his or her successor appointed, by the
appointing Partner.
(d) Each Partner will bear any cost incurred by any
Governor designated by it to serve on the Board of Governors, and
no member of the Board of Governors will be entitled to
compensation from the Partnership for serving in such capacity.
(e) Each Partner will notify the other Partner or
Partners and the Partnership of the name, business address and
business telephone and facsimile numbers of each Governor and each
alternate person and such Partner will promptly notify the other
Partner or Partners and the Partnership of any change in such
Partner's appointments or of any change in any such address or
numbers.
(f) For purposes of any approval or action taken by
the Board of Governors, each member of the Board of Governors will
have one vote. A majority of the votes eligible to be cast at any
meeting will be required for purposes of approving any action to be
taken by the Board of Governors at such meeting; provided, however,
that a majority of the votes eligible to be cast at a meeting
required for purposes of approving the matters described in
Sections 6.01(b)(i) through 6.01(b)(vi) hereof must include the
vote of at least one (1) Governor appointed by the AT&T Partner and
one (1) Governor appointed by the Cirrus Partner are present.
(g) At any meeting of the Board of Governors, a
Governor, in the absence of another Governor appointed by the same
Partner or an alternate person serving in the place of such absent
Governor, may cast the vote such absent Governor would otherwise be
entitled to cast.
(h) The quorum necessary for any meeting of the
Board of Governors will be those members entitled to cast a
majority of the votes held by the members of the Board of
Governors; provided, however, that a quorum necessary for approval
by the Board of Governors of the matters described in Sections
6.01(b)(i) through 6.01(b)(vi) hereof must include at least one (1)
Governor appointed by the AT&T Partner and one (1) Governor
appointed by the Cirrus Partner are present. A quorum will be
deemed not to be present at any meeting for which notice was not
properly given under Section 6.01(c) hereof, unless the member or
members as to whom such notice was not properly given attend such
meeting without protesting the lack of notice or duly execute and
deliver a written waiver of notice or a written consent to the
holding of such meeting.
(i) Any action by a Governor of the Board of
Governors in such Governor's capacity as such will, so far as the
Partners are concerned, be deemed to have been duly authorized by
the Partner that appointed such Governor; provided, however, that
any such action will not be deemed to be an approval, consent or
agreement of such Partner for any purposes of this Agreement
(including under Section 4.01 hereof), for which approval, consent
or agreement must be separately obtained in writing.
(j) Each appointment by a Partner to the Board of
Governors will remain in effect until the Partner making such
appointment notifies the other Partner of a change in such
appointment. A Governor may resign from his or her position as a
Governor at any time by notice to the Partners. Such resignation
will be effective as set forth in such notice. The resignation or
removal of a member of the Board of Governors will not invalidate
any act of such member taken before the giving of such written
notice of the removal or resignation of such member.
6.03. Meetings, Notice, etc.
(a) Meetings of the
Board of Governors will be held at the principal offices of the
Partnership or at such other place as may be determined by the
Board of Governors.
(b) Regular meetings of the Board of Governors will
be held at least quarterly on such dates and at such times as will
be determined by the Board of Governors.
(c) Notice of any regular meeting or special
meeting pursuant to paragraph (d) of this Section 6.03 will be
given to each member and alternate member of the Board of Governors
by the Partnership or any Partner at least ten business days prior
to such meeting in the case of a meeting in person or at least five
days prior to such meeting in the case of a meeting by conference
telephone or similar communications equipment pursuant to paragraph
(f) of this Section 6.03.
(d) Special meetings of the Board of Governors may
be called by any Governor by notice given in accordance with the
notice requirements set forth in paragraph (c) of this Section
6.03, which notice will state the purpose or purposes for which
such meeting is being called. No action may be taken and no
business may be transacted at such special meeting which is not
identified in such notice unless (a) such action or business is
incidental to the action or business for which the special meeting
is called or (b) such action or business does not materially
adversely affect either Partner or the Partnership.
(e) The actions taken by the Board of Governors at
any meeting, however called and noticed, will be as valid as though
taken at a meeting duly held after regular call and notice if (but
not until), either before, at or after the meeting, any Governor as
to whom it was improperly held duly executes and delivers a written
waiver of notice or a written consent to the holding of such
meeting; provided, however, that any Governor that is present at a
meeting will be deemed to have received adequate notice thereof. A
vote of the Board of Governors may be taken either in a meeting of
the Board of Governors or by written consent of the Governors
eligible to cast a majority of the votes on the Board of Governors
without a meeting, which majority for a written consent will be
required to include, at a minimum, one (1) member of the Board of
Governors appointed by each Partner.
(f) A meeting of the Board of Governors may be held
by conference telephone or similar communications equipment by
means of which all members participating in the meeting can be
heard by all other participants. Any member of the Board of
Governors may elect to participate in a meeting by conference
telephone or similar communications equipment upon sufficient
advance notice to permit arrangements therefor to be made.
(g) The Board of Governors will, from time to time,
elect one of the Governors to preside at its meetings. Such
elected Governor is referred to herein as the "Chairman of the
Board of Governors." The Board of Governors may establish
reasonable rules and regulations to (a) require officers and
employees to call meetings and perform other administrative duties,
(b) limit the number and participation of observers, if any, and
require such persons to observe confidentiality obligations and (c)
otherwise provide for the keeping and distribution of minutes and
internal Board of Governors governance matters not inconsistent
with the terms of this Agreement.
