Exhibit 3.4
OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS
1.1 Terms Defined in this Section 2
1.2 Terms Defined Elsewhere in this Agreement 11
SECTION 2. THE COMPANY AND ITS BUSINESS
2.1 Formation 12
2.2 Filing of Certificate of Formation 12
2.3 Company Name 12
2.4 Term of the Company 13
2.5 Purposes of the Company 13
2.6 Authority of the Company 13
2.7 Actions of Company Prior to Closing 15
2.8 Scope of Members' Authority 16
2.9 Principal Office and Other Offices; Registered Agent 16
2.10 Foreign Qualification 16
2.11 Fiscal Year 16
2.12 Addresses of the Members 16
2.13 Tax Classification 17
SECTION 3. COMPANY CAPITAL
3.1 Contributions 17
3.2 Additional Capital Contributions 17
3.3 Assumption of Liabilities 18
3.4 Return of Contributions 18
3.5 Refinancing and Purchase of Senior Debt and Subordinated Debt 18
SECTION 4. CASH DISTRIBUTIONS
4.1 Distributions Prior to Liquidation 26
4.2 Withholding 30
4.3 Redemption 30
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4.4 Certain Remedies 32
SECTION 5. ALLOCATIONS OF PROFITS AND LOSSES
5.1 Allocations of Net Profit and Net Loss 33
5.2 Special Provisions Regarding Allocations of Income and Loss 34
5.3 Section 754 Adjustments 37
5.4 Allocations for Tax Purposes 37
5.5 Allocations Following a Transfer of Membership Interest 38
SECTION 6. AUTHORITY OF THE MANAGER; OTHER MATTERS AFFECTING
MANAGER
6.1 Authority of Manager 38
6.2 Resignation as Manager 38
6.3 Tax Matters Member 39
6.4 Reimbursement of Expenses 40
SECTION 7. STATUS OF MEMBERS
7.1 No Management and Control 41
7.2 Limited Liability 41
7.3 Return of Distributions of Capital 41
7.4 Specific Limitations 41
7.5 Issuance of Membership Interests 42
SECTION 8. MANAGEMENT OF THE COMPANY
8.1 Creation of Management Committee 42
8.3 Meetings of the Management Committee 43
8.4 Procedural Matters 43
8.5 Matters Requiring Approval by the Principals 44
8.6 Permitted Transactions 46
8.7 Other Management Matters 47
SECTION 9. ASSIGNMENT, TRANSFER, OR SALE OF INTERESTS IN THE COMPANY
9.1 Limitations on Transfers 47
9.2 Assignee 48
9.3 Substitute Members 49
9.4 Other Consents and Requirements 49
9.5 Assignment Not In Compliance 50
9.6 Tag-Along and Drag-Along Rights 50
9.7 Pledge and Assignment of Interest 57
9.8 Condition on Change in Control of the Company 58
9.9 Substitution of Parent Undertaking 58
9.10 Continuing Rights and Privileges 59
9.11 Insight's Right to Put Its Interest 59
9.12 Treatment of Certain Membership Interests 60
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SECTION 10. DISSOLUTION AND TERMINATION OF THE COMPANY
10.1 Events of Dissolution 60
10.2 Liquidation 61
10.3 Distribution in Kind 62
10.4 No Action for Dissolution 63
10.5 No Further Claim 63
SECTION 11. INDEMNIFICATION
11.1 General 63
11.2 Exculpation 64
11.3 Persons Entitled to Indemnity 64
SECTION 12. BOOKS, RECORDS, ACCOUNTING, AND REPORTS
12.1 Books and Records 64
12.2 Delivery to Member and Inspection 65
12.3 Annual Statements 65
12.4 Quarterly Financial Statements 66
12.5 Monthly Statements 66
12.6 Other Information 67
12.7 Tax Matters 67
12.8 Other Filings 67
12.9 Non-Disclosure 67
SECTION 13. AMENDMENTS AND WAIVERS
13.1 Amendments to Operating Agreement 68
13.2 Waivers 69
SECTION 14. STATUS OF PRINCIPALS
14.1 Principals Not Members 69
14.2 Provisions for the Benefit of Principals 69
14.3 Assignment or Rights 69
14.4 Termination of Rights and Obligations 69
14.5 Actions by Principals 70
14.6 Limited Recourse 70
SECTION 15. MISCELLANEOUS
15.1 Captions 70
15.2 Pronouns; Singular and Plural Form 70
15.3 Further Action 70
15.4 Entire Agreement 71
15.5 Agreement Binding 71
15.6 Equitable Remedies 71
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15.7 Notices 71
15.8 Severability 71
15.9 Counterparts 72
15.10 Governing Law 72
15.11 No Third-Party Beneficiaries 72
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OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
THIS OPERATING AGREEMENT of INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
is entered into effective as of August 21, 1998, by and among Coaxial
Communications of Central Ohio, Inc., an Ohio corporation, Insight Holdings of
Ohio, LLC, a Delaware limited liability company, Barry Silverstein, an
individual resident of the State of Florida, Dennis McGillicuddy, an individual
resident of the State of Florida, and D. Stevens McVoy, an individual resident
of the State of Ohio.
RECITALS
Barry Silverstein is the sole member of Coaxial LLC, a Delaware limited
liability company, Dennis McGillicuddy is the sole member of Coaxial DJM LLC, a
Delaware limited liability company, and D. Stevens McVoy is the sole member of
Coaxial DSM LLC, a Delaware limited liability company. The Shareholders
collectively own all the issued and outstanding shares of Central.
Insight and the Shareholders have entered into certain Management
Agreements, providing for the management by Insight of the Shareholders. Through
its management of the Shareholders, Insight possesses the right to direct the
business and affairs of the Shareholders, subject to certain exceptions.
Central and Insight desire to enter into this Operating Agreement to
provide for the formation and organization of the Company, the allocation of
profits and losses, cash flow, and other proceeds of the Company between the
Members, the respective rights, obligations, and interests of the Members to
each other and to the Company, and certain other matters. Central, Insight, and
the Principals further desire to set forth in this Operating Agreement certain
agreements and understandings among them concerning the ownership and operation
of the Company and Central. The parties intend, therefore, that this Operating
Agreement will constitute both a "limited liability company agreement" between
the Members for purposes of the Act as well as an agreement among all the
parties with respect to the matters set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in
this Agreement, the parties agree as follows.
SECTION 1. DEFINITIONS
1.1 Terms Defined in this Section.
The following terms, as used in this Agreement, have the meanings set
forth in this Section:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
"Adjusted Capital Account" means with respect to either Member, the
balance in such Member's Capital Account as of the end of the relevant Fiscal
Year, after:
(i) crediting to such Capital Account any amounts that such
Member is obligated to restore to the Company pursuant to Treasury Regulations
Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to
the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) debiting from such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of this
definition and the definition of "Subsidiary," the term "controls" 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
securities, by contract, or otherwise. The terms "controlled by" and "under
common control with" have meanings corresponding to the meaning of "controls."
"Agreement" means this Operating Agreement, as it may be amended from
time to time.
"Assignee" means a Person that has acquired a beneficial interest in a
Membership Interest in accordance with the provisions of Section 9 but has not
become a Member in accordance with the provisions of Section 9.3.
"Borrowers" means, with respect to the Senior Debt, Central and Phoenix
Associates, and, with respect to the Subordinated Debt, the Shareholders and
Coaxial Financing Corp., a Delaware corporation.
"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 an account to be maintained for each Member in
accordance with the Code, which, subject to any contrary requirements of the
Code, shall equal (i) the amount of money contributed by such Member to the
Company, if any; (ii) the fair market value without regard
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to Code Section 7701(g) of property, if any, contributed by such Member to the
Company (net of liabilities secured by such contributed property that the
Company or the other Member is considered to assume under Code Section 752);
(iii) allocations to such Member of Net Profit pursuant to Section 5; and (iv)
other additions made in accordance with the Code; and decreased by (i) the
amount of cash distributed to such Member by the Company; (ii) allocations to
such Member of Net Loss pursuant to Section 5; (iii) the fair market value
without regard to Code Section 7701(g) of property distributed to such Member by
the Company (net of liabilities secured by such distributed property that such
Member is considered to assume or is considered to take under Code Section 752);
and (iv) other deductions made in accordance with the Code. The Members'
respective Capital Accounts shall be determined and maintained at all times in
accordance with all the provisions of Treasury Regulations Section 1.704-
1(b)(2)(iv).
"Capital Contributions" means, with respect to each Member, the amount
of money and the net fair market value of property contributed by such Member to
the Company pursuant to this Agreement.
"Central" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation.
"Class A Common Interest" means, at any time, any Common Interest owned
at such time by Insight.
"Class B Common Interest" means, at any time, any Common Interest owned
at such time by Central.
"Closing" and "Closing Date" have the meanings assigned to them in 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.
"Common Interest" means that portion of the Membership Interest of
either Member other than the Preferred A Interest and the Preferred B Interest,
including that portion of the Membership Interest of either Member having the
rights and privileges specified in this Agreement as pertaining to the Common
Interest.
"Company" means the limited liability company formed by the Members
pursuant to this Agreement.
"Contribution Agreement" means the Contribution Agreement, dated as
of June 30, 1998, between Central and Insight Communications Company, L.P.
(which assigned its rights and delegated its obligations thereunder to Insight),
as amended by amendments thereto dated as of July 15, 1998 and as of August 21,
1998, and as it may hereafter be amended from time to time in accordance with
its terms.
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"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).
"Discount Notes" means the Senior Discount Notes issued by Coaxial LLC
and Coaxial Financing Corp., a Delaware corporation, concurrently with the
Closing.
"Distributable Cash" means, on any Guaranteed Payment Date, Preferred A
Distribution Date, or Preferred B Distribution Date, (a) the total amount on
such date of the Company's cash, cash equivalents, and other assets, such as
marketable securities, that can readily be converted into cash, plus (b) the
amount then available to be borrowed by the Company under any existing credit
facility the proceeds of which may be used to make distributions to Members,
plus (c) the amount of any discretionary capital expenditures made by the
Company during the period since the preceding Guaranteed Payment Date, Preferred
A Distribution Date, or Preferred B Distribution Date, as applicable, less (d)
any portion of such amounts that the Company is then prohibited from
distributing to its Members pursuant to Section 18-607(a) of the Act.
"Fiscal Year" means the Company's fiscal year, as specified in Section
2.11.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such asset, as
agreed to by the Members;
(ii) The Gross Asset Values of all assets of the Company shall
be adjusted to equal their respective gross fair market values, as determined by
the Management Committee, as of the following times: (A) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for
more than a de minimis Capital Contribution; (B) the distribution by the Company
to a Member of more than a de minimis amount of property (including cash) as
consideration for an interest in the Company; and (C) the liquidation of the
Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that the adjustments pursuant to clauses (A) and (B) above
shall be made only if and to the extent that the Manager determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any asset of the Company
distributed to either Member shall be the gross fair market value of such asset
on the date of distribution, as agreed to by the Members or, in the absence of
an agreement by the Members, as determined by the Management Committee; and
(iv) The Gross Asset Value of the assets of the Company shall
be increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section
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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 5.3; provided, however,
that Gross Asset Value shall not be adjusted pursuant to this paragraph (iv) to
the extent that the Management Committee determines 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.
"Insight" means Insight Holdings of Ohio, LLC, a Delaware limited
liability company, or any other Person that succeeds to its Membership Interest
and is admitted as a Member in accordance with the provisions of this Agreement.
"Lien" has the meaning specified in the Contribution Agreement.
"Loan Document" means any agreement or other instrument, including any
note or indenture, evidencing all or any part of the Senior Debt or the
Subordinated Debt or pursuant to which all or any part of the Senior Debt or the
Subordinated Debt exists or is outstanding.
"Management Committee" means the Management Committee established by
Section 8.
"Management Return" means, for each Management Return Payment Date (or
for the date on which a distribution pursuant to Section 10.2(d)(iii)(D) is
made), the product of (x) three percent and (y) the gross revenues received by
the Company from services or goods sold to subscribers or other customers of the
Company (including subscriber fees, pay channel fees, leased channel fees,
installation fees, disconnection fees, launch or incentive fees, and advertising
revenue, but excluding extraordinary or non-recurring income, any customer
deposits (unless forfeited to the Company), interest, dividends, royalties, and
other investment income, and proceeds of the sale of any capital assets or any
financing), determined in accordance in generally accepted accounting principles
consistently applied, during the period beginning on the preceding Management
Return Payment Date (or, in the case of the first Management Return Payment
Date, the Closing Date) and ending on the day prior to such Management Return
Payment Date (or, in the case of a distribution pursuant to Section
10.2(d)(iii)(D), the date on which such distribution is made).
"Manager" means Insight, any new Manager appointed as successor to
Insight in accordance with the provisions of this Agreement, and, to the extent
provided in Section 4.4(b)(ii), a Person designated by the Principals.
"Member" means Central, Insight, and any other Person who may hereafter
become a Member pursuant to this Agreement, but does not include any of the
Principals (except to the extent that any of the Principals hereafter becomes a
Member pursuant to this Agreement).
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"Membership Interest" means the entire ownership interest of a Member
in the Company at any particular time, including all of its rights and
obligations hereunder and under the Act, which may include one or more of a
Common Interest (which may be designated as a Class A Common Interest or a Class
B Common Interest), a Preferred A Interest, or a Preferred B Interest.
"Net Profit" and "Net Loss" means for each Fiscal Year or other period,
an amount equal to the Company's taxable income or loss for such year or 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 Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profit or Net
Loss shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and which are not otherwise
taken into account in computing such Net Profit or Net Loss, shall be subtracted
from such taxable income or loss;
(iii) If the Gross Asset Value of any asset of the Company is
adjusted pursuant to paragraph (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Net Profit or Net
Loss;
(iv) Gain or loss resulting from any disposition of property
by the Company with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or other
period;
(vi) Notwithstanding anything to the contrary in the
definition of the terms "Net Profit" and "Net Loss," any items that are
specially allocated pursuant to Section 5.2 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 that is disallowed to the Company under Code
Section 267(a)(1) or Code Section 707(b) shall be treated as a Code Section
705(a)(2)(B) expenditure.
"Nonrecourse Deductions" means losses, deductions, or Code Section
705(a)(2)(B) expenditures attributable to Partnership Nonrecourse Liabilities.
The amount of Nonrecourse Deductions shall be determined pursuant to Treasury
Regulations Section 1.704-2(c), which provides
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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).
"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 liability of the Company to the extent such liability is
nonrecourse and a Member (or related person) bears the economic risk of loss
pursuant to Treasury Regulations Section 1.752-2.
"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 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 Member 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.
"Partnership Minimum Gain" means the excess of the Partnership
Nonrecourse Liabilities over the adjusted tax basis of property securing such
Liabilities. 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 Company would
realize if it disposed of the property subject to that Nonrecourse Liability for
no consideration other than full satisfaction of such Nonrecourse Liability, and
then aggregating the separately computed gains.
"Percentage Interest" means, with respect to a Member, the number of
Units assigned to the Common Interest of such Member divided by the aggregate
number of Units assigned to the Common Interests of both Members.
"Permitted Liens" has the meaning specified in the Contribution
Agreement.
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"Person" means an individual, corporation, limited liability company,
association, general partnership, limited partnership, limited liability
partnership, joint venture, trust, estate, or other entity or organization.
"Phoenix Associates" means Phoenix Associates, a Florida general
partnership.
"Preferred A Capital Amount" means, at any time, the product of (A)
$140,000,000 times (B) the percentage of the Preferred A Interest that as of
such time has not been redeemed pursuant to Section 4.3.
"Preferred B Capital Amount" means, at any time, the product of (A) the
sum of (i) $30,000,000 and (ii) the cumulative increases in the Preferred B
Capital Amount made pursuant to Section 4.1(a)(iii), times (B) the percentage of
the Preferred B Interest that as of such time has not been redeemed pursuant to
Section 4.3.
"Preferred A Interest" means that portion of the Membership Interest of
Central (or any other Person that succeeds to that portion of the Membership
Interest of Central) represented by a Capital Account balance of $140,000,000 as
of the Closing and having the rights and privileges specified in this Agreement
as pertaining to the Preferred A Interest.
"Preferred B Interest" means that portion of the Membership Interest of
Central (or any other Person that succeeds to that portion of the Membership
Interest of Central) represented by a Capital Account balance of $30,000,000 as
of the Closing and having the rights and privileges specified in this Agreement
as pertaining to the Preferred B Interest.
"Preferred A Preference Amount" means, for each Preferred A
Distribution Date (or for the date on which a distribution pursuant to Section
10.2(d)(iii)(B) is made), an amount equal to the excess of (A) the product of
(x) the Preferred A Rate and (y) the Preferred A Capital Amount, computed for
the period since the later of the Closing Date or the preceding Preferred A
Distribution Date on the basis of a 360-day year of twelve 30-day months, over
(B) with respect to the first Preferred A Distribution Date after the date of
this Agreement, a pro rata portion of the Guaranteed Payment Amount, based on
the ratio of the number of days between the Closing Date and such date to the
number of days between the preceding Guaranteed Payment Date (although prior to
the Closing Date) and such date, computed on the basis of a 360-day year of
twelve 30-day months, and, with respect to any other Preferred A Distribution
Date, the Guaranteed Payment Amount.
"Preferred B Preference Amount" shall mean, for each Preferred B
Distribution Date (or for the date on which a distribution pursuant to Section
10.2(d)(iii)(C) is made), the product of (x) the Preferred B Rate and (y) the
Preferred B Capital Amount, computed for the period since the later of the
Closing Date or the preceding Preferred B Distribution Date on the basis of a
360-day year of twelve 30-day months.
"Principals" means Barry Silverstein, Dennis McGillicuddy, and D.
Stevens McVoy, and their respective permitted successors and assigns, as
provided in Section 14.3.
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"Representative" means an individual appointed pursuant to Section 8 or
Section 4.4(b)(ii) to serve as a representative on the Management Committee.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means all obligations arising under the Senior Notes and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of any such obligations, and any obligation incurred in
refinancing or replacement of or substitution for any such obligations.
"Senior Notes" means the obligations of Central and Phoenix Associates,
originally incurred under that certain Credit Agreement, dated November 15,
1994, among Central, Phoenix Associates, certain other parties, and the lenders
named therein, as amended, as such obligations shall have been restructured in
connection with the purchase thereof concurrently with the Closing.
"Shareholders" means Coaxial LLC, a Delaware limited liability company,
Coaxial DJM LLC, a Delaware limited liability company, and Coaxial DSM LLC, a
Delaware limited liability company.
"Subordinated Debt" means all obligations arising under the Discount
Notes and the LLC Mirror Notes (as defined in the offering memorandum for the
Discount Notes) issued by Coaxial DJM LLC and Coaxial DSM LLC concurrently with
the Closing, and every subsequent amendment, modification, restructuring,
extension, renewal, or consolidation of any such obligations, and any obligation
incurred in refinancing or replacement of or substitution for any such
obligations.
"Subsidiary" means any corporation, limited liability company, general
partnership, limited partnership, limited liability partnership, or joint
venture controlled by the Company.
"Tax Matters Member" means the Member designated pursuant to Section
6.3 as the "tax matters partner" of the Company in accordance with Code Section
6231(a)(7).
"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).
