Exhibit 3.2
LIMITED PARTNERSHIP AGREEMENT OF
INSIGHT MIDWEST, L.P.
DATED AS OF
OCTOBER 1, 1999
TABLE OF CONTENTS
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Page
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ARTICLE 1 DEFINITIONS............................................................... 2
1.1 Terms Defined in this Section............................................. 2
1.2 Terms Defined Elsewhere in this Agreement................................. 13
1.3 Terms Generally........................................................... 14
ARTICLE 2 FORMATION AND PURPOSE..................................................... 14
2.1 Formation................................................................. 14
2.2 Name 14
2.3 Principal and Registered Office........................................... 15
2.4 Term 15
2.5 Purposes of Partnership................................................... 15
2.6 Certificate............................................................... 17
2.7 Addresses of the Partners................................................. 17
2.8 Foreign Qualification..................................................... 17
2.9 Tax Classification........................................................ 17
ARTICLE 3 PARTNERSHIP CAPITAL....................................................... 18
3.1 Contributions............................................................. 18
3.2 Additional Capital Contributions.......................................... 19
3.3 Return of Contributions................................................... 19
ARTICLE 4 DISTRIBUTIONS; ALLOCATIONS OF PROFIT AND LOSS............................. 19
4.1 Distributions of Cash..................................................... 19
4.2 Allocations of Net Profit and Net Loss.................................... 21
4.3 Special Provisions Regarding Allocations of Profit and Loss............... 21
4.4 Tax Allocations: Code Section 704(c)...................................... 23
4.5 Allocation in Event of Transfer........................................... 24
4.6 Alternative Allocations................................................... 24
ARTICLE 5 AUTHORITY OF THE GENERAL PARTNER;OTHER MATTERS AFFECTING GENERAL PARTNER.. 24
5.1 Authority of General Partner.............................................. 24
5.2 No Personal Liability..................................................... 25
5.3 Withdrawal of General Partner............................................. 25
5.4 Tax Matters Partner....................................................... 26
5.5 Operating and Capital Expenditure Budgets................................. 28
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ARTICLE 6 STATUS OF LIMITED PARTNER; OTHER LIMITATIONS ON PARTNERS.................................. 28
6.1 No Management and Control................................................................. 28
6.2 Limited Liability......................................................................... 29
6.3 Return of Distributions of Capital........................................................ 29
6.4 Specific Limitations...................................................................... 29
6.5 Matters Requiring TCI Approval............................................................ 30
6.6 Additional Matters Requiring Limited Partner Approval..................................... 30
6.7 Limited Partner Consent Defined........................................................... 34
ARTICLE 7 ADVISORY COMMITTEE........................................................................ 34
7.1 Appointment and Removal of Representatives................................................ 34
7.2 Meetings of the Advisory Committee........................................................ 35
7.3 Procedural Matters........................................................................ 35
ARTICLE 8 TRANSFER OF PARTNERSHIP INTERESTS......................................................... 36
8.1 Limitations on Transfers.................................................................. 36
8.2 Transferees and Successors................................................................ 37
8.3 Transfers of Interests in Partners........................................................ 38
8.4 Other Consents and Requirements........................................................... 38
8.5 Assignment Not In Compliance.............................................................. 39
8.6 Division of Partnership Interests......................................................... 39
8.7 Pledge of Partnership Interests........................................................... 39
8.8 Code Section 708(b)(1)(B)................................................................. 39
ARTICLE 9 BUY/SELL RIGHTS........................................................................... 40
9.1 Commencement of Buy/Sell Process.......................................................... 40
9.2 Non-Initiating Partner's Option to Postpone the Buy/Sell Process.......................... 41
9.3 TCI's Options as Non-Initiating Partner................................................... 41
9.4 Insight's Options as Non-Initiating Partner............................................... 43
9.5 TCI's Option to Negotiate Alternative Structure........................................... 43
9.6 Insight's Option to Require TCI to Purchase Insight's Partnership Interest................ 44
9.7 Default by Partner........................................................................ 44
9.8 Removal of Insight as Partner............................................................. 45
9.9 General Terms Applicable to Purchase and Sale of Partnership Interests and LLC Interests.. 47
ARTICLE 10 OTHER BUSINESSES AND INVESTMENT OPPORTUNITIES............................................. 49
10.1 Prohibited Cross-Interests................................................................ 49
10.2 No Other Restrictions..................................................................... 51
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ARTICLE 11 DISSOLUTION AND LIQUIDATION OF PARTNERSHIP.. 52
11.1 Events of Dissolution....................... 52
11.2 Liquidation................................. 52
11.3 Distribution in Kind........................ 54
11.4 No Action for Dissolution................... 54
11.5 No Further Claim............................ 54
ARTICLE 12 INDEMNIFICATION............................. 54
12.1 General..................................... 54
12.2 Exculpation................................. 55
12.3 Persons Entitled to Indemnity............... 55
12.4 Procedure Agreements........................ 55
ARTICLE 13 BOOKS, RECORDS, ACCOUNTING, AND REPORTS..... 56
13.1 Books and Records........................... 56
13.2 Delivery to Partner and Inspection.......... 56
13.3 Annual Statements........................... 56
13.4 Quarterly Financial Statements.............. 57
13.5 Monthly Statements.......................... 58
13.6 Other Information........................... 58
13.7 Tax Matters................................. 58
13.8 Other Filings............................... 59
13.9 Non-Disclosure.............................. 59
ARTICLE 14 REPRESENTATIONS BY THE PARTNERS............. 60
14.1 Investment Intent........................... 60
14.2 Securities Regulation....................... 60
14.3 Knowledge and Experience.................... 61
14.4 Economic Risk............................... 61
14.5 Binding Agreement........................... 61
14.6 Tax Position................................ 61
14.7 Information................................. 61
ARTICLE 15 AMENDMENTS AND WAIVERS...................... 61
15.1 Amendments to Operating Agreement........... 61
15.2 Waivers..................................... 62
ARTICLE 16 MISCELLANEOUS............................... 62
16.1 Programming and Discounts................... 62
16.2 Additional Documents........................ 65
16.3 Inspection.................................. 65
16.4 General..................................... 65
16.5 Notices, Etc................................ 65
16.6 Execution of Papers......................... 65
16.7 Attorneys' Fees............................. 66
16.8 No Third-Party Beneficiaries................ 66
16.9 Headings.................................... 66
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SCHEDULES
Schedule I Addresses of the Partners
Schedule II Capital Accounts; Percentage Interest
Schedule III Initial Members of the Advisory Committee
Schedule IV Indiana Systems
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LIMITED PARTNERSHIP AGREEMENT
OF
INSIGHT MIDWEST, L.P.
THIS LIMITED PARTNERSHIP AGREEMENT is made and entered into as of October
1, 1999, by and between INSIGHT COMMUNICATIONS COMPANY, L.P., a Delaware limited
partnership ("Insight Communications"), as general partner, and TCI OF INDIANA
HOLDINGS, LLC, a Colorado limited liability company ("TCI Indiana"), as limited
partner.
RECITALS
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A. Immediately prior to execution of this Agreement, Insight
Communications and TCI Indiana were the sole members of Insight Communications
of Indiana, LLC, a Delaware limited liability company ("Insight Indiana"), the
operations of which were governed by the Operating Agreement dated as of May 14,
1998 (as amended, the "Insight Indiana Operating Agreement").
B. Pursuant to the Purchase Agreement dated as of April 18, 1999 among
Insight Communications, certain affiliates of TCI Indiana and the other parties
named therein (as amended, the "Purchase Agreement"), Insight Communications
purchased 50% of the partnership interests in InterMedia Capital Partners VI,
L.P., a Delaware limited partnership ("ICP-VI").
C. The remaining 50% partnership interests in ICP-VI held by affiliates of
TCI Indiana were transferred to TCI Indiana immediately following closing under
the Purchase Agreement.
D. TCI Indiana and Insight Communications formed the Partnership pursuant
to an Agreement of Limited Partnership dated September 28, 1999, which is
superseded by this Agreement.
E. Pursuant to the Contribution Agreement, each of TCI Indiana and Insight
Communications contributed to the Partnership its 50% partnership interest in
ICP-VI and its 50% membership interest in Insight Indiana, with the effect that
as of the date of this Agreement, (1) Insight Indiana is wholly-owned by the
Partnership, (2) ICP-VI was dissolved by virtue of the Partnership's acquisition
of 100% of the partnership interests in such entity and (3) the Partnership
became the owner of 99.999% of the partnership interests of InterMedia Partners
Group VI, L.P. ("IPG VI").
F. Contemporaneously with closing under the Contribution Agreement, the
Insight Indiana Operating Agreement was amended and restated in its entirety and
the IPG VI Agreement of Limited Partnership was amended and restated in its
entirety.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
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1.1 Terms Defined in this Section .
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For purposes of this Agreement, the following terms shall have the
following meanings (all terms used in this Agreement that are not defined in
this Section 1.1 shall have the meanings set forth elsewhere in this Agreement
as indicated in Section 1.2, except as otherwise provided in this Agreement):
"@Home" means At Home Corporation, a Delaware corporation.
"@Home Distribution Agreement" means collectively, the Master Distribution
Agreement Term Sheet and the Term Sheet for Form of LCO Agreement, each of which
are exhibits to the letter agreement, dated as of May 15, 1997, among @Home and
Tele-Communications, Inc., Comcast Corporation, Cox Enterprises, Inc., Kleiner,
Perkins, Caufield & Byers and certain of their respective Affiliates, as each
such term sheet has been amended by the letter agreement, dated as of October 2,
1997, as amended as of October 10, 1997, among the parties to the May 15, 1997
letter agreement and Cablevision Systems Corporation and certain of its
Affiliates; provided, that such term shall include any definitive agreements
entered into by such parties in respect of the distribution of the @Home Service
as contemplated by the May 15, 1997 letter agreement.
"@Home Service" has the meaning specified in the @Home Distribution
Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act.
"Adjusted Capital Account Deficit" means with respect to either Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant Fiscal Year, after:
(i) crediting to such Capital Account any amounts that such Partner is
obligated to restore to the Partnership pursuant to Treasury Regulations Section
1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and 1.704-
2(i)(5); and
(ii) debiting from such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Advertising Sales Agreements" means (a) the Management Agreement for
Advertising Sales Business dated as of April 21, 1998 between Insight Kentucky
II and TCI Cable Management
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Corporation and (b) the Agreement dated as of December 1, 1995 between TKR Cable
of Greater Louisville and Insight Communications.
"Advisory Committee" means the Advisory Committee established by Article 7.
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by, or under common control with such Person. For
purposes of this definition and the definition of "Controlled Affiliate," the
term "control" means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock or other equity interests, by contract, or
otherwise, and the terms "controlled by" and "under common control with" have
meanings corresponding to the meaning of "control."
"Agreement" means this Agreement, as it may be amended from time to time.
"Asset Acquisition" shall mean (i) an investment by the Partnership or any
of its Subsidiaries in any other Person, pursuant to which such Person becomes a
Subsidiary of the Partnership or another Subsidiary of the Partnership or is
merged, consolidated, amalgamated with or into, or is liquidated into, the
Partnership or any of its Subsidiaries, or (ii) the acquisition by the
Partnership or any of its Subsidiaries of the assets of any Person (other than
the Partnership or any of its Subsidiaries) that constitute a division or line
of business or operating business (even if not a separate division or line of
business) of such Person, including, without limitation, the acquisition by the
Partnership or any of its Subsidiaries of any cable television system or other
business.
"Asset Disposition" shall mean the sale, exchange or other disposition by
the Partnership or any of its Subsidiaries (other than to the Partnership or
another Subsidiary of the Partnership) (i) of all or substantially all of the
capital stock, partnership interests or membership interests of any Subsidiary
of the Partnership, or (ii) of the assets that constitute a division or line of
business or operating business (even if not a separate division or line of
business) of the Partnership or of any of its Subsidiaries, including, without
limitation, the sale, exchange or disposition by the Partnership or any of its
Subsidiaries of any cable television system or other business.
"Business Day" means any day (other than a day that is a Saturday or
Sunday) on which banks are permitted to be open for business in the State of New
York.
"Capital Account" means a separate account to be maintained for each
Partner in accordance with the Code, which, subject to any contrary requirements
of the Code, shall equal such Partner's initial Capital Account balance as of
the date of this Agreement as provided in Section 3.1(b), increased by: (i)
the amount of money contributed by such Partner to the Partnership after the
date of this Agreement, if any; (ii) the fair market value without regard to
Code Section 7701(g) of property, if any, contributed by such Partner to the
Partnership after the date of this Agreement (net of liabilities that are
secured by such contributed property or that the Partnership or any other
Partner is considered to assume or take subject to under Code Section 752);
(iii) allocations to the Partner of Net Profit and items of income and gain
pursuant to Article 4 that are made after the date of this Agreement; and (iv)
other additions made in accordance with the Code; and decreased by (i)
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the amount of cash distributed to such Partner by the Partnership after the date
of this Agreement; (ii) allocations to the Partner of Net Loss and items of loss
and deduction pursuant to Article 4 that are made after the date of this
Agreement; (iii) the fair market value without regard to Code Section 7701(g) of
property distributed to such Partner by the Partnership after the date of this
Agreement (net of liabilities that are secured by such distributed property or
that such Partner is considered to assume or take subject to under Code Section
752); and (iv) other deductions made in accordance with the Code. The foregoing
provisions and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulations
under Code Section 704(b) and, to the extent not inconsistent with the
provisions of this Agreement, shall be interpreted and applied in a manner
consistent with such Treasury Regulations.
"Capital Contributions" means, with respect to either Partner, the amount
of money and the net fair market value of property contributed by such Partner
to the Partnership pursuant to this Agreement.
"Certificate" means the certificate of limited partnership filed with
respect to the Partnership pursuant to the Act.
"Closing" means the Closing under the Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import, and, to the extent
applicable, the Treasury Regulations.
"Contribution Agreement" means the Contribution and Formation Agreement,
dated as of April 18, 1999, between TCI Indiana and Insight Communications, as
it may be amended from time to time in accordance with its terms.
"Controlled Affiliate" means (i) with respect to TCI, any Person that, at
such time, is controlled directly or indirectly by TCI or Tele-Communications,
Inc., a Delaware corporation, (ii) with respect to Insight, any Person (other
than the Partnership or any Subsidiary) that, at such time, is controlled
directly or indirectly by Insight or Insight Communications Company, Inc., and
(iii) with respect to any other specified Person, any Person that, at such time,
is controlled directly or indirectly by such specified Person.
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be determined in the
manner described in Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3) or
Treasury Regulations Section 1.704-3(d)(2), as applicable.
"Equity Value" means, with respect to any Partnership Interest and LLC
Interest for purposes of any provision of this Agreement that refers to the
Equity Value of such Partnership Interest and LLC Interest, the amount that
would be distributed to the holder of such Partnership Interest and LLC Interest
if the Partnership's assets and Insight Kentucky Capital's assets were sold
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on the date of closing the purchase and sale of such Partner's Partnership
Interest and LLC Interest or the date of closing an Alternative Structure, as
applicable, pursuant to Article 9 for the Stated Value of the Partnership and
Insight Kentucky Capital (except, in the event of the purchase of Insight's
Partnership Interest and LLC Interest by TCI pursuant to Section 9.8, for the
Fair Market Value of the Partnership and Insight Kentucky Capital) and the
Partnership were then liquidated in accordance with Article 11 of this Agreement
on the date of said closing and Insight Kentucky Capital were then liquidated in
accordance with the Insight Kentucky Capital Agreement, subject to the following
sentences. In applying the provisions of Section 11.2 to such hypothetical
liquidation of the Partnership and in applying the liquidation provisions of the
Insight Kentucky Capital Agreement, (i) all current assets and all liabilities
of the Partnership and Insight Kentucky Capital, defined and determined in
accordance with generally accepted accounting principles, shall be calculated as
of the date of said closing, (ii) all costs that would customarily be incurred
in connection with such a purchase and sale (including attorneys' fees and
broker fees, but excluding taxes measured on the amount of income, gain or
proceeds realized by the selling Partner or any governmental charges imposed in
lieu of such taxes) shall be treated as an expense of liquidation under Section
11.2(d)(1), and (iii) appropriate reserves shall be set up pursuant to Section
11.2(d)(2) or the parallel provision of the Insight Kentucky Capital Agreement,
for any contingent or unforeseen liabilities or obligations of the Partnership
or Insight Kentucky Capital that relate to the period prior to the date of such
closing pursuant to Article 9 or any obligation or liability that relates to the
period prior to the date of such closing pursuant to Article 9 not then due and
payable (subject to the last sentence of Section 9.9(f)). The current assets and
liabilities referred to in clause (i), the costs referred to in clause (ii), and
the reserves referred to in clause (iii) shall all be determined in accordance
with the procedures set forth in Section 9.9(d).
"Exclusive Internet Services" means Internet Services which would
constitute a Restricted Business (as defined in the @Home Distribution
Agreement) to the extent engaged in or distributed by TCI Cable Parent or their
controlled affiliates (as defined in the @Home Distribution Agreement).
"FCC" means the Federal Communications Commission.
"Fiscal Year" means the fiscal year of the Partnership, which shall be the
calendar year.
"General Partner" means Insight or, following any conversion by TCI of its
Partnership Interest to that of a General Partner in accordance with the terms
of this Agreement, TCI.
"Gross Asset Value" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership pursuant to the Contribution Agreement shall be the
gross fair market value of such asset, as determined pursuant to Section 3.1;
(ii) The Gross Asset Values of all assets of the Partnership shall be
adjusted to equal their respective gross fair market values, as determined by
the mutual agreement of the
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Partners, as of the following times: (A) the acquisition of an additional
interest in the Partnership by any new or existing Partner in exchange for more
than a de minimis Capital Contribution; (B) the distribution by the Partnership
to a Partner of more than a de minimis amount of property of the Partnership as
consideration for an interest in the Partnership; and (C) the liquidation of the
Partnership within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g); provided, however, that the adjustments pursuant to
clauses (A) and (B) above shall be made only if the Partners determine by mutual
agreement that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Partners in the Partnership;
(iii) The Gross Asset Value of any asset of the Partnership
distributed to either Partner shall be the gross fair market value of such asset
on the date of distribution; and
(iv) The Gross Asset Value of the assets of the Partnership shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m) and
Section 4.3(g); provided, however, that Gross Asset Value shall not be adjusted
pursuant to this paragraph (iv) to the extent that the Partners determine by
mutual agreement that an adjustment pursuant to paragraph (ii) of this
definition is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraph (i), (ii), or (iv) of this definition, the Gross Asset
Value of such asset shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Net Profit and Net
Loss.
"Indebtedness" means, as to any Person, (without duplication) (i) all
indebtedness of such Person for borrowed money; (ii) obligations of such Person
evidenced by bonds, debentures, notes or other similar instruments; (iii)
obligations of such Person to pay the deferred purchase price of property or
services (other than trade payables incurred in the ordinary course of
business); (iv) all capitalized lease obligations of such Person; (v)
obligations of such Person in respect of letters of credit or other similar
forms of surety obligations to the extent treated as debt for purposes of
calculating applicable financial leverage covenants under the Insight Credit
Agreement, as in effect at the time of determination (but excluding any such
obligations under any cable television franchise, pole attachment agreement,
lease, or other similar agreement or license entered into in connection with the
day-to-day operations of a cable television system); and (vi) obligations of
such Person under guarantees in respect of, and obligations of such Person to
purchase or otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of other Persons (excluding any
obligations of any Subsidiary of the Partnership) of the kind referred to in
clauses (i) through (v) above; provided that the term guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business or obligations under or related to cable television franchises, pole
attachment agreements, leases, or other similar agreements or licenses entered
into in connection with the day-to-day operations of a cable television system.
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations or liabilities as
described in the foregoing sentence and shall be the
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amount that would appear as a liability on the balance sheet of such Person
prepared in accordance with generally accepted accounting principles.
"Indiana Contribution Agreement" means the Asset Contribution and Formation
Agreement dated as of May 14, 1998 between TCI Indiana and Insight
Communications.
"Initiating Partner" means the Partner that elects pursuant to Section
9.1(a) to commence the process described in Article 9.
"Insight" means Insight Communications or any other Person that succeeds to
its Partnership Interest and is admitted as a Partner in accordance with the
provisions of this Agreement, provided that to the extent Insight Communications
transfers less than all of its Partnership Interest to any other Person(s) and
such Person(s) is/are admitted as a Partner in accordance with the provisions of
this Agreement, "Insight" shall refer to Insight Communications and such other
Person(s) collectively.