6.04. Partners May Act. Notwithstanding anything to the
contrary set forth in this Article VI, the Partners will retain all
powers which may not be so delegated pursuant to the GPL and the
powers specified in this Agreement, and further provided, that
nothing in this Article VI will derogate from the power of the
Partners, which is absolute, to agree in writing to cause the
Partnership to act or refrain from acting as to any specific item
or matter.
ARTICLE VII
OFFICERS
7.01. Number; Titles; Election; Term; Qualification.
The officers of the Partnership will be a President and Chief
Executive Officer (one person), one or more Vice Presidents (and,
in the case of each Vice President with such descriptive title, if
any, as the Governors will determine), a secretary, and a Treasurer
and Chief Financial Officer (one person). The Partnership may also
have a Chairman of the Board of Governors, one or more Assistant
Treasurers, one or more Assistant Secretaries, and such other
officers and such agents as the Governors may from time to time
elect or appoint. The AT&T Partner will recommend a President and
Chief Executive Officer and a Treasurer and Chief Financial
Officer. The Partners will then elect a President and Chief
Executive Officer and a Treasurer and Chief Financial Officer at
the first meeting at which a quorum will be present or whenever a
vacancy exists; provided that any such election will require the
unanimous vote of the Partners. The President then, or from time
to time thereafter, will recommend one or more other officers, and
the Board of Governors will appoint such officers as they will deem
advisable; provided that any such election will require the
unanimous vote of the Governors. Each officer will hold office for
the term for which he or she is elected or appointed and until his
or her successor has been elected or appointed and qualified. Any
person may hold any number of offices. No officer or agent need be
a Governor.
7.02. Removal. Any officer or agent elected or
appointed by the Governors may be removed by the unanimous vote of
the Partners or the unanimous vote of the Governors whenever in
their judgment the best interest of the Partnership will be served
thereby. Election or appointment of any officer or agent will not
of itself create contract rights. [*].
7.03. Vacancies. Any vacancy occurring in any office of
the Partnership may be filled by the unanimous vote of the
Governors.
7.04. Authority. Officers will have such authority and
perform such duties in the management of the Partnership as are
provided in this Agreement or as may be determined by resolution of
the Governors not inconsistent with the Regulations.
7.05. Compensation. The compensation, if any, of
officers and agents will be fixed from time to time by the
Governors; provided, that the Governors may by resolution delegate
to any one or more officers of the Partnership the authority to fix
such compensation.
7.06. Chairman. The Chairman of the Board of Governors
will have such powers and duties as may be prescribed by the
Governors.
7.07. President and Chief Executive Officer. Unless and
to the extent that such powers and duties are expressly delegated
to the Chairman of the Board of Governors by the Governors, the
President will be the Chief Executive Officer of the Partnership
and, subject to the supervision of the Governors and the Partners,
will have general management and control of the business and
property of the Partnership in the ordinary course of its business
with all such powers with respect to such general management and
control as may be reasonably incident to such responsibilities,
including, but not limited to, the power to employ, discharge, or
suspend employees and agents of the Partnership, and to suspend,
with or without cause, any officer of the Partnership pending final
action by the Governors with respect to continued suspensions,
removal, or reinstatement of such officer. The President may,
without limitation, agree upon and execute all division and
transfer orders, bonds, contracts and other obligations in the name
of the Partnership. The President will have, in addition to the
powers and authorities normally incident to the office of president
and the powers and duties set forth in this Agreement, the
following authorities and accountabilities:
(a) accountability to the Board of Governors to
cause the Partnership to achieve its milestones, requirements and
objectives as set forth in the Annual Plan or otherwise;
(b) day to day administration of the operation of
the Partnership and coordination of the subcontractors;
(c) representing the Partnership in dealings with
the Partners, their Affiliates and third parties;
(d) proposing to the Board of Governors updates and
amendments to the Annual Plan;
(e) delegating authority pursuant to the Schedule
of Authorizations (as hereinafter defined); and
(f) managing the personnel resources of the
Partnership within the parameters of the Annual Plan including
appointment and removal of officers and personnel other than the
officers appointed by the Board of Governors. The Board of
Governors will adopt unanimously at or immediately following the
execution and delivery of this Agreement, and may amend from time
to time unanimously, the Schedule of Authorizations. As used
herein, "Schedule of Authorizations" will mean a schedule of
authorizations pursuant to which the President of the Partnership
may act or delegate to other officers and employees of the
Partnership authority to conduct the business of, and enter into
transactions in the name of, the Partnership, consistent with this
Agreement.
7.08. Vice Presidents. Each Vice President will have
such powers and duties as may be prescribed by the Governors or as
may be delegated from time to time by the President and (in the
order as designated by the Governors, or in the absence of such
designation, as determined by the length of time each has held the
office of Vice President continuously) will exercise the powers of
the President during the President's absence or inability to act.
As between the Partnership and third parties, any action taken by a
Vice President in the performance of the duties of the President
will be conclusive evidence of the absence or inability to act of
the President at the time such action was taken.