"Unit" means, for purposes of calculating a Member's Percentage
Interest, the value assigned to such Member's Common Interest in accordance with
the following provisions:
(i) in consideration for the Capital Contributions to be made
pursuant to Section 3.1(a), there shall be assigned to the Class A Common
Interest of Insight, effective on the date of this Agreement, a number of Units
equal to the product of 100,000 times a fraction, the numerator of which is the
sum of $10,000,000 plus the aggregate amount of any Capital Contributions made
by Insight pursuant to Section 2.1(d)(4)(A)(1) of the Contribution Agreement and
the denominator of which is $13,333,333;
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(ii) in consideration for the Capital Contributions to be made
pursuant to Section 3.1(a), after giving effect to the issuance to Central of
the Preferred A Interest and the Preferred B Interest, there shall be assigned
to the Class B Common Interest of Central, effective on the date of this
Agreement, a number of Units equal to the product of 100,000 times a fraction,
the numerator of which is $3,333,333 minus the aggregate amount of any Capital
Contributions described in Section 2.1(d)(4) of the Contribution Agreement for
which Central's obligation is canceled pursuant to Section 2.1(d)(4)(B) of the
Contribution Agreement and the denominator of which is $13,333,333;
(iii) in consideration for any Capital Contribution made by
any Person pursuant to Section 2.1(d)(4)(A)(2) of the Contribution Agreement,
there shall be assigned to the Common Interest of such Person, effective as of
the date of this Agreement, a number of Units equal to the product of 100,000
times a fraction, the numerator of which is the amount of all Capital
Contribution made by such Person pursuant to Section 2.1(d)(4)(A)(2) of the
Contribution Agreement and the denominator of which is $13,333,333; and
(iv) there shall be assigned to any other Common Interest
issued pursuant to Section 7.5, including any additional Common Interest issued
to Insight or Central, the number of Units required to be assigned to such
Common Interest under the terms of its issuance.
"Voting Interests" means the Preferred A Interest and the Preferred B
Interest, collectively, except that, at such time as (1) the Preferred A
Interest and the Preferred B Interest both cease to be outstanding, or (2) a
Person other than Central owns a majority of the Preferred A Interest and the
Preferred B Interest (determined in the manner described in the following
sentence), or (3) none of the Principals owns, directly or indirectly, any
interest in Central, or (4) Central ceases to be controlled, directly or
indirectly, by Insight or any Affiliate of Insight, then "Voting Interests"
shall mean the Common Interests. A "majority" of the outstanding Voting
Interests means, if the Voting Interests consist of the Preferred A Interest and
the Preferred B Interest, any portion of the Preferred A Interest and the
Preferred B Interest that together represents a majority of the sum of the
Preferred A Capital Amount and the Preferred B Capital Amount that is
represented by the total outstanding Preferred A Interest and Preferred B
Interest, and, if the Voting Interests consist of the Common Interests, any
portion of the Common Interests to which has been assigned a majority of the
Units assigned to all the outstanding Common Interests.
1.2 Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
Term Section
- ---- -------
AMT Liability Section 4.1(e)(iii)
April Distribution Section 4.1(a)(iv)
Capital Default Section 4.4(a)
Central's Appraiser Section 9.6(e)(i)
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Term Section
- ---- -------
Estimated Tax Distributions Section 4.1(a)(iv)
Guaranteed Payment Amount Schedule III
Guaranteed Payment Date Schedule III
Indemnified Persons Section 11.1
Insight Parent Section 3.5(e)
Insight's Appraiser Section 9.6(e)(i)
Liquidator Section 10.2(b)
Management Return Payment Date Schedule III
Offered Asset Purchase Price Section 9.6(g)(iii)(B)
Preferred A Distribution Date Schedule III
Preferred A Rate Schedule III
Preferred B Distribution Date Schedule III
Preferred B PIK Termination Date Schedule III
Preferred B Rate Schedule III
Regular Tax Liability Section 4.1(e)(ii)
Regulatory Allocations Section 5.2(f)
Related Party Section 8.5(b)(i)
Secretary Section 6.3(c)
Secured Party Section 9.7
Tax Amount Section 4.1(e)
Third Appraiser Section 9.6(e)(iii)
Third-Party Purchaser Section 9.6(a)
Transfer Section 9.1(a)
Unit Liquidation Amount Section 9.6(g)(iii)(A)
SECTION 2. THE COMPANY AND ITS BUSINESS
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2.1 Formation.
The Members agree to form the Company as a limited liability company
pursuant to the provisions of the Act. Except as provided in this Agreement, all
rights, liabilities, and obligations of the Members, both as between themselves
and with respect to Persons not parties to this Agreement, shall be as provided
in the Act, and this Agreement shall be construed in accordance with the
provisions of the Act. To the extent that the rights or obligations of either
Member are different by reason of any provision of this Agreement than they
would be in the absence of such provision, this Agreement shall, to the extent
permitted by the Act, control, except that neither Member shall be personally
liable for obligations of the Company beyond the liability provided in the Act.
2.2 Filing of Certificate of Formation.
The Manager has caused a Certificate of Formation conforming with the
Act to be filed with the Secretary of State of Delaware. The Manager will cause
the Certificate of Formation to be filed or recorded in any other public office
where filing or recording is required or advisable. The Members and the Company
shall do, and continue to do, all other things that are required or advisable to
maintain the Company as a limited liability company existing pursuant to the
laws of the State of Delaware.
2.3 Company Name.
The name of the Company shall be "Insight Communications of Central
Ohio, LLC." The business and operations of the Company may be conducted under
that name or any other name or names that the Manager may from time to time
select. The Company shall file any assumed name certificates and similar
filings, and any amendments thereto, that the Manager considers appropriate or
advisable.
2.4 Term of the Company.
The term of the Company commenced on the date of the filing of the
Certificate of Formation of the Company with the Secretary of State of Delaware
and shall continue until the Company is terminated pursuant to Section 10 of
this Agreement.
2.5 Purposes of the Company.
The purposes of the Company are to do the following, directly or
indirectly through interests in one or more Subsidiaries:
(a) to engage in the business of acquiring, developing,
owning, designing, constructing, maintaining, operating, managing, and selling
the cable television systems and other assets to be contributed to the Company
by Central pursuant to the Contribution Agreement;
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(b) to acquire, develop, own, design, construct, maintain,
operate, manage, and sell additional cable television systems;
(c) to acquire, develop, own, design, construct, maintain,
operate, manage, and sell, or invest in, businesses related to and ancillary to
those referred to above (including high-speed data service, Internet access,
telephony services, and other telecommunications and telephony-related
investments or businesses, and video wireless services and wireless
communications services and other wireless-related investments or businesses);
(d) to conduct other business of the type and character in
which cable television operators generally become involved, as the Management
Committee may determine;
(e) to possess, transfer, mortgage, pledge, or otherwise deal
in, and to exercise all rights, powers, privileges, and other incidents of
ownership or possession with respect to securities or other assets held or owned
by the Company, and to hold securities or assets in the name of a nominee or
nominees; and
(f) to form and own one or more corporations, trusts, or
partnerships (but no entity so formed or owned, while it is a Subsidiary, may do
what the Company is prohibited by this Agreement from doing).
2.6 Authority of the Company.
The Company shall be empowered and authorized to do all lawful acts and
things necessary, appropriate, proper, advisable, incidental to, or convenient
for the furtherance and accomplishment of its purposes. Without limiting the
foregoing, the Company shall be empowered and authorized, for itself or on
behalf of any Subsidiary, to the extent necessary, appropriate, proper,
advisable, incidental to, or convenient for the furtherance and accomplishment
of its purposes, to:
(a) construct, operate, maintain, improve, expand, buy, own,
sell, convey, assign, mortgage, refinance, rent, or lease real and personal
property, which shall be held in the name of the Company or a Subsidiary, as
applicable;
(b) enter into, perform, and carry out contracts, leases, and
agreements of any kind necessary to, in connection with, or incidental to
accomplishing the purposes of the Company;
(c) operate, maintain, finance, improve, construct, own, grant
options with respect to, sell, convey, assign, mortgage, and lease real and
personal property;
(d) sell, exchange, or otherwise dispose of all or any part of
the property and assets of the Company or of any Subsidiary for property, cash,
or on terms, or any combination thereof;
(e) obtain loans, secured and unsecured, for the Company or
any Subsidiary and secure the same by mortgaging, assigning for security
purposes, pledging, or otherwise
-13-
hypothecating all or any part of the property and assets of the Company or of
any Subsidiary (and in connection therewith to place record title to any such
property or assets in the name or names of a nominee or nominees);
(f) prepay in whole or in part, refinance, recast, increase,
decrease, modify, amend, restate, or extend any such mortgage, security
assignment, pledge, or other security instrument, and in connection therewith to
execute and deliver, for and on behalf of the Company or any Subsidiary, any
extensions, renewals, or modifications thereof, any new mortgage, security
assignment, pledge, or other security instrument in lieu thereof;
(g) draw, make, accept, endorse, sign, and deliver any notes,
drafts, or other negotiable instruments or commercial paper;
(h) establish, maintain, and draw upon checking, savings, and
other accounts in the name of the Company or any Subsidiary in such banks or
other financial institutions as the Manager may from time to time select;
(i) employ, fix the compensation of, oversee, and discharge
agents and employees of the Company and of any Subsidiary as it shall deem
advisable in the operation and management of the business of the Company,
including such accountants, attorneys, consultants, engineers, and appraisers,
on such terms and for such compensation, as the Manager shall determine;
(j) enter into management agreements with third parties
pursuant to which the management, supervision, or control of the business or
assets of the Company may be delegated to third parties for reasonable
compensation;
(k) enter into joint ventures, general or limited
partnerships, or other agreements relating to the Company's purposes;
(l) compromise any claim or liability due to the Company or
any Subsidiary;
(m) execute, acknowledge, verify, and file any notifications,
applications, statements, and other filings that the Manager considers necessary
or desirable to be filed with any state or federal securities administrator or
commission;
(n) execute, acknowledge, verify, and file any and all
certificates, documents, and instruments that the Manager considers necessary or
desirable to permit the Company or any Subsidiary to conduct business in any
state in which the Manager deems advisable;
(o) bring and defend actions in law and equity;
(p) 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
-14-
and of the interest thereon by mortgage upon or pledge, conveyance, or
assignment in trust of, the whole or any part of the property of the Company
whether at the time owned or thereafter acquired and to guarantee the
obligations of others and to sell, pledge, or otherwise dispose of such bonds or
other obligations of the Company for its purposes; and
(q) to maintain an office or offices in such place or places
as the Manager shall determine and in connection therewith to rent or acquire
office space, engage personnel, and do such other acts and things as may be
necessary or advisable in connection with the maintenance of such office, and on
behalf of and in the name of the Company to pay and incur reasonable expenses
and obligations for legal, accounting, investment advisory, consultative, and
custodial services, and other reasonable expenses including taxes, travel,
insurance, rent, supplies, interest, salaries and wages of employees, and all
other reasonable costs and expenses incident to the operation of the Company.
2.7 Actions of Company Prior to Closing.
Notwithstanding any other provisions hereof, until the Closing, the
sole activities of the Company shall be efforts to obtain the consents and
approvals required under the Contribution Agreement, to cooperate in the
consummation of the transactions contemplated by the Refinancing Proposals (as
defined in the Contribution Agreement), and to otherwise take actions in
accordance with the terms of the Contribution Agreement to consummate the
transactions contemplated thereby.
2.8 Scope of Members' Authority.
Except as otherwise expressly and specifically provided in this
Agreement, neither Member shall have any authority to act for, or assume any
obligation or responsibility on behalf of, the Company.
2.9 Principal Office and Other Offices; Registered Agent.
The address of the Company's registered office that is required to be
maintained by the Company in the State of Delaware pursuant to Section 18-104 of
the Act shall initially be located at 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801, and the name of the Company's registered agent at such
address is The Corporation Trust Company. The principal office of the Company
shall be located at 126 E. 56th Street, New York, New York 10022, or at such
other place as the Management Committee shall from time to time designate. The
Company may maintain any other offices and conduct business at any other places
that the Manager deems advisable. The Company may, upon compliance with the
applicable provisions of the Act, change its principal office or registered
agent from time to time in the discretion of the Management Committee.
2.10 Foreign Qualification.
The Manager shall cause the Company to be authorized to conduct
business legally in the State of Ohio and all other appropriate jurisdictions,
including registration
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or qualification of the Company as a foreign limited liability company in those
jurisdictions that provide for registration or qualification and the filing of a
certificate of limited liability company in the appropriate public offices of
those jurisdictions that do not provide for registration or qualification.
2.11 Fiscal Year.
The Fiscal Year of the Company shall be the calendar year, except that
the first Fiscal Year commenced on the date on which the Company was formed
under the Act and the last Fiscal Year shall end on the date on which the
winding up of the Company is completed. The Company shall have the same Fiscal
Year for income tax purposes and for financial and partnership accounting
purposes.
2.12 Addresses of the Members.
The respective addresses of the Members are set forth on Schedule I.
2.13 Tax Classification.
Notwithstanding any other provision of this Agreement, no Member nor
any Affiliate of any Member, nor any employee of the Company, may take any
action (including the filing of a U.S. Treasury Form 8832 Entity Classification
Election) that would cause the Company to be characterized as an entity other
than a partnership for federal income tax purposes without the affirmative
unanimous consent of the Members and the prior written consent of the
Principals, except that this sentence shall not preclude or in any way limit any
Person from taking any action that would cause any Affiliate of Insight (other
than the Company and any Person more than half of the assets of which consist of
direct or indirect equity interests in the Company at the time such action is
taken) to be characterized as a corporation for federal income tax purposes. A
determination of whether any action would cause the Company to be characterized
as an entity other than a partnership for federal income tax purposes will be
based upon a declaratory judgment or similar relief obtained from a court of
competent jurisdiction, a favorable ruling from the Internal Revenue Service, or
the receipt of an opinion of counsel reasonably satisfactory to the Members.
SECTION 3. COMPANY CAPITAL
3.1 Contributions.
(a) Contributions Pursuant to Contribution Agreement. At the
Closing, or at such later time as provided in Section 2.1(d), Section 8.3(c),
and Section 8.3(d) of the Contribution Agreement, and pursuant to the terms of
the Contribution Agreement:
(i) Central will contribute or cause to be
contributed to the Company, free and clear of all Liens (other than Permitted
Liens), the assets specified in Section 2.1 of the Contribution Agreement
(subject only to Assumed Liabilities as specified in the Contribution Agreement)
and, if applicable, cash in the amount specified in Section 2.1(d) and Section
8.3(d) of the Contribution Agreement; and
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(ii) Insight will contribute or cause to be
contributed to the Company, in cash, the sum of Ten Million Dollars.
(b) Fair Market Value of Contributions. The fair market value
of the assets contributed to the Company by Central pursuant to Section 3.1(a)
shall be as specified in the Contribution Agreement.
3.2 Additional Capital Contributions.
There shall be no further assessments for additional Capital
Contributions by the Members to the Company.
3.3 Assumption of Liabilities.
In accordance with the terms and conditions of the Contribution
Agreement, the Company will, at the Closing, assume and undertake to pay,
discharge, and perform only those obligations and liabilities of Central and
Insight that are specified in Section 4.1 and Section 12.2 of the Contribution
Agreement or are otherwise required to be paid by the Company pursuant to
Section 6.4(b).
3.4 Return of Contributions.
Except as provided in Section 4.3, neither Member shall have the right
to demand a return of all or any part of its Capital Contribution during the
term of the Company, and any return of the Capital Contribution of either Member
shall be only in accordance with the terms of this Agreement.
3.5 Refinancing and Purchase of Senior Debt and Subordinated Debt.
(a) Interim Refinancing.
(i) Insight may obtain and submit to Central
and the Principals at any time and from time to time a proposal from a financial
institution of nationally recognized standing for the refinancing of the Senior
Debt or the Subordinated Debt. In addition, if (A) any portion of the Senior
Debt or the Subordinated Debt becomes due and payable before its stated
maturity, or (B) the Company fails to make any distributions required by Section
4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) on or before the
applicable Guaranteed Payment Date, Preferred A Distribution Date, or Preferred
B Distribution Date, or (C) Insight determines that the Company is likely to be
unable to make all distributions required by Section 4.1(a)(i), Section
4.1(a)(ii), and Section 4.1(a)(iii) at the next applicable Guaranteed Payment
Date, Preferred A Distribution Date, or Preferred B Distribution Date, Insight
shall use commercially reasonable efforts to obtain and submit to Central and
the Principals either (as elected by Insight in good faith) a proposal from a
financial institution of nationally recognized standing for the refinancing of
the Senior Debt and the Subordinated Debt or a proposal from the holders of the
Senior Debt and the Subordinated Debt to modify the terms thereof in response to
the condition described in this sentence.
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(ii) After obtaining any proposal pursuant to
Section 3.5(a)(i), Insight may require that the Borrowers refinance or modify
the Senior Debt or the Subordinated Debt in accordance with the terms of such
proposal, and the parties agree that the Borrowers will comply with such
requirement, so long as the terms of the Senior Debt and the Subordinated Debt
as it would exist after the consummation of such refinancing or modification (A)
would not require any Person or its assets (including assets that may be
acquired after such refinancing or modification) to be liable or otherwise
responsible for the payment or collection of such Senior Debt or Subordinated
Debt, or for the performance of the obligations of any other Person, to a
greater extent than such Person or its assets is liable or otherwise responsible
under the Senior Debt and the Subordinated Debt as it exists prior to the
consummation of such refinancing or modification, (B) would not impose any
covenants on any Person other than a Borrower that are not imposed on such
Person under the Senior Debt and the Subordinated Debt as it will exist at the
Closing, and (C) would not otherwise modify the structure of the Senior Debt or
the Subordinated Debt in a manner that is adverse to the Principals.
(iii) If Insight is unable to obtain a proposal
pursuant to Section 3.5(a)(i) to refinance or modify the Senior Debt or the
Subordinated Debt on terms that conform with the criteria described in Section
3.5(a)(ii), and the second sentence of Section 3.5(a)(i) does not apply, then
the Principals may elect, in their sole discretion, whether the Borrowers will
consummate the refinancing or modification of the Senior Debt and the
Subordinated Debt on the terms of any proposal obtained by Insight and submitted
to Central and the Principals.
(iv) If Insight is unable to obtain a proposal
pursuant to Section 3.5(a)(i) to refinance or modify the Senior Debt or the
Subordinated Debt on terms that conform with the criteria described in Section
3.5(a)(ii) and the second sentence of Section 3.5(a)(i) applies, then the
Principals shall elect either (A) that the Borrowers will consummate the
refinancing or modification of the Senior Debt and the Subordinated Debt on the
terms of the proposal, if any, submitted to Central and the Principals, or (B)
that the Principals shall sell to Insight or a Person designated by Insight, and
Insight or a Person designated by Insight shall purchase from the Principals,
for one dollar (plus the Tax Amount that would be distributable to Central on
the date of the next scheduled April Distribution, calculated as if the
Company's Fiscal Year ended on the closing of such purchase), all of the
outstanding membership interests in the Shareholders; provided, however, that
(A) the Principals may not elect to require that Insight or a Person designated
by Insight purchase all of the outstanding membership interests in the
Shareholders, and the Principals shall be deemed to have elected that the
Borrowers will consummate the proposed refinancing or modification, if the
conditions specified in Section 3.5(f)(vi) are not satisfied at the time that
the Principals make such election, and (B) the Principals shall be deemed to
have elected that the Borrowers will consummate the proposed refinancing or
modification if the Principals fail to notify Insight of their election within
twenty-one days after the delivery to the Principals and their legal counsel of
the proposal obtained by Insight pursuant to Section 3.5(a)(i) and any other
information concerning the proposed refinancing or modification that the
Principals shall have reasonably requested within ten days after their receipt
of such proposal. If the Principals elect to require that Insight or a Person
designated by Insight purchase all of the outstanding membership interests in
the Shareholders, the closing of such purchase shall occur immediately prior to
the earlier of (A) the acceleration of the Senior Debt or the Subordinated
Debt as it then exists (if acceleration of the Senior Debt or the Subordinated
-18-
Debt shall not have already occurred) or (B) the consummation of the proposed
refinancing or modification of the Senior Debt or the Subordinated Debt, and,
upon such closing, Insight agrees that it or its designee will accept all of the
outstanding membership interests in the Shareholders, provided that neither
Insight nor its designee shall thereby acquire any personal liability for either
the Senior Debt or the Subordinated Debt.