"Insight Credit Agreement" means the Third Amended and Restated Credit
Agreement by and among Insight, the lenders party thereto, CIBC Inc., and Fleet
Bank, N.A., as Co-Agents, and The Bank of New York, as Issuing Bank and as
Agent, dated as of January 22, 1998, as such agreement may be amended from time
to time in accordance with its terms.
"Insight Indiana" means Insight Communications of Indiana, LLC.
"Insight Kentucky" means Insight Communications of Kentucky, L.P., f/k/a
InterMedia Partners Group VI, L.P.
"Insight Kentucky I" means Insight Kentucky Partners I, L.P., f/k/a
InterMedia Partners VI, L.P.
"Insight Kentucky II" means Insight Kentucky Partners II, L.P., f/k/a
InterMedia Partners of Kentucky, L.P.
"Insight Kentucky Capital" means Insight Kentucky Capital, LLC, a Delaware
limited liability company, the sole members of which are Insight Communications
and TCI Indiana.
"Insight Kentucky Capital Agreement" means the Operating Agreement of
Insight Kentucky Capital dated as of October 1, 1999 between Insight
Communications and TCI Indiana.
"Internet Backbone" means a network which: (i) can or does (A) assign IP
addresses or manage IP address assignments for machines or networks to which it
is connected, (B) accept or deliver IP datagrams from machines or networks to
which it is connected, or (C) maintain IP packet traffic to other machines or
networks; and (ii) provides IP connectivity on a regional, national or
international basis; provided, however, that such a network which provides
connectivity solely within a single metropolitan area shall not be deemed an
Internet Backbone.
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"Internet Backbone Service" means a communications service provided over an
Internet Backbone.
"Internet Service" means a communications service provided over a network
which can or does (i) assign IP addresses or manage IP address assignments for
machines or networks to which it is connected, (ii) accept or deliver IP
datagrams from machines or networks to which it is connected, or (iii) maintain
IP package traffic to other machines or networks.
"IP" means the Internet Protocols as defined by the document titled RFC-
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791, by John Pastell of the University of Southern California, dated 1981, or
subsequent revisions thereof.
"Limited Partner" means TCI or, following any conversion of Insight's
Partnership to that of a Limited Partner in accordance with the terms of this
Agreement, Insight.
"LLC Interest" means the membership interest of TCI or Insight, as
applicable, in Insight Kentucky Capital.
"Management Agreements" means the Amended and Restated Management Agreement
dated as of the date of this Agreement between Insight Indiana and Insight
Communications and the Management Agreement dated as of the date of this
Agreement between Insight Kentucky II and Insight Communications, as each may be
amended from time to time in accordance with its terms.
"Management Incentive Plan" means the Management Incentive Plan dated as of
_______, as it may be amended from time to time in accordance with its terms and
the provisions of this Agreement.
"Manager" means Insight Communications or any other Person that succeeds it
as Manager under the Management Agreements in accordance with the terms thereof.
"Net Profit and Net Loss" means for each Fiscal Year or other period, an
amount equal to the Partnership's taxable income or loss for such Fiscal Year or
other period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:
(i) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Net Profit or Net Loss
shall be added to such taxable income or loss;
(ii) Code Section 705(a)(2)(B) expenditures of the Partnership that
are not otherwise taken into account in computing Net Profit or Net Loss shall
be subtracted from such taxable income or loss;
(iii) If the Gross Asset Value of any asset of the Partnership is
adjusted pursuant to paragraph (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall
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be taken into account as gain or loss from the disposition of such asset for
purposes of computing Net Profit or Net Loss;
(iv) Gain or loss resulting from any disposition of property of the
Partnership with respect to which gain or loss is recognized for federal income
tax purposes shall be computed by reference to the Gross Asset Value of the
property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year or other period;
(vi) Notwithstanding anything to the contrary in the definition of the
terms "Net Profit" and "Net Loss," any items that are specially allocated
pursuant to Section 4.3 of this Agreement shall not be taken into account in
computing Net Profit or Net Loss; and
(vii) For purposes of this Agreement, any deduction for a loss on a
sale or exchange of property of the Partnership that is disallowed to the
Partnership under Code Section 267(a)(1) or Code Section 707(b) shall be treated
as a Code Section 705(a)(2)(B) expenditure.
"Non-Initiating Partner" means TCI, if Insight is the Initiating Partner,
and Insight, if TCI is the Initiating Partner.
"Nonrecourse Deductions" means losses, deductions, or Code Section
705(a)(2)(B) expenditures attributable to Nonrecourse Liabilities of the
Partnership. The amount of Nonrecourse Deductions shall be determined pursuant
to Treasury Regulations Section 1.704-2(c), which provides generally that the
amount of Nonrecourse Deductions for a Fiscal Year shall equal the net increase,
if any, in Partnership Minimum Gain during that Fiscal Year, reduced (but not
below zero) by the aggregate distributions made during that Fiscal Year of
proceeds of a Nonrecourse Liability that are allocable to an increase in
Partnership Minimum Gain.
"Nonrecourse Liability" has the meaning set forth in Treasury Regulations
Section 1.752-1(a)(2).
"Operating Cash Flow" means, for any Person, for any period, an amount
equal to (i) the net income (or loss) of such Person (exclusive of any non-
recurring items and any extraordinary gain or loss and of any gain or loss
realized in such period upon an Asset Disposition), plus (ii) the sum of
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depreciation, amortization, income tax expense (other than income tax expense
(either positive or negative) attributable to extraordinary or nonrecurring
gains or losses or sales of assets), interest expense, management fees paid or
payable under the Management Agreements or otherwise, the fees paid or payable
to SSI under the Programming Agreements and other non-cash charges, in each case
to the extent deducted in determining such net income, all as determined on a
consolidated basis in accordance with generally accepted accounting principles
consistently applied.
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"Operating Cash Flow Ratio" means, for the Partnership, on any applicable
date, the ratio of (i) the aggregate amount of Indebtedness of the Partnership
and its Subsidiaries on a consolidated basis on such date to (ii) four times the
Operating Cash Flow of the Partnership and its Subsidiaries on a consolidated
basis for the most recent fiscal quarter for which financial information in
respect thereof is available immediately prior to such date. In making the
foregoing calculation, (1) pro forma effect shall be given to any Asset
--- -----
Acquisition or Asset Disposition to the extent that either the outstanding
Indebtedness incurred in connection therewith or income or loss generated
therefrom were not included for the whole period in computing the Operating Cash
Flow Ratio and (2) Operating Cash Flow shall be adjusted to give effect to any
pro forma cost reductions arising out of any such Asset Acquisition or Asset
- --- -----
Disposition, in such amount as Insight shall reasonably and in good faith
determine.
"Ownership Restriction" means any provision of the Communications Act of
1934, as amended, or any other law subsequently enacted, or any rule,
regulation, or policy of the FCC promulgated thereunder restricting the
ownership and control of communications properties (including cable television
systems, television broadcast stations, radio broadcast stations, telephone
companies, and newspapers), including those relating to multiple ownership,
cross-ownership and cross-interest, as those terms are commonly understood in
the communications industry.
"Partner" means each of the signatories hereto in their respective
capacities as partners of the Partnership, and any additional Person that is
admitted as a partner in accordance with the provisions of this Agreement.
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704-2(b)(4), which generally defines "Partner Nonrecourse
Debt" as any Partnership liability to the extent such liability is nonrecourse
and a Partner (or related Person) bears the economic risk of loss pursuant to
Treasury Regulations Section 1.752-2.
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), which generally defines "Partner
Nonrecourse Debt Minimum Gain" as the Partnership Minimum Gain attributable to
Partner Nonrecourse Debt. The amount of Partner Nonrecourse Debt Minimum Gain
shall be determined in accordance with Treasury Regulations Section 1.704-
2(i)(3).
"Partner Nonrecourse Deductions" means losses, deductions, or Code Section
705(a)(2)(B) expenditures attributable to Partner Nonrecourse Debt. The amount
of Partner Nonrecourse Deductions shall be determined pursuant to Treasury
Regulations Section 1.704-2(i)(2), which provides generally that the amount of
Partner Nonrecourse Deductions for a Fiscal Year shall equal the net increase,
if any, in Partner Nonrecourse Debt Minimum Gain during that Fiscal Year,
reduced (but not below zero) by the proceeds of Partner Nonrecourse Debt
distributed during the Fiscal Year to the Partner bearing the economic risk of
loss for such Partner Nonrecourse Debt that are both attributable to such
Partner Nonrecourse Debt and allocable to an increase in Partner Nonrecourse
Debt Minimum Gain.
-10-
"Partnership" means the limited partnership formed by TCI Indiana and
Insight Communications pursuant to an Agreement of Limited Partnership dated
September 28, 1999, and continued under this Agreement.
"Partnership Interest" means the entire ownership interest of a Partner in
the Partnership at any particular time, including all of its rights and
obligations hereunder and under the Act.
"Partnership Minimum Gain" means the excess of the Nonrecourse Liabilities
of the Partnership over the adjusted tax basis of property securing such
Nonrecourse Liabilities of the Partnership. The amount of Partnership Minimum
Gain shall be determined in accordance with Treasury Regulations Section 1.704-
2(d), which provides generally that the amount of Partnership Minimum Gain shall
be determined by first computing for each Nonrecourse Liability any gain the
Partnership would realize if it disposed of the property subject to that
Nonrecourse Liability for no consideration other than full satisfaction of such
Nonrecourse Liability, and then aggregating the separately computed gains.
"Percentage Interest" means initially, with respect to each Partner, the
respective percentage specified on Schedule II hereto, subject to any
adjustments made in accordance with the provisions of this Agreement.
"Person" means an individual, partnership, joint venture, association,
corporation, trust, estate, limited liability company, limited liability
partnership, or any other legal entity.
"Programming Agreements" means (a) the Programming Supply Agreement dated
as of April 30, 1998 between the Partnership and SSI and (b) the Programming
Supply Agreement dated as of April 30, 1998 between Insight Kentucky I and SSI
and the related Programming Supply Agreement dated as of April 30, 1998 between
Insight Kentucky I and Insight Kentucky II, in each case as such agreement may
be amended from time to time in accordance with its terms.
"Securities Act" means the Securities Act of 1933, as amended.
"SSI" means Satellite Services, Inc., a Delaware corporation and an
indirect wholly-owned subsidiary of Tele-Communications, Inc.
"Subsidiary" means, at any time, any Person that is controlled by the
Partnership at such time.
"Tax Amount" means, subject to the last sentence of this definition, the
sum of Insight's tax liabilities for the current Fiscal Year and all previous
Fiscal Years. For this purpose, Insight's tax liability for any Fiscal Year
shall be the greater of Insight's "Regular Tax Liability" or its "AMT Liability"
for such Fiscal Year. "Regular Tax Liability" for a Fiscal Year shall be
determined separately for ordinary income and each character of capital gain
income to which separate federal income tax rates may apply, and for each such
type of income shall be computed as the product of (i) the excess of (A) the
aggregate amount of taxable income (if
-11-
any) allocated to Insight with respect to the Partnership in such Fiscal Year
over (B) the aggregate amount of taxable losses (if any) allocated to Insight
with respect to the Partnership for all prior Fiscal Years since the beginning
of the Partnership and not previously taken into account for purposes of
computing Insight's Tax Amount, and (ii) the highest marginal combined federal,
state and local tax rate (taking into account the provisions of Section 68 of
the Tax Code) imposed on an individual resident in New York City for income of
such type. Insight's "AMT Liability" for a Fiscal Year shall be computed as the
product of (x) the aggregate amount of alternative minimum taxable income (if
any) allocated to Insight with respect to the Partnership in such Fiscal Year
(less any alternative minimum tax losses allocated to Insight with respect to
the Partnership for all prior Fiscal Years since the beginning of the
Partnership and not previously taken into account for purposes of computing
Insight's Tax Amount) and (y) the highest marginal combined federal, state and
local tax rate imposed on the alternative minimum taxable income of an
individual resident in New York City (taking into account the lack of
deductibility for state and local taxes under the federal alternative minimum
tax).
"TCI" means TCI Indiana or any other Person that succeeds to its
Partnership Interest and is admitted as a Partner in accordance with the
provisions of this Agreement, provided that to the extent TCI Indiana transfers
less than all of its Partnership Interest to any other Person(s) and such
Person(s) is/are admitted as a Partner in accordance with the provisions of this
Agreement, "TCI" shall refer to TCI Indiana and such other Person(s)
collectively.
"TCI Cable Parent" means TCI Internet Services, Inc., TCI NET, Inc., Tele-
Communications, Inc. and TCI Cable Investments, Inc., individually and
collectively as the context requires.
"TCI Systems" means (i) the cable television systems contributed to Insight
Indiana by TCI Indiana pursuant to the Indiana Contribution Agreement and (ii)
any cable television system acquired by the Partnership upon the disposition of
a TCI System or an exchange of a TCI System (including an acquisition by the
Partnership using the proceeds of any disposition of a TCI System).
"Transferee" means any Person (other than a Successor) that acquires a
Partnership Interest from a Partner in accordance with the provisions of this
Agreement.
"Treasury Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Voting Stock" means ownership interests in a Person of any class or kind
ordinarily giving the holder the power to vote for the election of directors,
managers, or other members of the governing body of such Person or (as may be
the case with general partnership interests in a partnership) giving the holder
the power to exercise rights typically exercised by directors of a corporation.
1.2 Terms Defined Elsewhere in this Agreement.
-----------------------------------------
For purposes of this Agreement, the following terms have the meanings set
forth in the sections indicated:
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Term Section
- ---- -------
Alternative Structure Section 9.3
Exit Notice Section 9.1(a)
Fair Market Value of the Partnership and Insight Section 9.8(b)
Kentucky Capital
Formal Determination Section 10.1(b)
ICP-VI Recital B
Indemnified Persons Section 12.1
Insight Communications Preamble
Insight Indiana Recital A
Insight Indiana Operating Agreement Recital A
Initial Election Notice Section 9.3
Liquidator Section 11.2(b)
Purchase Agreement Recital B
Regulatory Allocations Section 4.3(i)
Secretary Section 5.4(b)
Stated Value of the Partnership and Insight Kentucky Section 9.1(a)
Capital
Successor Section 8.1(b)(2)
TCI Indiana Preamble
Transfer Section 8.1(a)
Withholding Advance Section 4.1(c)(2)
1.3 Terms Generally.
---------------
The definitions in Section 1.1 and elsewhere in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context requires, any pronoun includes the corresponding masculine,
feminine, and neuter forms. The words "include," "includes," and "including"
are not limiting. Any reference in this Agreement to a "day" or number of
"days" (without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days. If any action or
notice is to be taken or given on or by a particular calendar day, and such
calendar day is not a Business Day, then such action or notice shall be deferred
until, or may be taken or given on, the next Business Day.
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ARTICLE 2
FORMATION AND PURPOSE
---------------------
2.1 Formation.
---------
The Partners formed the Partnership as a limited partnership pursuant to
the Act on September 28, 1999. The rights and liabilities of the Partners shall
be determined pursuant to the Act and this Agreement. To the extent that the
rights or obligations of either Partner are different by reason of any provision
of this Agreement than they would be in the absence of such provision, this
Agreement shall, to the extent permitted by the Act, control.
2.2 Name.
----
(a) The name of the Partnership is Insight Midwest, L.P. Except as
provided in Section 2.2(b), the business of the Partnership may be conducted
under that name or, upon compliance with applicable laws, any other name that
the General Partner deems appropriate or advisable. The Partnership shall file
any assumed name certificates and similar filings, and any amendments thereto,
that the General Partner considers appropriate or advisable. Such names and any
trade or service names, marks, emblems or logos used by the Partnership shall be
exclusive property of the Partnership and no Person shall have any right to use,
and each Partner agrees not to use, any of said names, marks, emblems or logos
other than on behalf of the Partnership (other than any of the foregoing that
incorporates the name "Insight" or any variant thereof, which shall remain the
exclusive property of Insight Communications and its Affiliates and may be used
by Insight Communications and its Affiliates without limitation).
(b) Neither the Partnership nor any Subsidiary shall conduct business
under the name "Tele-Communications, Inc.," "TCI," or any variation thereof
without the approval of TCI. The parties agree that "Communications" is not a
variation of "Tele-Communications, Inc." for purposes of this Section 2.2(b).
2.3 Principal and Registered Office.
-------------------------------
The office required to be maintained by the Partnership in the State of
Delaware pursuant to Section 17-104 of the Act shall initially be located at
1209 Orange Street, Wilmington, New Castle County, Delaware 19801. The resident
agent of the Partnership pursuant to Section 17-104 of the Act shall initially
be The Corporation Trust Company. The Partnership may, upon compliance with the
applicable provisions of the Act, change its principal office or resident agent
from time to time in the discretion of the General Partner. The principal
office of the Partnership shall be located at 126 E. 56th Street, New York, New
York 10022, or at such other place as the General Partner shall from time to
time designate by written notice to the other Partner. The Partnership may
conduct business at such additional places as the General Partner shall deem
advisable.
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2.4 Term.
----
The term of the Partnership commenced on September 28, 1999, when the
Certificate was filed with the Secretary of State of Delaware, and shall
continue until October 1, 2011, unless sooner terminated as provided in this
Agreement.
2.5 Purposes of Partnership.
-----------------------
Subject to Sections 10.1 and 16.1, the purposes of the Partnership are:
(a) to engage in the business, directly or indirectly through
interests in one or more Subsidiaries, of acquiring, developing, owning,
operating, managing, and selling cable television systems in the State of
Indiana and in the Commonwealth of Kentucky;
(b) to acquire, develop, own, operate, manage, and sell additional
cable television systems in the State of Indiana and the Commonwealth of
Kentucky and such other States as the General Partner may determine (subject to
the provisions of Section 6.6(l));
(c) to acquire, develop, own, operate, manage, and sell, or invest in,
businesses related to and ancillary to the ownership and operation of the cable
television systems referred to above (including, but not limited to, high speed
data service, Internet access, telephony services and other telephony-related
investments or businesses, and video wireless services and wireless
communications services and other wireless-related investments or businesses but
not including multipoint distribution systems ("MDS"), multichannel multipoint
distribution systems ("MMDS"), direct-to-home satellite systems ("DTH") or
Internet Backbone Services), it being agreed that the use of IP technology to
provide telephone, fax, video, video conferencing, telecommuting, virtual
private networks, security and energy management services to subscribers of the
Partnership's cable television systems does not constitute engaging in an
Internet Backbone Service and, subject to Section 16.1(b), is within the
purposes of the Partnership;
(d) to conduct other businesses as determined by mutual agreement of
the Partners;
(e) in connection with the businesses described in Section 2.5(a)-(d),
to possess, transfer, mortgage, pledge, or otherwise deal in, and to exercise
all rights, powers, privileges, and other incidents of ownership or possession
with respect to securities or other assets held or owned by the Partnership, and
to hold securities or assets in the name of a nominee or nominees;
(f) in connection with the businesses described in Section 2.5(a)-(d),
to borrow or raise money, and from time to time to issue, accept, endorse, and
execute promissory notes, loan agreements, options, stock purchase agreements,
contracts, documents, checks, drafts, bills of exchange, warrants, bonds,
debentures, and other negotiable or non-negotiable instruments and evidences of
indebtedness, and to secure the payment of any thereof and of the interest
thereon by mortgage upon or pledge, conveyance, or assignment in trust of, the
whole or any part of the property of the Partnership whether at the time owned
or thereafter acquired and to guarantee the
-15-
obligations of others and to sell, pledge, or otherwise dispose of such bonds or
other obligations of the Partnership for its purposes;
(g) in connection with the businesses described in Section 2.5(a)-(d),
to guarantee the obligations of others in connection with the purchase or
acquisition by the Partnership of securities or assets;
(h) to maintain an office or offices in such place or places as the
General Partner shall determine and in connection therewith to rent or acquire
office space, engage personnel, and do such other acts and things as may be
necessary or advisable in connection with the maintenance of such office, and on
behalf of and in the name of the Partnership to pay and incur reasonable
expenses and obligations for legal, accounting, investment advisory,
consultative and custodial services, and other reasonable expenses including
taxes, travel, insurance, rent, supplies, interest, salaries and wages of
employees, and all other reasonable costs and expenses incident to the operation
of the Partnership;
(i) to form and own one or more corporations, trusts, partnerships or
other entities (but no entity so formed or owned, while it is a Subsidiary, may
do what the Partnership is prohibited by this Agreement from doing); and
(j) to own, lease, or otherwise acquire any and all assets and
services related to the foregoing purposes and to engage in such other
activities related either directly or indirectly to the foregoing purposes as
may be necessary, advisable, or appropriate, in the opinion of the General
Partner, for the promotion or conduct of the business of the Partnership.