7.09. Treasurer and Chief Financial Officer. The
Treasurer will have custody of the Partnership's funds and
securities, will keep full and accurate accounts of receipts and
disbursements, and will deposit all moneys and valuable effects in
the name and to the credit of the Partnership in such depository or
depositories as may be designated by the Governors. The Treasurer
will be the chief financial officer of the Partnership. The
Treasurer will audit all payrolls and vouchers of the Partnership,
receive, audit, and consolidate all operating and financial
statements of the Partnership and its various departments, will
supervise the accounting and auditing practices of the Partnership,
and will have charge of matters relating to taxation.
Additionally, the Treasurer will have the power to endorse for
deposit, collection, or otherwise all checks, drafts, notes, bills
of exchange, and other commercial paper payable to the Partnership
and to give proper receipts and discharges for all payments to the
Partnership. The Treasurer will perform such other duties as may
be prescribed by the Governors or as may be delegated from time to
time by the president.
7.10. Assistant Treasurers. Each Assistant Treasurer
will have such powers and duties as may be prescribed by the Board
of Governors or as may be delegated from time to time by the
President. The Assistant Treasurers (in the order as designated by
the Governors or, in the absence of such designation, as determined
by the length of time each has held the office of Assistant
Treasurer continuously) will exercise the powers of the treasurer
during that officer's absence or inability to act. As between the
Partnership and third parties, any action taken by an Assistant
Treasurer will be conclusive evidence of the absence or inability
to act of the Treasurer at the time such action was taken.
7.11. Secretary. The Secretary will maintain minutes of
all meetings of the Governors, of any committee, and of the
Partners, or consent in lieu of such minutes in the Partnership's
minute books, and will cause notice of such meetings to be given
when requested by any person authorized to call such meetings. The
Secretary may sign with the president, in the name of the
Partnership, all contracts of the Partnership and affix the seal of
the Partnership thereto. The Secretary will have charge of the
certificate books, transfer records, ledgers, and such other books
and papers as the Governors may direct, all of which will at all
reasonable times be open to inspection by any Governor at the
office of the Partnership during business hours. The Secretary
will perform such other duties as may be prescribed by the
Governors or as may be delegated from time to time by the
president.
7.12. Assistant Secretaries. Each Assistant Secretary
will have such powers and duties as may be prescribed by the
Governors or as may be delegated from time to time by the
President. The Assistant Secretaries (in the order designated by
the Governors or, in the absence of such designation, as determined
by the length of time each has held the office of Assistant
Secretary continuously) will exercise the powers of the secretary
during that officer's absence or inability to act. As between the
Partnership and third parties, any action taken by an Assistant
Secretary in the performance of the duties of the Secretary will be
conclusive evidence of the absence or inability to act of the
Secretary at the time such action was taken.
ARTICLE VIII
ALLOCATION OF PROFITS AND LOSSES
8.01. Allocation of Profits and Losses. Subject to the
provisions of Sections 8.02, 8.03 and 8.04 hereof, the Profits and
Losses of the Partnership for each Fiscal Year will be allocated
among the Partners in the following manner.
(a) Profits will be allocated among the Partners in
the following manner:
(i) First, the Profits derived from, or
attributable to, the operation of OR1 will be allocated to the AT&T
Partner; and
(ii) Second, the Profits derived from, or
attributable to, the operation of OR2 will be allocated among the
Partners pro rata in proportion to their Percentage Interests.
(b) Losses will be allocated among the Partners in
the following manner:
(i) First, any Losses derived from, or
attributable to, OR1 will be allocated to the AT&T Partner; and
(ii) Second, in the event that [*] makes
Additional Capital Contributions pursuant to Section 3.05(b)
hereof, Losses derived from, or attributable to, OR2 will be
allocated to the [*] in an amount equal to such additional Capital
Contributions; and
(iii) Third, any remaining Losses derived from,
or attributable to, OR2 will be allocated to the Partners pro rata
in proportion to their Percentage Interests.
8.02. Special Allocations.
(a) Minimum Gain Chargeback.
Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Section
8.02, if there is a net decrease in Partnership Minimum Gain during
any Fiscal Year of the Partnership, each Partner will be specially
allocated items of Partnership income and gain for such Fiscal Year
of the Partnership (and, if necessary, subsequent Fiscal Year of
the Partnerships) in an amount equal to that Partner's share of the
net decrease in Partnership Minimum Gain. These allocations will
be determined in accordance with Section 1.704-2(f) of the
Regulations. The items to be so allocated will be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Section 8.02(a) is intended to comply with the
minimum gain charge back requirement in Section 1.704-2 of the
Regulations and will be interpreted consistently therewith. Where
such a minimum gain chargeback would cause a distortion in the
economic arrangement of the Partners and it is not expected that
the Partnership will have sufficient other income to correct that
distortion, the Partnership will apply for a waiver of the minimum
gain charge back requirement in accordance with Section 1.704-2(f)
of the Regulations.