(v) If either the Senior Debt or the
Subordinated Debt is accelerated, then, regardless whether Insight had the
opportunity to obtain a proposal pursuant to Section 3.5(a)(i) to refinance or
modify the Senior Debt or the Subordinated Debt, the Principals may elect to
sell to Insight or a Person designated by Insight, and Insight or a Person
designated by Insight shall purchase from the Principals, for one dollar (plus
the Tax Amount that would be distributable to Central on the date of the next
scheduled April Distribution, calculated as if the Company's Fiscal Year ended
on the closing of such purchase), all of the outstanding membership interests in
the Shareholders; provided, however, that the Principals may not elect to
require that Insight or a Person designated by Insight purchase all of the
outstanding membership interests in the Shareholders if the conditions specified
in Section 3.5(f)(vi) are not satisfied at the time that the Principals would
otherwise be permitted to make such election. If the Principals elect to require
that Insight or a Person designated by Insight purchase all of the outstanding
membership interests in the Shareholders, the closing of such purchase shall
occur as soon as practicable following such election and, in any event, prior to
any redemption of the Preferred A Interest or the Preferred B Interest. Upon
such closing, Insight agrees that it or its designee will accept all of the
outstanding membership interests in the Shareholders, provided that neither
Insight nor its designee shall thereby acquire any personal liability for either
the Senior Debt or the Subordinated Debt.
(b) Refinancing at Maturity of Senior Debt.
(i) Prior to the maturity of the Senior Debt,
Insight shall use commercially reasonable efforts to obtain and submit to
Central and the Principals a proposal from a financial institution of nationally
recognized standing for the refinancing of the Senior Debt at or prior to its
maturity. Insight shall use commercially reasonable efforts to obtain such
proposal sufficiently in advance of the maturity of the Senior Debt so as to
permit the refinancing of the Senior Debt to be consummated at or prior to the
maturity of the Senior Debt in a manner consistent with the rights and
obligations of the parties under this Section 3.5.
(ii) If Insight is able to obtain a proposal pursuant
to Section 3.5(b)(i) to refinance the Senior Debt that (A) would not require any
Person or its assets (including assets that may be acquired after such
refinancing) to be liable or otherwise responsible for the payment or collection
of such Senior Debt, or for the performance of the obligations of any other
Person, to a greater extent than such Person or its assets is liable or
otherwise responsible under the Senior Debt as it exists prior to the
consummation of such refinancing, (B) would not impose any covenants on any
Person other than a Borrower that are not imposed on such Person under the
Senior Debt as it will exist at the Closing, and (C) would not otherwise modify
the structure of the Senior Debt or the Subordinated Debt in a manner that is
adverse to the Principals, then (1) the parties agree that the Borrowers will
consummate the refinancing of the Senior Debt on the terms of such proposal and
(2) Insight agrees that, if the refinancing contemplated by such proposal is not
consummated for any
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reason (other than inaction by a Principal to which Section 3.5(d) applies)
prior to the maturity of the Senior Debt as it exists prior to the consummation
of such refinancing, Insight or an Affiliate of Insight will itself refinance
the Senior Debt on the terms of such proposal (and such substitution of Insight
or its Affiliate as the lender shall not constitute action by Insight or its
Affiliate to modify the structure of the Senior Debt or the Subordinated Debt).
(iii) If Insight is unable to obtain a proposal to
refinance the Senior Debt on terms that conform with the criteria described in
Section 3.5(b)(ii), then the Principals shall elect either (A) that the
Borrowers will consummate the refinancing of the Senior Debt on the terms of the
proposal, if any, submitted to Central and the Principals or (B) that the
Principals shall sell to Insight or a Person designated by Insight, and Insight
or a Person designated by Insight shall purchase from the Principals, for one
dollar (plus the Tax Amount that would be distributable to Central on the date
of the next scheduled April Distribution, calculated as if the Company's Fiscal
Year ended on the closing of such purchase), all of the outstanding membership
interests in the Shareholders; provided, however, that (A) the Principals may
not elect to require that Insight or a Person designated by Insight purchase all
of the outstanding membership interests in the Shareholders, and the Principals
shall be deemed to have elected that the Borrowers will consummate the proposed
refinancing, if the conditions specified in Section 3.5(f)(vi) are not satisfied
at the time that the Principals make such election, and (B) the Principals shall
be deemed to have elected that the Borrowers will consummate the proposed
refinancing if the Principals fail to notify Insight of their election within
twenty-one days after the delivery to the Principals and their legal counsel of
the proposal obtained by Insight pursuant to Section 3.5(b)(i) and any other
information concerning the proposed refinancing that the Principals shall have
reasonably requested within ten days after their receipt of such proposal. If
the Principals elect to require that Insight or a Person designated by Insight
purchase all of the outstanding membership interests in the Shareholders, the
closing of such purchase shall occur immediately prior to the earlier of (A) the
maturity of the Senior Debt as it then exists or (B) the consummation of the
proposed refinancing of the Senior Debt, and, upon such closing, Insight agrees
that it or its designee will accept all of the outstanding membership interests
in the Shareholders, provided that neither Insight nor its designee shall
thereby acquire any personal liability for either the Senior Debt or the
Subordinated Debt.
(iv) Upon the refinancing of any Senior Debt pursuant
to this Section 3.5,
including any refinancing pursuant to this Section 3.5(b) (including any such
refinancing by Insight or an Affiliate of Insight), the obligations of Insight
under this Section 3.5(b) shall again apply upon the maturity of the Senior Debt
as it exists after the consummation of such refinancing.
(v) The obligations of Insight under this Section
3.5(b) shall terminate upon the earliest of (A) the death of the last to die of
Barry Silverstein, Dennis McGillicuddy, and D. Stevens McVoy, (B) the first date
on which none of the Principals owns, directly or indirectly, any interest in
any of the Borrowers, or (C) the receipt by the Principals of an opinion of
their legal counsel that, in its opinion, there are no circumstances under which
the refinancing, retirement, satisfaction, or purchase of the Senior Debt, in
any manner and on any terms, would increase by more than a de minimis amount the
likelihood of those adverse tax consequences to the Principals that were
intended to be avoided by the Senior Debt and the Subordinated Debt, as it will
exist at the Closing.
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(c) Funding Purchase of Debt. The Company may make loans to
Insight or any Affiliate of Insight for the purpose of funding the acquisition
by such Person of any of the outstanding Senior Debt or Subordinated Debt. The
proceeds used to make such loans may include the proceeds of the issuance of
Membership Interests (subject to the restrictions on the issuance of Membership
Interests provided in Section 8.5(b)). The terms of any such loan shall:
(i) provide that all obligations and
liabilities of such Person with respect to such loan shall be secured by all of
such Person's interest in the Senior Debt or Subordinated Debt so purchased, and
any replacements or proceeds thereof (but such loan shall otherwise be non-
recourse to such Person);
(ii) require the payment to the Company, either
as principal, interest, or additional interest, of all amounts received by such
Person with respect to the Senior Debt or Subordinated Debt so purchased; and
(iii) require that the Person to which the loan is
made, if other than Insight,
remain an Affiliate of Insight.
(d) Financing by the Company. If Insight obtains and submits
to Central and the Principals a proposal for the refinancing or modification of
the Senior Debt or Subordinated Debt pursuant to Section 3.5(a)(i) or Section
3.5(b)(i) and either (1) the terms of the proposed refinancing or modification
conform with the criteria described in Section 3.5(a)(ii) or Section 3.5(b)(ii),
as applicable, or (2) the Principals expressly agreed that the Borrowers will
consummate the refinancing or modification of the Senior Debt and the
Subordinated Debt on the terms of such proposal, and, thereafter, any of the
Principals fails to take any action reasonably necessary to consummate the
refinancing or modification of the Senior Debt and the Subordinated Debt on the
terms of such proposal (including executing and delivering any consent,
approval, or authority) and fails to cure such failure within ten Business Days
after its receipt of written notice from Insight specifying such failure and
specifying that Insight believes this Section 3.5(d) applies to such failure,
then Insight may cause the Company or any Subsidiary of the Company to incur
indebtedness directly, on terms approved by the Management Committee, and use
the proceeds of such indebtedness to purchase or repay the Senior Debt or the
Subordinated Debt.
(e) Other Actions Prohibited. Insight agrees that, except as
specifically permitted by this Section 3.5, neither Insight nor any of its
Affiliates (including the Company) will take any willful or intentional action
in any capacity (including as manager of the Shareholders) that is intended to
have, and has, the effect of modifying the structure of the Senior Debt or the
Subordinated Debt (such as by imposing any covenants on any Person other than a
Borrower that are not imposed on such Person under the Senior Debt or the
Subordinated Debt as it will exist at the Closing or agreeing that any Person or
its assets would be liable or otherwise responsible for the payment or
collection of the Senior Debt or the Subordinated Debt, or for the performance
of the obligations of any Borrower, to a greater extent than such Person or its
assets is liable or otherwise responsible under the Senior Debt and the
Subordinated Debt as then in effect). The Principals and Central agree that any
action taken by Insight in connection with its management of the business and
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operations of the Company, Central, or the Shareholders (whether under this
Agreement or under any of the management agreements between the Shareholders and
Insight) that does not directly relate to the structure of the Senior Debt or
the Subordinated Debt shall not be considered an action that was intended to
have the effect of modifying the structure of the Senior Debt or the
Subordinated Debt unless Insight, in taking such action, intended that a
modification of such structure result from such action. Solely for purposes of
this Section 3.5(e), (1) a Person shall not be considered an Affiliate of
Insight with respect to any action taken by such Person if neither Insight
Parent nor any Person controlling Insight Parent possessed the power, directly
or indirectly, to cause such Person to refrain from taking such action, whether
through the ownership of voting securities, contractually, or otherwise, and (2)
"Insight Parent" means Insight Communications Company, L.P., or, if Insight
ceases to be controlled, directly or indirectly, by one or more individuals who,
on the date of this Agreement, collectively control Insight, the ultimate parent
entity (as determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder) of Insight.
(f) Other General Provisions.
(i) The manner of soliciting and obtaining any
refinancing proposal pursuant to this Section 3.5 shall be determined by
Insight. The Principals will cooperate, as reasonably requested by Insight, in
connection with Insight's efforts to solicit and obtain any refinancing proposal
pursuant to this Section 3.5.
(ii) In connection with any refinancing
pursuant to this Section 3.5, the Company shall pay all costs and expenses
incurred by any of the Borrowers, any of the Principals, or any of their
respective Affiliates in connection with the consummation of such refinancing,
including the authorization, preparation, execution, and performance of any
agreements or other instruments relating thereto, to the extent such costs and
expenses are similar in kind to the costs and expenses that the Company would
have incurred in issuing indebtedness similar to the Senior Debt or the
Subordinated Debt.
(iii) In connection with any refinancing or purchase
of any of the Senior Debt or the Subordinated Debt pursuant to this Section 3.5,
Insight and the Principals shall agree to appropriate modifications to the terms
of the Preferred A Interest and the Preferred B Interest, to the extent
necessary to preserve the reasonable expectations of Insight and the Principals
under this Agreement. Any agreement between Insight and the Principals pursuant
to this Section 3.5(f)(iii) as to any modification to the terms of the Preferred
A Interest and the Preferred B Interest shall be binding on the Members.
(iv) For purposes of this Section 3.5,
(A) the terms of any refinancing or
modification of the Senior Debt or the Subordinated Debt will be conclusively
deemed not to modify the structure of the Senior Debt or the Subordinated Debt
in a manner that is adverse to the Principals if, within twenty-one days after
the delivery to the Principals and their legal counsel of the applicable
refinancing or modification proposal and any other information concerning the
proposed refinancing or modification that the Principals shall have reasonably
requested within ten days after their receipt of such proposal, the Principals
do not receive and deliver to Insight an opinion of the Principals' legal
counsel that, in its opinion, consummation of such refinancing or
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modification on the terms proposed would modify the structure of the Senior Debt
or the Subordinated Debt in a manner that would increase by more than a de
minimis amount the likelihood of those adverse tax consequences to the
Principals that were intended to be avoided by the Senior Debt and the
Subordinated Debt, as it will exist at the Closing; and
(B) the terms of any refinancing or
modification of the Senior Debt or the Subordinated Debt will be conclusively
deemed to modify the structure of the Senior Debt or the Subordinated Debt in a
manner that is adverse to the Principals if, within twenty-one days after the
delivery to the Principals and their legal counsel of the applicable refinancing
or modification proposal and any other information concerning the proposed
refinancing or modification that the Principals shall have reasonably requested
within ten days after their receipt of such proposal, the Principals receive and
deliver to Insight an opinion of the Principals' legal counsel that, in its
opinion, consummation of such refinancing or modification on the terms proposed
would modify the structure of the Senior Debt or the Subordinated Debt in a
manner that would increase by more than a de minimis amount the likelihood of
those adverse tax consequences to the Principals that were intended to be
avoided by the Senior Debt and the Subordinated Debt, as it will exist at the
Closing.
(v) The Principals agree that any legal counsel from
which the Principals request an opinion described in Section 3.5(f)(iv) will be
reasonably satisfactory to Insight.
(vi) The Principals may not elect to require that
Insight or a Person designated by Insight purchase all of the outstanding
membership interests in the Shareholders pursuant to Section 3.5(a)(iv), Section
3.5(a)(v), or Section 3.5(b)(iii) unless, at the time that the Principals make
such election:
(A) all outstanding stock of Central
shall have been duly and validly issued and shall be fully paid and
nonassessable;
(B) Central shall have no liabilities
other than the Senior Debt, liabilities arising under this Agreement or under
any other agreement between Central and the Company, Insight, or any Affiliate
of the Company or Insight, liabilities incurred at the direction of Insight,
directly or indirectly, through its control over the business and affairs of
Central, and other liabilities (such as accrued administrative expenses) that
are not significant in amount and for which the Principals agree to indemnify
Insight, on terms reasonably satisfactory to Insight;
(C) Central shall have no assets other
than its equity interest in the Company, contractual rights arising under any of
the Loan Documents, this Agreement, and any other agreement between Central and
the Company, Insight, or any Affiliate of the Company or Insight, assets
acquired at the direction of Insight, directly or indirectly, through its
control over the business and affairs of Central, and other assets (such as
internal corporate records) that are not significant in amount;
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(D) all of the outstanding shares of
Central shall be free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, and encumbrances of any nature
whatsoever, other than liens securing the Senior Debt, the Subordinated Debt,
and any other obligations and liabilities arising under the Loan Documents;
(E) all outstanding membership interests
of the Shareholders shall have been duly and validly issued and shall be fully
paid and nonassessable;
(F) the Shareholders shall have no
liabilities other than the Subordinated Debt, liabilities arising under any
agreement between the Shareholders and Central, the Company, Insight, or any
Affiliate of the Company or Insight, liabilities incurred at the direction of
Insight, directly or indirectly, through its management of the Shareholders, and
other liabilities (such as accrued administrative expenses) that are not
significant in amount and for which the Principals agree to indemnify Insight,
on terms reasonably satisfactory to Insight;
(G) the Shareholders shall have no assets
other than their equity interests in Central, the LLC Mirror Notes, contractual
rights arising under any of the Loan Documents, any agreement between the
Shareholders, and Central, the Company, Insight, or any Affiliate of the Company
or Insight, assets acquired at the direction of Insight, directly or indirectly,
through its management of the Shareholders, and other assets (such as internal
corporate records) that are not significant in amount; and
(H) all of the outstanding membership
interests of the Shareholders shall be free and clear of all claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
and encumbrances of any nature whatsoever, other than liens securing the Senior
Debt, the Subordinated Debt, and any other obligations and liabilities arising
under the Loan Documents.
(vii) If the Principals elect to require that Insight
or a Person designated by Insight purchase all of the outstanding membership
interests in the Shareholders pursuant to Section 3.5(a)(iv), Section 3.5(a)(v),
or Section 3.5(b)(iii), then (A) the Principals covenant that the conditions
specified in Section 3.5(f)(vi) will also be satisfied at the closing of the
purchase and sale of all of the outstanding membership interests in the
Shareholders, and (B) it shall be a condition to the purchase by Insight or a
Person designated by Insight of the outstanding membership interests in the
Shareholders that the conditions specified in Section 3.5(f)(vi) will also be
satisfied at the closing.
(viii) At Insight's request, Central and the
Principals agree to join in making an election under Code Section 338(h)(10)
with respect to the deemed purchase and sale of the shares of Central resulting
from the purchase and sale of all of the outstanding membership interests in the
Shareholders pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section
3.5(b)(iii).
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SECTION 4. CASH DISTRIBUTIONS
4.1 Distributions Prior to Liquidation.
(a) Distributions Generally. Except as provided in
Section 10.2(d), the Company shall make cash distributions as follows:
(i) First, on each Guaranteed Payment Date,
commencing on the first Guaranteed Payment Date after the Closing, so long as
the Preferred A Interest is outstanding, the Company shall distribute to the
holder of the Preferred A Interest (A) on the first such date, a pro rata
portion of the Guaranteed Payment Amount, based on the ratio of the number of
days between the Closing Date and such date to the number of days between the
preceding Guaranteed Payment Date (although prior to the Closing Date) and such
date, computed on the basis of a 360-day year of twelve 30-day months, and (B)
on each other such date, the Guaranteed Payment Amount.
(ii) Second, on each Preferred A Distribution Date,
commencing on the first Preferred A Distribution Date after the Closing, so long
as the Preferred A Interest is outstanding, the Company shall distribute to the
holder of the Preferred A Interest the Preferred A Preference Amount.
(iii) Third, on each Preferred B Distribution Date,
commencing on the first Preferred B Distribution Date after the Closing, so long
as the Preferred B Interest is outstanding, the Company shall distribute to the
holder of the Preferred B Interest the Preferred B Preference Amount; provided,
however, that on any such Preferred B Distribution Date falling prior to the
Preferred B PIK Termination Date, the Company shall, in lieu of making such
distribution, accrue such amount, and any such accrued and unpaid amount shall
be added to the Preferred B Capital Amount.
(iv) Fourth, no less than three days prior to April
15 of each year, the Company shall distribute to each Member holding a Common
Interest, the excess of such Member's Tax Amount over the amounts previously
distributed to such Member under this Section 4.1(a)(iv), including Estimated
Tax Distributions (the "April Distribution"). If the Company's taxable income
for any year is increased above the amount used to compute the April
Distribution as a result of an adjustment deemed necessary by the Company or as
the result of a tax audit, the Company shall distribute to the Members holding
the Common Interests such amount as the Management Committee shall determine is
appropriate, in its good faith discretion, taking into account the respective
additional federal, state, and local tax liability of the Members as a result of
such increase and any related penalties and interest. The Company shall also
make distributions ("Estimated Tax Distributions") for the payment of taxes at
such times as either Member would be required to pay federal estimated taxes in
an amount not in excess of the Company's good faith estimate of the Tax Amount
for the period to which such estimated taxes relate. Notwithstanding anything to
the contrary herein, distributions under this Section 4.1(a)(iv) shall be made
in proportion to the Members' Percentage Interests.