2.6 Certificate.
-----------
The General Partner caused the Certificate to be filed with the Secretary
of State of Delaware on September 28, 1999 and shall cause the Certificate to be
filed or recorded in any other public office where filing or recording is
required or is deemed by the General Partner to be advisable.
2.7 Addresses of the Partners.
-------------------------
The respective addresses of the Partners are set forth on Schedule I.
2.8 Foreign Qualification.
---------------------
The General Partner shall take all necessary actions to cause the
Partnership to be authorized to conduct business legally in all appropriate
jurisdictions, including registration or qualification of the Partnership as a
foreign limited partnership in those jurisdictions that provide for registration
or qualification and the filing of a certificate of limited partnership in the
appropriate public offices of those jurisdictions that do not provide for
registration or qualification.
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2.9 Tax Classification.
------------------
Notwithstanding any other provision of this Agreement, no Partner or
employee of the Partnership may take any action (including the filing of a U.S.
Treasury Form 8832 Entity Classification Election) that would cause the
Partnership or any Subsidiary to be characterized as an entity other than a
partnership for federal income tax purposes without the mutual agreement of the
Partners. A determination of whether any action will have the effect described
in the preceding sentence will be based upon a declaratory judgement or similar
relief obtained from a court of competent jurisdiction, a favorable ruling from
the Internal Revenue Service, or the receipt of an opinion of counsel reasonably
satisfactory to the Partners.
ARTICLE 3
PARTNERSHIP CAPITAL
-------------------
3.1 Contributions.
-------------
(a) Initial Capital Contributions. Pursuant to the Contribution
-----------------------------
Agreement, each of TCI Indiana and Insight Communications contributed to the
Partnership at the Closing thereunder, a 50% membership interest in Insight
Indiana and a 50% partnership interest in ICP-VI.
(b) Capital Account Balances, Applicable Percentages. Schedule II
------------------------------------------------
sets forth (1) the Percentage Interest of each Partner as of the date of this
Agreement. The balance in each Partner's Capital Account as of the date of this
Agreement equals the sum of (i) the fair market value of the membership interest
in Insight Indiana contributed to the Partnership by such Partner, determined in
accordance with Section 3.1(c), and (ii) the fair market value of the
partnership interest in ICP-VI contributed to the Partnership by such Partner,
with each such ICP-VI partnership interest being valued at the Purchase Price
(as defined in the Purchase Agreement) for Insight's ICP-VI partnership
interest, as finally determined pursuant to the Purchase Agreement. Within six
months after the date of this Agreement (or such longer period as may be
applicable pursuant to Section 3.1(c)(2)), the Partners will mutually agree on a
Schedule setting forth the Capital Accounts of the Partners and the capital
accounts of the partners of each Subsidiary.
(c) Determining Fair Market Value of Additional Contributed Assets.
--------------------------------------------------------------
Except as otherwise mutually agreed to by the Partners, the fair market value of
any asset contributed by a Partner to the Partnership (other than the ICP-VI
partnership interests contributed pursuant to Section 3.1(a)) shall be
determined for purposes of this Agreement as follows:
(1) For purposes of this Agreement, other than under Article 9 and
except as provided in Section 3.1(c)(2), the fair market value of an asset shall
be that value mutually agreed to by the Partners within ten days after either
Partner requests such determination or, in the case of the membership interests
in Insight Indiana, that value mutually agreed to by the Partners within six
months after the date of this Agreement.
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(2) In the event the Partners are unable to agree on the value
during such ten-day or six-month period, fair market value shall be determined
within twenty days thereafter by an investment banker mutually selected by the
Partners within five days of the end of such ten-day or six-month period and
such determination shall be conclusive and binding on both Partners. Each
Partner shall pay its pro rata portion (based on the Partners' Percentage
Interests) of the expenses of the investment banker. If the investment banker is
only able to provide a range in which fair market value would exist, fair market
value shall be the average value of the highest and lowest values of such range.
3.2 Additional Capital Contributions.
--------------------------------
There shall be no further assessments for additional Capital Contributions
by the Partners to the Partnership.
3.3 Return of Contributions.
-----------------------
Neither Partner shall have the right to demand a return of all or any part
of its Capital Contribution during the term of the Partnership, and any return
of the Capital Contribution of either Partner shall be made solely from the
assets of the Partnership and only in accordance with the terms of this
Agreement. No interest shall be paid to either Partner with respect to its
Capital Contribution to the Partnership.
ARTICLE 4
DISTRIBUTIONS; ALLOCATIONS OF PROFIT AND LOSS
---------------------------------------------
4.1 Distributions of Cash.
---------------------
(a) Amount and Timing of Distributions.
----------------------------------
(1) The Partnership shall, with respect to each Fiscal Year (other
than the fiscal quarter in which the Partnership is liquidated), distribute to
Insight, (i) at least ten days prior to each quarterly due date for individual
estimated tax payments for the Fiscal Year, an amount equal to the estimated Tax
Amount for Insight for such quarter, computed on an annualized basis and
prorated for the cumulative number of months in the Fiscal Year that have passed
as of the end of the quarter for which such estimated Tax Amount is being
computed; and (ii) not later than ninety days after the end of such Fiscal Year
an aggregate amount equal to the Tax Amount for Insight for such Fiscal Year (to
the extent not previously distributed to Insight pursuant to the preceding
clause (i) with respect to such Fiscal Year). For purposes of making the
computation in Section 4.1(a)(1)(i) for the first, second, and third quarters of
each Fiscal Year, such computation shall be based upon the Partnership's
estimated taxable income for the first three, five and eight months of the
Fiscal Year, respectively. The Partnership shall make a pro rata distribution
to TCI in proportion to the Partners' relative Percentage Interests in respect
of each distribution to Insight pursuant to the preceding sentence.
-18-
(2) No cash of the Partnership not required to be distributed
pursuant to Section 4.1(a)(1) or Section 11.2(d)(3) shall be distributed except
with the written consent of all Partners.
(b) Allocation of Distributions. All distributions of cash pursuant
---------------------------
to Section 4.1(a), Section 11.2(d)(3) or otherwise approved by the Partners
shall be made to the Partners in proportion to their Percentage Interests.
(c) Tax Withholding.
---------------
(1) The Partnership shall seek to qualify for and obtain exemptions
from any provision of the Code or any provision of state, local, or foreign tax
law that would otherwise require the Partnership to withhold amounts from
payments or distributions to the Partners. If the Partnership does not obtain
any such exemption, the Partnership is authorized to withhold from any payment
or distribution to either Partner any amounts that are required to be withheld
pursuant to the Code or any provision of any state, local, or foreign tax law
that is binding on the Partnership.
(2) Any amount withheld with respect to any payment or distribution
to either Partner shall be credited against the amount of the payment or
distribution to which the Partner would otherwise be entitled. If the Code or
any provision of any state, local, or foreign tax law that is binding on the
Partnership requires that the Partnership remit to any taxing authority any
withholding tax with respect to, or for the account of, either Partner in its
capacity as a Partner, the Partnership shall, to the extent that Partnership
funds are available therefor, remit the full required amount of such withholding
tax to the taxing authority and shall notify such Partner in writing of its
obligation to pay to the Partnership such withholding tax to the extent it
exceeds the amount of any payment or distribution to which such Partner would
otherwise then be entitled. Each Partner shall pay to the Partnership, within
five Business Days after its receipt of written notice from the Partnership that
withholding is required with respect to such Partner, any amounts required to be
remitted by the Partnership to any taxing authority with respect to such Partner
that are in excess of the amount of any payment or distribution to which such
Partner would otherwise be entitled. If the Partnership is required to remit any
withholding tax with respect to, or for the account of, either Partner prior to
the Partnership's receipt of any payment required to be made by such Partner
pursuant to the preceding sentence, the amount of the payment required to be
made by such Partner shall be treated as a loan (the "Withholding Advance") from
the Partnership to the Partner, which shall accrue interest from the date the
Partnership is required to remit such withholding tax until paid by such Partner
or credited against payments or distributions to which such Partner would
otherwise be entitled as provided in Section 4.1(c)(3) at a rate of fifteen
percent per year, compounded semi-annually.
(3) Any Withholding Advance made to a Partner and any interest accrued
thereon shall be credited against, and shall be offset by, the amount of any
later payment or distribution to which the Partner would otherwise be entitled
(without duplication of the credit provided in the first sentence of Section
4.1(c)(2)), with any credit for accrued and unpaid interest as of the date such
payment or distribution would otherwise have been made being applied before any
credit for the amount of the Withholding Advance. Any Withholding Advance made
to a Partner and any interest accrued thereon, to the extent it has not
previously been paid by the Partner
-19-
in cash or fully credited against payments or distributions to which the Partner
would otherwise be entitled, shall be paid by the Partner to the Partnership
upon the earliest of (A) the dissolution of the Partnership, (B) the date on
which the Partner ceases to be a Partner of the Partnership, or (C) demand for
payment by the Partnership.
(4) All amounts that are credited against payments or distributions
to which a Partner would otherwise be entitled pursuant to this Section 4.1(c)
shall be treated as amounts distributed to such Partner pursuant to Section
4.1(a) for all purposes of this Agreement.
4.2 Allocations of Net Profit and Net Loss.
--------------------------------------
(a) Allocations of Net Profit and Net Loss. Except as provided in
--------------------------------------
Section 4.2(b), Net Profit and Net Loss for each Fiscal Year (or portion
thereof) shall be allocated between the Partners in proportion to their
Percentage Interests.
(b) Allocations of Net Profit and Net Loss Following Dissolution.
------------------------------------------------------------
Notwithstanding Section 4.2(a), following the dissolution of the Partnership
pursuant to Section 11.1, beginning in the Fiscal Year in which such dissolution
occurs or beginning in any Fiscal Year prior to the Fiscal Year in which such
dissolution occurs if the Partnership's Federal income tax return for such prior
Fiscal Year has not yet been required to be filed (not including extensions),
items of income and gain, loss, and deduction shall be allocated between the
Partners so as to cause the credit balances in the Partners' Capital Accounts to
be in proportion to their Percentage Interests.
4.3 Special Provisions Regarding Allocations of Profit and Loss.
-----------------------------------------------------------
(a) Minimum Gain Chargeback. Notwithstanding any other provision of
-----------------------
this Article 4, if there is a net decrease in Partnership Minimum Gain for any
Fiscal Year, each Partner shall be specially allocated items of Partnership
income and gain for such Fiscal Year (and if necessary for succeeding Fiscal
Years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, determined in accordance with Treasury Regulations
Section 1.704-2(g); provided, however, that this Section 4.3(a) shall not apply
to the extent the circumstances described in Treasury Regulations Sections
1.704-2(f)(2), 1.704-2(f)(3), 1.704-2(f)(4), or 1.704-2(f)(5) exist.
Allocations made pursuant to the preceding sentence shall be made in proportion
to the respective amounts required to be allocated to each Partner pursuant
thereto. The items of Partnership income and gain to be allocated pursuant to
this Section 4.3(a) shall be determined in accordance with Treasury Regulations
Section 1.704-2(f)(6). This Section 4.3(a) is intended to comply with the
minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f)
and shall be interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Notwithstanding any other
-------------------------------
provision of this Article 4 except Section 4.3(a), if during any Fiscal Year
there is a net decrease in Partner Nonrecourse Debt Minimum Gain, each Partner
with a share of that Partner Nonrecourse Debt Minimum Gain (determined in
accordance with Treasury Regulations Section 1.704-2(i)(5)) as of the beginning
of such Fiscal Year must be allocated items of Partnership income and gain for
the Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Partner's share of the net
-20-
decrease in the Partner Nonrecourse Debt Minimum Gain (determined in accordance
with Treasury Regulations Section 1.704-2(i)(4)); provided, however, that this
Section 4.3(b) shall not apply to the extent the circumstances described in the
third and fifth sentences of Treasury Regulations Section 1.704-2(i)(4) exist.
Allocations pursuant to the preceding sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner pursuant
thereto. The items of Partnership income and gain to be allocated pursuant to
this Section 4.3(b) shall be determined in accordance with Treasury Regulations
Section 1.704-2(i)(4). This Section 4.3(b) is intended to comply with the
minimum gain chargeback requirement in Treasury Regulations Section
1.704-2(i)(4) and shall be interpreted consistently therewith.
(c) Qualified Income Offset. If a Partner unexpectedly receives any
-----------------------
adjustments, allocations, or distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to eliminate, to
the extent required by the Treasury Regulations, the Adjusted Capital Account
Deficit of such Partner as quickly as possible; provided, however, that an
allocation pursuant to this Section 4.3(c) shall be made if and only to the
extent that such Partner would have an Adjusted Capital Account Deficit after
all other allocations provided for in this Article 4 have been tentatively made
as if this Section 4.3(c) were not in this Agreement. Allocations made pursuant
to the preceding sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto.
(d) Gross Income Allocation. If a Partner has a deficit Capital
-----------------------
Account at the end of any Fiscal Year that is in excess of the sum of (1) the
amount such Partner is obligated to restore to the Partnership pursuant to
Treasury Regulations Section 1.704-1(b)(2)(ii)(c), (2) the amount such Partner
is deemed to be obligated to restore pursuant to the penultimate sentence of
Treasury Regulations Section 1.704-2(g)(1), and (3) the amount such Partner is
deemed to be obligated to restore pursuant to the penultimate sentence of
Treasury Regulations Section 1.704-2(i)(5), such Partner shall be specially
allocated items of Partnership income and gain in the amount of such excess as
quickly as possible; provided, however, that an allocation pursuant to this
Section 4.3(d) shall be made if and only to the extent that such Partner would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article 4 have been tentatively made as if Section 4.3(c)
and this Section 4.3(d) were not in this Agreement. Allocations made pursuant
to the preceding sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
----------------------
Year or other period shall be specially allocated between the Partners in
proportion to their Percentage Interests.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
------------------------------
Deductions for any Fiscal Year or other period shall be specially allocated to
the Partner that bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulations Section 1.704-2(i).
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(g) Section 754 Adjustment. To the extent any adjustment to the
----------------------
adjusted tax basis of any asset of the Partnership pursuant to Code Section
734(b) or Code Section 743(b) is required, pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such section of the Treasury
Regulations.
(h) Excess Nonrecourse Liabilities. For purposes of determining a
------------------------------
Partner's proportionate share of the "excess nonrecourse liabilities" of the
Partnership within the meaning of Treasury Regulations Section 1.752-3(a)(3),
each Partner's interest in Partnership profits shall be deemed to be equal to
such Partner's Percentage Interest.
(i) Curative Allocations. The allocations set forth in this Article
--------------------
4 (other than Section 4.3(g), Section 4.3(h), and this Section 4.3(i)) (the
"Regulatory Allocations") are intended to comply with certain requirements of
the Treasury Regulations. The Partners intend that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Partnership income, gain, loss, or
deduction pursuant to this Section 4.3(i). Therefore, notwithstanding any other
provision of this Article 4 (other than the Regulatory Allocations), offsetting
special allocations of Partnership income, gain, loss, or deduction shall be
made 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 4.2. In
making such offsetting special allocations, future Regulatory Allocations under
Section 4.3(a) and Section 4.3(b) that, although not yet made, are likely to
offset Regulatory Allocations made under Section 4.3(e) and Section 4.3(f),
shall be taken into account.
4.4 Tax Allocations: Code Section 704(c).
------------------------------------
(a) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall, solely for tax
purposes, be allocated between 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 using the
traditional allocation method described in Treasury Regulations Section 1.704-
3(b).
(b) If the Gross Asset Value of any asset of the Partnership is
adjusted pursuant to paragraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Treasury Regulations thereunder.
(c) Allocations pursuant to this Section 4.4 are solely for purposes
of federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, either
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Partner's Capital Account or share of Net Profit, Net Loss, other items, or
distributions pursuant to any provision of this Agreement.
4.5 Allocation in Event of Transfer.
-------------------------------
If an interest in the Partnership is transferred in accordance with Article
8 or 9 of this Agreement, the Net Profit and Net Loss of the Partnership and
each item thereof, and all other items attributable to the transferred interest
for such Fiscal Year, shall be divided and allocated between the transferor and
the transferee pursuant to the interim closing of the Partnership books method
set forth in Treasury Regulation Section 1.706-1(c)(2)(ii) unless the parties
otherwise mutually agree. This Section shall apply for purposes of computing a
Partner's Capital Account and for federal income tax purposes.
4.6 Alternative Allocations.
-----------------------
The General Partner is authorized and directed to allocate items of income,
gain, loss, or deduction arising in any Fiscal Year differently from the manner
that is otherwise provided for in this Agreement if, and to the extent that, the
General Partner believes that the allocation of items of income, gain, loss, or
deduction in the manner otherwise provided for in this Agreement would cause the
credit balances in the Partners' Capital Accounts not to be in proportion to
their Percentage Interests immediately prior to any distributions pursuant to
Section 11.2(d)(3) if the Partnership were dissolved and terminated on the last
day of such Fiscal Year. Any allocation that is made pursuant to this Section
4.6 shall be deemed to be a complete substitute for any allocation that is
otherwise provided for in this Agreement and no amendment to this Agreement
shall be required.
ARTICLE 5
AUTHORITY OF THE GENERAL PARTNER;
---------------------------------
OTHER MATTERS AFFECTING GENERAL PARTNER
---------------------------------------
5.1 Authority of General Partner.
----------------------------
(a) Except as otherwise expressly provided for herein, the business
of the Partnership shall be managed by the General Partner pursuant to the
provisions of this Agreement. The General Partner shall have exclusive
authority and full discretion with respect to the management of the business of
the Partnership and the Subsidiaries, subject to Sections 5.1(b) and (c).
(b) The General Partner may delegate such general or specific
authority to the officers of the Partnership with respect to the business and
day-to-day operations of the Partnership as it from time to time considers
desirable, and the officers of the Partnership may exercise the authority
granted to them, subject to any restraints or limitations imposed by the
provisions of Sections 6.5 and 6.6 and any other express provisions of this
Agreement.
-23-
(c) The General Partner agrees that acting alone it shall not give
any consent on any matter or take any other action as the General Partner,
including, without limitation, acting on behalf of or binding the Partnership or
any Subsidiary with respect to any matter in respect of which approval by the
Limited Partner is required by the provisions of this Agreement or the Act,
unless such consent, matter or other action shall first have been adopted or
approved by the Limited Partner in accordance with the provisions of this
Agreement or the Act as applicable.
5.2 No Personal Liability.
---------------------
The General Partner shall not have any personal liability for the repayment
of the Capital Contributions of any other Partner; provided that the General
Partner shall promptly return to the Partnership or to the Partner or Partners
entitled thereto any distributions received by the General Partner in excess of
those to which the General Partner is entitled under this Agreement.
5.3 Withdrawal of General Partner.
-----------------------------
(a) The General Partner may not resign or withdraw from the
Partnership without the consent of the Limited Partner (subject to the rights of
transfer set forth elsewhere in this Agreement and it being understood that no
transfer permitted by the terms of this Agreement shall be deemed to be a
withdrawal for any purpose except as provided in Section 5.3(d)), other than
upon the dissolution and winding up of the Partnership in accordance with the
provisions of Article 11. If the General Partner so resigns or withdraws from
the Partnership, the Partnership shall dissolve in accordance with the
provisions of Article 11 unless, within ninety days after the withdrawal of the
General Partner, the Limited Partner elects in writing to continue the business
of the Partnership pursuant to the terms and provisions of this Agreement and
consents to the admission of at least one General Partner (which may be effected
by the Limited Partner converting a portion of its Partnership Interest to that
of a General Partner).
(b) For purposes of this Agreement, the term "withdrawal" does not
include the happening of any event described in Section 17-402(a)(4) or (5) of
the Act, and no Partner shall cease to be a Partner solely upon the happening of
such event(s); provided, that upon the happening of any such event that results
in the appointment of a trustee, receiver or liquidator of a Partner or of all
or substantially all of a Partner's properties and the loss by such Partner of
its management authority with respect to all or substantially all of its
properties, then (x) if the Partner to which such event occurs (the "Affected
Partner") is the General Partner, the Limited Partner shall have the right to
convert all or a portion of its Partnership Interest to that of a General
Partner, whereupon the General Partner's Partnership Interest will automatically
be converted to that of a Limited Partner; (y) all representatives of the
Affected Partner shall be deemed to have resigned from the Advisory Committee
and such Partner shall have no further right to designate any representatives;
and (z) no consent of the Affected Partner required under any provision of this
Agreement shall any longer be required and the other Partner shall be entitled
to grant all such consents and take all actions relating to the Partnership and
its business; provided, that clauses (y) and (z) will not apply if the Affected
Partner is the General Partner and the Limited Partner does not elect pursuant
to clause (x) to convert its Partnership Interest to that of a General Partner.