(b) Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Regulations,
notwithstanding any other provision of this Section 8.02, if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Fiscal Year
of the Partnership, each Partner that has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5)
of the Regulations, will be specially allocated items of
Partnership income and gain for such Fiscal Year of the Partnership
(and, if necessary, subsequent Fiscal Year of the Partnerships) in
an amount equal to the portion of such Partner's share of the net
decrease in Partner Nonrecourse Debt Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with
Section 1.704-2(i)(4) of the Regulations. Allocations pursuant to
the previous sentence will be made in proportion to the respective
amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated will be determined in accordance with
Sections 1.704-2(i)(4) and 1.704-2(j)(2) of the Regulations. This
Section 8.02(b) is intended to comply with the minimum gain charge
back requirement of Section 1.704-2(i)(4) of the Regulations and
will be interpreted consistently therewith. In addition, rules
consistent with the provisions of Section 1.704-2(f)(2), (3), (4)
and (5) of the Regulations (including rules regarding a waiver of
the type discussed in Section 8.02(a) hereof), will apply to the
special allocation required by this Section 8.02(b).
(c) Gross Income Allocation. In the event any
Partner has an Adjusted Capital Account Deficit at the end of any
Fiscal Year of the Partnership, such Partner will be specially
allocated items of Partnership income and gain in the amount and in
the manner necessary to eliminate the deficit as quickly as
possible, provided that an allocation pursuant to this Section
8.02(c) will be made only and to the extent that such Partner would
have an Adjusted Capital Account Deficit after all other
allocations provided for in this Article VIII have been made as if
Section 8.02(g) hereof and this Section 8.02(c) were not in this
Agreement. The allocations contained in this Section 8.02(c) are
intended to satisfy the "qualified income offset" provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and will be
interpreted consistently therewith.
(d) Section 754 Adjustment. To the extent an
adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or 743(b) of the Code is required,
pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section 1.704-1(b)(2)(iv)
(m)(4) of the Regulations, to be taken into account in
determining Capital Accounts as a result of a distribution to a
Partner in complete liquidation of his interest in the Partnership,
the amount of such adjustment to the Capital Accounts will be
treated as an item of gain (if the adjustment increases the basis
in the asset) or loss (if the adjustment decreases such basis) and
such gain or loss will be specially allocated to the Partners in
proportion to the Percentage Interest of each Partner in the event
Section 1.702-1(b)(2)(iv)(m)(2) of the Regulations applies, or to
the Partners to which such distribution was made in the event that
Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
(e) Nonrecourse Deductions. Nonrecourse Deductions
for any Fiscal Year of the Partnership or other period will be
specially allocated among the Partners in proportion to their
Percentage Interests.
(f) Partner Nonrecourse Deductions. Any Partner
Nonrecourse Deductions for any Fiscal Year of the Partnership or
other period will be specially allocated to the Partner who bears
the economic risk of loss with respect to the Partner Nonrecourse
Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Section 1.704-2(i)(1) of the Regulations.
(g) Curative Allocations. The allocations set
forth in Sections 8.02(a) through (f) hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of
the Regulations. It is the intent of the Partners that, to the
extent possible, all Regulatory Allocations will be offset either
with Regulatory Allocations or with special allocations of other
items of Partnership income, gain, loss or deduction pursuant to
this Section 8.02(g). Therefore, notwithstanding any other
provisions of this Article VIII (other than the Regulatory
Allocations), the Partners will make such offsetting special
allocations of Partnership income, gain, loss, or deduction in
whatever manner they determine appropriate so that, after such
offsetting allocations are made, each Partner's Capital Account
balance is, to the extent possible, equal to the Capital Account
balance such Partner would have had if the Regulatory Allocations
were not part of this Agreement and all Partnership items were
allocated pursuant to Section 8.01 hereof. In exercising their
discretion under this Section 8.02(g), the Partners will take into
account future Regulatory Allocations under Section 8.02(a) and (b)
hereof that, although not yet made, are likely to offset Regulatory
Allocations made under Sections 8.02(e) and (f) hereof.
8.03. Other Allocation Rules.
(a) The Partners are
aware of the income tax consequences of the allocations made by
this Article VIII and hereby agree to be bound by the provisions of
this Article VIII in reporting their shares of partnership income
and loss for income tax purposes.
(b) Income and loss for financial reporting
purposes will be allocated among the Partners in a manner
consistent with the allocations of the Profits and Losses for
federal income tax purposes and in accordance with the accounting
standards set forth in Section 10.01 hereof.
(c) For purposes of determining Profits, Losses, or
any other items allocable to any period, Profits, Losses, and any
such other items will be determined on a daily, monthly, or other
basis, as determined by the Partners using any permissible method
under Section 706 of the Code and the Regulations thereunder.
(d) Solely for purposes of determining a Partner's
proportionate share of the "excess nonrecourse liabilities" of the
Partnership within the meaning of Section 1.752-(3) of the
Regulations, the Partners' interests in Partnership profits will be
their respective Percentage Interests.
(e) To the extent permitted by Section 1.704-2(h)(3)
of the Regulations, the Partners will endeavor to treat
distributions as having been made from the proceeds of Nonrecourse
Liability or a Partner Nonrecourse Debt only to the extent that
such distributions would cause or increase an Adjusted Capital
Account Deficit for any Partner.