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(v) Fifth, on each Management Return Payment
Date, commencing on the first Management Return Payment Date after the Closing,
the Company shall distribute to the Manager the Management Return.
(vi) Thereafter, at such times and in such
amounts as the Management Committee may determine, to the Members holding Common
Interests in proportion to their Percentage Interests.
(b) Late Distributions.
(i) If the Company fails to make any
distribution required to be made pursuant to Section 4.1(a)(i) on or before the
applicable Guaranteed Payment Date, then the Guaranteed Payment Amount payable
with respect to that Guaranteed Payment Date shall be increased at a rate per
year equal to the Preferred A Rate for the number of days from the applicable
Guaranteed Payment Date to the date on which the required distribution is
actually made.
(ii) If the Company fails to make any distribution
required to be made pursuant to Section 4.1(a)(ii) on or before the applicable
Preferred A Distribution Date, then the amount to be distributed with respect to
that Preferred A Distribution Date shall be increased at a rate per year equal
to the Preferred A Rate for the number of days from the applicable Preferred A
Distribution Date to the date on which the required distribution is actually
made.
(iii) If the Company fails to make any distribution
required to be made pursuant to Section 4.1(a)(iii) on or before the applicable
Preferred B Distribution Date, then the amount to be distributed with respect to
that Preferred B Distribution Date shall be increased at a rate per year equal
to the Preferred B Rate for the number of days from the applicable Preferred B
Distribution Date to the date on which the required distribution is actually
made; provided, however, that this Section 4.1(b)(iii) shall apply only to
distributions required to be made on Preferred B Distribution Dates occurring on
or after the Preferred B PIK Termination Date.
(iv) If the Company fails to make any distribution
required to be made pursuant to Section 4.1(a)(v) on or before the applicable
Management Return Payment Date, then the amount to be distributed with respect
to that Management Return Payment Date shall bear interest at the Preferred A
Rate from that Management Return Payment Date to the date that the required
distribution is actually made.
(c) Borrowings for Guaranteed Payments. To the extent the
Company does not have sufficient cash to make the distribution required to be
made pursuant to Section 4.1(a)(i) then, unless the Manager or the Principals
object, the Manager shall cause the Company to borrow funds in order to make
such distributions in a full and timely manner.
(d) Treatment of Guaranteed Payments. The distributions
provided for in Section 4.1(a)(i) are required to be made without regard to the
income of the Company and shall be treated as guaranteed payments as described
in Code Section 707(c). No Member shall take a position inconsistent with such
treatment.
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(e) Determination of Tax Amount. For purposes of Section
4.1(a)(iv), the "Tax Amount" of a Member holding a Common Interest means, the
sum of such Member's tax liabilities for all previous Fiscal Years, determined
in accordance with, and subject to, the following:
(i) The tax liability of a Member holding a
Common Interest for any Fiscal Year shall be the greater of such Member's
Regular Tax Liability or its AMT Liability for such Fiscal Year.
(ii) The "Regular Tax Liability" of a Member
holding a Common Interest for any 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 (A) the excess of (1) the aggregate amount of taxable
income (if any) allocated to such Member with respect to its Common Interest in
such Fiscal Year over (2) the aggregate amount of taxable losses (if any)
allocated to such Member with respect to its Common Interest for all prior
Fiscal Years since the beginning of the Company and not previously taken into
account for purposes of computing such Member's Tax Amount, and (B) the highest
marginal combined federal, state, and local tax rate (taking into count the
provisions of Code Section 68) imposed on an individual resident in New York
City for income of such type.
(iii) The "AMT Liability" of a Member holding a
Common Interest for any Fiscal Year shall be computed as the product of (A) the
aggregate amount of alternative minimum taxable income (if any) allocated to
such Member with respect to its Common Interest in such Fiscal Year (less any
alternative minimum tax losses allocated to such Member with respect to its
Common Interest for all prior Fiscal Years since the beginning of the Company
and not previously taken into account for purposes of computing such Member's
Tax Amount) and (B) 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).
(iv) For purposes of determining a Member's
Regular Tax Liability or AMT Liability, any Member who receives a Common
Interest in a transfer with respect to which an election under Code Section 754
has not been made (or is not in effect) shall be deemed to have been allocated
any taxable losses or income allocated to the transferor of such Common
Interest. For purposes of determining a Member's April Distribution, any Member
who receives a Common Interest in a transfer with respect to which an election
under Code Section 754 has not been made (or is not in effect) shall be deemed
to have received any distributions made pursuant to Section 4.1(a)(iv) to the
transferor of such Common Interest.
(v) Notwithstanding anything to the contrary
herein, for purposes of calculating a Member's Tax Amount under this Section
4.1(e), the taxable income or taxable loss (including alternative minimum
taxable income and alternative minimum taxable loss) allocated to a Member shall
exclude (and no April Distributions or Estimated Tax Distributions shall be made
with respect to) (A) gain allocated to any Member with respect to the sale,
exchange, or other actual or deemed disposition of any assets contributed to the
Company by either Member, (B) gross income
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allocated to the holder of the Preferred A Interest with respect to
distributions made under Section 4.1(a)(i), (C) gross income allocated to the
holder of the Preferred A Interest under Section 5.2(h), (D) gross income
allocated to the holder of the Preferred B Interest under Section 5.2(i), and
(E) gross income allocated to the Manager under Section 5.2(k).
(f) Delaying Distributions. If (i) any default (other than a
notification or delivery default) shall have occurred and be continuing under
any of the Loan Documents, or if Insight in good faith determines that such a
default under any of the Loan Documents is reasonably likely to occur, and (ii)
Insight determines in good faith that, as a result of such existing or
anticipated default, it would be in the best interests of the Company for the
Company not to make any distribution required pursuant to Section 4.1(a)(i),
Section 4.1(a)(ii), or Section 4.1(a)(iii), and (iii) Insight notifies the
Principals in writing that it has made such determination, then Insight may
cause the Company not to make such distribution until such time as Insight shall
have determined that it is no longer in the best interests of the Company for
the Company not to make such distribution. To the extent, but only for so long
as, Insight is authorized by this Section 4.1(f) to cause the Company not to
make such distribution, then (i) neither Insight nor the Company shall have any
liability to the holder of the Preferred A Interest or the holder of the
Preferred B Interest as a result of the Company's failure to make any
distribution required pursuant to Section 4.1(a)(i), Section 4.1(a)(ii), or
Section 4.1(a)(iii), and (ii) the Company's failure to make such distribution
shall not constitute a Capital Default. The provisions of Section 4.1(b) shall
apply to the Company's failure to make any distribution required pursuant to
Section 4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) notwithstanding
Insight's rights under this Section 4.1(f) to cause the Company not to make any
such distribution.
4.2 Withholding.
All amounts withheld pursuant to the Code or any provision of any state
or local tax law with respect to any payment or distribution to the Company or
the Members shall be treated as amounts distributed to Members pursuant to
Section 4 for all purposes of this Agreement.
4.3 Redemption.
(a) Redemption of Preferred B Interest.
(i) Subject to Section 4.3(a)(iv), the Company
shall redeem the Preferred B Interest in full on the tenth anniversary of the
Closing Date. Subject to Section 4.3(a)(iv), the Company shall redeem the
Preferred B Interest in full if (A) the Discount Notes shall have been
accelerated, (B) the holders of the Discount Notes shall have commenced the
enforcement of any remedies available to them under any agreement under which
shares of Central and the LLC Mirror Notes (as defined in the offering
memorandum for the Discount Notes) are pledged as security for the Discount
Notes, (C) at least ten days shall have elapsed since the maturity or
acceleration of the Discount Notes, and (D) the holders of the Discount Notes,
acting on their own behalf or through the trustee of the Discount Notes, shall
have requested redemption of the Preferred B Interest in accordance with the
provisions of any agreement under which shares of Central and the LLC Mirror
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Notes (as defined in the offering memorandum for the Discount Notes) are pledged
as security for the Discount Notes.
(ii) The Company may redeem the Preferred B
Interest, in whole or in part, at any time at its option if (A) the Principals
shall have received an opinion of their legal counsel that the redemption of the
Preferred B Interest would not, in its opinion, increase by more than a de
minimis amount the likelihood of those adverse tax consequences to the
Principals that were intended to be avoided by the Senior Debt and the
Subordinated Debt, as it will exist at the Closing, and (B) the Borrowers would
be permitted under the Loan Documents to use the proceeds of the redemption of
the Preferred B Interest to repay or purchase the Subordinated Debt.
(iii) Except as expressly provided in this Section
4.3(a), the Company may not redeem the Preferred B Interest, in whole or in
part, without the consent of the Principals.
(iv) Notwithstanding Section 4.3(a)(i), the
Company shall not redeem the Preferred B Interest if the Company is required to
redeem the Preferred A Interest pursuant to Section 4.3(b)(i) and has not yet
done so.
(v) If the Company redeems all or part of the
Preferred B Interest pursuant to this Section 4.3(a), the redemption price shall
equal the sum of (A) the amount that would be distributed to the holder of the
Preferred B Interest with respect to the redeemed portion of the Preferred B
Interest pursuant to Section 10.2(d)(iii)(C) upon dissolution and liquidation of
the Company, assuming that the distribution pursuant to Section 10.2(d)(iii)(C)
was made on the date of such redemption and that the proceeds of the liquidation
of the Company were sufficient to permit the Company to make the full
distribution provided for in Section 10.2(d)(iii)(C), plus (B) the amount of any
premium required to be paid by the Borrowers to the holders of the Subordinated
Debt in connection with the Borrowers' use of the proceeds of the redemption of
the Preferred B Interest to repay or purchase the Subordinated Debt.
(b) Redemption of Preferred A Interest.
(i) The Company shall redeem the Preferred A
Interest in full if (A) the Senior Notes shall be payable in full (either upon
reaching their stated maturity or upon their acceleration), (B) the holders of
the Senior Notes shall have commenced the enforcement of any remedies available
to them under any agreement under which the Preferred A Interest is pledged as
security for the Senior Notes, (C) at least ten days shall have elapsed since
the maturity or acceleration of the Senior Notes, and (D) the holders of the
Senior Notes, acting on their own behalf or through the trustee of the Senior
Notes, shall have requested redemption of the Preferred A Interest in accordance
with the provisions of any agreement under which the Preferred A Interest is
pledged as security for the Senior Notes.
(ii) The Company may redeem the Preferred A
Interest, in whole or in part, at any time at its option if (A) the Principals
shall have received an opinion of their legal counsel that the redemption of the
Preferred A Interest would not, in its opinion, increase by more than a de
minimis amount the likelihood of those adverse tax consequences to the
Principals that
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were intended to be avoided by the Senior Debt and the Subordinated Debt, as it
will exist at the Closing, and (B) the Borrowers would be permitted under the
Loan Documents to use the proceeds of the redemption of the Preferred A Interest
to repay or purchase the Senior Debt.
(iii) Except as expressly provided in this Section
4.3(b), the Company may not redeem the Preferred A Interest, in whole or in
part, without the consent of the Principals.
(iv) If the Company redeems all or part of the
Preferred A Interest pursuant to this Section 4.3(b), the redemption price shall
equal the sum of (A) the amount that would be distributed to the holder of the
Preferred A Interest with respect to the redeemed portion of the Preferred A
Interest pursuant to Section 10.2(d)(iii)(A) and Section 10.2(d)(iii)(B) upon
dissolution and liquidation of the Company, assuming that the distributions
pursuant to Section 10.2(d)(iii)(A) and Section 10.2(d)(iii)(B) were made on the
date of such redemption and that the proceeds of the liquidation of the Company
were sufficient to permit the Company to make the full distributions provided
for in Section 10.2(d)(iii)(A) and Section 10.2(d)(iii)(B), plus (B) the amount
of any premium required to be paid by the Borrowers to the holders of the Senior
Debt in connection with the Borrowers' use of the proceeds of the redemption of
the Preferred A Interest to repay or purchase the Senior Debt.
4.4 Certain Remedies.
(a) As used in this Agreement, a "Capital Default" means:
(i) Except as provided in Section 4.1(f), the
failure of the Company to make any distribution required pursuant to Section
4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) on or before the
applicable Guaranteed Payment Date, Preferred A Distribution Date, or Preferred
B Distribution Date (other than a distribution pursuant to Section 4.1(a)(iii)
required to be made before the Preferred B PIK Termination Date), if on such
date the Company had Distributable Cash (taking into account any other
distributions pursuant to Section 4.1(a)(i), Section 4.1(a)(ii), or Section
4.1(a)(iii) that were made on such date and after giving effect to any
borrowings pursuant to Section 4.1(c)), in an amount at least equal to the
entire amount of such distribution; provided, however, that the failure to make
any such distribution shall not constitute a Capital Default (A) if a Person
designated by the Principals shall have become an additional Manager pursuant to
Section 4.4(b)(ii) and such Person shall have had the power to cause such
distribution to be made or (B) to the extent such distribution would violate any
covenant contained in any agreement or other instrument, including any note or
indenture, evidencing any indebtedness of the Company to a Person that is not an
Affiliate of either Member or pursuant to which any such indebtedness of the
Company exists or is outstanding; or
(ii) The redemption of the Preferred A Interest
or the Preferred B Interest in violation of Section 4.3; provided, however, that
such redemption shall not constitute a Capital Default if a Person designated by
the Principals shall have become an additional Manager pursuant to Section
4.4(b)(ii) and such Person shall have caused such redemption to occur; or
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(iii) The willful and intentional breach by
Insight of any of its obligations under Section 3.5.
(b) Upon the occurrence of a Capital Default:
(i) Insight shall indemnify, defend, and hold
harmless Central, each other Borrower, and each of the Principals, from any
liability, loss, or damage incurred by any such Person, 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, and
including any tax liabilities incurred as a result of the receipt of any
indemnification payment under this Section 4.4(b)(i), that either (A) arise out
of or result from such Capital Default or (B) to the extent such Capital Default
consists of an action taken to modify the structure of the Senior Debt or the
Subordinated Debt, arise out of or result from any failure of the Senior Debt
and the Subordinated Debt to prevent those adverse tax consequences to the
Principals that were intended to be avoided by the Senior Debt and the
Subordinated Debt, as it will exist at the Closing. Insight acknowledges and
agrees that any Capital Default could result in significant tax liabilities
being incurred by the Principals, and that such tax liabilities are included in
the possible damages for which the Principals would be entitled to indemnity
under this Section 4.4(b)(i).
(ii) Subject to the receipt of any required
consents, approvals, waivers, or authorizations of governmental authorities, (A)
the number of Representatives constituting the Management Committee shall be
increased to six, three of which shall be appointed by holders of a majority of
the outstanding Voting Interests and three of which shall be appointed by the
Principals, and (B) a Person designated by the Principals shall become an
additional Manager of the Company and shall have the authority to exercise, to
the same extent as Insight, all powers designated in this Agreement as powers of
the Manager or delegated to the Manager by the Management Committee, including
the power to cause distributions to be made to the Members in accordance with
Section 4.1(a)(i), Section 4.1(a)(ii), and Section 4.1(a)(iii) or to cause the
Preferred A Interest or the Preferred B Interest to be redeemed pursuant to
Section 4.3.
SECTION 5. ALLOCATIONS OF PROFITS AND LOSSES
5.1 Allocations of Net Profit and Net Loss.
(a) Allocations of Net Profit. For purposes of maintaining
Capital Accounts, except as otherwise provided in this Agreement, Net Profit for
each taxable year (or portion thereof) shall be allocated to the Members as
follows:
(i) First, to the Members to reverse any
allocations of Net Losses to the Members pursuant to Section 5.1(b)(iii) and
Section 5.1(b)(ii) (in reverse order to the order in which such Net Losses were
allocated to the Members) to the extent not previously reversed under this
Section 5.1(a)(i); and
(ii) Thereafter, to the Members holding Common
Interests in proportion to their Percentage Interests.
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(b) Allocations of Net Loss. Net Loss for each taxable year
(or portion thereof) shall be allocated to the Members as follows:
(i) First, to the Members in proportion to
their Percentage Interests; provided, however, that no allocation pursuant to
this Section 5.1(b)(i) shall reduce a Member's Adjusted Capital Account balance
below zero;
(ii) Second, to the Members in proportion to
their positive Adjusted Capital Account balances until each Member's Adjusted
Capital Account balance is at zero; and
(iii) Thereafter, to all Members in proportion to
their Percentage Interests.
5.2 Special Provisions Regarding Allocations of Income and Loss.
The following special allocations for purposes of maintaining Capital
Accounts shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of
this Section 5, if there is a net decrease in Partnership Minimum Gain for any
Fiscal Year, each Member shall be specially allocated items of Company income
and gain for such Fiscal Year (and if necessary for succeeding Fiscal Years) in
an amount equal to such Member's share of the net decrease in Partnership
Minimum Gain, determined in accordance with Treasury Regulations Section
1.704-2(g). Allocations made pursuant to the preceding sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items of Company income and gain to be allocated pursuant
to this Section 5.2(a) shall be determined in accordance with Treasury
Regulations Section 1.704-2(f)(6) and Treasury Regulations Section
1.704-2(j)(2). The amount of Partnership Minimum Gain shall be determined in
accordance with Treasury Regulations Section 1.704-2(d). This Section 5.2(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. Except as otherwise
provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Section 5 except Section 5.2(a), if during any Fiscal
Year there is a net decrease in Partner Nonrecourse Debt Minimum Gain, each
Member that has 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 shall be allocated items of Company income and
gain for the Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal
to that Member's share of the net decrease in the Partner Nonrecourse Debt
Minimum Gain (determined in accordance with Treasury Regulations Section
1.704-2(i)(4)). Allocations pursuant to the preceding sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items of Company income and gain to be allocated pursuant
to this Section 5.2(b) shall be determined in accordance with Treasury
Regulations Section 1.704-2(i)(4) and Treasury Regulations Section
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1.704-2(j)(2). The amount of Partner Nonrecourse Debt Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(i)(3). This
Section 5.2(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) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated between the Members in
proportion to their Percentage Interests.
(d) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member that bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulations Section 1.704-2(i).
(e) Qualified Income Offset. If either Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704- 1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Adjusted Capital Account of
such Member as quickly as possible; provided, however, that an allocation
pursuant to this Section 5.2(e) shall be made if and only to the extent that
such Member would have an Adjusted Capital Account after all other allocations
provided for in this Section 5 have been tentatively made as if this Section
5.2(e) were not in this Agreement.
(f) Curative Allocations. The allocations set forth in the
foregoing provisions of this Section 5.2 (the "Regulatory Allocations") are
intended to comply with certain requirements of the Treasury Regulations. It is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss, or deduction
pursuant to this Section 5.2. Therefore, notwithstanding any other provision of
this Section 5 (other than the Regulatory Allocations), the Company shall make
such offsetting special allocations of Company income, gain, loss, or deduction
in whatever manner that the Management Committee determines is appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not in this Agreement.
In exercising its discretion under this Section 5.2(f), the Management Committee
shall take into account future Regulatory Allocations under Section 5.2(a) and
Section 5.2(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 5.2(c) and Section 5.2(d).
(g) Recharacterization of Payments. If any payments or
expenses deducted for federal income tax purposes by a Member are
recharacterized by a final determination of the Internal Revenue Service as
nondeductible contributions to the Company, any corresponding items of loss or
deduction available to the Company shall be allocated to such Member so that, to
the extent possible, such Member has the same tax consequences as it would have
had if such payments or expenses had been deductible by such Member.
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(h) Allocations with Respect to Preferred A Interest. There
shall be allocated to the holder of the Preferred A Interest an amount of gross
income of the Company for any taxable year equal to the cumulative distributions
made with respect to the Preferred A Interest pursuant to Section 4.1(a)(ii)
(including any late payments on such distributions pursuant to Section
4.1(b)(ii)) in such taxable year.