-24-
(c) Without limiting any other rights or remedies that the
Partnership or the Limited Partner may have at law or in equity, if the
Partnership is continued pursuant to Section 5.3(a) following the withdrawal of
the General Partner, the General Partner shall continue to be a Partner of the
Partnership; provided, that its Partnership Interest shall be converted to that
of a Limited Partner and, if the former General Partner withdrew without the
consent of the Limited Partner, (1) its representatives to the Advisory
Committee shall be deemed to have resigned and the former General Partner shall
have no further right as Limited Partner to designate any representatives, and
(2) no consent of the former General Partner required under any provision of
this Agreement shall any longer be required and the new General Partner shall be
entitled to grant all such consents and take all actions relating to the
Partnership and its business. Notwithstanding the foregoing, any change in the
identity of the General Partner shall be subject to and conditioned upon receipt
of all necessary governmental approvals and other material third party consents.
The withdrawal of the General Partner shall not alter the allocations and
distributions to be made to the Partners pursuant to this Agreement.
(d) Notwithstanding Section 5.3(a), the General Partner may withdraw
from the Partnership upon the transfer of all of its Partnership Interest to any
Transferee or Successor that is admitted to the Partnership as a Partner and
substituted for the General Partner in accordance with Section 8.2(b).
5.4 Tax Matters Partner.
-------------------
(a) The General Partner is hereby designated as the Tax Matters
Partner of the Partnership, as provided in Treasury Regulations pursuant to Code
Section 6231 and analogous provisions of state law. Each Partner, by the
execution of this Agreement, consents to such designation of the Tax Matters
Partner and agrees to execute, certify, acknowledge, deliver, swear to, file,
and record at the appropriate public offices such documents as may be necessary
or appropriate to evidence such consent.
(b) To the extent and in the manner provided by applicable law and
Treasury Regulations, the Tax Matters Partner shall furnish the name, address,
profits interest, and taxpayer identification number of each Partner and any
Transferee to the Secretary of the Treasury or his delegate (the "Secretary").
(c) The Tax Matters Partner shall notify each Partner of any audit
that is brought to the attention of the Tax Matters Partner by notice from the
Internal Revenue Service, and shall forward to each Partner copies of any
written notices, correspondence, reports, or other documents received by the Tax
Matters Partner in connection with such audit within ten Business Days following
its notification by the Internal Revenue Service or its receipt, as the case may
be. The Tax Matters Partner shall provide TCI with reasonable advance notice of
administrative proceedings with the Internal Revenue Service, including any
closing conference with the examiner and any appeals conference.
(d) The Tax Matters Partner shall give the Partners written notice of
its intent to initiate judicial review, file a request for administrative
adjustment on behalf of the Partnership,
-25-
extend the period of limitations for making assessments of any tax against a
Partner with respect to any Partnership item, or enter into any agreement with
the Internal Revenue Service that would result in the settlement of any alleged
tax deficiency or other tax matter, or to any adjustment of taxable income or
loss or any item included therein, affecting the Partnership or any Partner. The
Tax Matters Partner shall not take any such action if TCI elects within thirty
days after its receipt of the Tax Matters Partner's notice to require that the
Tax Matters Partner refrain from taking such action.
(e) Subject to the foregoing provisions of this Section 5.4, the Tax
Matters Partner is hereby authorized, but not required:
(1) to enter into any settlement with the Internal Revenue Service
or the Secretary with respect to any tax audit or judicial review, in which
agreement the Tax Matters Partner may expressly state that such agreement shall
bind the other Partners, except that such settlement agreement shall not bind
either Partner that (within the time prescribed pursuant to the Code and
Treasury Regulations thereunder) files a statement with the Secretary providing
that the Tax Matters Partner shall not have the authority to enter into a
settlement agreement on the behalf of such Partner;
(2) if a notice of a final administrative adjustment at the
Partnership level of any item required to be taken into account by a Partner for
tax purposes (a "final adjustment") is mailed to the Tax Matters Partner, to
seek judicial review of such final adjustment, including the filing of a
petition for readjustment with the Tax Court, the District Court of the United
States for the district in which the Partnership's principal place of business
is located, or elsewhere as allowed by law, or the United States Claims Court;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the
Secretary at any time and, if any part of such request is not allowed by the
Secretary, to file a petition for judicial review with respect to such request;
(5) to enter into an agreement with the Internal Revenue Service to
extend the period for assessing any tax that is attributable to any item
required to be taken into account by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners (with respect
to the Partnership) or the Partnership in connection with any administrative or
judicial tax proceeding to the extent permitted by applicable law or Treasury
Regulations.
(f) The Partnership shall indemnify and reimburse the Tax Matters
Partner for all expenses (including legal and accounting fees) incurred pursuant
to this Section 5.4 in connection with any administrative or judicial proceeding
with respect to the tax liability of the Partners. The payment of all such
reasonable expenses shall be made before any distributions are made to the
Partners. The taking of any action and the incurring of any expense by the Tax
Matters Partner in
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connection with any such proceeding, except to the extent provided herein or
required by law, is a matter in the sole discretion of the Tax Matters Partner
and the provisions on limitations of liability of the General Partner and
indemnification set forth in Article 12 shall be fully applicable to the General
Partner in its capacity as the Tax Matters Partner.
(g) Any Partner that receives a notice of an administrative
proceeding under Code Section 6233 relating to the Partnership shall promptly
notify the Tax Matters Partner of the treatment of any Partnership item on such
Partner's federal income tax return that is or may be inconsistent with the
treatment of that item on the Partnership's return.
(h) Either Partner that enters into a settlement agreement with the
Secretary with respect to any Partnership item shall notify the Tax Matters
Partner of such agreement and its terms within thirty days after its date, and
the Tax Matters Partner shall notify the other Partners of the settlement
agreement within thirty days of such notification.
5.5 Operating and Capital Expenditure Budgets.
-----------------------------------------
At least thirty days prior to the end of each Fiscal Year during the term
of this Agreement, the General Partner will submit to the Limited Partner
proposed operating and capital expenditure budgets for the Partnership and its
Subsidiaries for the following Fiscal Year and will negotiate in good faith with
the Limited Partner regarding any changes to such budgets requested by the
Limited Partner. If the General Partner and the Limited Partner are unable to
reach agreement on the changes proposed by the Limited Partner, the operating
and capital expenditure budgets for the Partnership and its Subsidiaries
proposed by the General Partner will be the budgets of the Partnership and its
Subsidiaries.
ARTICLE 6
STATUS OF LIMITED PARTNER; OTHER LIMITATIONS ON PARTNERS
--------------------------------------------------------
6.1 No Management and Control.
-------------------------
Except as expressly provided in this Agreement, no Limited Partner shall
take part in or interfere in any manner with the control, conduct, or operation
of the Partnership or have any right or authority to act for or bind the
Partnership or to vote on matters relating to the Partnership.
6.2 Limited Liability.
-----------------
No Limited Partner shall be bound by or personally liable for the expenses,
liabilities, or obligations of the Partnership. In no event shall any Partner
be required to make up a deficiency in its Capital Account upon the dissolution
and termination of the Partnership.
-27-
6.3 Return of Distributions of Capital.
----------------------------------
A Limited Partner may, under certain circumstances, be required by law to
return to the Partnership, for the benefit of the Partnership's creditors,
amounts previously distributed. No Limited Partner shall be obligated by this
Agreement to pay those distributions to or for the account of the Partnership or
any creditor of the Partnership. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, a
Limited Partner must return or pay over any part of those distributions, the
obligation shall be that of such Limited Partner alone and not of any other
Partner. Any payment returned to the Partnership by a Partner or made directly
by a Partner to a creditor of the Partnership shall be deemed a Capital
Contribution by such Partner.
6.4 Specific Limitations.
--------------------
No Partner shall have the right or power to: (a) (i) withdraw as a Partner
(subject to the rights of transfer set forth elsewhere in this Agreement and
subject to Section 5.3(a) with respect to the General Partner) or (ii) reduce
its Capital Contribution except as a result of the dissolution of the
Partnership or as otherwise provided by law, (b) bring an action for partition
against the Partnership or any assets of the Partnership, (c) cause the
termination and dissolution of the Partnership, except as set forth in this
Agreement, or (d) demand or receive property other than cash in return for its
Capital Contribution. Except as otherwise set forth in this Agreement or in any
agreement permitted to be entered into under this Agreement with respect to the
purchase, redemption, retirement, or other acquisition of Partnership Interests,
no Partner shall have priority over any other Partner either as to the return of
its Capital Contribution or as to Net Profit, Net Loss, or distributions. Other
than upon the termination and dissolution of the Partnership as provided by this
Agreement, there has been no time agreed upon when the Capital Contribution of
any Partner will be returned.
6.5 Matters Requiring TCI Approval.
------------------------------
Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other consent or approval that may be required by the express
terms of this Agreement, without the consent of TCI, which may be withheld by
TCI in its sole discretion, the Partnership shall not take, and the General
Partner shall have no authority to cause the Partnership to, or cause or permit
any Subsidiary to, consummate an Asset Disposition if such Asset Disposition
would result in the allocation of income or gain to TCI pursuant to Section 4.4
and Code Section 704(c), unless Insight reimburses TCI for the amount of such
adverse tax consequence as reasonably determined by TCI. Notwithstanding the
foregoing, the limitations of this paragraph shall not apply (i) upon the
liquidation and dissolution of the Partnership in accordance with Articles 9 and
11; (ii) to any pledging of assets by any Person to secure any Indebtedness of
such Person permitted by this Agreement or to any disposition of assets upon the
exercise of any rights granted by such a pledge; or (iii) to exchanges of assets
that cumulatively are equal to or less than twenty percent of the value of the
Partnership's assets, if any such exchanges of assets are made pursuant to Code
Section 1031 and do not result in an adverse tax consequence to TCI as
reasonably determined by TCI, unless Insight reimburses TCI for the amount of
such adverse tax consequence as reasonably determined by TCI.
-28-
6.6 Additional Matters Requiring Limited Partner Approval.
-----------------------------------------------------
Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other consent or approval that may be required by the express
terms of this Agreement, the Partnership shall not take, and the General Partner
shall have no authority to cause the Partnership to take, or cause or permit any
Subsidiary to take, any of the following actions without the consent of the
Limited Partner:
(a) (i) incur any Indebtedness, or consummate any Asset Acquisition,
such that immediately after the incurrence of such Indebtedness or consummation
of such Asset Acquisition, the Partnership's Operating Cash Flow Ratio would
exceed 7.0 to 1; (ii) enter into any agreement evidencing Indebtedness or any
amendment to an agreement governing Indebtedness that includes any borrower
other than the Partnership or its Subsidiaries or that provides that the
Partnership or its Subsidiaries may be deemed to be in default thereunder as the
result of a default by the General Partner, its Affiliates or any other Person
under any other agreement to which neither the Partnership nor any of its
Subsidiaries is a party or (iii) enter into any amendment to, or refinancing of,
any Indebtedness that would affect any keepwell or guarantee issued by TCI
(provided, that the limitations of this paragraph shall not apply to the
Purchase Agreement, dated as of September 28, 1999, between the Partnership and
Donaldson, Lufkin & Jenrette Securities Corporation, Morgan Stanley & Co.
Incorporated, BNY Capital Markets, Inc., and Wasserstein Parella Securities,
Inc., the Amended and Restated Revolving Credit and Term Loan Agreement dated as
of October 1, 1999 among Insight Kentucky I and the financial institutions party
thereto, and Toronto Dominion (Texas), Inc., as Administrative Agent, and any
Indebtedness incurred pursuant to such agreements; and provided, further, that
such agreements are hereby consented to by TCI for purposes of Section 4.2 of
the Contribution Agreement); or
(b) consummate one or more Asset Dispositions, in any consecutive
twelve month period, having an aggregate value in excess of $25,000,000.
Notwithstanding the foregoing, the limitations of this paragraph shall not apply
(i) upon the liquidation and dissolution of the Partnership in accordance with
Articles 9 and 11; (ii) to any pledging of assets by any Person to secure any
Indebtedness of such Person permitted by this Agreement, or to any disposition
of assets upon the exercise of any rights granted by such a pledge; or (iii) to
exchanges of assets that cumulatively are equal to or less than twenty percent
of the value of the Partnership's assets, if any such exchanges of assets are
made pursuant to Code Section 1031 and do not result in an adverse tax
consequence to TCI as reasonably determined by TCI, unless Insight reimburses
TCI for the amount of such adverse tax consequence as reasonably determined by
TCI; or
(c) merge with or consolidate into any Person or become a party to
any recapitalization or other form of reorganization, or cause or permit any
Subsidiary to merge with or consolidate into any Person or become a party to any
recapitalization or other form of reorganization (except that, without the
consent of the Limited Partner, (1) a Subsidiary may merge with another
Subsidiary or with the Partnership and the Partnership may merge with a
Subsidiary; and (2) a Subsidiary may merge with a Person other than a Subsidiary
as a means of effecting any acquisition or disposition of assets that is
otherwise permitted by this Agreement); or
-29-
(d) enter into any transaction with either Partner or any Affiliate
of either Partner unless the transaction is in the ordinary course of the
Partnership's or Subsidiary's business, is on terms that are no less favorable
to the Partnership or Subsidiary than could have been obtained in a comparable
arm's-length transaction with a Person that is not a Partner or an Affiliate of
either Partner, and contemplates payments to or by the Partnership and its
Subsidiaries in any twelve month period not in excess of $500,000, individually
or in the aggregate (provided that (1) the Management Agreements are hereby
approved, (2) the Advertising Sales Agreements are hereby approved, (3) any
other agreement of the Partnership or its Subsidiaries that is already in effect
on the date of this Agreement is hereby approved and (4) transactions described
in the Contribution Agreement, the Indiana Contribution Agreement or in this
Agreement, including without limitation the transactions contemplated by Section
16.1(b) hereof, under the circumstances specified therein or herein, and in
accordance with the terms provided therein or herein, are hereby approved), or
enter into any transaction with either Partner or any Affiliate of either
Partner pursuant to which such Partner or any Affiliate of such Partner would be
authorized or permitted to use the Partnership's or any Subsidiary's cable
television system distribution facilities in connection with such Partner
engaging in any business (other than through the Partnership) that is ancillary
to the ownership or operation of cable television systems, including, without
limitation, those businesses described in Section 2.5(c); or
(e) select a new General Partner of the Partnership or select a new
general partner of a Subsidiary; or
(f) liquidate or dissolve the Partnership except in accordance with
Articles 9 and 11 or liquidate or dissolve Insight Indiana or liquidate or
dissolve any other Subsidiary except in accordance with the express provisions
of such other Subsidiary's partnership agreement; or
(g) issue any Partnership Interest or other equity interest in the
Partnership or any Subsidiary (including the creation of a new Subsidiary), or
any option, warrant or other debt or equity interest convertible into or
evidencing the right to acquire (whether for not for additional consideration)
any Partnership Interest or other equity interest in the Partnership or any
Subsidiary, except pursuant to the Management Incentive Plan; or
(h) admit any additional Partners to the Partnership or any
additional partners or members to any Subsidiary except in the case of the
Partnership, in accordance with Article 8; or
(i) convert the Partnership or any Subsidiary to corporate form or to
any other form or change the partnership tax classification of the Partnership
or any Subsidiary; or
(j) commence any bankruptcy or insolvency proceeding, acquiesce in
the appointment of a receiver, trustee, custodian or liquidator, admit to the
material allegations of a petition filed against the Partnership or any
Subsidiary in any bankruptcy proceeding or make, execute or deliver any general
assignment for the benefit of the Partnership's or any Subsidiary's creditors;
or
(k) commence, institute, settle or release any claim or lawsuit (or
series of related claims and/or lawsuits) on behalf of the Partnership or any
Subsidiary, or the confession of a
-30-
judgment against the Partnership or any Subsidiary or either Partner (or any
partners of a Subsidiary) in connection with its relationship with the
Partnership or any Subsidiary, for any amount in excess of $3,000,000 or
involving the potential granting of equitable relief that, if granted, would
have a material adverse effect on the business of the Partnership and the
Subsidiaries, taken as a whole (except that (1) Insight may, without the consent
of TCI, cause the Partnership or its Subsidiaries to take action pursuant to
Section 7.19 of the Indiana Contribution Agreement subject to the terms and
conditions thereof, and (2) notwithstanding any other provision in this
Agreement to the contrary, TCI may, without the consent of Insight, cause the
Partnership or its Subsidiaries to make a good faith claim against Insight
Communications pursuant to the indemnification provisions of the Indiana
Contribution Agreement or against the Manager pursuant to the Management
Agreements, and Insight may, without the consent of TCI, cause the Partnership
or its Subsidiaries to make a good faith claim against TCI Indiana pursuant to
the indemnification provisions of the Indiana Contribution Agreement); or
(l0) (1) engage in any line of business not described in Section 2.5
or (2) acquire, operate or manage cable television systems or otherwise conduct
business in any area other than the Commonwealth of Kentucky and that geographic
portion of the State of Indiana that is located below the bold line drawn on the
map of the State of Indiana attached hereto as Schedule IV unless in either case
any such systems or businesses that relate to any other area were acquired in a
transaction or series of transactions in which any such systems or businesses
did not constitute more than twenty percent of the total assets (as determined
by cash flow, the number of subscribers or such other reasonable method, as
determined by the General Partner in its reasonable discretion) acquired in such
transaction or series of transactions; or
(m) make a call for additional Capital Contributions; or
(n) purchase, redeem, retire, or otherwise acquire any Partnership
Interests or other equity interest in the Partnership or any Subsidiary, except
for the purchase, redemption, retirement, or other acquisition of any equity
interest where the terms of such interest, as approved in accordance with this
Section 6.6, permit or require such purchase, redemption, retirement, or other
acquisition; or
(o) make any distribution to the Partners other than distributions
permitted pursuant to Section 4.1(a)(1) or required by Section 11.2(d)(3); or
(p) amend the Management Incentive Plan, the Management Agreements or
the partnership or operating agreement of any Subsidiary; or
(q) enter into, conduct, engage in or participate in the business of
providing or engaging in any Internet Backbone Service, or obtain or acquire any
record or beneficial equity interest in any Person which conducts, engages in or
participates in any Internet Backbone Service, it being agreed that the use of
IP technology to provide telephone, fax, video, video conferencing,
telecommuting, virtual private networks, security and energy management services
to subscribers of the Partnership's or its Subsidiaries' cable television
systems does not constitute such conducting,
-31-
engaging in, or participating in an Internet Backbone Service and does not,
subject to Section 16.1(b), require the consent or approval of the Limited
Partner pursuant to this Section 6.6(q); or
(r) take any action that would make it impossible or impracticable to
carry on the business of the Partnership or any Subsidiary, except upon the
dissolution of the Partnership or any Subsidiary in accordance with this
Agreement or the applicable Subsidiary partnership or operating agreement (it
being agreed that the exercise by the Partnership of its right to cause the
dissolution of Insight Indiana is subject to the consent of the Limited
Partner); or
(s) use any funds or assets of the Partnership or any Subsidiary
other than for the benefit of the Partnership and the Subsidiaries; or
(t) take any action that would subject any Limited Partner to
personal liability in any jurisdiction; or
(u) make any change in the Partnership's or any Subsidiary's public
accountants; or
(v) sell, assign or otherwise Transfer any equity interest in any
Subsidiary, except a Transfer of all of the equity interests in a Subsidiary as
a means of effecting any Asset Disposition that does not require the Limited
Partner's consent pursuant to this Agreement and except in connection with a
pledge of such equity interest (and any subsequent foreclosure made by the
pledgee) that is permitted under the terms of the applicable Subsidiary
partnership or operating agreement; or
(w) make any determination of "Gross Asset Value" with respect to a
Subsidiary, any determination that an adjustment to "Gross Asset Value" with
respect to a Subsidiary should be made ("Gross Asset Value" for this purpose
being as defined in the applicable Subsidiary partnership agreement) or any
determination of the fair market value of any asset contributed to such
Subsidiary; or
(x) withdraw as the general partner or member of a Subsidiary.
6.7 Limited Partner Consent Definedz.
-------------------------------
For purposes of this Agreement, including Sections 6.5 and 6.6, the Limited
Partner shall be deemed to have approved any action or proposed action by or on
behalf of the General Partner, the Partnership, or any Subsidiary only if the
Limited Partner has affirmatively approved the taking of such action in writing.