8.04. Code Section 704(c).
(a) In accordance with
Section 704(c) of the Code and the Regulations thereunder, items of
income, gain, loss, and deduction with respect to any property
(other than money) contributed to the capital of the Partnership
will, solely for tax purposes, be allocated among the Partners so
as to take account of any variation between the adjusted basis of
such property to the Partnership for federal income tax purposes
and its initial Gross Asset Value.
(b) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to the definition thereof,
subsequent allocations of income, gain, loss, and deduction with
respect to such asset will 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 Section
704(c) of the Code and the Regulations thereunder.
(c) Any elections or other decisions relating to
such allocations will be made by the Partners in any manner that
reasonably reflects the purpose and intention of this Agreement and
are otherwise allowable under Section 1.704-3 of the Regulations.
8.05. Federal Income Tax. The parties hereto intend
that the Partnership will be governed by the applicable provisions
of Subchapter K, of Chapter 1, of the Code.
8.06. Allocation of Income and Loss in Respect of
Transferred Interests.
(a) If any interest in the Partnership is
transferred, or upon the admission or withdrawal of a Partner, in
accordance with the provisions of this Agreement during any
calendar year, the income or loss attributable to such interest for
such calendar year will be divided and allocated between the
Partners based upon an interim closing of the Partnership's books
or on a daily basis, as determined in the sole discretion of the
Governors. For the purpose of accounting convenience and
simplicity, the Partnership will treat a transfer of, or any
increase or decrease in, an interest in the Partnership which
occurs at any time during a semi-monthly period (commencing with
the semi-monthly period including the date hereof) as having been
consummated on the first day of such semi-monthly period,
regardless of when during such semi-monthly period such transfer,
increase, or decrease actually occurs (e.g., sales and dispositions
made during the first 15 days of any month will be deemed to have
been made on the first day of the month and sales and dispositions
thereafter will be deemed to have been made on the 16th day of the
month). Notwithstanding any provision above to the contrary, gain
or loss of the Partnership realized in connection with a sale or
other disposition of any of the assets of the Partnership will be
allocated solely to the Partners owning interests in the
Partnership as of the date such sale or other disposition occurs.
8.07. Reallocations Between the Partnership and a
Partner. Any redistribution, reapportionment or reallocation of
income, deductions, credits or allowances between the Partnership
and a Partner (or Affiliate of such Partner) effected pursuant to
Section 482 of the Code or any similar provision of state law
(along with any penalties, charges, interest or additions relating
thereto) with respect to any transaction between the Partnership
and such Partner (or Affiliate of such Partner) will be allocated
in full to such Partner. The Partner to which reallocations under
this Section 8.07 are made (as well as such Partner's Affiliates)
will indemnify and hold harmless the other Partner (as well as
Affiliates of such Partner) from any effects (including any taxes,
interest, penalties, charges or other additions) arising from any
such redistributions, reapportionment or reallocation. If, as a
result of any such redistribution, reapportionment or reallocation,
the Capital Accounts of the Partners are not in the same proportion
to each other as immediately prior to such redistribution,
reapportionment or reallocation, the Capital Accounts will be
adjusted to achieve such relative proportions using the mechanism
specified in Section 9.05 hereof.
ARTICLE IX
DISTRIBUTIONS
9.01. Operating Distributions. The Partnership's cash
available for distribution will, at such times as the Board of
Governors deem advisable, be distributed among the Partners in such
amounts as the Governors will unanimously determine. Except as
otherwise expressly provided in this Agreement, such operating
distributions will be allocated among the Partners as follows: (a)
all operating distributions derived from the operation of OR1 will
be paid to the AT&T Partner, and (b) all operating distributions
derived from the operation of OR2 will be allocated among the
Partners pro rata in proportion to their Percentage Interests.
9.02. Distribution on Dissolution and Liquidation. In
the event of the dissolution and liquidation of the Partnership for
any reason other than pursuant to Article V hereof or pursuant to
the terms of the Joint Venture Agreement with respect to the
transfer of the interest of a Partner in the Partnership to another
Partner, after the payment of or provision for creditors pursuant
to applicable law, the Partnership's assets will be distributed
among the Partners in the following manner:
(a) First, all assets related to OR1 shall be
distributed to the AT&T Partner; and
(b) Second, all remaining assets will be distributed to
the Partners pro rata in accordance with their positive
Capital Account balances in accordance with Regulation
Section 1.704-1(b)(2)(ii)(b)(2) (after taking into
account the distribution to the AT&T Partner of the
assets related to OR1).
To the extent consistent with the foregoing provisions of this
Section 9.02, the Partnership's non-monetary assets will be
distributed to the Partner which contributed such asset to the
Partnership (or to the successor of such contributing Partner). In
the event of the dissolution and liquidation of the Partnership
pursuant to Article V hereof or pursuant to the terms of the Joint
Venture Agreement with respect to the transfer of the interest of a
Partner in the Partnership to another Partner, after the payment of
or provision for creditors pursuant to applicable law, the
Partnership's assets will be distributed to the Partner or the
third party purchasing the interest of the Selling Partner.