(i) Allocations with Respect to Preferred B Interest. There
shall be allocated to the holder of the Preferred B Interest an amount of gross
income of the Company for any taxable year equal to the sum of (A) cumulative
distributions made with respect to the Preferred B Interest pursuant to Section
4.1(a)(iii) (including any late payments on such distributions pursuant to
Section 4.1(b)(iii)) in such taxable year and (B) the cumulative amount of
increases in the Preferred B Capital Amount pursuant to Section 4.1(a)(iii)
occurring during such taxable year.
(j) Allocations to Central.
(i) There shall be allocated to Central an
amount of gross income of the Company for any taxable year equal to $513,400
(pro-rated for any taxable year having less than 365 days), but only to the
extent that the cumulative allocations made under this Section 5.2(j)(i) (in all
taxable years) do not exceed $4,107,200.
(ii) There shall be allocated to Central an
amount of gross income of the Company for any taxable year equal to $161,300
(pro-rated for any taxable year having less than 365 days), but only to the
extent that the cumulative allocations made under this Section 5.2(j)(ii) (in
all taxable years) do not exceed $1,613,000.
(k) Allocations to Manager. There shall be allocated to the
Manager an amount of gross income of the Company for any taxable year equal to
the cumulative distributions made to the Manager pursuant to Section 4.1(a)(v)
during such taxable year.
(l) Amortization Deductions Attributable to Certain Intangible
Assets. Amortization deductions attributable to intangible assets contributed to
the Company by Central that have an initial Gross Asset Value in excess of
initial adjusted basis for federal income tax purposes shall be allocated as
follows: (i) in any taxable year, amortization deductions equal to the
amortization deductions for income tax purposes available with respect to such
assets shall be allocated to Insight, (ii) in any taxable year, amortization
deductions in excess of amortization deductions for income tax purposes shall be
allocated to Central, provided that the cumulative allocations made to Central
under this clause shall not exceed the initial Gross Asset Value of such assets
reduced by $30 million, provided further that no allocation pursuant to this
clause shall reduce Central's Adjusted Capital Account balance below zero, (iii)
thereafter, all amortization deductions in respect of such assets shall be
allocated to Insight, provided that no allocation pursuant to this clause shall
reduce Insight's Adjusted Capital Account balance below zero, and (iv) any
remaining amortization deductions available with respect to such assets shall be
allocated to Central to the extent of Central's positive Adjusted Capital
Account balance and thereafter to the Members in accordance with their
Percentage Interests. Any "book-up" or recapture of the amortization
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deductions described in the preceding sentence shall be allocated to the Member
to which the previously claimed deduction was allocated.
(m) Allocations Upon Liquidation. Notwithstanding anything to
the contrary herein, upon a liquidation of the Company, allocations of Net
Profit and Net Loss, and if necessary, of gross income and deductions, shall be
made so that, after such allocations have been made, the Capital Accounts of the
Members will equal as closely as possible the amounts to be distributed to the
Members pursuant to Section 10.2(d)(iii), with distributions under Section
10.2(d)(iii)(E) made in proportion to each Member's Percentage Interests.
5.3 Section 754 Adjustments.
To the extent any adjustment to the adjusted tax basis of any asset of
the Company pursuant to Code Section 734(b) or Code Section 743(b) is required,
pursuant to Treasury Regulations Section 1.704- 1(b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such gain or loss shall be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
section of the Treasury Regulations. An election under Code Section 754 shall be
made by the Company only with the consent of the Principals.
5.4 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income
tax purposes, (i) each item of income, gain, loss and deduction shall be
allocated between the Members in the same manner as its correlative items of
"book" income, gain, loss or deduction is allocated pursuant to Section 5.1,
Section 5.2, and Section 5.3, and (ii) each tax credit shall be allocated to the
Members in the same manner as the receipt or expenditure giving rise to such
credit is allocated pursuant to Section 5.1, Section 5.2, and Section 5.3.
(b) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated between the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its initial Gross Asset Value. The Company shall use the
"traditional method" of making Code Section 704(c) allocations (as described in
Treasury Regulations Section 1.704-3(b)).
(c) If the Gross Asset Value of any asset of the Company is
adjusted pursuant to paragraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Treasury Regulations thereunder.
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(d) Any elections or other decisions relating to allocations
described in Section 5.4(b) and Section 5.4(c) shall be made by the Management
Committee in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to Section 5.4(b) and Section 5.4(c) are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, either Member's Capital Account
or share of Net Profit, Net Loss, other items, or distributions pursuant to any
provision of this Agreement.
5.5 Allocations Following a Transfer of Membership Interest.
If a Membership Interest is transferred in accordance with Section 9 of
this Agreement, Net Profit and Net Loss shall be allocated between the periods
before and after the transfer by the interim closing of the Company books method
set forth in Treasury Regulation Section 1.706-1(c)(2)(ii). As of the date of
such transfer, the transferee shall succeed to the Capital Account of the
transferor with respect to the transferred Membership Interest. This paragraph
shall apply for purposes of computing a Member's Capital Account and for federal
income tax purposes.
SECTION 6. AUTHORITY OF THE MANAGER; OTHER
MATTERS AFFECTING MANAGER
6.1 Authority of Manager.
The Manager agrees that, except as otherwise expressly provided herein,
the Manager acting alone shall not give any consent to any matter or take any
other action as the Manager, including acting on behalf of or binding the
Company with respect to any matter in respect of which approval by the
Management Committee or the Members is required by the provisions of this
Agreement or the Act, unless such consent, matter, or other action shall first
have been adopted or approved by the Management Committee or the Members, as the
case may be, or authority to consent to such matter or to take such other action
shall have been expressly delegated to the Manager by the Management Committee
or the Members, as the case may be, in each case in accordance with the
provisions of this Agreement or the Act as applicable.
6.2 Resignation as Manager.
(a) Insight may not resign as the Manager without the consent
of holders of a majority of the outstanding Voting Interests and the consent of
the Principals (except in the case of a Transfer of all of Insight's Membership
Interest that is permitted by this Agreement, including a Transfer pursuant to
Section 9.11, where the Assignee of Insight's Membership Interest has been
admitted as a substitute Member in accordance with Section 9.3). If holders of a
majority of the outstanding Voting Interests and the Principals consent to such
resignation, the Company shall dissolve in accordance with the provisions of
Section 10 unless, within ninety days after the resignation of Insight as the
Manager, all the Members and the Principals elect to continue the business of
the Company and agree to the appointment, effective as of the date of the
resignation of Insight as the Manager, of one or more new Managers.
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(b) Any change in the identity of the Manager shall be subject
to and conditioned upon receipt of all necessary governmental approvals and
other material third-party consents.
(c) Without limiting any other rights or remedies that the
Company or Central may have at law or in equity, upon any resignation by Insight
as the Manager in violation of this Agreement, then, notwithstanding any other
provision of this Agreement to the contrary, no consent of Insight required
under any provision of this Agreement shall any longer be required and Central
shall be entitled to grant all such consents and take all actions relating to
the Company and its business.
6.3 Tax Matters Member.
(a) The Manager is hereby designated as the Tax Matters Member
of the Company, as provided in Treasury Regulations pursuant to Code Section
6231 and analogous provisions of state law. Each Member, by the execution of
this Agreement, consents to such designation of the Tax Matters Member and
agrees to execute, certify, acknowledge, deliver, swear to, file, and record at
the appropriate public offices such documents as may be necessary or appropriate
to evidence such consent.
(b) The Manager, as the Tax Matters Member, is authorized to
represent the Company before taxing authorities and courts in tax matters
affecting the Company and the Members in their capacity as Members and is
entitled to take any actions on behalf of the Company in any such tax
proceedings that the Manager, in its reasonable business judgment, deems to be
in the best interests of the Company and the Members, except that, without the
written consent of Central and the Principals, the Manager shall not extend the
statute of limitations for assessment of tax deficiencies against the Members
with respect to adjustments to the Company's federal, state, and local tax
returns, agree to any deficiency or other adjustment of any kind that adversely
affects Central or any of the Principals, make any material tax elections, or
execute any agreements or other documents relating to or affecting any tax
matters that are binding on the Company or Central or any of the Principals;
provided, however, that intangible assets contributed to the Company by Central
that have an initial Gross Asset Value in excess of their initial adjusted basis
for federal income tax purposes shall be amortized over a 25-year period.
(c) To the extent and in the manner provided by applicable law
and Treasury Regulations, the Tax Matters Member shall furnish the name,
address, profits interest, and taxpayer identification number of each Member and
any Assignee to the Secretary of the Treasury or his delegate (the "Secretary").
(d) The Tax Matters Member shall notify each Member and each
Principal of any audit that is brought to the attention of the Tax Matters
Member by notice from the Internal Revenue Service, and shall forward to each
Member and each Principal copies of any written notices, correspondence,
reports, or other documents received by the Tax Matters Member in connection
with such audit within ten Business Days following its notification by the
Internal Revenue Service or its receipt, as the case may be. The Tax Matters
Member shall provide each Member and each Principal with reasonable advance
notice of, and shall afford each Member and each Principal the
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right to participate in, any administrative proceedings or other material
discussions with the Internal Revenue Service, including any closing conference
with the examiner and any appeals conference, relating to the Company.
(e) The Tax Matters Partner shall, at the Company's expense,
cause all federal, state, local, and other tax returns and reports (including
amended returns) required to be filed by the Company or any Subsidiary to be
prepared and timely filed with the appropriate authorities. The Tax Matters
Partner shall cause all income or franchise tax returns or reports required to
be filed by the Company or any Subsidiary to be sent to each Member and each
Principal for review at least five Business Days prior to filing, and the Tax
Matters Partner shall afford each Member and each Principal a reasonable
opportunity to comment on any such return prior to filing.
(f) Any Member that receives a notice of an administrative
proceeding under Code Section 6223 relating to the Company shall promptly notify
the Tax Matters Member of the treatment of any Company item on such Member's
federal income tax return that is or may be inconsistent with the treatment of
that item on the Company's return.
(g) Any Member that enters into a settlement agreement with
the Secretary with respect to any Company item shall notify the Tax Matters
Member of such agreement and its terms within thirty days after its date, and
the Tax Matters Member shall notify each other Member and each Principal of the
settlement agreement within thirty days of such notification.
6.4 Reimbursement of Expenses.
(a) The Company shall reimburse the Manager for all direct,
out-of-pocket expenses incurred by or on behalf of the Manager that directly
relate to its management of the business and operations of the Company,
including any such expenses incurred in connection with the management of the
Shareholders pursuant to the management agreements between the Shareholders and
Insight; provided, however, that the Manager shall not be entitled to
reimbursement from the Company for corporate overhead (including employee
bonuses and health, welfare, retirement, and other employee benefits and
overhead expenses of its corporate office management, development, internal
accounting, and finance management personnel).
(b) The Company shall reimburse the Borrowers for all direct,
out-of-pocket expenses incurred by or on behalf of the Borrowers in complying
with the terms of the Loan Documents (excluding any payment of principal or
interest under the Senior Debt or the Subordinated Debt). The Company shall pay,
or shall reimburse the Borrowers for, any amounts required to be paid by any
Borrower as a result of any indemnification or reimbursement obligation arising
under any of the Loan Documents or otherwise arising in connection with the
offer or sale of any of the Senior Debt or the Subordinated Debt.
Notwithstanding the foregoing, no Borrower shall be entitled to reimbursement
from the Company for costs and expenses incurred in connection with maintaining
the legal existence of any Borrower, preparing and filing tax returns and
reports on behalf of the Borrower, or any other similar recurring expenses.
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SECTION 7. STATUS OF MEMBERS
7.1 No Management and Control.
Except as expressly provided in this Agreement, neither Member (other
than the Manager) shall take part in or interfere in any manner with the
control, conduct, or operation of the Company or have any right or authority to
act for or bind the Company or to vote on matters relating to the Company.
7.2 Limited Liability.
Neither Member shall be bound by or personally liable for the expenses,
liabilities, or obligations of the Company. In no event shall either Member be
required to make up a deficiency in its Capital Account upon the dissolution and
termination of the Company.
7.3 Return of Distributions of Capital.
A Member may, under certain circumstances, be required by law to return
to the Company, for the benefit of the Company's creditors, amounts previously
distributed. Neither Member shall be obligated by this Agreement to pay those
distributions to or for the account of the Company or any creditor of the
Company. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, a Member must return or pay
over any part of those distributions, the obligation shall be that of such
Member alone and not of the other Member. Any payment returned to the Company by
a Member or made directly by a Member to a creditor of the Company shall be
deemed a Capital Contribution by such Member.
7.4 Specific Limitations.
Neither Member shall have the right or power to (a) resign as a Member
(except in the case of a Transfer of all of a Member's Membership Interest that
is permitted by this Agreement, including a Transfer pursuant to Section 9.11,
where the Assignee of such Member's Membership Interest has been admitted as a
substitute Member in accordance with Section 9.3, and except as provided in
Section 6.2(a) with respect to the Manager), (b) reduce its Capital Contribution
except as a result of the dissolution of the Company or as otherwise provided by
law, or (c) demand or receive property other than cash in return for its Capital
Contribution. Except as otherwise set forth in this Agreement or in any
agreement permitted to be entered into under this Agreement with respect to the
purchase, redemption, retirement, or other acquisition of Membership Interests,
neither Member shall have priority over the other Member either as to the return
of its Capital Contribution or as to Net Profit, Net Loss, or distributions.
Other than upon the termination and dissolution of the Company as provided by
this Agreement, and except has provided in Section 4.3, there has been no time
agreed upon when the Capital Contribution of either Member will be returned.
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7.5 Issuance of Membership Interests.
Subject to any approval that may be required by Section 8.5(b) and, if
such approval is required, in accordance with the terms thereof, the Manager may
issue additional Membership Interests to any Person and may admit to the Company
as additional Members the Persons acquiring such Membership Interests, if such
Persons were not previously admitted as Members. The Persons acquiring such
Membership Interests shall have the rights and be subject to the obligations
attributable to such Membership Interests in the form issued to them. A Person
admitted as a new Member shall only be entitled to distributions and allocations
of Net Profit and Net Loss attributable to the period beginning on the effective
date of its admission to the Company, and the Company shall attribute Net Profit
and Net Loss to the period before the effective date of the admission of a new
Member and to the period beginning on the effective date of the admission of a
new Member by the closing of the books method.
SECTION 8. MANAGEMENT OF THE COMPANY
8.1 Creation of Management Committee.
(a) Except as otherwise expressly provided in this Agreement,
the business and operations of the Company shall be managed by a Management
Committee consisting of four Representatives, three of which shall be appointed
by holders of a majority of the outstanding Voting Interests and one of which
shall be appointed by the Principals. The initial Representatives are specified
in Schedule II.
(b) All decisions of the Management Committee shall be by
resolution duly adopted in accordance with the provisions of this Agreement. The
Management Committee may delegate such general or specific authority to the
Manager and the officers of the Company as it from time to time considers
desirable, and the Manager and the officers of the Company may exercise the
authority granted to them, subject to any restraints or limitations imposed by
the Management Committee and the provisions of Section 8.5 and any other express
provisions of this Agreement.
8.2 Appointment and Removal of Representatives.
(a) The Chairman and Secretary of the Management Committee
shall be chosen by the Management Committee.
(b) Holders of a majority of the outstanding Voting Interests
may vote at any time to remove any of the Representatives previously appointed
by the holders of a majority of the outstanding Voting Interests, with or
without cause, and may replace any Representative so removed, by sending notice
of such removal and replacement to the other Members and the Principals. The
Principals may at any time remove the Representative appointed by them, with or
without cause, and may replace the Representative so removed, by sending notice
of such removal and replacement to the Members. No Representative shall be
removed from office, with or without cause, other than as provided in the
preceding two sentences.
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(c) If any Representative is unwilling or unable to serve as
such or is removed from office, before the transaction of any other business by
the Management Committee, holders of a majority of the outstanding Voting
Interests, in the case of any Representative appointed by holders of a majority
of the outstanding Voting Interests, or the Principals, in the case of the
Representative appointed by the Principals, shall appoint a successor to such
Representative.
(d) No compensation of, or expenses incurred by, the
Representatives incident to their duties and responsibilities as such under this
Agreement shall be paid by, or charged to, the Company.
8.3 Meetings of the Management Committee.
The Management Committee shall hold one regular meeting each year at
such time and place as shall be determined by the Chairman of the Management
Committee. Special meetings of the Management Committee may be called at any
time by any Representative upon not less than three Business Days' prior notice
to the other Representatives, which may be waived by each Representative either
before or after the meeting. Except as otherwise determined by the Chairman of
the Management Committee, all special and regular meetings of the Management
Committee shall be held at the principal office of the Company.
8.4 Procedural Matters.
(a) Each Representative shall have one vote in all matters
presented to the Management Committee for decision or approval. At all meetings
of the Management Committee, except as otherwise expressly provided for in this
Agreement, the affirmative vote of a majority of the Representatives, present at
such meeting in person or by proxy, shall be required for all actions and
decisions of the Management Committee. If a majority of the Representatives are
not present in person or represented by proxy at any meeting, the
Representatives present may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a majority of the
Representatives shall be present or represented.
(b) Any notice of a special meeting of the Management
Committee shall state the purpose for which such meeting has been called.
(c) Each Representative entitled to vote at a meeting of the
Management Committee or to express consent to any action in writing without a
meeting or to express consent to any action pursuant to any other provision of
this Agreement may authorize another Representative or any individual reasonably
acceptable to the other Representatives to act for him by proxy. Any
Representative may designate another individual reasonably acceptable to the
other Representatives to act as the alternate of such Representative at any
meeting of the Management Committee.
(d) Any action required or permitted to be taken by the
Management Committee may be taken without a meeting if all Representatives
consent in writing to such action. Such consent shall have the same effect as a
vote of the Management Committee. Members of the
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Management Committee shall have the right to participate in a meeting of the
Management Committee by means of a conference telephone or similar
communications equipment by means of which all Representatives participating in
the meeting can hear each other and be heard, and such participation shall
constitute presence in person at the meeting.
(e) The Management Committee shall cause to be kept a book of
minutes of all of its meetings in which there shall be recorded the time and
place of each such meeting, whether regular or special, and if special, by whom
called, the notice thereof given, the names of those present, and the
proceedings thereof.