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ARTICLE 7
ADVISORY COMMITTEE
------------------
7.1 Appointment and Removal of Representatives.
------------------------------------------
(a) The Partnership shall have an Advisory Committee consisting of
five individual representatives of the Partners, three representatives to be
appointed by the General Partner and two representatives to be appointed by the
Limited Partner. The function of the Advisory Committee shall be to consult
with and advise the General Partner regarding significant decisions relating to
the Partnership, its Subsidiaries and their business and to make recommendations
to the General Partner with respect thereto; provided that ultimate decision
making power is vested in the General Partner, subject to the rights of the
Limited Partner specified elsewhere in this Agreement and provided further that
the Advisory Committee will not perform any functions or duties which, if
performed by a Limited Partner, would constitute participation in the control of
the business of the Partnership under the Act. The initial representatives of
the Partners, together with their respective business addresses and telephone
numbers are specified in Schedule III. The Chairman and Secretary of the
Advisory Committee shall be chosen by the Advisory Committee.
(b) Each Partner shall use its good faith efforts to designate its
representatives as promptly as is reasonably practicable so that the Advisory
Committee shall at all times contain the number of representatives provided for
in Section 7.1(a).
(c) Either Partner may at any time, by written notice to the other
Partner, remove its representatives, with or without cause, and substitute
representatives to serve in their stead. No representative shall be removed
from office, with or without cause, without the consent of the Partner that
designated him.
(d) The written notice of the Partner appointing a substitute
representative shall in each case set forth such representative's business
address and business telephone number.
(e) Each Partner shall promptly give written notice to the other
Partner of any change in the business address or business telephone number of
any of its representatives.
(f) The representatives appointed by the Partners shall be entitled
to reimbursement from the Partnership for their travel expenses incident to
their duties and responsibilities as such under this Agreement.
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7.2 Meetings of the Advisory Committee.
----------------------------------
The Advisory Committee shall hold one regular meeting each quarter at such
time and place as shall be determined by the Advisory Committee. Special
meetings of the Advisory Committee may be called at any time by any
representative upon not less than three Business Days' prior notice. Except as
otherwise determined by the Advisory Committee, all special and regular meetings
of the Advisory Committee shall be held at the principal office of the
Partnership.
7.3 Procedural Matters.
------------------
(a) Unless waived in writing by all of the representatives (before or
after a meeting) at least three Business Days' prior notice of any meeting shall
be given to each representative. Such notice shall state the purpose for which
such meeting has been called.
(b) The General Partner must consult the Advisory Committee in
advance with respect to any significant action or decision to be taken by the
General Partner.
(c) Members of the Advisory Committee shall have the right to
participate in a meeting of the Advisory Committee by means of a conference
telephone or similar communications equipment by means of which all
representatives participating in the meeting can hear each other and be heard,
and such participation shall constitute presence in person at the meeting.
(d) The Advisory Committee shall cause to be kept a book of minutes
of all of its meetings in which there shall be recorded the time and place of
each such meeting, whether regular or special, and if special, by whom called,
the notice thereof given, the names of those present, and the proceedings
thereof.
ARTICLE 8
TRANSFER OF PARTNERSHIP INTERESTS
---------------------------------
8.1 Limitations on Transfers.
------------------------
(a) Except as provided in Section 8.1(b) and 8.1(c), neither Partner
may sell, assign, transfer or otherwise dispose of, or pledge, hypothecate or
otherwise encumber (any or all of the foregoing, a "Transfer") all or any part
of its Partnership Interest, the profits, losses and distributions therefrom, or
any part thereof (whether voluntarily, involuntarily or by operation of law)
unless approved by the other Partner, which consent shall not be unreasonably
withheld or delayed. Notwithstanding the approval of the non-transferring
Partner to any Transfer by a Partner, the rights of any Transferee shall be
subject at all times to the limitations set forth in Section 8.2.
(b) The restrictions of Section 8.1(a) shall not apply and no consent
of the other Partner shall be required for:
(1) a Transfer pursuant to Article 9; or
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(2) a Transfer to an Affiliate of such Partner (a "Successor") so
long as (A) such Transfer would not hinder or impair consummation of any of the
transactions contemplated by Article 9; (B) such Successor, prior to such sale
or transfer, becomes a party to this Agreement and agrees to be bound by the
terms and conditions hereof; and (C) in the case of a Transfer by TCI, Tele-
Communications, Inc. holds and maintains, directly or indirectly, an economic
ownership in such Affiliate equal to at least 50.1% of the economic interest in
such Affiliate following such Transfer and has and maintains, directly or
indirectly, voting control of such Affiliate following such Transfer; or
(3) a Transfer pursuant to Section 8.7.
(c) If Insight desires to effect a Transfer that is not permitted by
the terms of this Section 8.1 except with the approval of TCI, and if TCI grants
such approval upon Insight's request, TCI shall have the right, effective upon
the Transfer by Insight, to convert its Partnership Interest into that of a
General Partner; provided that any such change in the identity of the General
Partner shall be subject to and conditioned upon receipt of all necessary
governmental approvals and other material third party consents. TCI shall
exercise such right, if at all, by giving written notice to Insight at the same
time TCI grants its approval to the Transfer by Insight. If TCI exercises such
right, the transferee of Insight, upon becoming a Partner pursuant to Section
8.2, shall not be the General Partner but shall be a Limited Partner, and the
allocations and distributions to be made to the Partners pursuant to this
Agreement shall not be altered.
(d) Notwithstanding anything in this Agreement to the contrary,
without the consent of the other Partner, neither Partner shall effect, or agree
to effect, any Transfer that will adversely affect or change, or is reasonably
likely to adversely affect or change, the partnership tax classification of the
Partnership.
(e) Neither Partner may Transfer all or any part of its Partnership
Interest unless it simultaneously Transfers to the same Transferee or Successor
a proportionate part of its LLC Interest.
8.2 Transferees and Successors.
--------------------------
(a) No Transfer of a Partnership Interest will be effective nor will
any purported Transferee or Successor become a Partner or otherwise be entitled
to any of attributes of ownership of the Partnership purportedly Transferred
unless such Transfer is made in accordance with the provisions of this Article 8
and the transferor and Transferee or Successor have complied with the following
conditions:
(1) the transferor has executed and delivered to the Partnership a
copy of the assignment of the Partnership Interest to Transferee or Successor in
form and substance satisfactory to the Partnership;
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(2) the Transferee or Successor, if not already a party to this
Agreement, becomes a party to this Agreement, assumes all of the obligations
hereunder of its transferor and agrees to be bound by the terms and conditions
hereof in the same manner as the transferor.
(b) Upon compliance with Section 8.2(a), any Transferee or Successor
shall be substituted as a Partner for, and shall, subject to Section 8.1(c)
regarding the Transferee of Insight's Partnership Interest becoming a Limited
Partner, enjoy the same rights and be subject to the same obligations as, its
predecessor as a Partner hereunder.
(c) If there is a permitted Transfer of a Partnership Interest under
this Agreement:
(1) A Transferee's or Successor's Percentage Interest shall equal
the Percentage Interest transferred to it by the transferring Partner;
(2) A Transferee's or Successor's Capital Account shall initially be
equal to the Capital Account balance transferred to it by the transferring
Partner;
(3) If requested to do so by any transferring Partner or by the
Transferee or Successor by notice given to the Partners, the Partnership shall
make an election under Section 754 of the Code (and a corresponding election
under applicable state and local law). Upon the request of either Partner, the
Partnership shall also make a timely election under Section 754 of the Code upon
a distribution of property or money to a Partner.
8.3 Transfers of Interests in Partners.
----------------------------------
(a) Except as provided in Section 8.3(b), Tele-Communications, Inc.
agrees that it will not Transfer (whether voluntarily, involuntarily or by
operation of law) all or any part of its direct or indirect ownership interests
in TCI Indiana, without the consent of Insight.
(b) The restriction of Section 8.3(a) shall not apply and no consent
of Insight shall be required for a Transfer directly or indirectly by Tele-
Communications, Inc. to an Affiliate of Tele- Communications, Inc. so long as
(1) such Transfer would not hinder or impair consummation of any of the
transactions contemplated by Article 9; (2) such transferee, prior to such sale
or transfer, complies with the requirements of Section 8.9; and (3) Tele-
Communications, Inc. holds and maintains, directly or indirectly, an economic
ownership in such Affiliate equal to at least 50.1% of the economic interest in
such Affiliate following such Transfer and has and maintains, directly or
indirectly, voting control of such Affiliate following such Transfer.
(c) It is understood and agreed that nothing in this Section 8.3
shall be deemed to require any consent of Insight to any proposed or actual
transfer of control (however such transfer is effected, by sale of stock or
assets, merger or consolidation or otherwise) of Tele-Communications, Inc. or to
any proposed or actual distribution to the stockholders of Tele-Communications,
Inc. of direct or indirect equity interests in Tele- Communications, Inc.
-36-
(d) It is understood and agreed that nothing in this Agreement shall
be deemed to require any consent of TCI to any proposed or actual transfer of
control (however such transfer is effected, by sale of stock or assets, merger
or consolidation or otherwise) of Insight, provided, however, in the event of
such a transfer of control, TCI shall have the right, effective upon such
transfer, to convert its Partnership Interest to that of a General Partner;
provided that any such change in the identity of the General Partner shall be
subject to and conditioned upon receipt of all necessary governmental approvals
and other material third party consents. TCI shall exercise such right, if at
all, by giving written notice to Insight within ten Business Days of TCI's
receipt of notice that such a transfer of control is contemplated. If TCI
exercises such right, Insight, effective upon such transfer of control, shall no
longer be the General Partner but shall be a Limited Partner, and the
allocations and distributions to be made to the Partners pursuant to this
Agreement shall not be altered.
(e) By executing this Agreement, Tele-Communications, Inc. represents
and warrants to Insight and the Partnership that as of the date of this
Agreement it owns, directly or indirectly, all of the outstanding equity
interests in TCI Indiana.
8.4 Other Consents and Requirements.
-------------------------------
Any Transfer must be in compliance with all requirements imposed by any
state securities administrator having jurisdiction over the Transfer and the
United States Securities and Exchange Commission and must not cause the
Partnership or any Subsidiary to be in violation of any Ownership Restriction.
8.5 Assignment Not In Compliance.
----------------------------
Any Transfer in contravention of any of the provisions of this Article 8
(whether voluntarily, involuntarily or by operation of law) shall be void and of
no effect, and shall neither bind nor be recognized by the Partnership.
8.6 Division of Partnership Interests.
---------------------------------
The several rights and obligations inherent in the Capital Account and
Percentage Interest attributable to a Partner's Partnership Interest are
indivisible except in equal proportions, such that the assignment of a specified
percentage of a Partner's Partnership Interest may only represent an equal
percentage of the total Capital Account and Percentage Interest that were
attributable to such Partner's Partnership Interest prior to the assignment.
-37-
8.7 Pledge of Partnership Interests.
-------------------------------
At the request of the General Partner, each Partner agrees to pledge its
Partnership Interest to secure any Indebtedness of the Partnership or its
Subsidiaries that is permitted under this Agreement, on terms determined by the
General Partner, so long as all Partners are required to pledge their
Partnership Interests and the terms of the pledge do not impose any personal
liability on any Partner. In negotiating the terms of any such pledge, the
General Partner will require that the secured party agree to enforce its rights
against the Partnership Interests of the Partners proportionately (based on the
Percentage Interest of each Partner). If the secured party under any such
pledge enforces its rights against the Partnership Interests of the Partners
other than proportionately, the Partners will afford each other such rights of
contribution and indemnity as are necessary to cause all liabilities, losses,
and damages suffered by the Partners as a result of the exercise by the secured
party of its rights under such pledge to be borne by the Partners
proportionately.
8.8 Code Section 708(b)(1)(B).
-------------------------
(a) If a Transfer by a Partner of all or any portion of its
Partnership Interest (other than a Transfer pursuant to Article 9) or any action
by such Partner in violation of this Agreement results in a termination of the
Partnership or any Subsidiary pursuant to Section 708(b)(1)(B) of the Code, the
transferring Partner will indemnify the other Partner for any additional income
tax paid by such other Partner as a result of such termination (including income
tax attributable to Code Section 704(c) allocations), whether required to be
paid in or for the taxable year in which such termination occurs or in or for
any subsequent taxable year, as offset by any income tax savings to be realized
by the other Partner as a result of such termination (including income tax
savings attributable to Code Section 704(c) allocations), whether realized in or
for the taxable year in which such termination occurs or in or for any
subsequent taxable year.
(b) If a Partner desires to assign all or part of its Partnership
Interest in a transaction that, if consummated at one time, would result in the
termination of the Partnership within the meaning of Code Section 708(b)(1)(B),
such Partner may elect (1) to assign immediately as much of its Partnership
Interest as may then be assigned without resulting in the termination of the
Partnership within the meaning of Code Section 708(b)(1)(B) and (2) to assign
the remaining portion of its Partnership Interest that it desires to assign as
soon thereafter as such subsequent assignment would not result in the
termination of the Partnership within the meaning of Code Section 708(b)(1)(B).
If a Partner notifies the other Partner that it has elected to assign all or
part of its Partnership Interest in accordance with this Section 8.8(b)
specifying in its notice the portion of its Partnership Interest to be assigned
immediately in accordance with clause (1) of the preceding sentence and the
portion of its Partnership Interest to be assigned subsequently in accordance
with clause (2) of the preceding sentence (the assignment of such portion, the
"Deferred Assignment"), then, if the other Partner assigns all or any part of
its Partnership Interest prior to the Deferred Assignment by the notifying
Partner and the Deferred Assignment therefore results in the termination of the
Partnership within the meaning of Code Section 708(b)(1)(B), the other Partner
and not the notifying Partner shall be treated as the Partner causing such
termination for purposes of Section 8.8(a).
-38-
ARTICLE 9
BUY/SELL RIGHTS
---------------
9.1 Commencement of Buy/Sell Process.
--------------------------------
(a) At any time on or after October 1, 2004 (subject to Section
9.1(b)), either TCI or Insight may elect to commence the process described in
this Article 9 by giving written notice (the "Exit Notice") of its election to
commence the process described in this Article 9 to the Non-Initiating Partner.
The Exit Notice shall also specify the Initiating Partner's determination of the
fair market value of all of the assets of the Partnership and Insight Kentucky
Capital as of the date the Initiating Partner delivers the Exit Notice (it being
understood and agreed that to the extent the Partnership has any Subsidiaries,
in making the determination of the value of the Partnership, the value of the
Subsidiaries shall be taken into account) (such determination, the "Stated Value
of the Partnership and Insight Kentucky Capital").
(b) A Partner may not elect to commence the process described in this
Article 9:
(1) at any time within twelve months of delivering a prior Exit
Notice to the Non-Initiating Partner pursuant to Section 9.1(a); or
(2) at any time within six months of the effectiveness of a valid
notice of postponement delivered by either Partner pursuant to Section 9.2; or
(3) at any time following the delivery of an Exit Notice by the
other Partner pursuant to Section 9.1(a) and prior to such time, if any, that
(A) the Initiating Partner and the Non-Initiating Partner mutually agree to
abandon the purchase and sale of Partnership Interests and LLC Interests
commenced by such Exit Notice pursuant to a subsequent election pursuant to
Section 9.1(c), or (B) TCI elects to terminate (or is deemed to have elected to
terminate) the purchase and sale of Partnership Interests and LLC Interests
commenced by such Exit Notice pursuant to a subsequent election pursuant to
Section 9.3(c)(2) or Section 9.5(b), or (C) the non-defaulting Partner elects to
terminate the purchase and sale of Partnership Interests and LLC Interests
commenced by such Exit Notice pursuant to a subsequent election pursuant to
Section 9.7(a)(3).
(c) The purchase and sale of Partnership Interests and LLC Interests
pursuant to this Article 9 may be abandoned at any time following the delivery
of an Exit Notice pursuant to Section 9.1(a) and prior to the closing thereof by
mutual agreement between the Initiating Partner and the Non-Initiating Partner.
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9.2 Non-Initiating Partner's Option to Postpone the Buy/Sell Process.
----------------------------------------------------------------
Upon receipt of a valid Exit Notice from the Initiating Partner pursuant to
Section 9.1, the Non-Initiating Partner may elect, by giving written notice to
the Initiating Partner within five Business Days of the Non-Initiating Partner's
receipt of such Exit Notice, to postpone for a period of six months the first
date on which either Partner may commence the process described in this Article
9 by delivering an Exit Notice, provided that each Partner may exercise this
option to postpone only once during the term of the Partnership. If the Non-
Initiating Partner fails to give a timely written notice of its election to
postpone pursuant to the preceding sentence (or if the Non-Initiating Partner
has already exercised its one election to postpone), the Non-Initiating Partner
shall be deemed not to have made such an election to postpone. A timely and
valid election to postpone by the Non-Initiating Partner shall become effective
immediately upon its delivery to the Initiating Partner, at which time the
Initiating Partner's Exit Notice shall automatically be rescinded and be of no
further force and effect and neither Partner shall have any further obligations
in respect of such Exit Notice and such Exit Notice shall not count against the
Initiating Partner for purposes of Section 9.1(b)(1).
9.3 TCI's Options as Non-Initiating Partner.
---------------------------------------
If TCI receives an Exit Notice from Insight pursuant to Section 9.1 and
does not make (or is deemed not to have made) an election to postpone pursuant
to Section 9.2, TCI shall elect, by giving written notice (an "Initial Election
Notice") of its election to Insight within ninety days after its receipt of the
Exit Notice, either to (1) purchase Insight's Partnership Interest and LLC
Interest, or (2) sell its Partnership Interest and LLC Interest to Insight or
to otherwise effect an exit from the Partnership and Insight Kentucky Capital
pursuant to an Alternative Structure. If TCI makes an election pursuant to
clause (2) of the preceding sentence, TCI's Initial Election Notice shall also
specify whether TCI desires to enter into negotiations with Insight to
restructure the sale of TCI's Partnership Interest and LLC Interest or its exit
from the Partnership and Insight Kentucky Capital in a manner that results in
tax-deferred or tax-advantaged treatment to TCI (for example, by the purchase by
the Partnership and Insight Kentucky Capital of assets to distribute to TCI in
redemption of TCI's Partnership Interest and LLC Interest or the distribution by
the Partnership and Insight Kentucky Capital of certain of its then existing
assets in redemption of TCI's Partnership Interest and LLC Interest) (an
"Alternative Structure").
(a) Election to Purchase. Upon the timely delivery by TCI of an
--------------------
Initial Election Notice pursuant to this Section 9.3 specifying its election to
purchase Insight's Partnership Interest and LLC Interest, Insight shall be
obligated to sell and TCI shall be obligated to purchase, in accordance with
this Article 9, all of Insight's Partnership Interest and LLC Interest for a
cash price equal to the Equity Value of such Partnership Interest and LLC
Interest. At TCI's option, TCI may designate a financially, legally and
technically qualified third party to purchase Insight's Partnership Interest and
LLC Interest, provided that TCI shall not be relieved of its obligation under
this Section 9.3(a) in the event such third party does not perform.
(b) Election to Sell Without Election to Negotiate Alternative
----------------------------------------------------------
Structure. Upon the timely delivery by TCI of an Initial Election Notice
- ---------
pursuant to this Section 9.3 specifying TCI's
-40-
election to sell its Partnership Interest and LLC Interest to Insight without an
election by TCI to negotiate an Alternative Structure, TCI shall be obligated to
sell and Insight shall be obligated to purchase, in accordance with this Article
9, all of TCI's Partnership Interest and LLC Interest for a cash price equal to
the Equity Value of such Partnership Interest and LLC Interest.
(c) Election to Sell or Exit With an Election to Negotiate Alternative
------------------------------------------------------------------
Structure. Upon the timely delivery by TCI of an Initial Election Notice
- ---------
pursuant to this Section 9.3 specifying TCI's election to sell its Partnership
Interest and LLC Interest to Insight or otherwise effect an exit from the
Partnership and Insight Kentucky Capital and specifying TCI's election to
negotiate an Alternative Structure, the Partners will negotiate in good faith
and use commercially reasonable efforts (taking into account any tax,
regulatory, or economic considerations) for a reasonable period (not to exceed
sixty days) to mutually agree on an Alternative Structure.
(1) If the Partners mutually agree on an Alternative Structure
within such sixty-day period, TCI and Insight shall be obligated to effect TCI's
exit from the Partnership and Insight Kentucky Capital, in accordance with this
Article 9 and the terms of the Alternative Structure.