9.03. Deemed Sale of Assets. For all purposes of this
Agreement, any property (other than cash) that is distributed or to
be distributed in kind to one or more Partners for a Fiscal Year,
including without limitation all non-cash assets which will be
deemed distributed immediately prior to the dissolution and winding
up of the Partnership so as to permit the unrealized gain or loss
inherent in such assets to be allocated to the Partners, or that is
constructively distributed on termination of the Partnership
pursuant to Section 708(b)(1)(B) of the Code and Section 9.04
hereof, will be deemed to have been sold for cash equal to its fair
market value, and the unrealized gain or loss inherent in such
assets will be treated as recognized gain or loss for purposes of
determining the Profits and Loss of the Partnership to be allocated
pursuant to Section 8.01 hereof for such Fiscal Year.
9.04. Deemed Termination. Any constructive termination
of the Partnership pursuant to Section 708(b)(1)(B) of the Code
will be deemed to be a winding up and termination of the
Partnership pursuant to which: (a) all assets of the Partnership
are deemed to have been sold as provided in Section 9.03 hereof,
with the unrealized gain or loss inherent in such assets being
allocated pursuant to Section 8.01 hereof, (b) the proceeds of the
deemed sales being deemed distributed pursuant to Section 9.02
hereof, and (c) such assets being then deemed to have been
recontributed to a new Partnership, and the Capital Accounts of the
Partners will be adjusted appropriately to reflect such deemed
termination, sale, distribution, and reconstitution. This Section
9.04 applies solely for purposes of adjusting Capital Accounts.
9.05. Distribution In the Event of a Reallocation. In
the event of a reallocation of income from a Partner (or an
Affiliate of a Partner) to the Partnership which is specially
allocated to the affected Partner under Section 8.07 of this
Agreement, the Partnership will (at the expense of the affected
Partner) seek approval from the IRS to establish an appropriate
account receivable from the affected Partner (or the Affiliate)
under the principles of Rev. Proc. 65-17. Any payment of an
account receivable established under the principles of Rev. Proc.
65-17 will, when received by the Partnership, be distributed to the
affected Partner. In the event that no such account receivable is
established, the Partnership will be deemed to have distributed an
amount to the affected Partner equal to the income which was
specially allocated to that Partner under Section 8.07 hereof.
ARTICLE X
ACCOUNTING AND RECORDS
10.01. Records and Accounting. The books and records of
the Partnership will be kept on the accrual basis, will reflect all
Partnership transactions and will be appropriate and adequate for
the Partnership's business. The books and records of the
Partnership will include separate accounts for the operations of,
and activities associated with, OR1 and OR2. To the extent
appropriate, all items of Profits and Losses will be allocated to
either OR1 or OR2. All items of Profits and Losses which are
shared or are not directly related to either OR1 or OR2 will be
allocated between OR1 and OR2 in a reasonable and consistent
manner. The fiscal year of the Partnership for financial reporting
and for Federal income tax purposes will be the Fiscal Year.
10.02. Access to Accounting Records. All books and
records of the Partnership will be maintained at any office of the
Partnership or at the Partnership's principal place of business,
and each Partner, and its duly authorized representatives, will
have access to them at such office of the Partnership and the right
to inspect and copy them at reasonable times.
10.03. Taxation.
(a) Characterization. The Partners
intend that the Partnership will be treated as a partnership for
Federal, state, local and foreign income and franchise tax purposes
and will take all reasonable action, including the amendment of
this Agreement and the execution of other documents, as may be
reasonably required to qualify for and receive treatment as a
partnership for Federal income tax purposes.
(b) Tax Matters Partner. The AT&T Partner will be
the Tax Matters Partner of the Partnership within the meaning of
Section 6231(a)(7) of the Code and will act in any similar capacity
under applicable state, local or foreign law (in such capacity, the
"Tax Matters Partner"). All reasonable expenses incurred by the
AT&T Partner while acting in such capacity will be paid or
reimbursed by the Partnership upon approval of the chief financial
officer of the Partnership; provided, however, that with respect to
any matter described in Section 8.07 hereof, the Partner to which
is reallocated any item described in Section 8.07 hereof (whether
or not such reallocation is adjusted, canceled or revoked by the
IRS) will (i) pay or reimburse all expenses incurred by the AT&T
Partner while acting in its capacity as the Tax Matters Partner in
connection with such matter and (ii) pay or reimburse all out of
pocket costs incurred by the Partnership in connection with such
matter.
(c) Tax Returns. (1) The Tax Matters Partner will
prepare or cause the Accountants to prepare and file on a timely
basis the Federal tax returns of the Partnership. The Tax Matters
Partner will cause state, local and any other tax returns required
to be filed by the Partnership to be prepared and filed on a timely
basis. The Tax Matters Partner will consult with the Cirrus
Partner regarding all non-ministerial decisions described in
Section 9.05(c)(2)(iii) hereof. Any disagreement with respect to
such consultation will be resolved in the manner described in
Section 9.05(c)(3) hereof. No Partner will file any tax return
that is inconsistent with the tax returns filed by the Partnership
except as provided in Section 9.05(c)(3) hereof.