8.5 Matters Requiring Approval by the Principals.
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 the Principals, which may be
withheld by the Principals in their sole discretion, the Company shall not, and
neither the Manager nor the Management Committee shall have any authority to
cause the Company to, or cause or permit any Subsidiary to:
(a) enter into any transaction between the Company or any
Subsidiary and either Member or any Affiliate of either Member, unless such
transaction is on commercially reasonable terms;
(b) except for a Membership Interest issued in accordance with
Section 2.1(d)(4)(A) of the Contribution Agreement, issue any Membership
Interest or any option, warrant, or other debt or equity interest convertible
into or evidencing the right to acquire (whether or not for additional
consideration) any Membership Interest, unless:
(i) either (A) at least twenty-five percent of
the Membership Interests or other debt or equity interests so issued are issued
to Persons that are not Related Parties of Insight (for purposes of this Section
8.5(b), a "Related Party" of Insight means any Affiliate of Insight, any member,
partner, officer, director, shareholder, employee, or agent of Insight or of any
Affiliate of Insight, and any Person that has a material financial relationship
with Insight or any Affiliate of Insight), or (B) the Company has obtained and
delivered to Central and the Principals an opinion of an independent investment
banking firm of nationally recognized standing that the terms and conditions on
which such Membership Interests or other debt or equity interests are to be
issued are fair, from an economic standpoint, to the Company and the holders of
the outstanding Membership Interests; and
(ii) any of such Membership Interests or other debt
or equity interests that are issued to Persons that are Related Parties of
Insight are issued on the same terms and conditions as the Membership Interests
or other debt or equity interests that are issued to Persons that are not
Related Parties of Insight; and
(iii) the Company shall have afforded the Principals
or their designee (provided that such designee, if it is not Central, shall be
entirely owned, directly or indirectly, by
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one or more of the Principals and shall be owned, at least in part, directly or
indirectly, by Dennis McGillicuddy) the opportunity to acquire a portion of the
Membership Interests or other debt or equity interests so issued (other than any
Membership Interests or other debt or equity interests that are issued to
Persons that are not Related Parties of Insight) equal to a fraction, the
numerator of which is the number of Units assigned to the Common Interests held
by Central or otherwise held directly or indirectly by the Principals
immediately prior to such issuance and the denominator of which is the sum of
the number of Units assigned to all Common Interests held by Insight and Related
Parties of Insight prior to such issuance plus the number of Units assigned to
the Common Interests held by Central or otherwise held directly or indirectly by
the Principals immediately prior to such issuance;
(c) sell or otherwise dispose of, or cause or permit any
Subsidiary to sell or otherwise dispose of, any assets of the Company or any
Subsidiary that were contributed to the Company by Central or any assets of the
Company or any Subsidiary the initial adjusted tax basis of which is determined,
in whole in part, with reference to the adjusted tax basis of the assets
contributed by Central, except upon the liquidation and dissolution of the
Company in accordance with Section 10 and except for:
(i) sales and dispositions of assets that do not
involve the disposition of any of the Company's cable television subscribers;
and
(ii) any disposition of assets that does not,
together with all prior dispositions previously made by the Company, represent a
portion of the Company's business serving more than 1,000 cable television
subscribers in the aggregate;
(d) sell or otherwise dispose of, or cause or permit any
Subsidiary to sell or otherwise dispose of, any assets of the Company or any
Subsidiary if such sale or other disposition would trigger the right of any
holder of any of the Senior Debt or any of the Subordinated Debt to require that
any of such Senior Debt or Subordinated Debt be repaid, purchased, or redeemed;
(e) enter into any agreement restricting the ability of the
Company to make any distribution required to be made pursuant to Section
4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) or to redeem the Preferred
B Interest to the extent required by Section 4.3;
(f) liquidate or dissolve except in accordance with
Section 10; or
(g) do any act in contravention of this Agreement, the
Certificate of Formation of the Company, or the Act.
The parties acknowledge and agree that each provision of this Section
8.5 is intended to be a separate condition and that therefore, for example, a
sale or disposition described in Section 8.5(c) would require the consent of the
Principals under Section 8.5(c) even if such sale or other disposition did not
require the consent of the Principals under any other provision of this Section
8.5. The parties agree to negotiate in good faith and, if such negotiations are
successful, to enter into an amendment to this Agreement that would (a) permit
the Company to consummate transactions that
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are intended to qualify, in whole or in part, under Code Section 1031, so long
as, in the opinion of nationally-recognized tax counsel based on an appraisal
acceptable to the Principals, the aggregate federal, state, or local tax
liability of the Principals resulting from all such dispositions and any
dispositions made pursuant to Section 8.5(c)(ii) does not exceed $2,750,000, (b)
provide a means to allow the Principals to pay any federal, state, or local tax
liability in excess of $2,750,000 if any transaction that was intended to be
within the limitations in clause (a) ultimately generates a greater federal,
state, or local tax liability to the Principals than was originally
contemplated, (c) allocate any additional depreciation and amortization for tax
purposes and other economic factors resulting from the recognition of income or
gain in any transaction that was intended to qualify under Code Section 1031,
and (d) make additional changes to this Agreement consistent with the principles
underlying the amendments described in the foregoing clauses.
8.6 Permitted Transactions.
(a) Other Businesses. Nothing in this Agreement shall limit
the ability of either Member, any partner, Affiliate, or agent of either Member,
or any Representative to engage in or possess an interest in other business
ventures of any nature or description, independently or with others, whether
currently existing or hereafter created and whether or not competitive with or
advanced by the business of the Company. Neither the Company nor the other
Member shall have any rights in or to the income or profits derived therefrom,
nor shall either Member have any obligation to the other Member with respect to
any such enterprise or related transaction. The foregoing provisions shall not
impair or otherwise affect any limitation to which either Member is or may be
subject with respect to his business activities under any other agreement
between the Company and such Member.
(b) Dealings with the Company. Subject to Section 8.5(a), the
Company may, in the discretion of the Management Committee, contract with any
Person (including either Member or any Person that is an Affiliate of either
Member or in which either Member may be interested) for the performance of any
services that may reasonably be required to carry on the business of the
Company, and any such Person dealing with the Company, whether as an independent
contractor, agent, employee, or otherwise, may receive from others or from the
Company profits, compensation, commissions, or other income incident to such
dealings.
8.7 Other Management Matters.
(a) Central and the Shareholders as Affiliates of Insight. The
parties agree that each Shareholder shall be an Affiliate of Insight for
purposes of this Agreement so long as the management agreement between Insight
and such Shareholder remains in effect and that Central shall be an Affiliate of
Insight for purposes of this Agreement so long the management agreements between
Insight and Shareholders holding a majority of the outstanding shares of Central
remain in effect. Notwithstanding the foregoing or any other provision of this
Agreement, Insight shall not be in violation of any provision of this Agreement
restricting any action by its Affiliates with respect to any action taken by
Central or any Shareholder to the extent that such action was caused to be taken
by one or more of the Principals exercising authority reserved to the Principals
under the management agreements between Insight and Shareholders, and Insight
shall not be in violation of
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any provision of this Agreement requiring any action by its Affiliates with
respect to any action not taken by Central or any Shareholder to the extent that
such action was prevented from being taken by one or more of the Principals
exercising authority reserved to the Principals under the management agreements
between Insight and Shareholders.
(b) Programming and Other Discounts. Insight agrees to make
available to the Company the benefits of any currently existing programming or
equipment discounts or other similar beneficial arrangements that are available
to Insight Communications Company, L.P.
SECTION 9. ASSIGNMENT, TRANSFER, OR SALE OF
INTERESTS IN THE COMPANY
9.1 Limitations on Transfers.
(a) Except as provided in Section 9.1(b), neither Member may
sell, assign, transfer, or otherwise dispose of, or pledge, hypothecate, or
otherwise encumber all or any part of its Membership Interest (any such action,
a "Transfer"), whether voluntarily, involuntarily, or by operation of law,
unless approved by the other Member and the Principals. Notwithstanding the
approval of the other Member and the Principals to any Transfer by a Member, the
rights of any Assignee shall be subject at all times to the limitations set
forth in Section 9.2.
(b) The restrictions of Section 9.1(a) shall not apply and no
consent of the other Member or the Principals shall be required for:
(i) a Transfer to an Affiliate of the
transferring Member;
(ii) a redemption of the Preferred A Interest or
the Preferred B Interest pursuant to Section 4.3;
(iii) a Transfer pursuant to Section 9.7;
(iv) a sale of all or part of the Common Interest
of Insight if Insight complies with Section 9.6(a);
(v) a sale of all or part of the Common Interest
of Central in accordance with Section 9.6(a), Section 9.6(b), or Section 9.6(c);
or
(vi) a sale of Insight's Membership Interest to a
Person designated by the Principals pursuant to Section 9.11.
9.2 Assignee.
If the provisions of this Section 9 have been complied with, an
Assignee shall be entitled to receive distributions of cash or other property,
and allocations of Net Profit and Net Loss and of items of income, deduction,
gain, loss, or credit, from the Company attributable to the assigned
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Membership Interests from and after the effective date of the assignment, and
shall have the right to receive a copy of the financial statements required
herein to be provided the Members, but an Assignee shall have no other rights of
a Member herein, such as rights to any other information, an accounting,
inspection of books or records, or voting as a Member on matters required by
law, unless and until such Assignee is admitted as a substitute Member pursuant
to the provisions of Section 9.3. The Company and the Manager shall be entitled
to treat the assignor as the absolute owner of the Membership Interests in all
respects, and shall incur no liability for distributions, allocations of Net
Profit or Net Loss, or transmittal of reports and notices required to be given
to Members that are made in good faith to the assignor until the effective date
of the assignment, or, in the case of the transmittal of reports (other than the
financial statements referred to above) or notices, until the Assignee is so
admitted as a substitute Member. The effective date of an assignment shall be
the first day of the calendar month following the month in which the Manager has
received an executed instrument of assignment in compliance with this Section 9
or the first day of a later month if specified in the executed instrument of
assignment. The Assignee shall be deemed an Assignee on the effective date, and
shall be only entitled to distributions and allocations of Net Profit and Net
Loss attributable to the period beginning on the effective date of assignment.
The Company shall attribute Net Profit and Net Loss to the period before the
effective date of assignment and to the period beginning on the effective date
of assignment by the interim closing of the Company books method set forth in
Treasury Regulation Section 1.706-1(c)(2)(ii). Each Assignee will inherit the
balance of the Capital Account, as of the effective date of assignment, of the
assignor with respect to the Membership Interests assigned.
9.3 Substitute Members.
Any Assignee of Insight's Membership Interest pursuant to Section 9.11
shall be automatically admitted as a substitute Member. Any other Assignee may
not become a substitute Member unless all of the following conditions are first
satisfied:
(a) a duly executed and acknowledged written instrument of
assignment shall have been filed with the Company, specifying the Membership
Interests being assigned and setting forth the intention of the assignor that
the Assignee succeed to the assignor's interest as a substitute Member;
(b) the assignor and Assignee shall have executed and
acknowledged any other instruments that the Principals, in the case of a
Transfer by Insight, or Insight, in the case of any other Transfer, deems
necessary or desirable for substitution, including the written acceptance and
adoption by the Assignee of the provisions of this Agreement and the assumption
by the Assignee of all obligations of the assignor under this Agreement
(including, in the case of a Transfer by Insight, the obligations of Insight
under Section 3.5);
(c) except in the case of an assignment permitted by Section
9.1(b), the Principals, in the case of a Transfer by Insight, or Insight, in the
case of any other Transfer, shall have consented in writing to the admission of
the Assignee as a substitute Member, the granting of which may be withheld by
the Principals or Insight, as applicable, in their or its sole and absolute
discretion; and
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(d) the assignment to the Assignee shall have complied with
the other provisions of this Section 9.
9.4 Other Consents and Requirements.
Any Transfer must be in compliance with all requirements imposed by any
state securities administrator having jurisdiction over the Transfer and the
United States Securities and Exchange Commission and must not cause the Company
or any Subsidiary to be in violation of any cable television franchise, any
provision of the Communications Act of 1934, as amended, or any other law
subsequently enacted, or any rule, regulation, or policy of the Federal
Communications Commission 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.
9.5 Assignment Not In Compliance.
Any Transfer in contravention of any of the provisions of this Section
9 (whether voluntarily, involuntarily or by operation of law) shall be void and
of no effect, and shall neither bind nor be recognized by the Company.
9.6 Tag-Along and Drag-Along Rights.
(a) Tag-Along Rights. If Insight desires at any time to sell
to any other Person (the "Third-Party Purchaser") all or any part of any Common
Interest held by Insight, Insight shall send Central and the Principals a
written notice of the proposed sale and shall afford Central the opportunity to
sell to the Third-Party Purchaser, for the type of consideration provided in
Section 9.6(d), on terms equivalent as to purchase price per Unit (subject to
Section 9.6(g)) and otherwise identical (subject to Section 9.6(f)) to those
applicable to the sale of the Common Interest proposed to be sold by Insight,
that percentage of its Common Interest equal to a fraction, the numerator of
which is the number of Units assigned to the Common Interest proposed to be sold
by Insight and the denominator of which is the number of Units assigned to all
of the Common Interests of Insight. For purposes of this Section 9.6(a), Central
shall have been afforded the opportunity to sell its Common Interest if Central
and the Principals shall have received, at least thirty days prior to the sale
by Insight, the notice from Insight referred to in the first sentence of this
Section 9.6(a), specifying the material terms of the proposed sale, the purchase
price and other terms and conditions of payment, and the anticipated date on or
about which the proposed sale is to be made, and accompanied by an offer from
the Third-Party Purchaser to purchase Central's Common Interest on the terms
described in this Section 9.6(a). Central shall accept the offer to sell its
Common Interest pursuant to this Section 9.6(a) if the Principals so elect, and
Insight's notice to Central and the Principals pursuant to this Section 9.6(a)
shall specify the deadline before which the Principals must notify Insight of
their election that Central sell any of its Common Interest pursuant to this
Section 9.6(a), which deadline may not be before the later of (1) the fifteenth
day after the Principals' receipt
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of Insight's notice or (2) the fifth day after the amount of consideration
allocable to Insight's Common Interest is agreed to between Insight and the
Principals or otherwise determined pursuant to Section 9.6(e). Any purchase and
sale of any part of Central's Common Interest pursuant to this Section 9.6(a)
shall be conditioned on the consummation of the purchase and sale of Insight's
Common Interest to which this Section 9.6(a) applies.
(b) Drag-Along Rights. In connection with any sale by Insight
of all or any part of its Common Interests, Insight may elect to require that
Central sell (and, upon such election, Central shall be obligated to sell) to
the Third-Party Purchaser, for the type of consideration provided in Section
9.6(d), on terms equivalent as to purchase price per Unit (subject to Section
9.6(g)) and otherwise identical (subject to Section 9.6(f)) to those applicable
to the sale by Insight of its Common Interest, that percentage of its Common
Interest equal to a fraction, the numerator of which is the number of Units
assigned to the Common Interest to be sold by Insight and the denominator of
which is the number of Units assigned to all of the Common Interests of Insight.
Notwithstanding the foregoing, Insight's right to elect that Central sell all or
part of its Common Interest and Central's obligation to sell all or part of its
Common Interest shall be subject to any required consent or approval of the
holders of the Senior Debt or the holders of the Subordinated Debt and to any
liens securing the Senior Debt, the Subordinated Debt, or any other obligations
and liabilities arising under the Loan Documents. Any purchase and sale of all
or part of Central's Common Interest pursuant to this Section 9.6(b) shall be
conditioned on the consummation of the purchase and sale of Insight's Common
Interest to which this Section 9.6(b) applies.
(c) Put and Call of Central's Common Interest.
(i) Prior to the consummation of any transaction
or series of related transactions that would result in Insight ceasing to be
controlled, directly or indirectly, by one or more individuals who, on the date
of this Agreement, collectively control Insight (other than a transaction to
which Section 9.6(a) applies), Insight shall send Central and the Principals a
written notice setting forth the material terms of the proposed transaction and
setting forth the purchase price that would be paid for Central's Common
Interest if the Principals make an election pursuant to this Section 9.6(c), as
determined in accordance with Section 9.6(e). Within fifteen days after their
receipt of such notice, the Principals may elect, by delivering written notice
of their election to Insight, to require that Insight purchase all of Central's
Common Interest and that Central sell all of its Common Interest to Insight, for
the purchase price determined pursuant to Section 9.6(e) (subject to Section
9.6(g)) and otherwise on terms comparable (subject to Section 9.6(f)) to those
applicable to the transaction involving Insight to which this Section 9.6(c)
applies. Upon an election by the Principals pursuant to this Section 9.6(c),
Insight shall be obligated to purchase and Central shall be obligated to sell
all of Central's Common Interest. Insight's notice to Central and the Principals
pursuant to this Section 9.6(c)(i) shall specify the deadline before which the
Principals must notify Insight of their election to require that Central sell
its Common Interest pursuant to this Section 9.6(c), which deadline may not be
before the later of (A) the fifteenth day after the Principals' receipt of
Insight's notice or (B) the fifth day after the amount of consideration
allocable to Insight's Common Interest is agreed to between Insight and the
Principals or otherwise determined pursuant to Section 9.6(e).
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(ii) In connection with the consummation of any
transaction or series of related transactions that would result in Insight
ceasing to be controlled, directly or indirectly, by one or more individuals
who, on the date of this Agreement, collectively control Insight (other than a
transaction to which Section 9.6(a) applies), Insight may elect to require that
Central sell (and, upon such election, Central shall be obligated to sell) to
Insight all of Central's Common Interest for the purchase price determined
pursuant to Section 9.6(e) (subject to Section 9.6(g)) and otherwise on terms
comparable (subject to Section 9.6(f)) to those applicable to the transaction
involving Insight to which this Section 9.6(c) applies. Notwithstanding the
foregoing, Insight's right to elect that Central sell its Common Interest and
Central's obligation to sell its Common Interest shall be subject to any
required consent or approval of the holders of the Senior Debt or the holders of
the Subordinated Debt and to any liens securing the Senior Debt, the
Subordinated Debt, or any other obligations and liabilities arising under the
Loan Documents.
(iii) Any purchase and sale of Central's Common
Interest pursuant to this Section 9.6(c) shall be conditioned on the
consummation of the transaction involving Insight to which this Section 9.6(c)
applies.
(iv) The closing of the purchase and sale of
Central's Common Interest pursuant to this Section 9.6(c) shall occur
concurrently with the closing of the transaction that results in Insight ceasing
to be controlled, directly or indirectly, by one or more individuals who, on the
date of this Agreement, collectively control Insight. At the closing of the
purchase and sale of Central's Common Interest pursuant to this Section 9.6(c),
Insight shall pay or cause to be paid to Central the purchase price in the form
provided in Section 9.6(d), and Central will convey to Insight all of its Common
Interest free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, and encumbrances of any nature
whatsoever, other than the rights granted to other parties under this Agreement
and liens securing the Senior Debt, the Subordinated Debt, and any other
obligations and liabilities arising under the Loan Documents.
(d) Consideration for Purchase of Central's Common
Interest; Tax Loans.
(i) In case of a sale of all or part of
Central's Common Interest pursuant to Section 9.6(a), Section 9.6(b), or Section
9.6(c), the purchase price shall be paid through the delivery to Central of
property (including cash) of the same kind, and in the same proportions, as that
received by Insight or any direct or indirect owner of Insight in connection
with the transaction that triggered the right or obligation of Central to sell
all or part of Central's Common Interest pursuant to Section 9.6(a), Section
9.6(b), or Section 9.6(c). For purposes of this Section 9.6(d)(i) and Section
9.6(e), any liabilities assumed by the purchaser as part of the transaction that
triggered the right or obligation of Central to sell all or part of Central's
Common Interest pursuant to Section 9.6(a), Section 9.6(b), or Section 9.6(c)
(whether assumed directly or indirectly as part of the acquisition of the
outstanding equity interests in any entity, other than liabilities of the
Company) shall be treated as cash received by the selling Person. Any property
other than cash received by Central pursuant to this Section 9.6(d)(i) shall
have the same rights as to liquidity and marketability, including, in the case
of securities, registration rights, as the property received by Insight or any
direct or indirect owner of Insight.