(2) If the Partners are unable to reach mutual agreement on an
Alternative Structure within such sixty-day period, then TCI shall elect, by
giving written notice to Insight within fifteen Business Days of the end of such
sixty-day period, either to (1) sell its Partnership Interest and LLC Interest
to Insight, in which event TCI shall be obligated to sell and Insight shall be
obligated to purchase, in accordance with this Article 9, all of TCI's
Partnership Interest and LLC Interest for a cash price equal to the Equity Value
of such Partnership Interest and LLC Interest, or (2) terminate the purchase and
sale process commenced pursuant to Insight's Exit Notice, subject to Section
9.6. If TCI fails to give a timely notice to Insight pursuant to the preceding
sentence, TCI shall be deemed to have made an election pursuant to clause (2) of
the preceding sentence.
(d) Failure to Make a Timely Election. If TCI fails to give an
---------------------------------
Initial Election Notice to Insight within ninety days after its receipt of
Insight's Exit Notice, TCI shall be deemed to have made an election pursuant to
either Section 9.3(a), 9.3(b) or 9.3(c) as Insight shall determine in its sole
discretion by giving written notice to TCI within five Business Days after the
end of such ninety-day period.
9.4 Insight's Options as Non-Initiating Partner.
-------------------------------------------
If Insight receives an Exit Notice from TCI pursuant to Section 9.1 and
does not make (or is deemed not to have made) an election to postpone pursuant
to Section 9.2, Insight shall elect, by giving written notice (an "Initial
Election Notice") of its election to TCI within ninety days after its receipt of
the Exit Notice, either to (1) sell its Partnership Interest and LLC Interest to
TCI, or (2) purchase TCI's Partnership Interest and LLC Interest.
(a) Election to Sell. Upon the timely delivery by Insight of an
----------------
Initial Election Notice pursuant to this Section 9.4 specifying its election to
sell its Partnership Interest and LLC
-41-
Interest to TCI, Insight shall be obligated to sell and TCI shall be obligated
to purchase, in accordance with this Article 9, all of Insight's Partnership
Interest and LLC Interest, for an amount in cash equal to the Equity Value of
such Partnership Interest and LLC Interest.
(b) Election to Purchase. Upon the timely delivery by Insight of an
--------------------
Initial Election Notice pursuant to this Section 9.4 specifying its election to
purchase TCI's Partnership Interest and LLC Interest, and upon the failure (or
deemed failure) of TCI to make an election to negotiate an Alternative Structure
pursuant to Section 9.5, TCI shall be obligated to sell and Insight shall be
obligated to purchase, in accordance with this Article 9, all of TCI's
Partnership Interest and LLC Interest, for an amount in cash equal to the Equity
Value of such Partnership Interest and LLC Interest.
(c) Failure to Make a Timely Election If Insight fails to give an
---------------------------------
Initial Election Notice to TCI within ninety days after its receipt of TCI's
Exit Notice, Insight shall be deemed to have made an election pursuant to either
Section 9.4(a) or 9.4(b) as TCI shall determine in its sole discretion by giving
written notice to Insight within five Business Days after the end of such
ninety-day period.
9.5 TCI's Option to Negotiate Alternative Structure.
-----------------------------------------------
Upon its receipt of an Initial Election Notice from Insight pursuant to
Section 9.4 specifying Insight's election to purchase TCI's Partnership Interest
and LLC Interest, TCI may elect, by giving written notice to Insight within
fifteen Business Days of its receipt of Insight's Initial Election Notice, to
enter into negotiations with Insight to agree on an Alternative Structure. If
TCI fails to give a timely notice pursuant to the preceding sentence specifying
such an election, TCI shall be deemed not to have made such an election. Upon
TCI's timely delivery of its election to negotiate an Alternative Structure, the
Partners will negotiate in good faith and use commercially reasonable efforts
(taking into account any tax, regulatory, or economic considerations) for a
reasonable period (not to exceed sixty days) to agree on an Alternative
Structure.
(a) If the Partners mutually agree on an Alternative Structure within
such sixty-day period, TCI and Insight shall be obligated to effect TCI's exit
from the Partnership and Insight Kentucky Capital in accordance with this
Article 9 and the terms of the Alternative Structure.
(b) If the Partners are unable to reach mutual agreement on an
Alternative Structure within such sixty-day period, then TCI shall elect, by
giving written notice to Insight within fifteen Business Days of the end of such
sixty-day period, either to (1) sell its Partnership Interest and LLC Interest
to Insight, in which event TCI shall be obligated to sell and Insight shall be
obligated to purchase, in accordance with this Article 9, all of TCI's
Partnership Interest and LLC Interest for a cash price equal to the Equity Value
of such Partnership Interest and LLC Interest, or (2) terminate the purchase and
sale process commenced pursuant to Insight's Exit Notice, subject to Section
9.6. If TCI fails to give a timely notice to Insight pursuant to the preceding
sentence, TCI shall be deemed to have made an election pursuant to clause (2) of
the preceding sentence.
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9.6 Insight's Option to Require TCI to Purchase Insight's Partnership
-----------------------------------------------------------------
Interest.
- --------
If TCI elects (or is deemed to have elected) to terminate the purchase and
sale process pursuant to Section 9.3(c)(2) or Section 9.5(b), Insight may elect,
by giving written notice to TCI within five Business Days of Insight's receipt
of TCI's election to terminate (or within five Business Days of TCI's deemed
election to terminate), to require TCI to purchase Insight's Partnership
Interest and LLC Interest. Upon the timely delivery by Insight of a notice
pursuant to the preceding sentence specifying Insight's election to require TCI
to purchase Insight's Partnership Interest and LLC Interest, Insight shall be
obligated to sell and TCI shall be obligated to purchase, in accordance with
this Article 9, all of Insight's Partnership Interest and LLC Interest for a
cash price equal to the Equity Value of such Partnership Interest and LLC
Interest. If Insight fails to make a timely election pursuant to the first
sentence of this Section 9.6, Insight shall be deemed to have agreed to the
termination of the purchase and sale process commenced by the Initiating
Partner's Exit Notice.
9.7 Default by Partner.
------------------
(a) If either Partner becomes obligated to purchase the other
Partner's Partnership Interest and LLC Interest under this Article 9 pursuant to
an Exit Notice, or if Insight becomes obligated to effect an Alternative
Structure under this Article 9 pursuant to Section 9.3(c)(1) or Section 9.5(a),
and such Partner defaults in its obligation to purchase the selling Partner's
Partnership Interest and LLC Interest on the date specified in Section 9.9(a)
for the closing of the purchase and sale of the selling Partner's Partnership
Interest and LLC Interest or Insight defaults in its obligation to effect an
Alternative Structure, then the non-defaulting Partner may elect either:
(1) to purchase the Partnership Interest and LLC Interest of the
defaulting Partner for a cash price equal to 95% of the Equity Value of such
Partnership Interest and LLC Interest and otherwise on the terms and subject to
the conditions set forth in this Article 9; or
(2) to cause the Partnership to be liquidated and dissolved in
accordance with Article 11; or
(3) to terminate the buy/sell process commenced by the Initiating
Partner's Exit Notice and continue the Partnership.
(b) The three options that may be elected by the non-defaulting
Partner pursuant to Section 9.7(a) are exclusive of each other and are exclusive
of all other rights and remedies that may otherwise have been available to the
non-defaulting Partner at law or equity as a result of the defaulting Partner's
default.
(c) The non-defaulting Partner may make an election pursuant to
Section 9.7(a) by giving written notice of its election to the defaulting
Partner at any time within thirty days after the date specified in Section
9.9(a) for the closing of the purchase and sale of the non-defaulting Partner's
Partnership Interest and LLC Interest or the date scheduled for closing of an
Alternative Structure and prior to such time, if any, as the defaulting Partner
stands ready, willing, and able to
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purchase the non-defaulting Partner's Partnership Interest and LLC Interest in
accordance with this Article 9 or to consummate the Alternative Structure. If
the non-defaulting Partner makes a timely election pursuant to Section
9.7(a)(1), the defaulting Partner shall be obligated to sell and the
non-defaulting Partner shall be obligated to purchase, in accordance with this
Article 9, all of the defaulting Partner's Partnership Interest and LLC
Interest.
9.8 Removal of Insight as Partner.
-----------------------------
(a) The provisions of this Section 9.8 shall apply if:
(1) a court of competent jurisdiction finds that Insight has engaged
in conduct while acting as General Partner that constitutes either fraud against
the Partnership or TCI or a felony involving moral turpitude and that such
conduct has resulted in material harm to the Partnership or TCI, and
(2) the finding described in Section 9.8(a)(1) has not been
reversed, stayed, enjoined, set aside, annulled, or suspended, and is not the
subject of any pending request for judicial review, reconsideration, appeal, or
stay, and
(3) the time for filing any further request for judicial review,
reconsideration, appeal, or stay of the finding described in Section 9.8(a)(1)
has expired.
(b) If each of the conditions specified in Section 9.8(a) is
satisfied, then (1) TCI may elect to convert its Partnership Interest to that of
a General Partner, provided, that such change in the identity of the General
Partner shall be subject to and conditioned upon receipt of all necessary
governmental approvals and other material third party consents, and provided
further that if TCI exercises such right, Insight will cease to be the General
Partner but shall be a Limited Partner; and (2) TCI shall have the option to
purchase all of Insight's Partnership Interest and LLC Interest in accordance
with the process described in this Section 9.8(b) and Section 9.8(c). TCI may
elect to commence such process by giving written notice of its election to
Insight within ten Business Days after the condition specified in Section
9.8(a)(3) is satisfied. Upon Insight's receipt of TCI's notice pursuant to the
preceding sentence, Insight and TCI shall, within thirty Business Days of such
receipt, negotiate in good faith to determine the fair market value of all of
the assets of the Partnership and Insight Kentucky Capital as of the date TCI
delivers notice to Insight pursuant to the first sentence of this Section 9.8(b)
(it being understood and agreed that to the extent the Partnership has any
Subsidiaries, in making the determination of the value of the Partnership, the
Subsidiaries shall be taken into account) (the "Fair Market Value of the
Partnership and Insight Kentucky Capital").
(1) If Insight and TCI fail to agree upon the Fair Market Value of the
Partnership and Insight Kentucky Capital within such period, then each of
Insight and TCI will select a nationally recognized investment banking firm or
nationally recognized qualified appraisal firm who will determine the Fair
Market Value of the Partnership and Insight Kentucky Capital within sixty days
of engagement. If the average of the two appraisals is within 1.5% of the lower
of the appraisals, then the Fair Market Value of the Partnership and Insight
Kentucky Capital will
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be the average of the two appraisals. If such average is not within 1.5% of the
lower of the two appraisals, the two appraisers selected by Insight and TCI will
select a third nationally recognized investment banking firm or a nationally
recognized qualified appraisal firm who will conduct a third appraisal, and the
Fair Market Value of the Partnership and Insight Kentucky Capital will be equal
to the average of the two appraisals that are closest to one another, provided
that if the highest and lowest appraisals are equidistant from the middle
appraisal, then the Fair Market Value of the Partnership and Insight Kentucky
Capital will be equal to the middle appraisal. Each of Insight and TCI shall
have the right to submit to all appraisers a position paper with respect to
valuation. Each of Insight and TCI will bear the expenses of the investment
banking firm or appraisal firm that they select, and if a third investment
banking firm or appraisal firm is used, Insight and TCI will share equally the
expenses of the third firm. In conducting the appraisals, the appraisers shall
assume that the value of any business is the price at which the assets of such
business as a going concern would change hands between a willing buyer and a
willing seller, on terms and subject to conditions and costs applicable in the
cable television industry (and, if and to the extent applicable, any other
industry in which the Partnership or any of its Subsidiaries is engaged) and
otherwise use valuation techniques then prevailing in the cable television
industry or such other industry.
(c) TCI may elect to purchase all of Insight's Partnership Interest
and LLC Interest and, upon the consummation of such purchase, to remove Insight
as a Partner, by giving written notice of its election to Insight within ten
Business Days after the final determination of the Fair Market Value of the
Partnership and Insight Kentucky Capital. Upon the timely delivery by TCI of
notice pursuant to the preceding sentence specifying its election to purchase
Insight's Partnership Interest and LLC Interest, Insight shall be obligated to
sell and TCI shall be obligated to purchase, in accordance with this Article 9,
all of Insight's Partnership Interest and LLC Interest for a cash price equal to
the Equity Value of Insight's Partnership Interest and LLC Interest. If TCI
fails to give a timely notice to Insight pursuant to the first sentence of this
Section 9.8(c) specifying its election to purchase Insight's Partnership
Interest and LLC Interest, TCI shall be deemed to have made an election not to
purchase Insight's Partnership Interest and LLC Interest pursuant to this
Section 9.8, in which event, subject to Sections 9.8(b) and (d), Insight shall
continue as the General Partner.
(d) The rights of TCI under this Section 9.8 are in addition to any
other rights and remedies available to TCI at law or equity as a result of any
conduct by Insight described in Section 9.8(a).
9.9 General Terms Applicable to Purchase and Sale of Partnership Interests
----------------------------------------------------------------------
and LLC Interests
- -----------------
(a) The closing of the purchase and sale of a Partner's Partnership
Interest and LLC Interest or of an Alternative Structure in accordance with this
Article 9 shall occur not later than twenty Business Days after the receipt of
all material governmental consents and approvals required in connection with the
sale of the selling Partner's Partnership Interest and LLC Interest in
connection with such Alternative Structure.
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(b) The closing of the purchase and sale of the selling Partner's
Partnership Interest and LLC Interest or of the Alternative Structure in
accordance with this Article 9 shall take place at the principal office of the
Partnership or at any other location agreed to by Insight and TCI.
(c) At the closing of any purchase and sale of the selling Partner's
Partnership Interest and LLC Interest or of any Alternative Structure pursuant
to this Article 9, the purchasing Partner or the Partnership or other buyer in
an Alternative Structure shall pay or cause to be paid to the selling Partner,
by cash or other immediately available funds or any other form of consideration
mutually agreed to by the selling Partner and the purchasing Partner or the
consideration agreed to as part of the Alternative Structure, the purchase price
for the Partnership Interest and LLC Interest being purchased and the selling
Partner shall deliver to the purchasing Partner (or its permitted assignee or
the Partnership or other buyer in an Alternative Structure) good title, free and
clear of any liens (other than those created by this Agreement and those
securing financing obtained by the Partnership or any Subsidiary), to the
Partnership Interest and LLC Interest being sold.
(d) With respect to the current assets and liabilities of the
Partnership, the transaction costs and the reserves to be determined as part of
the Equity Value of the Partnership Interest and LLC Interest to be sold at the
closing pursuant to this Article 9, such current assets and liabilities, costs
and reserves shall be determined by mutual agreement of Insight and TCI at least
five days in advance of the date scheduled for said closing, but to the extent
that as of such date there is a good faith disagreement between the parties as
to any portion of such current assets, liabilities, costs or reserves the
parties shall proceed to closing of such purchase and sale, with closing based
on matters not in dispute. Thereafter, all matters in dispute shall be
immediately referred to an independent public accountant mutually acceptable to
Insight and TCI who shall make such determination as promptly as practicable and
whose determination shall be final and binding upon the parties. If the
accountant determines that either party is entitled to payment from the other
party, the party which owes such payment shall make it to the entitled party in
cash (or in the same form of consideration as is being paid in such transaction
if the parties have agreed to an Alternative Structure) in accordance with the
accountant's determination.
(e) The Partners will cooperate in good faith and use their respective
commercially reasonable efforts to obtain as quickly as practicable all
governmental consents and approvals required in connection with the purchase and
sale of a Partner's Partnership Interest and LLC Interest or an Alternative
Structure pursuant to this Article 9.
(f) From and after the closing, the purchasing Partner will be
entitled to indemnification from the selling Partner (or another creditworthy
entity reasonably acceptable to the purchasing Partner) against any liabilities
of the selling Partner as a Partner or as a member in Insight Kentucky Capital
(including without limitation, tax liabilities of the selling Partner for
periods prior to the closing) for periods prior to closing not taken into
account in determining the Equity Value of the Partnership Interest and LLC
Interest purchased by the purchasing Partner. The other indemnification
obligations of the selling Partner to the purchasing Partner shall be
substantially equivalent to its indemnification obligations to the Partnership
pursuant to the Indiana Contribution Agreement. On the date that is one year
after the closing under this Article 9, the selling Partner shall be entitled to
its distributable share of any reserves set up pursuant to Section
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11.2(d)(2) that had not yet been used to pay any obligation or liability that
relates to the period prior to the date of closing pursuant to this Article 9
and that would not be required to be maintained in accordance with generally
accepted accounting principles with respect to the period prior to the date of
closing pursuant to this Article 9.
(g) Each Partner agrees that, from and after the date on which the
respective obligations of the Partners to purchase and sell the selling
Partner's Partnership Interest and LLC Interest or to effect an Alternative
Structure become effective in accordance with this Article 9, it will negotiate
in good faith and use commercially reasonable efforts to enter into an
appropriate purchase agreement or other agreements on reasonable terms and
conditions that are consistent with the other provisions of this Article 9 and
that are otherwise standard and customary at the time for similar transactions.
The Partners recognize that the sixty-day period specified in Sections 9.3(c)
and 9.5 to agree on an Alternative Structure relates to agreement on the form
and material terms of the structure and a timetable for entering into the
purchase agreement or other agreements necessary to effect the Alternative
Structure, but that additional time may be required to negotiate and enter into
such agreements.
(h) Each Partner hereby agrees that the other Partner shall be
entitled to an injunction or injunctions to prevent breaches by such Partner of
its obligations under this Article 9 and to enforce specifically the terms and
provisions of this Article 9 in any court of the United States or any state
having jurisdiction, in addition to any other remedy to which it is entitled at
law or in equity. If an action is brought by either Partner pursuant to this
Section 9.9(h), the other Partner shall waive the defense that there is an
adequate remedy at law.
ARTICLE 10
OTHER BUSINESSES AND INVESTMENT OPPORTUNITIES
---------------------------------------------
10.1 Prohibited Cross-Interests.
--------------------------
(a) Each Partner agrees that, during the term of this Agreement,
neither such Partner nor any Affiliate of such Partner shall, directly or
indirectly, acquire any interest in any business or in any Person if the
acquisition of such interest would cause the Partnership or any Subsidiary to be
in violation of any Ownership Restriction.
(b) If, during the term of this Agreement, there is a Formal
Determination that either Partner's holding of a Partnership Interest causes the
Partnership or any Subsidiary to be in violation of any Ownership Restriction,
then the following provisions of this Section 10.1(b) shall apply. For purposes
of this Section 10.1(b), a "Formal Determination" means (i) an agreement between
Insight and TCI, (ii) a written determination by the FCC (including a
determination by staff employees of the FCC acting under delegated authority),
regardless of whether such determination is subject to administrative or
judicial review, reconsideration, or appeal (except to the extent that, so long
as a stay of any enforcement action by the FCC against the Partnership or any
Subsidiary as a result of any such violation of an Ownership Restriction is
effective, the Partner that caused the violation specifies that any such
determination will not constitute a Formal Determination during
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the pendency of any review, reconsideration, or appeal), or (iii) a decision of
any court of competent jurisdiction, regardless of whether such decision is
subject to administrative or judicial review, reconsideration, or appeal (except
to the extent that, so long as a stay of any enforcement action by the FCC
against the Partnership or any Subsidiary as a result of any such violation of
an Ownership Restriction is effective, the Partner that caused the violation
specifies that any such decision will not constitute a Formal Determination
during the pendency of any review, reconsideration, or appeal). Insight and TCI
will use their respective good faith efforts, after consultation with legal
counsel, to reach an agreement as to whether either Partner's holding of a
Partnership Interest causes the Partnership or any Subsidiary to be in violation
of any Ownership Restriction.
(1) The Partnership will use reasonable efforts to obtain a stay of
any enforcement action by the FCC against the Partnership or any Subsidiary as a
result of any such violation of an Ownership Restriction (and the agreement of
both Partners shall be required for the Partnership to act otherwise), and the
Partners will cooperate reasonably with the Partnership in such efforts, to the
extent necessary to prevent such violation from having a material adverse effect
on the Partnership and the Subsidiaries before it is cured. For purposes of
this Section 10.1(b), a material adverse effect on the Partnership and the
Subsidiaries includes the loss of any license or licenses issued by the FCC
that, in the aggregate, are material to the conduct of the business of the
Partnership and the Subsidiaries, the imposition of any fines or forfeitures
that, in the aggregate, are material in amount, and limitations on the ability
of the Partnership or any Subsidiary to conduct its business in the ordinary
course consistent with its past practices.