(2) The Tax Matters Partner will take such action
as may be reasonably necessary to constitute the Cirrus Partner as
a "notice partner" within the meaning of Section 6231(a)(8) of the
Code. The Tax Matters Partner will furnish to each Partner within
five days (or within such shorter period as may be required by the
appropriate statutory or regulatory provisions) (i) copies of all
notices or other written communications received by the Tax Matters
Partner form the IRS, (ii) written notice of all material
communications the IRS has had with the tax Matters Partner and
(iii) written notice of all non-ministerial decisions to be made
regarding tax elections, tax returns, tax audits, tax litigation,
tax settlements and other tax matters that may come to the
attention of the Tax Matters Partner in its capacity as Tax Matters
Partner.
(3) The Tax Matters Partner will deliver to each
other Partner a copy of all written materials (including tax
returns) proposed to be filed with or submitted to the IRS or any
other taxing authority at least thirty (30) days prior to the date
such filing or submission is required to be made. If the Cirrus
Partner does not notify the Tax Matters Partner of its objection to
such filing or submission in writing before the fifteenth (15th)
day before the date for such filing or submission, the Cirrus
Partner will be considered to have approved such filing or
submission. If the Cirrus Partner provides such timely notice of
objection, the Cirrus Partner and the Tax Matters Partner will
negotiate in good faith to reach agreement with respect to such
filing or submission. If the Cirrus Partner and the Tax Matters
Partner are unable to reach such an agreement within 30 days, the
Cirrus Partner and the Tax Matters Partner will appoint a "Big Six"
accounting firm (except any "Big Six" accounting firm that is an
accountant of any of the AT&T Partner, the Cirrus Partner or the
Partnership or any of their respective Affiliates) to determine the
position that should be taken by the Partnership. Each Partner
will retain the right to take a position inconsistent with such
determination to the extent allowed under Section 6222 of the Code
or comparable provisions of state or local law.
(d) Tax Elections. The Governors will make the
following elections on behalf of the Partnership:
(i) to elect the calendar year as the Fiscal
Year of the Partnership if permitted by applicable law;
(ii) to elect a specified method of accounting;
(iii) if requested by a Partner, to elect, in
accordance with Sections 734, 743 and 754 of the Code and
applicable regulations and comparable state law provisions, to
adjust basis in the event any Partner's interest is transferred in
accordance with this Agreement or any of the Partnership's property
is distributed to any Partner;
(iv) to elect to treat all organization and
start-up costs of the Partnership as deferred expenses amortizable
over 60 months under Sections 195 and 709 of the Code; and
(v) To elect with respect to such other
Federal, state and local tax matters as the Governors will agree
upon from time to time.
(e) Annual Tax Information. The Governors will
cause the Partnership to deliver to each Partner all information
necessary for the preparation of such Partner's Federal and state
income tax returns.
ARTICLE XI
TERM; TERMINATION
11.01. Term; Termination. The term of the Partnership
will begin on the date of this Agreement and will continue until
the day immediately prior that same date ten years following the
date of this Agreement (the "Initial Term"), unless terminated
prior thereto: (a) in accordance with the provisions hereof; (b) by
unanimous agreement of the Partners; (c) by the material breach of
the Joint Venture Agreement or any of the Material Agreements which
breach remains uncured in accordance with the terms of the Joint
Venture Agreement or the Material Agreements, as the case may be;
or (d) pursuant to the GPL. Notwithstanding the foregoing, the
Partners may elect on or before two (2) years prior to the
expiration of the Initial Term or any Extended Term (as hereinafter
defined) to extend such term for an additional two (2) year period
(each such two (2) year period being referred to herein as an
"Extended Term"). If the Partners do not elect to extend the
Initial Term as set forth in this Article XI, the provisions of
Section 5.03 hereof will apply.
ARTICLE XII
DISSOLUTION OF THE PARTNERSHIP AND
TERMINATION OF A PARTNER'S INTEREST
12.01. Dissolution. The Partnership will be dissolved
upon the occurrence of any event which would cause or result in a
dissolution of the Partnership under the GPL or otherwise, unless
the Business is continued in accordance with the terms of the Joint
Venture Agreement.
ARTICLE XIII
INDEMNIFICATION
13.01. Indemnity. Subject to the provisions of Section
13.04 hereof, the Partnership will indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, except an action by or
in the right of the Partnership, by reason of the fact that he or
she or it is or was a Partner, Governor, director, officer,
employee or agent of the Partnership, or is or was serving at the
request of the Partnership as a Partner, Governor, director,
officer, employee or agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by him or it in
connection with the defense or settlement of the action, suit or
proceeding if he or she or it acted in good faith and in a manner
which he or she or it reasonably believed to be in or not opposed
to the best interests of the Partnership, and, with respect to a
criminal action or proceeding, had no reasonable cause to believe
his or her or its conduct was unlawful.