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(ii) To the extent that (A) the amount of cash plus
the fair market value of any marketable securities received by Central as
consideration for the sale of Central's Common Interest pursuant to Section
9.6(b) or Section 9.6(c)(ii), is less than the tax liabilities of Central, the
Principals, and their respective Affiliates resulting from the sale of Central's
Common Interest, and (B) Central (or any Person, including any Principal, to
whom the consideration for the sale of Central's Common Interest is distributed
by Central and the Shareholders) is unable, after using commercially reasonable
efforts, to borrow the amount of such tax liabilities on the terms described in
clauses (1), (2), and (3) of the last sentence of this Section 9.6(d)(ii) with
respect to loans from Insight and at an interest rate not materially higher than
that described in clause (4) of the last sentence of this Section 9.6(d)(ii)
with respect to loans from Insight, then Insight agrees to lend to Central the
amount of such tax liabilities (less any amount that Central was able to borrow
from a lender other than Insight). Any such loan from Insight shall (1) be non-
recourse to the borrower, (2) secured only by any consideration received by
Central as consideration for the sale of its Common Interest, other than cash,
marketable securities, and any security given to secure Central's borrowings
pursuant to this Section 9.6(d)(ii) from a lender other than Insight, (3) not
require that it be repaid prior to such time as Central (or any successor) is
able to liquidate the consideration (other than cash and marketable securities)
received for the sale of Central's Common Interest, and (4) bear interest at the
weighted average cost of funds of Insight Communications Company, L.P. and its
subsidiaries for their secured debt or, if Insight Communications Company, L.P.
and its subsidiaries have no secured debt, for their senior debt.
(e) Allocation of Consideration. If Insight (i) sends a notice
to Central and the Principals pursuant to Section 9.6(a) or makes an election
pursuant to Section 9.6(b) with respect to any proposed sale to a Third-Party
Purchaser that contemplates a sale of all or part of Insight's Common Interest
in conjunction with other assets or (ii) sends a notice to Central pursuant to
Section 9.6(c)(i), Insight and the Principals shall cause the amount of
consideration proposed to be paid in any such transaction that is allocable to
Insight's Common Interest to be determined. Unless Insight and the Principals
otherwise agree (either as to the applicable value or as to an alternative
method of determining such value, including the use of a single appraiser agreed
upon between Insight and the Principals), the amount of consideration allocable
to all or part of Insight's Common Interest shall be determined as provided
below in this Section 9.6(e):
(i) Insight shall deliver to the Principals a
notice stating that Insight intends to send a notice or make an election to
which this Section 9.6(e) applies and identifying an appraiser ("Insight's
Appraiser") who has been retained by the Company to allocate the total
consideration proposed to be paid in such transaction pursuant to this Section
9.6(e). Within ten business days after their receipt of Insight's notice
pursuant to the preceding sentence, the Principals shall send a notice to
Insight identifying a second appraiser ("Central's Appraiser") who shall also be
retained by the Company to make such allocation pursuant to this Section 9.6(e).
(ii) Insight's Appraiser and Central's Appraiser
shall submit their independent determinations of the amount of consideration
allocable to the portion of Insight's Common Interest proposed to be transferred
(directly or indirectly) within thirty days after the date on which Central's
Appraiser is retained. If the respective determinations of Insight's Appraiser
and Central's Appraiser vary by less than ten percent of the higher
determination, the amount of
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consideration allocable to the portion of Insight's Common Interest proposed to
be transferred (directly or indirectly) shall be the average of the two
determinations.
(iii) If the respective determinations of Insight's
Appraiser and Central's Appraiser vary by ten percent or more of the higher
determination, the two appraisers shall promptly designate a third appraiser
(the "Third Appraiser"), who shall also be retained by the Company to make an
allocation or conduct an appraisal pursuant to this Section 9.6(e). Insight's
Appraiser and Central's Appraiser shall be instructed not to, and neither Member
nor any Affiliate of either Member shall, provide any information to the Third
Appraiser as to the determinations of Insight's Appraiser and Central's
Appraiser or otherwise influence the Third Appraiser's determination in any way.
The Third Appraiser shall submit its determination of the amount of
consideration allocable to the portion of Insight's Common Interest proposed to
be transferred (directly or indirectly) within thirty days after the date on
which the Third Appraiser is retained. If a Third Appraiser is retained, the
amount of consideration allocable to the portion of Insight's Common Interest
proposed to be transferred (directly or indirectly) shall equal the average of
the two closest of the three determinations, except that, if the difference
between the highest and middle determinations is no more than 105% and no less
than 95% of the difference between the middle and lowest determinations, then
the amount of consideration allocable to the portion of Insight's Common
Interest proposed to be transferred (directly or indirectly) shall equal the
middle determination.
(iv) Any appraiser retained pursuant to this
Section 9.6(e) shall be nationally recognized as being qualified and experienced
in the appraisal of cable television systems, assets comparable to Insight's
Common Interest, any other assets proposed to be sold by Insight, and any other
assets owned by relevant Persons owning direct or indirect ownership interests
in Insight, each as applicable, and shall not be an Affiliate of either Member.
All fees and expenses of any appraiser retained pursuant to this Section 9.6(e)
shall be paid by the Company.
(v) In determining the fair market value of any
asset, to the extent relevant to its allocation of consideration to Insight's
Common Interest, each appraiser retained pursuant to this Section 9.6(e) shall
(A) assume that the fair market value of the applicable asset is the price at
which the asset would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and each having reasonable
knowledge of all relevant facts; (B) assume that the applicable asset would be
sold for cash; (C) use valuation techniques then prevailing in the relevant
industry; (D) assume that any assets constituting a going concern would be sold,
in the aggregate, as a going concern, in a single transaction; (E) assume that
the value of Insight's Common Interest includes the value of any right of
Insight or any Affiliate of Insight to control the Company, regardless whether
such right inures in any other Membership Interest or arises under any other
agreement.
(vi) For purposes of Section 9.6(a), Section
9.6(b), or Section 9.6(c), the purchase price to be paid for any portion of
Insight's Common Interest proposed to be transferred (directly or indirectly)
shall be the amount of the total consideration that is allocated to such portion
of Insight's Common Interest pursuant to this Section 9.6(e) (subject to Section
9.6(g)).
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(f) Absence of Representations.
(i) In connection with any sale by Central
pursuant to Section 9.6(a), Section 9.6(b), or Section 9.6(c), neither Central
nor any Principal shall be required to (i) make any representation or warranty
to the Third-Party Purchaser other than (A) a representation and warranty to the
effect that, at the closing of the purchase and sale of Central's Common
Interest, Central will hold its Common Interest free and clear of all claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
and encumbrances of any nature whatsoever, other than the rights granted to
other parties under this Agreement and liens securing the Senior Debt, the
Subordinated Debt, and any other obligations and liabilities arising under the
Loan Documents, and (B) customary, non-operational representations and
warranties (such as those relating to Central's legal existence and corporate
authority, due authorization of the purchase and sale agreement, and the absence
of legal impediments to the consummation of the sale that relate specifically to
Central), (ii) make any covenant except as to the delivery to the Third-Party
Purchaser of Central's Common Interest, or (iii) indemnify the Third-Party
Purchaser for any liability other than damages resulting from a breach of the
representations described in this Section 9.6(f).
(ii) Notwithstanding the foregoing provisions of
this Section 9.6(f), but subject to Section 9.6(f)(iii), in connection with any
sale by Central pursuant to Section 9.6(a) or Section 9.6(b), Central shall be
responsible for Central's proportionate share (calculated per Unit) of any
purchase price reduction or indemnity obligation of Insight that is attributable
to:
(A) a breach of any customary
representation, warranty, or covenant relating to the business, operations, or
liabilities of the Company (but not any representation, warranty, or covenant
that relates specifically to Insight, such as those relating to Insight's legal
existence and authority, due authorization of the purchase and sale agreement,
and the absence of legal impediments to the consummation of the sale by
Insight); and
(B) any provision in the purchase and sale
agreements with respect to the Common Interests that requires customary deferred
adjustments to the purchase price (such as those relating to net working
capital, cash flow, and numbers of subscribers) until a reasonable period after
the closing of the purchase and sale of the Common Interest pursuant to Section
9.6(a) or Section 9.6(b).
(iii) Under no circumstances shall Central be
required to reimburse Insight for any part of any special, incidental,
consequential, exemplary, or punitive damages that may be payable to any Third-
Party Purchaser as a result of any breach by Insight of any representation or
warranty in connection with the sale of Common Interests pursuant to Section
9.6(a) or Section 9.6(b).
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(g) Reallocation of Purchase Price.
(i) Subject to Section 9.6(g)(iv), in connection
with any sale to a Third-Party Purchaser pursuant to Section 9.6(a) or Section
9.6(b) of all or a majority of the outstanding Common Interests that includes a
sale of all or a majority of the Common Interest held by Insight and the same
percentage of the Common Interest held by Central, if Insight has received an
offer described in Section 9.6(g)(iii)(B) and, before giving effect to this
Section 9.6(g), the consideration that would be paid to Insight per Unit for its
Common Interest would be less than the Unit Liquidation Amount, then the total
consideration to be paid by the Third-Party Purchaser to Insight and Central for
their Common Interest shall be reallocated so that:
(A) the amount paid to Insight for its
Common Interest, in the aggregate, shall equal the lesser of (1) the product of
the Unit Liquidation Amount times the number of Units assigned to the Common
Interest being sold by Insight and (2) the total consideration to be paid by the
Third-Party Purchaser to Insight and Central for their Common Interests; and
(B) the amount paid to Central for its
Common Interest, in the aggregate, shall equal the amount, if any, by which the
total consideration to be paid by the Third-Party Purchaser to Insight and
Central for their Common Interests exceeds the amount payable to Insight
pursuant to Section 9.6(g)(i)(A).
(ii) Subject to Section 9.6(g)(iv), in connection
with any transaction described in Section 9.6(c), if Insight has received an
offer described in Section 9.6(g)(iii)(B) and the amount of consideration that
is allocated to Insight's Common Interest pursuant to Section 9.6(e) is less
than the Unit Liquidation Amount, then the purchase price to be paid for
Central's Common Interest shall be reduced by the lesser of (A) one-half of the
amount by which the amount of consideration that is allocated to Insight's
Common Interest pursuant to Section 9.6(e) is less than the Unit Liquidation
Amount, and (B) the purchase price to be paid for Central's Common Interest
before giving effect to this Section 9.6(g).
(iii) For purposes of this Section 9.6(g),
(A) the "Unit Liquidation Amount" means
the amount that would have been distributed to Insight upon dissolution and
liquidation of the Company with respect to its Common Interest, per Unit, if (1)
the assets of the Company had been sold for the Offered Asset Purchase Price,
(2) Net Profit and Net Loss and items specially allocated in accordance with
Section 5.2, including any gain or loss resulting from the sale described in
clause (1), were allocated in accordance with Section 5, (3) the Company paid
its accrued, but unpaid, liabilities, other than liabilities that would have
been assumed by the purchaser in connection with the sale described in clause
(1), and (4) the Company distributed the remaining proceeds received by it (net
of reserves for contingent or unknown liabilities and any transaction costs that
would have been incurred in connection with such sale) to the Members in
liquidation; and
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(B) the "Offered Asset Purchase Price"
means the highest purchase price offered to be paid by any Person that is not an
Affiliate of Insight for all the assets of the Company in a bona fide written
offer where (1) all terms and conditions of such offer with respect to
representations, warranties, covenants, indemnities, adjustments, closing
conditions, and other relevant non-price matters are customary, (2) the offeror
was legally qualified and financially capable (taking into account reasonable
expectations of financing availability) to purchase the assets of the Company
and, at the time the offer was made, there were no significant risks that the
offeror would be unable to close the purchase of the assets of the Company on
the offered terms, and (3) not more than thirty days before the execution of a
binding agreement for the transfer (directly or indirectly) of all of Insight's
Common Interest to which this Section 9.6(g) would apply, Insight sought the
consent of the Principals pursuant to Section 8.5(c) and, if applicable, Section
8.5(d) to a sale of all the assets of the Company to the Person making such
offer, on the terms described in such offer, and the Principals declined to
consent to such sale; provided, however, that if the terms and conditions of any
such offer with respect to relevant non-price matters are less favorable to the
Company, taken as a whole, than the terms and conditions of the sale of the
Common Interests to the Third-Party Purchaser, so as to affect value, then the
amount of the purchase price offered to be paid in such offer shall be reduced
by an appropriate amount to reflect the differences in such terms and
conditions, as agreed to between Insight and the Principals or, if they fail to
agree on the amount, as determined by an independent investment banking firm of
nationally recognized standing that is agreed to between Insight and the
Principals, or if they fail to agree on such investment banking firm, as agreed
to by an independent investment banking firm of nationally recognized standing
selected by Insight and an independent investment banking firm of nationally
recognized standing selected by the Principals.
(iv) This Section 9.6(g) shall not apply to any sale
of Common Interests occurring prior to the second anniversary of the Closing
Date or any transaction described in Section 9.6(c) occurring prior to the
second anniversary of the Closing Date.
9.7 Pledge and Assignment of Interest.
Central may pledge its Membership Interest only for the purposes of
securing the Senior Debt, the Subordinated Debt, and any other obligations and
liabilities arising under the Loan Documents. Insight may pledge its Membership
Interest only for the purposes of securing obligations of Insight Communications
Company, L.P. and its subsidiaries under its senior bank credit agreement, and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of such obligations, and any obligation incurred in refinancing or
replacement of or substitution for such obligations. Notwithstanding any
provision of this Agreement to the contrary, any Person to which Central or
Insight pledges its Membership Interest pursuant to this Section 9.7 (each, a
"Secured Party") may exercise all rights and remedies incident to the pledge of
such Membership Interest, which may include authority for the Secured Party
(without dissolving the Company unless dissolution is required by law):
(a) to cause the pledged Membership Interest to be assigned in
whole or in part on one or more occasions to one or more Persons (which may
include the Secured Party); provided,
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however, that any Transfer of Insight's Common Interest upon the exercise of any
rights or remedies incident to any pledge thereof shall be conditioned on
Insight's compliance with Section 9.6(a);
(b) to cause any assignee of the pledged Membership Interest
to be admitted as a Member having the interest so assigned;
(c) to cause the holder of the pledged Membership Interest to
resign as a Member once all of its Membership Interest has been assigned; and
(d) to cause one or more amended Certificates of Formation to
be filed with respect to the Company.
9.8 Condition on Change in Control of the Company.
Prior to the consummation of any transaction or series of related
transactions by Insight or any of its Affiliates, including any Transfer by
Insight of all or any part of its Membership Interest, that would trigger the
right of any holder of any of the Senior Debt or any of the Subordinated Debt to
require that such Senior Debt or Subordinated Debt be repaid, purchased, or
redeemed, Insight or, in the case of a Transfer, Insight or its Assignee shall:
(a) agree to purchase such Senior Debt or Subordinated Debt
from the holder thereof in the event the holder elects to require that such
Senior Debt or Subordinated Debt be repaid, purchased, or redeemed, and, upon
such purchase, Insight or its Assignee shall waive any right to require that
such Senior Debt or Subordinated Debt be repaid, purchased, or redeemed, or
(b) obtain an irrevocable, binding agreement of the holder of
such Senior Debt or Subordinated Debt not to require that such Senior Debt or
Subordinated Debt be repaid, purchased, or redeemed upon the consummation of
such Transfer.
9.9 Substitution of Parent Undertaking.
Prior to the consummation of any transaction or series of related
transactions, including any Transfer, that would result in Insight ceasing to be
controlled, directly or indirectly, by one or more individuals who, on the date
of this Agreement, collectively control Insight, Insight shall cause the Person
that, after giving effect to such transaction, would be the ultimate parent
entity (as determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder) of Insight, or such other Person reasonably acceptable to the
Principals, to execute and deliver to Central and the Principals an agreement,
substantially in the form of the parent undertaking executed and delivered by
Insight Communications Company, L.P. in connection with the execution and
delivery of this Agreement.
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9.10 Continuing Rights and Privileges.
Notwithstanding the sale or other disposition by Central of all of its
Common Interest in accordance with this Agreement, Central shall continue to be
a Member of the Company so long as it continues to hold the Preferred A Interest
or the Preferred B Interest and shall have the rights and privileges specified
in this Agreement as pertaining to the Preferred A Interest or the Preferred B
Interest or specified in this Agreement as rights and privileges of Central.
9.11 Insight's Right to Put Its Interest.
Insight may elect at any time, by delivering written notice of its
election to Central and the Principals, to require that a Person designated by
the Principals purchase all of Insight's Membership Interest, for one dollar
(plus the Tax Amount that would be distributable to Insight on the date of the
next scheduled April Distribution after the closing of such purchase, calculated
as if the Company's Fiscal Year ended on the closing of such purchase). Upon an
election by Insight pursuant to this Section 9.11, the Principals shall be
obligated to cause a Person designated by the Principals to purchase and Insight
shall be obligated to sell all of Insight's Membership Interest. Insight's right
to make an election pursuant to this Section 9.11, and any purchase and sale of
Insight's Membership Interest pursuant to this Section 9.11, shall be subject to
the following provisions:
(a) At the closing of the purchase and sale of Insight's
Membership Interest pursuant to this Section 9.11, the Person designated by the
Principals shall pay to Insight one dollar and shall assign to Insight its right
to receive that portion of the next April Distribution after the closing equal
to the balance of the purchase price for Insight's Membership Interest, and
Insight will convey to the Person designated by the Principals all of its
Membership Interest free and clear of all claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges, and encumbrances of
any nature whatsoever, other than the rights granted to other parties under this
Agreement. The Company shall pay to Insight that portion of the next April
Distribution after the closing that was assigned to Insight, which payment shall
be considered payment by the Person designated by the Principals of the balance
of the purchase price for Insight's Membership Interest.
(b) The closing of the purchase and sale of Insight's
Membership Interest pursuant to this Section 9.11 shall occur on a date to be
specified by the Principals that is within 180 days after the Principals'
receipt of Insight's election pursuant to this Section 9.11, subject to the
receipt of all necessary governmental approvals and other material third-party
consents.
(c) Each of the management agreements between Insight and the
Shareholders shall terminate automatically upon the closing of the purchase and
sale of Insight's Membership Interest pursuant to this Section 9.11.
9.12 Treatment of Certain Membership Interests.
Any Membership Interests purchased by the Principals or their designee,
if it is not Central, pursuant to Section 8.5(b)(iii) shall be treated as if
such Membership Interests were owned by Central for purposes of this Section 9
(which includes Insight's right to require that such Membership
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Interests be sold under certain circumstances pursuant to Section 9.6(b) or
Section 9.6(c) and the Principals' right to require that such Membership
Interests be purchased under certain circumstances pursuant to Section 9.6(a) or
Section 9.6(c), in each case on the same terms as would be applicable to
Membership Interests owned by Central).
SECTION 10. DISSOLUTION AND TERMINATION OF THE
COMPANY
10.1 Events of Dissolution.
The Company shall be dissolved upon the happening of any of the
following events:
(a) December 31, 2058;
(b) if the Principals consent to the resignation of
Insight as Manager pursuant to Section 6.2(a) but the Members and the Principals
do not elect to continue the Company thereafter in accordance with the
provisions of Section 6.2(a);
(c) upon agreement of Insight and the Principals;
(d) upon the affirmative vote of holders of a majority of
the outstanding Voting Interests; provided, however, that the holders of the
outstanding Voting Interests may not vote to dissolve the Company at any time
prior to the earlier of (1) the death of the last to die of Barry Silverstein,
Dennis McGillicuddy, and D. Stevens McVoy, or (2) the receipt by the Principals
of an opinion of their legal counsel that the dissolution and liquidation of the
Company would not, in its opinion, increase by more than a de minimis amount the
likelihood of adverse tax consequences to the Principals (other than adverse tax
consequences that are incurred after the triggering of all adverse tax
consequences to the Principals relating to the Senior Debt, the Subordinated
Debt, and the holding of the Preferred A Interest and the Preferred B Interest);
(e) upon the sale of all or substantially all of the
assets of the Company in a manner permitted by this Agreement;
(f) the termination of the Contribution Agreement in
accordance with its terms prior to the Closing; or
(g) subject to any provision of this Agreement that
limits or prevents dissolution, the happening of any event that, under
applicable law, causes the dissolution of a limited liability company.