(2) The Partnership and the Partners will cooperate reasonably with
each other and negotiate in good faith with the FCC to obtain a determination by
the FCC (including a determination by staff employees of the FCC acting under
delegated authority) that certain actions proposed to be taken by a Partner or
its Affiliates would cure any such violation of an Ownership Restriction. The
actions proposed to be taken by a Partner or its Affiliates to cure such
violation may be those that, in such Partner's judgment, are least detrimental
to such Partner and its Affiliates, and may include the divestiture of any asset
or the restructuring of any investment.
(3) If there is a Formal Determination that a Partner's holding of a
Partnership Interest causes the Partnership or any Subsidiary to be in violation
of any Ownership Restriction, such Partner (the "Curing Partner") agrees to take
all actions reasonably necessary to cure any such violation of an Ownership
Restriction; provided, however, that:
(A) if the Partnership and the Partners receive a determination by
the FCC (including a determination by staff employees of the FCC acting under
delegated authority) that certain actions proposed to be taken by the Curing
Partner or its Affiliates would cure such violation, then, if the Curing Partner
and its Affiliates take such actions, the Curing Partner shall not be required
to take any other action under this Section 10.1(b) to cure such violation until
such time, if any, that there is a subsequent Formal Determination that such
actions did not cure such violation;
(B) The Curing Partner shall not be required to take any action to
cure such violation prior to the time that such violation would have a material
adverse effect on the Partnership and the Subsidiaries; and
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(C) The Curing Partner shall not be required to take any action to
cure any violation that arose from any acquisition made by the Partnership or
any Subsidiary in violation of Section 10.1(c).
(4) The actions that the Curing Partner may be required to take
pursuant to Section 10.1(b)(3), subject to the limitations therein, shall
include, to the extent necessary to cure such violation, executing amendments to
this Agreement to eliminate any right of the Curing Partner under this Agreement
(other than its right to allocations of income, its right to distributions, its
rights under Section 6.5 in the case of TCI as the Curing Partner, its rights
under Section 6.6, and its right to approve any other action by the Partnership
and the Subsidiaries if such action (A) in the case of an action that does not
uniquely affect either Partner, such as an acquisition or disposition of assets
or a financing, would have a material adverse economic effect on the Curing
Partner or (B) in the case of an action that uniquely affects either Partner,
such as a transaction between the Partnership and a Partner or an Affiliate of a
Partner, would have an adverse economic effect on the Curing Partner).
(c) Neither Partner will approve the acquisition, directly or
indirectly, by the Partnership or any Subsidiary of any interest in any business
or in any Person if such Partner has actual knowledge that consummating such
acquisition would cause either Partner or any Affiliate of either Partner to be
in violation of any Ownership Restriction; provided that if the General Partner
desires to cause the Partnership or a Subsidiary to acquire assets or an
interest in a business or any Person, and the General Partner does not have
actual knowledge that such acquisition would cause the Partnership or a
Subsidiary, either Partner or any Affiliate of either Partner to be in violation
of any Ownership Restriction, then the General Partner shall provide prior
written notice to TCI of such proposed acquisition at least thirty days prior to
entering into a binding agreement to effect such acquisition and if TCI notifies
the General Partner within fifteen days of receiving such notice that such
acquisition would cause the Partnership or a Subsidiary or TCI to be in
violation of any Ownership Restriction, the General Partner shall not proceed
with such acquisition without first complying with this Section 10.1(c) again,
it being understood that if TCI does not so notify the General Partner within
such fifteen-day period then the General Partner shall be presumed not to have
knowledge that such acquisition would cause the Partnership or a Subsidiary,
either Partner or any Affiliate of either Partner to be in violation of any
Ownership Restriction.
10.2 No Other Restrictions.
---------------------
Except as specifically provided above in this Article 10, nothing in this
Agreement shall limit the ability of either Partner, or any partner, member,
Affiliate, Controlled Affiliate, agent, or representative of either Partner, to
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter created and whether or not competitive with or advanced by the
business of the Partnership. Neither the Partnership nor the other Partner
shall have any rights in or to the income or profits derived therefrom, nor
shall either Partner have any obligation to the other Partner with respect to
any such enterprise or related transaction.
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ARTICLE 11
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP
------------------------------------------
11.1 Events of Dissolution.
---------------------
The Partnership shall be dissolved upon the happening of any of the
following events:
(a) the failure of the Limited Partner to continue the Partnership in
accordance with the provisions of Section 5.3(a) after the withdrawal of the
General Partner;
(b) the expiration of the term of the Partnership as set forth in
Section 2.4;
(c) an election to liquidate and dissolve the Partnership made by a
non-defaulting Partner pursuant to Section 9.7(a)(2);
(d) the sale, exchange, involuntary conversion, or other disposition
or transfer of all or substantially all of the assets of the Partnership;
(e) upon mutual agreement of the Partners; or
(f) subject to any provision of this Agreement that limits or prevents
dissolution, the happening of any event that, under applicable law, causes the
dissolution of a limited partnership.
11.2 Liquidation.
-----------
(a) Upon dissolution of the Partnership for any reason, the
Partnership shall immediately commence to wind up its affairs. A reasonable
period of time shall be allowed for the orderly termination of the Partnership
business, discharge of its liabilities, and distribution or liquidation of the
remaining assets so as to enable the Partnership to minimize the normal losses
attendant to the liquidation process.
(b) Liquidation of the assets of the Partnership shall be managed on
behalf of the Partnership by the "Liquidator," which shall be (1) if the
Partnership is being liquidated pursuant to Section 11.1(c), the non-defaulting
Partner, (2) if the Partnership is being liquidated following a withdrawal by
the General Partner, the Limited Partner, and (3) in all other events, the
General Partner or a liquidating trustee selected by the General Partner. The
Liquidator shall be responsible for soliciting offers to purchase the entirety
of the Partnership's assets (including equity interests in other Persons) or
portions or clusters of assets of the Partnership. The Liquidator shall afford
each Partner an opportunity to offer to purchase any assets of the Partnership
that are offered for sale in connection with the liquidation of the Partnership
to the extent doing so would be consistent with the orderly liquidation of the
Partnership.
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(c) The Liquidator shall cause a full accounting of the assets and
liabilities of the Partnership to be taken and a statement thereof to be
furnished to each Partner within thirty days after the distribution of all of
the assets of the Partnership.
(d) The property and assets of the Partnership and the proceeds from
the liquidation thereof shall be applied in the following order of priority:
(1) first, to payment of the debts and liabilities of the
Partnership, in the order of priority provided by law (including any loans by
either Partner to the Partnership) and payment of the expenses of liquidation;
(2) second, to setting up of such reserves as the Liquidator may
deem reasonably necessary for any contingent or unforeseen liabilities or
obligations of the Partnership or any obligation or liability not then due and
payable; provided, however, that any such reserve shall be paid over by the
Liquidator into a Partnership account or a liquidating trust account established
for such purpose, to be held in such account for the purpose of disbursing such
reserves in payment of such liabilities, and, at the expiration of such holdback
period as the Liquidator shall deem advisable, to distribute the balance
thereafter remaining in the manner hereinafter provided; and
(3) finally, to payment to the Partners, in accordance with Section
4.1(b). The distributions pursuant to this Section 11.2(d)(3) shall, to the
extent possible, be made prior to the later of the end of the Fiscal Year in
which the dissolution occurs or the ninetieth day after the date of dissolution,
or such other time period which may be permitted under Treasury Regulations
Section 1.704-1(b)(2)(ii)(b).
(e) If in the course of the liquidation and dissolution of the
Partnership pursuant to this Article 11, the Liquidator determines that a sale
by all the Partners to any Person of their Partnership Interests, instead of a
sale by the Partnership and the Subsidiaries of their respective assets, would
more efficiently effect the liquidation of the Partners' economic interests in
the Partnership or would reduce negative tax consequences to the Partners and
the Partnership, but would not adversely affect the rights and obligations of
either Partner (including the tax consequences to either Partner), then each
Partner agrees to sell its Partnership Interest to such Person, and the
Liquidator shall have the authority, pursuant to the power of attorney granted
in Section 16.6(b), to execute, acknowledge, deliver, swear to, file, and record
all agreements, instruments, and other documents that may be necessary or
appropriate to effect the sale of such Partner's Partnership Interest.
(f) Following the dissolution of the Partnership pursuant to Section
11.1, the Partners will use commercially reasonable efforts to structure the
liquidation of the Partnership in a manner that minimizes negative tax
consequences to the Partners and the Partnership to the extent doing so would
not materially adversely affect either Partner (except to the extent such
Partner is adequately compensated by the other Partner for such adverse effect).
Any structure agreed to by the Partners pursuant to this Section 11.2(f) shall
supersede the other provisions of this Article 11 to the extent it is
inconsistent with such other provisions, but nothing in this Section 11.2(f)
shall
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modify or otherwise affect the other provisions of this Article 11 if the
Partners are unable to agree on such a structure.
11.3 Distribution in Kind.
--------------------
The Partnership shall not distribute any non-cash asset to either Partner
without the consent of each Partner. Any asset distributed in kind to one or
more Partners shall first be valued at its fair market value to determine the
gain or loss used in determining Net Profit or Net Loss that would have resulted
if such asset were sold for such value, such gain or loss shall then be
allocated pursuant to Article 4, and the Partners' Capital Accounts shall be
adjusted to reflect such gain or loss. The amount distributed and charged to
the Capital Account of each Partner receiving an interest in such distributed
asset shall be the fair market value of such interest (net of any liability
secured by such asset that such Partner assumes or takes subject to). The fair
market value of any asset distributed in kind in connection with the liquidation
of the Partnership shall be determined by an independent appraiser (any such
appraiser must be nationally recognized as an expert in valuing the type of
asset involved) selected by the Liquidator.
11.4 No Action for Dissolution.
-------------------------
The Partners acknowledge that irreparable damage would be done to the
goodwill and reputation of the Partnership if either Partner should bring an
action in court to dissolve the Partnership under circumstances where
dissolution is not required by Section 11.1. This Agreement has been drawn
carefully to provide fair treatment of all parties and equitable payment in
liquidation of the Partnership Interests of both Partners. Accordingly, except
where liquidation and dissolution are required by Section 11.1, each Partner
hereby waives and renounces its right to initiate legal action to seek
dissolution or to seek the appointment of a receiver or trustee to liquidate the
Partnership.
11.5 No Further Claim.
----------------
Upon dissolution, each Partner shall look solely to the assets of the
Partnership for the return of its investment, and if the property of the
Partnership remaining after payment or discharge of the debts and liabilities of
the Partnership, including debts and liabilities owed to one or more of the
Partners, is insufficient to return the aggregate capital contributions of a
Partner, no Partner shall have any recourse against any other Partner.
ARTICLE 12
INDEMNIFICATION
---------------
12.1 General.
-------
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The Partnership shall indemnify, defend, and hold harmless each Partner and
their respective members, partners, officers, directors, shareholders,
employees, and agents, the employees, officers, and agents of the Partnership,
and the members of the Advisory Committee (all indemnified persons being
referred to as "Indemnified Persons" for purposes of this Article 12), from any
liability, loss, or damage incurred by the Indemnified Person by reason of any
act performed or omitted to be performed by the Indemnified Person in connection
with the business of the Partnership and its Subsidiaries, including costs and
attorneys' fees (which attorneys' fees may be paid as incurred) and any amounts
expended in the settlement of any claims of liability, loss, or damage;
provided, however, that, if the liability, loss, damage, or claim arises out of
any action or inaction of an Indemnified Person, indemnification under this
Section 12.1 shall not be available if the action or inaction is finally
adjudicated to have constituted fraud, gross negligence, breach of fiduciary
duty (which shall not be construed to encompass mistakes in judgment or any
breach of any Indemnified Person's duty of care that did not constitute gross
negligence), or willful misconduct by the Indemnified Person; and provided,
further, however, that indemnification under this Section 12.1 shall be
recoverable only from the assets of the Partnership and not from any assets of
the Partners. The Partnership may pay for insurance covering liability of the
Indemnified Persons for negligence in operation of the Partnership's affairs.
12.2 Exculpation.
-----------
No Indemnified Person shall be liable, in damages or otherwise, to the
Partnership or its Subsidiaries or to either Partner for any loss that arises
out of any act performed or omitted to be performed by it or him pursuant to the
authority granted by this Agreement unless the conduct of the Indemnified Person
is finally adjudicated to have constituted fraud, gross negligence, breach of
fiduciary duty (which shall not be construed to encompass mistakes in judgment
or any breach of any Indemnified Person's duty of care that did not constitute
gross negligence), or willful misconduct by such Indemnified Person.
12.3 Persons Entitled to Indemnity.
-----------------------------
Any Person who is within the definition of "Indemnified Person" at the time
of any action or inaction in connection with the business of the Partnership
shall be entitled to the benefits of this Article 12 as an "Indemnified Person"
with respect thereto, regardless of whether such Person continues to be within
the definition of "Indemnified Person" at the time of his or its claim for
indemnification or exculpation hereunder.
12.4 Procedure Agreements.
--------------------
The Partnership may enter into agreements with any of its Partners,
employees, officers, and agents, any of the officers, directors, shareholders,
employees, and agents of the General Partner, and any member of the Advisory
Committee or other Indemnified Person, setting forth procedures for implementing
the indemnities provided in this Article 12.
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ARTICLE 13
BOOKS, RECORDS, ACCOUNTING, AND REPORTS
---------------------------------------
13.1 Books and Records.
-----------------
The Partnership shall maintain at its principal office all of the
following:
(a) A current list of the full name and last known business or
residence address of each Partner together with the Capital Contributions and
Partnership Interest of each Partner;
(b) A copy of the Certificate, this Agreement, and any and all
amendments to either thereof, together with executed copies of any powers of
attorney pursuant to which any certificate or amendment has been executed;
(c) Copies of the Partnership's federal, state, and local income tax
or information returns and reports, if any, for the six most recent taxable
years;
(d) The audited financial statements of the Partnership for the six
most recent Fiscal Years; and
(e) The Partnership's books and records for at least the current and
past three Fiscal Years.
13.2 Delivery to Partner and Inspection.
----------------------------------
(a) Upon the request of a Partner, the Partnership shall promptly
deliver to the requesting Partner, at the expense of the Partnership, a copy of
the information required to be maintained by Section 13.1 except for Section
13.1(e).
(b) Each Partner, or its duly authorized representative, has the
right, upon reasonable request, to inspect and copy during normal business hours
any of the Partnership records.
13.3 Annual Statements.
-----------------
-54-
(a) The Partnership shall cause to be prepared for each Partner at
least annually, at Partnership expense, audited financial statements of Insight
Kentucky Capital, the Partnership and a consolidated audited financial statement
for the Partnership and the Subsidiaries (other than any Subsidiary the
financial statements of which cannot, under generally accepted accounting
principles, be consolidated with the financial statements of the Partnership),
along with supplemental information for Insight Kentucky Capital, the
Partnership and each Subsidiary included in the consolidated financial
statements, all prepared in accordance with generally accepted accounting
principles and accompanied by a report thereon containing the opinion of Ernst &
Young LLP or other nationally recognized accounting firm chosen in accordance
with this Agreement. The financial statements will include a balance sheet,
statement of income or loss, statement of cash flows, and statement of Partners'
equity. The supplemental information will consist of a consolidating balance
sheet and a consolidating statement of operations and Partners' equity for the
preceding Fiscal Year. The Partnership shall distribute the financial
statements or portions thereof to each Partner as follows:
(1) the Partnership shall distribute to each Partner a statement
setting forth the net income or loss of Insight Kentucky Capital and the
Partnership for each Fiscal Year within forty-five days after the close of such
Fiscal Year;
(2) the Partnership shall distribute to each Partner the balance
sheet, statement of income or loss, statement of cash flows, and statement of
Partners' equity to be included in the financial statements for each Fiscal Year
within forty-five days after the close of such Fiscal Year;
(3) the Partnership shall distribute to each Partner the complete
audited financial statements for each Fiscal Year as soon as practicable after
the close of such Fiscal Year and, in any event, by March 15 of the year
following the close of such Fiscal Year.
(b) The Partnership shall have prepared at least annually, at
Partnership expense, Partnership and Insight Kentucky Capital information
necessary for the preparation of each Partner's federal and state income tax
returns. The Partnership shall send the information described in this paragraph
to each Partner within ninety days after the end of each Fiscal Year and shall
use commercially reasonable efforts to send such information to each Partner
within seventy-five days after the end of each Fiscal Year.
(c) The Partnership shall also cause to be distributed to each
Partner, within ten days after delivery to the Partnership, any audited
financial statements that are prepared with respect to any Subsidiary the
financial statements of which are not consolidated with the financial statements
of the Partnership.
(d) The Partnership, shall distribute to each Partner, promptly after
they become available, copies of Insight Kentucky Capital's and the
Partnership's federal, state, and local income tax or information returns for
each taxable year.
-55-
13.4 Quarterly Financial Statements.
------------------------------
At the close of each of the first three quarters of any Fiscal Year, the
Partnership shall cause to be distributed to each Partner a quarterly report
covering each calendar quarter of the operations of Insight Kentucky Capital,
the Partnership and each Subsidiary, consisting of unaudited financial
statements (comprising a balance sheet, a statement of income or loss, and a
statement of cash flows), and a statement of other pertinent information
regarding Insight Kentucky Capital, the Partnership and each such Subsidiary and
their activities. The Partnership shall cause copies of the statements and
other pertinent information (including a summarized statement of operations data
of the Partnership and its Subsidiaries that complies with the requirements of
APB Opinion No. 18 and Rule 4-08(g) of Regulation S-X under the Securities Act)
to be distributed to each Partner within thirty days after the close of the
calendar quarter to which the statements relate. The Partnership shall
distribute to each Partner (a) a preliminary draft of a statement setting forth
the net income or loss of Insight Kentucky Capital and the Partnership for each
calendar quarter within twenty-one days after the close of such calendar
quarter, and (b) a final statement setting forth the net income or loss of
Insight Kentucky Capital and the Partnership for each calendar quarter within
thirty days after the close of such calendar quarter. The Partnership shall
also cause to be distributed to each Partner, within ten days after delivery to
the Partnership, any quarterly report that is prepared with respect to any
Subsidiary the operating results of which are not included in the quarterly
report of the Partnership.
13.5 Monthly Statements.
------------------
The Partnership shall cause to be distributed to each Partner a monthly
report covering each calendar month of the operations of Insight Kentucky
Capital, the Partnership and each Subsidiary, consisting of unaudited statements
of income and loss for Insight Kentucky Capital, the Partnership and each
Subsidiary. The Partnership shall cause copies of the statements to be
distributed to each Partner within thirty days after the close of the calendar
month covered by such report. The Partnership shall also cause to be
distributed to each Partner, within ten days after delivery to the Partnership,
any monthly report that is prepared with respect to any Subsidiary the operating
results of which are not included in the monthly report of the Partnership. In
addition, the Partnership shall deliver to each Partner within fifteen calendar
days after each month end, a report detailing the number of homes passed by each
cable television system owned by the Partnership and its Subsidiaries, the
number of equivalent basic subscribers served by each such system and the number
of premium subscribers served by each such system (on a premium service-by-
service basis), together with such other operating statistics as may be
reasonably requested by a Partner in reasonable advance.
-56-
13.6 Other Information.
-----------------
The Partnership shall provide to each Partner any other information and
reports relating to any cable television systems or other businesses owned by,
and the financial condition of, Insight Kentucky Capital, the Partnership, each
Subsidiary, and any other Person in which the Partnership owns, directly or
indirectly, an equity interest, the Partner may reasonably request. The
Partnership shall distribute to each Partner, promptly after the receipt thereof
by the Partnership, any financial or other information with respect to any
Person in which the Partnership owns, directly or indirectly, an equity
interest, but which is not a Subsidiary.
13.7 Tax Matters.
-----------
The Partnership shall be treated as a partnership for federal and state
income tax and franchise tax purposes. The Partnership, at Partnership expense,
shall prepare and timely file with the appropriate authorities all income tax
returns for the Partnership required to be filed by the Partnership.
13.8 Other Filings.
-------------
The Partnership, at Partnership expense, shall also prepare and timely
file, with appropriate federal and state regulatory and administrative bodies,
all reports required to be filed by the Partnership with those entities under
then current applicable laws, rules, and regulations. The reports shall be
prepared on the accounting or reporting basis required by the regulatory bodies.
Upon written request, each Partner shall be provided with a copy of any of the
reports without expense to the requesting Partner.