13.02. Indemnity for Actions By or In the Right of the
Partnership. Subject to the provisions of Section 13.04 hereof,
the Partnership will indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by or in the rights of the
Partnership to procure a judgment in his or her or its favor by
reason of the fact that he or she or it is or was a Partner,
Governor, director, officer, employee or agent of the Partnership,
or is or was serving at the request of the Partnership as a
Partner, Governor, director, officer, employee or agent of another
limited-liability Partnership, corporation, partnership, joint
venture, trust or other enterprise against expenses, including
amounts paid in settlement and attorneys' fees actually and
reasonably incurred by him or it in connection with the defense or
settlement of the action, suit or proceeding if he or she or it
acted in good faith and in a manner which he or she or it
reasonably believed to be in or not opposed to the best interests
of the Partnership. Indemnification may not be made for any claim,
issue or matter as to which such person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the Partnership or for amounts paid in
settlement to the Partnership, unless and only to the extent that
the court in which the action or suit was brought or other court of
competent jurisdiction determines upon application that in view of
all the circumstances of the case, the person is fairly and
reasonably entitled to indemnify for such expenses as the court
deems proper.
13.03. Indemnity If Successful. The Partnership will
indemnify a Partner, Governor, director, officer, employee or agent
of the Partnership against expenses, including attorneys' fees,
actually and reasonably incurred by him or it in connection with
the defense of any action, suit or proceeding referred to in
Sections 13.01 and 13.02 or in defense of any claim, issue or
matter therein, to the extent that such person or entity has been
successful on the merits.
13.04. Expenses.
(a) Any indemnification under
Sections 13.01 and 13.02, as well as the advance payment of
expenses permitted under Section 13.05 unless ordered by a court or
advanced pursuant to Section 13.05 below, must be made by the
Partnership only as authorized in the specific case upon a
determination that indemnification of the Partner, Governor,
director, officer, employee or agent is proper in the
circumstances. The determination must be made:
(b) by the Partners by a majority of a quorum
consisting of Partners who were not parties to the act, suit or
proceeding;
(c) if a majority of those Partners who were not
parties to the act, suit or proceeding so order, by independent
legal counsel in a written opinion; or
(d) if a quorum consisting of Partners who were not
parties to the act, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.
13.05. Advance Payment of Expenses. The expenses of
Partners, Governors, officers, employees and agents incurred in
defending a civil or criminal action, suit or proceeding may be
paid by the Partnership as they are incurred and in advance of the
final disposition of the action, suit or proceeding, upon receipt
of an undertaking by or on behalf of the Partner, Governor,
director, officer, employee or agent to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he
or she or it is not entitled to be indemnified by the Partnership.
The provisions of this subsection do not affect any rights to
advancement of expenses to which personnel other than Partners,
Governors, officers, employees or agents may be entitled under any
contract or otherwise by law.
13.06. Other Arrangements Not Excluded. The
indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this Article XIII:
(a) does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be
entitled under the Certificate of Formation or any agreement, vote
of the Partners or otherwise, for either an action in his or her or
its official capacity or an action in another capacity while
holding his or her or its office, except that indemnification,
unless ordered by a court pursuant to Section 13.05 hereof, may not
be made to or on behalf of any Partner or Governor if a final
adjudication established that his or her or its acts or omissions
involved intentional misconduct, fraud or a knowing violation of
the law and was material to the cause of action; and
(b) continues for a person who has ceased to be a
Partner, Governor, director, officer, employee or agent and inures
to the benefit of the heirs, executors and administrators of such a
person, notwithstanding any amendment or subsequent modification of
this Article XIII.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.01. Complete Agreement. This Agreement, the Joint
Venture Agreement and the Material Agreements constitute the
complete and exclusive statement of the agreement among the
Partners with respect to the subject matter contained herein and
therein. This Agreement, the Joint Venture Agreement and the
Material Agreements replace and supersede all prior agreements by
and among the Partners with respect to the subject matter contained
herein and therein.
14.02. Amendments. This Agreement may be amended only
in writing by the Partners at a meeting or by written consent.
14.03. Applicable Law. The Certificate of Formation and
this Agreement, and its application, will be governed exclusively
by its terms and will be construed in accordance with the laws of
the State of New York, without regard to its conflicts of laws
principles.
14.04. Headings. The headings in this Agreement are
inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent or intent
of this Agreement or any provisions contained herein.
14.05. Severability. If any provision of this Agreement
or the application thereof to any person or circumstance will be
deemed invalid, illegal or unenforceable to any extent, the
remainder of this Agreement and the application thereof will not be
affected and will be enforceable to the fullest extent permitted by
law.
14.06. Successors and Assigns. Each and all of the
covenants, terms, provisions and agreements contained in this
Agreement will be binding upon and inure to the benefit of the
existing Partners, all new and substituted Partners, and their
respective assignees, legal representatives, successors and
assigns.
14.07. Assignment. Except to the extent permitted under
Article V hereof, the rights and obligations under this Agreement
may not be assigned by any party to any person; provided, however,
the AT&T Partner may assign this Agreement and its rights and
obligations hereunder in connection with any transaction effecting
the Restructuring and any such assignment will release the AT&T
Partner of its obligations and liabilities under this Agreement.
Any other attempted assignment in contravention of this provision
will be void.
IN WITNESS WHEREOF, this Agreement has been duly executed
by or on behalf of each of the parties hereto as of the date first
above written.
ATOR CORP.
By:
Name:
Title:
CIROR, INC.
By:
Name:
Title:
SCHEDULE A
Schedule of Initial Capital Contributions
PARTNER'S NAME
INITIAL CAPITAL
CONTRIBUTION
PERCENTAGE INTEREST
[*]
[*]
SCHEDULE B
Initial Governors