13.9 Non-Disclosure.
--------------
Each Partner agrees that, except as otherwise consented to by the other
Partner, all non-public information furnished to it or to which it has access
pursuant to this Agreement will be kept confidential and will not be disclosed
by such Partner (it being agreed that the standard each Partner shall adhere to
is to use the same degree of care it would use for its own confidential
information), or by any of its agents, representatives, or employees, in any
manner whatsoever, in whole or in part, except that:
(a) each Partner shall be permitted to disclose such information to
those of its agents, representatives, and employees who need to be familiar with
such information in connection with such Partner's investment in the
Partnership,
(b) each Partner shall be permitted to disclose such information to
its Affiliates,
(c) each Partner shall be permitted to disclose information to the
extent required by law, including federal or state securities laws or
regulations, or by the rules and regulations of any stock exchange or
association on which securities of such Partner or any of its Affiliates are
-57-
traded, so long as such Partner shall have first afforded the Partnership with a
reasonable opportunity to contest the necessity of disclosing such information,
(d) each Partner shall be permitted to disclose information to the
extent necessary for the enforcement of any right of such Partner arising under
this Agreement,
(e) each Partner shall be permitted to disclose information to a
permitted Transferee or Successor, so long as (1) such Partner shall first have
provided to the other Partner written notice thereof and of the identity of the
Person to whom the disclosure is to be made and (2) such Person agrees (in a
writing which provides the Partnership with an independent right of enforcement)
to be bound by the provisions of this Section 13.9,
(f) each Partner shall be permitted to disclose information that is or
becomes generally available to the public other than as a result of a disclosure
by such Partner, its agents, representatives, or employees, and
(g) each Partner shall be permitted to disclose information that
becomes available to such Partner on a nonconfidential basis from a source
(other than the Partnership, any other Partner, or their respective agents,
representatives, and employees) that, to the best of such Partner's knowledge,
is not prohibited from disclosing such information to such Partner by a legal,
contractual, or fiduciary obligation to the Partnership or any other Partner.
ARTICLE 14
REPRESENTATIONS BY THE PARTNERS
-------------------------------
Each Partner represents and warrants to, and agrees with, the other Partner
and the Partnership as follows:
14.1 Investment Intent.
-----------------
It is acquiring its Partnership Interest with the intent of holding the
same for investment for its own account and without the intent or a view to
participating directly or indirectly in, or for resale in connection with, any
distribution of such Partnership Interest within the meaning of the Securities
Act or any applicable state securities laws, and it does not intend to divide
its participation with others, nor to resell, assign, or otherwise dispose of
all or any part of its Partnership Interest. In making such representation,
each Partner acknowledges that a purchase now with an intent to resell by reason
of any foreseeable specific contingency, some predetermined event, or an
anticipated change in market value or in the condition of the Partnership would
represent a purchase with an intent inconsistent with the foregoing
representation.
-58-
14.2 Securities Regulation.
---------------------
(a) It acknowledges and agrees that the Partnership Interest is being
issued and sold in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act and exemptions contained in applicable state
securities laws, and that it cannot and will not be sold or transferred except
in a transaction that is exempt under the Securities Act and those state acts or
pursuant to an effective registration statement under those acts or in a
transaction that is otherwise in compliance with the Securities Act and those
state acts.
(b) It understands that it has no contract right for the registration
under the Securities Act of the Partnership Interest for public sale and that,
unless such Partnership Interest is registered or an exemption from registration
is available, such Partnership Interest may be required to be held indefinitely.
14.3 Knowledge and Experience.
------------------------
It has such knowledge and experience in financial, tax, and business
matters as to enable it to evaluate the merits and risks of its investment in
the Partnership and to make an informed investment decision with respect
thereto.
14.4 Economic Risk.
-------------
It is able to bear the economic risk of an investment in its Partnership
Interest.
14.5 Binding Agreement.
-----------------
This Agreement is and will remain its valid and binding agreement,
enforceable in accordance with its terms (subject, as to the enforcement of
remedies, to any applicable bankruptcy, insolvency, or other laws affecting the
enforcement of creditor's rights).
14.6 Tax Position.
------------
Unless it provides prior written notice to the Partnership, it will not
take a position on its federal income tax return, on any claim for refund, or in
any administrative or legal proceedings that is inconsistent with any
information return filed by the Partnership or with the provisions of this
Agreement.
14.7 Information.
-----------
It has received all documents, books, and records pertaining to an
investment in the Partnership requested by it. It has had a reasonable
opportunity to ask questions of and receive answers concerning the Partnership,
and all such questions have been answered to its satisfaction.
-59-
ARTICLE 15
AMENDMENTS AND WAIVERS
----------------------
15.1 Amendments to Operating Agreement.
---------------------------------
(a) This Agreement may only be modified or amended with the consent of
all Partners.
(b) The Partnership shall prepare and file any amendment to the
Certificate that may be required to be filed under the Act as a consequence of
any amendment to this Agreement.
15.2 Waivers.
-------
The observance or performance of any term or provision of this Agreement
may be waived (either generally or in a particular instance, and either
retroactively or prospectively) by the party entitled to the benefits of such
term or provision.
ARTICLE 16
MISCELLANEOUS
-------------
16.1 Programming and Discounts.
-------------------------
(a) General. Subject to Section 16.1(b) and any other particular
-------
arrangements the Partners may agree to with respect to the following, each
Partner will use commercially reasonable efforts to make all of the services,
programming and equipment discounts available to such Partner available to the
Partnership.
(b) @Home.
-----
-60-
(1) The Partners and the Partnership agree that, subject to the other
provisions of this Section 16.1(b) and only so long as controlled affiliates
(as used in this Section 16.1, "controlled affiliate" has the meaning given to
such term in the @Home Distribution Agreement) of a TCI Cable Parent continue to
be bound by a similar requirement, @Home will be the exclusive provider of
Exclusive Internet Services over the cable plant and equipment of the TCI
Systems and that the TCI Systems will continue to be bound by the @Home
Distribution Agreement as if such TCI Systems were "controlled affiliates" of a
TCI Cable Parent with respect to the distribution and delivery of Exclusive
Internet Services in accordance with the @Home Distribution Agreement. In
furtherance of the foregoing, subject to the other provisions of this Section
16.1(b) and only so long as controlled affiliates of a TCI Cable Parent continue
to be bound by a similar requirement, the Partnership and the General Partner
each agree that it and the Subsidiaries will not provide or distribute, and will
not permit any Person other than @Home and its controlled affiliates to provide
or distribute, Exclusive Internet Services using the cable plant and equipment
of the TCI Systems, in each case without the prior written consent of TCI. The
Partners and the Partnership acknowledge and agree that the foregoing
limitations will not be applicable to the Partnership's and the Subsidiaries'
provision over their cable television systems other Internet Services which do
not constitute Exclusive Internet Services (including all Internet Services
which are listed as exceptions to the definition of the term "Restricted
Business" in the @Home Distribution Agreement), and with respect to those
Internet Services which do not constitute Exclusive Internet Services, the
General Partner shall be entitled to make all determinations in respect of the
provision of such Internet Services, subject to the provisions of this
Agreement. The Partners and the Partnership also acknowledge and agree that the
foregoing limitations are also not applicable to the Partnership's and the
Subsidiaries' provision over their cable television systems other than the TCI
Systems (such other systems, the "Non-TCI Systems") of any Internet Services,
whether or not they would constitute Exclusive Internet Services with respect to
the TCI Systems in accordance with the @Home Distribution Agreement, and do not
limit the right of the Partnership, its Subsidiaries and the General Partner to
manage and operate the Non-TCI Systems as the Partnership, its Subsidiaries and
the General Partner determine (but subject to the terms of this Agreement and
the Management Agreements). Without limiting the preceding sentence, subject
to the other provisions of this Section 16.1(b), the parties agree as follows:
(A) the Partnership and the General Partner agree that they and the Subsidiaries
will: (1) manage and operate (and cause the manager under the Management
Agreements to manage and operate) the TCI Systems in accordance with the terms
and conditions set forth in the @Home Distribution Agreement and in such a
manner that the activities and businesses engaged in by the TCI Systems will not
violate or be in contravention of the Cable Parent Exclusivity Provisions, or
cause any TCI Cable Parent or any of its controlled affiliates to be in
violation of such Cable Parent Exclusivity Provisions, (2) provide to @Home and
its representatives such access to the cable plant and equipment of the TCI
Systems as is required in order to satisfy the TCI Cable Parents' obligations
under the @Home Distribution Agreement in respect of such TCI Systems and as is
reasonably necessary in order to distribute the @Home Service over the cable
plant and equipment of such TCI Systems, (3) cooperate with @Home, TCI Cable
Parent and their respective controlled affiliates in order to schedule and
coordinate @Home's roll-out of the @Home Service to the TCI Systems with the
upgrade of the physical cable plant and equipment of such TCI Systems,
including, without limitation, (x) providing the TCI Cable Parent and @Home with
information and periodic updates as to upgrade schedules, and (y) entering into
LCO Agreements (as defined in the @Home Distribution Agreement) in respect of
each TCI System
-61-
upon the commencement of the offering of the @Home Service in such TCI System,
and (4) cooperate with the TCI Cable Parent and @Home with respect to the
operational matters relating to the distribution of the @Home Service,
including, without limitation, pricing, the programming of the Local Area (as
defined in the @Home Distribution Agreement), billing, customer service and
service offerings; and (B) (1) with respect to the timing and implementation of
Exclusive Internet Services over the TCI Systems, the General Partner shall
consult and cooperate with the TCI Cable Parent in order to coordinate the
launch of the @Home Service over the TCI Systems as efficiently and
expeditiously as practical and (2) the TCI Cable Parent may disclose to @Home
information relating to the upgrade plans for the TCI Systems for the purpose of
coordinating the @Home build-out and the launch of the @Home Service in such
systems. Subject to the Partnership's, the Subsidiaries' and the General
Partner's compliance with the foregoing, the TCI Cable Parent agrees that it
will use its commercially reasonable efforts to obtain for the benefit of the
TCI Systems the economic and other benefits available to a controlled affiliate
of a TCI Cable Parent under the @Home Distribution Agreement, on the same basis
as, and for so long as, such benefits are available to other controlled
affiliates of the TCI Cable Parent, including, but not limited to, the benefits
available under the MFN Provision (as defined in the @Home Distribution
Agreement) and the ability to purchase Ancillary Services (as defined in the
@Home Distribution Agreement) from @Home for the TCI Systems to the extent
provided in the @Home Distribution Agreement and as are reasonably necessary to
the distribution of the Exclusive Internet Services on the TCI Systems. TCI's
obligations under the foregoing sentence will terminate if the Partnership
exercises its option set forth below to terminate its obligation to manage the
TCI Systems in accordance with the terms of the @Home Distribution Agreement or
if the Partnership or any Subsidiary enters into a separate distribution
agreement with @Home that covers the TCI Systems. In the event the @Home
Distribution Agreement is amended or modified in such a way as would reasonably
be expected to cause the terms and conditions of the Partnership's or the
Subsidiaries' distribution of the @Home Service over the TCI Systems to be
materially more onerous to the Partnership or its Subsidiaries than as provided
in the @Home Distribution Agreement as in effect on the date hereof, the TCI
Cable Parent shall promptly notify the Partnership and the Partnership shall
then have the option to terminate its obligation to manage the TCI Systems in
accordance with the terms of the @Home Distribution Agreement; provided that the
Partnership's agreement not to provide or distribute, or permit any Person to
provide or distribute, any Exclusive Internet Services using the cable plant and
equipment of the TCI Systems, other than the @Home Service, shall survive such
termination. No amendment to the @Home Distribution Agreement shall be deemed to
cause the terms and conditions of the Partnership's distribution of the @Home
Service over the TCI Systems to be materially more onerous to the Partnership
(x) to the extent that such amendment or modification does not result in such
distribution being more onerous than that provided under any separate agreement
between the Partnership or any Subsidiary and @Home relating to the distribution
of the @Home Service to the Non-TCI Systems or (y) if the Partnership or any
Subsidiary consents to an amendment or modification of any separate agreement
between the Partnership and @Home in respect of the distribution of the @Home
Service to the Non-TCI Systems, which amendment or modification has
substantially the same effects as the proposed amendment or modification of the
@Home Distribution Agreement. For so long as the TCI Systems are included under
the @Home Distribution Agreement, to the extent the @Home Distribution Agreement
is modified in any respect (or any other event occurs) that would increase the
benefits available to (or reduces the obligations of) a controlled affiliate of
a TCI Cable Parent, the TCI Cable Parent will use its
-62-
commercially reasonable efforts to obtain for the benefit of the TCI Systems
such increased benefits, and to the extent the obligations are reduced, the TCI
Cable Parent will use its commercially reasonable efforts to cause such reduced
obligations to be applicable to the TCI Systems, in each case on the same basis
as is applicable to controlled affiliates of the TCI Cable Parent other than the
TCI Systems. For purposes of this Section 16.1(b), the TCI Systems shall,
notwithstanding ownership by the Partnership or a Subsidiary, continue to be
deemed to be controlled affiliates of a TCI Cable Parent for purposes of
determining the Partnership's satisfaction of its obligations to operate and
manage the TCI Systems in accordance with the @Home Distribution Agreement.
(2) In addition, the Partnership and the General Partner agree to use
their commercially reasonable efforts to keep in effect a distribution agreement
for the @Home Service for the cable television systems contributed to Insight
Indiana by Insight Communications and for all other cable televisions owned by
the Partnership and its Subsidiaries. To the extent that TCI is not able to
include the TCI Systems under the @Home Distribution Agreement following the
closing under the Indiana Contribution Argument, the Partnership or its
Subsidiaries may enter into a distribution agreement with @Home that covers the
TCI Systems and terminate its obligation to manage the TCI Systems in accordance
with the @Home Distribution Agreement; provided, that such agreement shall be
approved by TCI as it relates to the TCI Systems and provided further that the
Partnership's obligations under this Section 16.1(b) to (i) have @Home be the
exclusive provider of Exclusive Internet Services over the cable plant and
equipment of the TCI Systems, (ii) not provide or distribute or permit any other
Person to provide or distribute Exclusive Internet Services using the cable
plant and equipment of the TCI Systems and (iii) manage the TCI Systems in such
a manner that the activities and business engaged in by them will not violate or
be in contravention of the Cable Parent Exclusivity Provisions will not cause
any TCI Cable Parent or its controlled affiliates to be in violation of such
provisions will continue notwithstanding such separate agreement being entered
into.
16.2 Additional Documents.
--------------------
At any time and from time to time after the date of this Agreement, upon
the request of the Partnership or the other Partner, each Partner shall do and
perform, or cause to be done and performed, all such additional acts and deeds,
and shall execute, acknowledge, and deliver, or cause to be executed,
acknowledged, and delivered, all such additional instruments and documents, as
may be required to best effectuate the purposes and intent of this Agreement.
16.3 Inspection.
----------
Each Partner shall have the right at reasonable times to inspect the books
and records of the Partnership.
-63-
16.4 General.
-------
This Agreement: (a) shall be binding on the executors, administrators,
estates, heirs, and legal successors of the Partners; (b) be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to conflicts of law principles thereunder; (c) may be executed in more than one
counterpart as of the day and year first above written; and (d) except for the
Contribution Agreement and the other agreements expressly referred to herein to
which the Partners or their Affiliates are parties, contains the entire
agreement between the Partners as to the subject matter of this Agreement. The
waiver of any of the provisions, terms, or conditions contained in this
Agreement shall not be considered as a waiver of any of the other provisions,
terms, or conditions of this Agreement.
16.5 Notices, Etc.
------------
All notices and other communications required or permitted hereunder shall
be in writing and shall be deemed effectively given or delivered upon personal
delivery, confirmation of telex or telecopy, or receipt (which may be evidenced
by a return receipt if sent by registered mail), addressed (a) if to either
Partner, at the address of such Partner set forth on Schedule I or at such other
address as such Partner shall have furnished to the Partnership in writing, (b)
if to the Partnership, at 126 E. 56th Street, New York, New York 10022.
16.6 Execution of Papers.
-------------------
(a) The Partners agree to execute such instruments, documents, and
papers as the General Partner deems necessary or appropriate to carry out the
intent of this Agreement.
(b) Each Partner, including each additional and substituted Partner,
by the execution of this Agreement, irrevocably constitutes and appoints the
Liquidator its true and lawful attorney-in-fact with full power and authority in
its name, place, and stead to execute, acknowledge, deliver, swear to, file, and
record all agreements, instruments, and other documents that may be necessary or
appropriate to effect the sale of such Partner's Partnership Interest pursuant
to Section 11.2(e).
(c) The power of attorney granted pursuant to Section 16.6(b) shall
be deemed to be a power coupled with an interest, in recognition of the fact
that each of the Partners under this Agreement will be relying upon the power of
the Liquidator to act as contemplated by this Agreement in any filing and other
action by it on behalf of the Partnership, and shall survive the bankruptcy,
death, adjudication of incompetence or insanity, or dissolution of any Person
hereby giving such powers and the transfer or assignment of all or any part of
such Person's Partnership Interest; provided, however, that in the event of a
Transfer by a Partner, the powers of attorney given by the transferor shall
survive such Transfer only until such time as the Transferee or Successor shall
have been admitted to the Partnership as a substituted Partner and all required
documents and instruments shall have been duly executed, filed, and recorded to
effect such substitution.
-64-
(d) Each Partner agrees to be bound by any actions taken by the
Liquidator acting in good faith pursuant to the power of attorney granted
pursuant to Section 16.6(b) that are consistent with and subject to the
provisions of this Agreement and hereby waives any and all defenses that may be
available to contest, negate, or disaffirm any action of the Liquidator taken in
good faith under the power of attorney granted pursuant to Section 16.6(b) that
are consistent with and subject to the provisions of this Agreement.
16.7 Attorneys' Fees.
---------------
In the event of commencement of suit or other action by either party to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to receive such attorneys' fees and costs as the court or other forum in which
such suit or action is adjudicated may determine reasonable in addition to all
other relief granted.
16.8 No Third-Party Beneficiaries.
----------------------------
This Agreement is not intended to, and shall not be construed to, create
any right enforceable by any Person not a party hereto, including any partner or
Partner of either Partner or any creditor of the Partnership or of either of the
Partners.
16.9 Headings.
--------
The headings herein are included for ease of reference only and shall not
control or affect the meaning or construction of the provisions of this
Agreement.
-65-
IN WITNESS WHEREOF, the Partners have hereunto set their hands as of the
day first heretofore mentioned.
INSIGHT COMMUNICATIONS COMPANY, L.P.
By: Insight Communications Company, Inc., its
general partner
By:___________________________________________
Name:
Title:
TCI OF INDIANA HOLDINGS, LLC
By: TCI of Indiana Insgt Holdings, LLC, its
managing member
By: TCI of Indiana, Inc., its managing member
By:___________________________________________
Name:
Title:
FOR PURPOSES OF SECTION 8.3 AND SECTION 16.1(b)
ONLY:
Tele-Communications, Inc.
By:___________________________________________
Name:
Title:
-66-
SCHEDULE I
TO
LIMITED PARTNERSHIP AGREEMENT
ADDRESSES OF THE PARTNERS
Insight Communications Company, L.P.
126 E. 56th Street
New York, New York 10022
Attention: Sidney R. Knafel
Facsimile: (212) 371-1549
TCI of Indiana Holdings, LLC
AT&T Broadband & Internet Services
9197 South Peoria Street
Englewood, Colorado 80112
Attention: Derek Chang
Facsimile: (720) 875-5396
SCHEDULE II
TO
LIMITED PARTNERSHIP AGREEMENT
PERCENTAGE INTERESTS
Percentage Interests of Partners:
- --------------------------------
The Percentage Interests of the Partners as of the date of this Agreement are:
Insight Communications 50%
TCI Indiana 50%
SCHEDULE III
TO
LIMITED PARTNERSHIP AGREEMENT
INITIAL MEMBERS OF THE ADVISORY COMMITTEE
1. Members designated by Insight pursuant to Section 7.1(a):
Sidney Knafel (same address as Insight)
Telephone No. (212) 371-2266
Michael Willner (same address as Insight)
Telephone No. (212) 371-2266
Kim Kelly (same address as Insight)
Telephone No. (212) 371-2266
2. Members designated by TCI pursuant to Section 7.1(a)
William Fitzgerald (same address as TCI)
Telephone No. (720) 875-4720
Derek Chang (same address as TCI)
Telephone No. (720) 875-5241
SCHEDULE IV
TO
LIMITED PARTNERSHIP AGREEMENT
INDIANA SYSTEMS
See Attached Map.