10.2 Liquidation.
(a) Upon dissolution of the Company for any reason, the
Company shall immediately commence to wind up its affairs. A reasonable period
of time shall be allowed for the orderly termination of the Company business,
discharge of its liabilities, and distribution or
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liquidation of the remaining assets so as to enable the Company to minimize the
normal losses attendant to the liquidation process.
(b) Liquidation of the assets of the Company shall be
managed on behalf of the Company by the "Liquidator," which shall be (i) if
Insight wrongfully caused the dissolution of the Company, a liquidating trustee
selected by the Principals, and (ii) in all other events, Insight or a
liquidating trustee selected by Insight. The Liquidator shall be responsible for
soliciting offers to purchase the entirety of the Company's assets (including
equity interests in other Persons) or portions or clusters of assets of the
Company.
(c) The Liquidator shall cause a full accounting of the
assets and liabilities of the Company to be taken and a statement thereof to be
furnished to each Member and each Principal within thirty days after the
distribution of all of the assets of the Company.
(d) The property and assets of the Company and the
proceeds from the liquidation thereof shall be applied in the following order of
priority:
(i) first, to payment of the debts and
liabilities of the Company, in the order of priority provided by law (including
any loans by either Member to the Company) and payment of the expenses of
liquidation;
(ii) second, to setting up of such reserves as
the Liquidator may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company or any obligation or liability not
then due and payable; provided, however, that any such reserve shall be paid
over by the Liquidator into a Company account or a liquidating trust account
established for such purpose, to be held in such account for the purpose of
disbursing such reserves in payment of 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
(iii) finally, remaining proceeds shall be
distributed to the Members as follows:
(A) First, if the Preferred A Interest
is then outstanding, to the holder of the Preferred A Interest in an amount
equal to the sum of (x) the amount of any distributions that were required to be
made pursuant to Section 4.1(a)(i) but were not made (including any increase to
such amount pursuant to Section 4.1(b)(i)), plus (y) a pro rata portion of the
Guaranteed Payment Amount, based on the ratio of the number of days between the
immediately preceding Guaranteed Payment Date and the date on which the
distribution is made pursuant to this Section 10.2(d)(iii)(A) to the number of
days between the immediately preceding Guaranteed Payment Date and the next
following Guaranteed Payment Date, computed on the basis of a 360-day year of
twelve 30-day months;
(B) Second, if the Preferred A Interest
is then outstanding, to the holder of the Preferred A Interest in an amount
equal to the sum of (x) the Preferred A Capital Amount, plus (y) the amount of
any distributions that were required to be made pursuant to Section
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4.1(a)(ii) but were not made (including any increase to such amount pursuant to
Section 4.1(b)(ii)), plus (z) the amount by which the Preferred A Preference
Amount exceeds the amount described in clause (y) of Section 10.2(d)(iii)(A);
(C) Third, if the Preferred B Interest
is then outstanding, to the holder of the Preferred B Interest in an amount
equal to the sum of (x) the Preferred B Capital Amount, plus (y) the amount of
any distributions that were required to be made pursuant to Section 4.1(a)(iii)
but were not made (including any increase to such amount pursuant to Section
4.1(b)(iii)), plus (z) the Preferred B Preference Amount;
(D) Fourth, to the Manager in an amount
equal to the sum of (x) the amount of any distributions that were required to be
made pursuant to Section 4.1(a)(v) but were not made (including any increase to
such amount pursuant to Section 4.1(b)(iv)), plus (y) the Management Return;
(E) Thereafter, pro rata to the Members
in proportion to their remaining positive Capital Account balances, after
reducing the Members' Capital Account balances to take into account
distributions pursuant to the foregoing paragraphs of this Section 10.2(d)(iii).
The distributions pursuant to this Section 10.2(d)(iii) 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).
10.3 Distribution in Kind.
The Company shall not distribute any non-cash asset to either Member
without the consent of each Member and the Principals, except that, upon
liquidation of the Company, the Company may distribute identical assets (such as
shares of stock or other securities) to the Members pro rata pursuant to Section
10.2(d)(iii)(E). The amount distributed and charged to the Capital Account of
each Member receiving any non-cash asset shall be the fair market value of such
asset, as agreed to by the Members and the Principals (net of any liability
secured by such asset that such Member assumes or takes subject to). Gain or
loss on the disposition of any asset distributed in kind to one or more Members
shall be determined as if such asset were sold for its fair market value, as
agreed to by the Members and the Principals, and such gain or loss shall then be
allocated pursuant to Section 5.
10.4 No Action for Dissolution.
The Members acknowledge that irreparable damage would be done to the
goodwill and reputation of the Company if either Member should bring an action
in court to dissolve the Company under circumstances where dissolution is not
required by Section 10.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of the
Membership Interests of both Members. Accordingly, except where liquidation and
dissolution are required by Section 10.1, each Member hereby waives and
renounces its right to initiate legal action
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to seek dissolution or to seek the appointment of a receiver or trustee to
liquidate the Company or to seek partition of any assets of the Company.
10.5 No Further Claim.
Upon dissolution, each Member shall look solely to the assets of the
Company for the return of its investment, and if the property of the Company
remaining after payment or discharge of the debts and liabilities of the
Company, including debts and liabilities owed to one or more of the Members, is
insufficient to return the aggregate capital contributions of a Member, neither
Member shall have any recourse against the other Member.
SECTION 11. INDEMNIFICATION
11.1 General.
The Company shall indemnify, defend, and hold harmless each Member and
its members, partners, officers, directors, shareholders, employees, and agents,
the employees, officers, and agents of the Company, the Principals, and the
Representatives (all indemnified persons being referred to as "Indemnified
Persons" for purposes of this Section 11.1), from any liability, loss, or damage
incurred by the Indemnified Person by reason of any act performed or omitted to
be performed by the Indemnified Person in connection with the business of the
Company (including, in the case of Insight, any such act in connection with the
management of the Shareholders pursuant to the management agreements between the
Shareholders and Insight, or arising by reason of Insight's status as manager of
the Shareholders), 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 11.1 shall not be available if the
action or inaction 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),
willful misconduct, or a breach of this Agreement by the Indemnified Person; and
provided, further, however, that indemnification under this Section 11.1 shall
be recoverable only from the assets of the Company and not from any assets of
the Members. The Company may pay for insurance covering liability of the
Indemnified Persons for negligence in operation of the Company's affairs.
11.2 Exculpation.
No Indemnified Person shall be liable, in damages or otherwise, to the
Company or to either Member for any loss that arises out of any act performed or
omitted to be performed by it or him pursuant to the authority granted by this
Agreement unless the conduct of the Indemnified Person 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), willful misconduct, or a breach of this
Agreement by such Indemnified Person.
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11.3 Persons Entitled to Indemnity.
Any Person who is within the definition of "Indemnified Person" at the
time of any action or inaction in connection with the business of the Company
shall be entitled to the benefits of Section 11.1 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.
SECTION 12. BOOKS, RECORDS, ACCOUNTING, AND
REPORTS
12.1 Books and Records.
The Company shall maintain at its principal office all of the
following:
(a) A current list of the full name and last known business or
residence address of each Member together with the Capital Contributions and
Membership Interest of each Member;
(b) A copy of the Certificate of Formation, this Agreement,
and any and all amendments to either thereof, together with executed copies of
any powers of attorney pursuant to which any certificate or amendment has been
executed;
(c) Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the six most recent taxable
years;
(d) The audited financial statements of the Company for the
six most recent Fiscal Years; and
(e) The Company's books and records for at least the current
and past three Fiscal Years.
12.2 Delivery to Member and Inspection.
(a) Upon the request of a Member or a Principal, the Company
shall promptly deliver to the requesting Member or Principal, at the expense of
the Company, a copy of the information required to be maintained by Section 12.1
except for Section 12.1(e).
(b) Each Member and each Principal, or its duly authorized
representative, has the right, upon reasonable request, to inspect and copy
during normal business hours any of the Company records.
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12.3 Annual Statements.
(a) The Company shall cause to be prepared for each Member and
each Principal at least annually, at Company expense, audited financial
statements of the Company and a consolidated audited financial statement for the
Company and the Subsidiaries in accordance with generally accepted accounting
principles, along with supplemental information for the Company and each
Subsidiary, and accompanied by a report thereon containing the opinion of Ernst
& Young LLP or other nationally recognized accounting firm chosen by the
Management Committee. The financial statements will include a balance sheet,
statement of income or loss, statement of cash flows, and statement of Members'
equity. The supplemental information will consist of a consolidating balance
sheet and a consolidating statement of operations and Members' equity for the
preceding Fiscal Year. The Company shall distribute the financial statements or
portions thereof to each Member and each Principal as follows:
(i) the Company shall distribute to each Member
and each Principal a statement setting forth the net income or loss of the
Company for each Fiscal Year within forty-five days after the close of such
Fiscal Year;
(ii) the Company shall distribute to each Member
and each Principal the balance sheet, statement of income or loss, statement of
cash flows, and statement of Members' equity to be included in the financial
statements for each Fiscal Year within forty-five days after the close of such
Fiscal Year;
(iii) the Company shall distribute to each Member
and each Principal the complete audited financial statements for each Fiscal
Year as soon as practicable after the close of such Fiscal Year and, in any
event, by March 15 of the year following the close of such Fiscal Year.
(b) The Company shall have prepared at least annually,
at Company expense, Company information necessary for the preparation of each
Member's federal and state income tax returns. The Company shall send the
information described in this paragraph to each Member and each Principal within
ninety days after the end of each Fiscal Year and shall use commercially
reasonable efforts to send such information to each Member and each Principal
within seventy-five days after the end of each Fiscal Year.
(c) The Company shall also cause to be distributed to
each Member and each Principal, within ten days after delivery to the Company,
any audited financial statements that are prepared with respect to any
Subsidiary the financial statements of which are not consolidated with the
financial statements of the Company.
(d) The Company, shall distribute to each Member and
each Principal, promptly after they become available, copies of the Company's
federal, state, and local income tax or information returns for each taxable
year.
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12.4 Quarterly Financial Statements.
At the close of each of the first three quarters of any Fiscal Year,
the Company shall cause to be distributed to each Member and each Principal a
quarterly report covering each calendar quarter of the operations of the Company
and the Subsidiaries, consisting of unaudited financial statements (comprising a
balance sheet, a statement of income or loss, and a statement of cash flows),
and a statement of other pertinent information regarding the Company and the
Subsidiaries and their activities. The Company shall cause copies of the
statements and other pertinent information (including selected financial data of
the Company that complies with the requirements of APB Opinion No. 18 and Rule
4-08(g) of Regulation S-X under the Securities Act and any other applicable
rules pursuant to Regulation S-X under the Securities Act) to be distributed to
each Member and each Principal within thirty days after the close of the
calendar quarter to which the statements relate. The Company shall distribute to
each Member and each Principal a statement setting forth the net income or loss
of the Company for each calendar quarter within thirty days after the close of
such calendar quarter. The Company shall also cause to be distributed to each
Member and each Principal, within ten days after delivery to the Company, any
quarterly report that is prepared with respect to any Subsidiary the operating
results of which are not included in the quarterly report of the Company.
12.5 Monthly Statements.
The Company shall cause to be distributed to each Member and each
Principal a monthly report covering each calendar month of the operations of the
Company and each Subsidiary, consisting of unaudited statements of income and
loss for the Company and each Subsidiary. The Company shall cause copies of the
statements to be distributed to each Member and each Principal within thirty
days after the close of the calendar month covered by such report. The Company
shall also cause to be distributed to each Member and each Principal, within ten
days after delivery to the Company, any monthly report that is prepared with
respect to any Subsidiary the operating results of which are not included in the
monthly report of the Company.
12.6 Other Information.
The Company shall provide to each Member and each Principal any other
information and reports relating to any cable television systems or other
businesses owned by, and the financial condition of, the Company, each
Subsidiary, and any other Person in which the Company owns, directly or
indirectly, an equity interest, that such Member or Principal may reasonably
request, including, in the case of Central, any information that Central is
required to distribute to holders of the Senior Debt. or the Subordinated
Debt. The Company shall distribute to each Member and each Principal, promptly
after the receipt thereof by the Company, any financial or other information
with respect to any Person in which the Company owns, directly or indirectly, an
equity interest, but which is not a Subsidiary.
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12.7 Tax Matters.
To the extent permitted by law, the Company shall be treated as a
partnership for federal and state income tax and franchise tax purposes. This
Section 12.7 shall not prohibit any Member or any Affiliate of any Member from
taking any action that is not prohibited by Section 2.13.
12.8 Other Filings.
The Company, at Company expense, shall also prepare and timely file,
with appropriate federal and state regulatory and administrative bodies, all
reports required to be filed by the Company with those entities under then
current applicable laws, rules, and regulations. The reports shall be prepared
on the accounting or reporting basis required by the regulatory bodies. Upon
written request, the Manager shall provide each Member and each Principal with a
copy of any of such reports, without expense to the requesting Member or
Principal.
12.9 Non-Disclosure.
Any Member or Principal to which non-public information is furnished
pursuant to this Agreement agrees to keep such information confidential and not
to disclose such information, in any manner whatsoever, in whole or in part, and
to use the degree of care that it uses with respect to its own confidential
information to prevent disclosure of such information by its agents,
representatives, or employees, in any manner whatsoever, in whole or in part,
except that:
(a) each Member and Principal shall be permitted to disclose
such information to those of its agents, representatives, and employees who need
to be familiar with such information in connection with such Member or
Principal's investment in the Company,
(b) each Member and Principal shall be permitted to disclose
such information to its Affiliates,
(c) Central shall be permitted to disclose such information to
its lenders and to the other Borrowers, and each Borrower shall be permitted to
disclose such information to its lenders;
(d) the Principals may use such information, as appropriate,
in the preparation of their personal financial statements and other similar
documents, which may then be disclosed by the Principals as they deem
appropriate;
(e) each Member shall be permitted to disclose information to
the extent required by law, including federal or state securities laws or
regulations, or by the rules and regulations of any stock exchange or
association on which securities of such Member or any of its Affiliates are
traded, so long as such Member shall have first afforded the Company with a
reasonable opportunity to contest the necessity of disclosing such information,
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(f) each Member and Principal shall be permitted to disclose
information to the extent necessary for the enforcement of any right or the
performance of any obligation of such Member and Principal (including
obligations of a Member in its capacity as Manager) arising under this
Agreement,
(g) each Member and Principal shall be permitted to disclose
information that is or becomes generally available to the public other than as a
result of a disclosure by such Member or Principal, its agents, representatives,
or employees, and
(h) each Member and Principal shall be permitted to disclose
information that becomes available to such Member or Principal on a
nonconfidential basis from a source (other than the Company, a Member, or their
respective agents, representatives, and employees) that such Member or Principal
believes is not prohibited from disclosing such information to such Member or
Principal by a legal, contractual, or fiduciary obligation to the Company or
either Member.
SECTION 13. AMENDMENTS AND WAIVERS
13.1 Amendments to Operating Agreement.
(a) This Agreement may only be modified or amended with the
consent of all the Members and the Principals.
(b) The Company shall prepare and file any amendment to the
Certificate of Formation that may be required to be filed under the Act as a
consequence of any amendment to this Agreement.
13.2 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, but no provision of this Agreement may be waived except
by a written instrument specifically waiving such provision and executed by the
party to be charged with such waiver, and no provision of this Agreement may be
waived by Central without the prior written consent of the Principals in a
written instrument specifically consenting to such waiver. No delay on the part
of either Member in exercising any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any waiver on the part of
either Member of any right, power, or privilege under this Agreement operate as
a waiver of any other right, power, or privilege under this Agreement, nor shall
any single or partial exercise of any right, power, or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power, or privilege under this Agreement.
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SECTION 14. STATUS OF PRINCIPALS
14.1 Principals Not Members.
The Principals are not members of the Company for purposes of the Act
and shall have none of the rights of a member of a limited liability company
under the Act, except to the extent that the Principals are afforded such rights
under the express provisions of this Agreement.
14.2 Provisions for the Benefit of Principals.
The parties acknowledge that the Principals have a significant economic
interest in the Company through their ownership of the Shareholders and are
relying on the provisions of this Agreement to protect and preserve such
interest. Accordingly, each provision of this Agreement is intended to be for
the benefit of, and shall be enforceable by, the Principals.
14.3 Assignment or Rights.
None of the rights of any Principal under this Agreement may be
assigned or otherwise transferred except, following the death of a Principal,
pursuant to the laws of descent and distribution.
14.4 Termination of Rights and Obligations.
Notwithstanding any provision of this Agreement to the contrary, all
rights of the Principals under this Agreement shall terminate at such time as
the Principals cease to own, directly or indirectly, any interest in the
Company.
14.5 Actions by Principals.
Any action to be taken by the Principals under this Agreement
(including exercising any right, granting any consent or approval, making any
election, or giving any notice) shall be taken by all of the Principals
collectively, with the decision to take or to refrain from taking any such
action being made by the Principals in such manner as they may agree upon among
themselves. The Principals shall from time to time jointly designate one or more
agents to execute on their behalf any instrument necessary to evidence any
action taken collectively by the Principals under this Agreement. The Company
and each Member shall be entitled to rely upon any instrument delivered to it
under this Agreement and purporting to be (a) the joint designation by the
Principals of any such agent or (b) an instrument executed by such agent to
evidence any action taken collectively by the Principals under this Agreement,
and may assume that any Person signing such instrument has been duly authorized
to do so.
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14.6 Limited Recourse.
Each party agrees that no Principal shall have any personal liability
whatsoever under this Agreement, and any damages suffered by any party as a
result of any failure of a Principal to perform his obligations under this
Agreement, to the extent such party would be entitled to remedy therefor but for
this Section 14.6, shall be satisfied, if at all, from the assets of Central.
SECTION 15. MISCELLANEOUS
15.1 Captions.
All article, section, or paragraph captions contained in this Agreement
are for convenience only and shall not be deemed part of this Agreement.
15.2 Pronouns; Singular and Plural Form.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, and neuter as the identity of the Person or Persons
referred to may require, and all words shall include the singular or plural as
the context or the identity of Persons may require. The words "include,"
"includes," and "including" are not limiting.
15.3 Further Action.
Each Member agrees to execute, with acknowledgment or affidavit, if
required, any documents and writings in furtherance of this Agreement, including
(a) amendments of this Agreement adopted pursuant to this Agreement, (b) any
amendments, certificates, and other documents that the Company deems necessary
or appropriate to qualify or continue the Company as a limited liability company
in all jurisdictions in which the Company conducts or plans to conduct business
or owns or plans to own property, and (c) all agreements, certificates, tax
statements, tax returns, and other documents that may be required of the Company
or its Members under applicable law.
15.4 Entire Agreement.
This Agreement contains the entire understanding among the parties and
supersedes any prior understandings and agreements among them regarding the
subject matter of this Agreement.
15.5 Agreement Binding.
This Agreement shall be binding upon the successors and assigns of the
parties.
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15.6 Equitable Remedies.
The rights and remedies of the parties under this Agreement are not
mutually exclusive. Each of the parties confirms that damages at law may not
always be an adequate remedy for a breach or threatened breach of this Agreement
and agrees that, in the event of a breach or threatened breach of any provision
of this Agreement, the respective rights and obligations under this Agreement
shall be enforceable by specific performance, injunction, or other equitable
remedy.
15.7 Notices.
All notices, demands, and requests required or permitted to be given
under the provisions of this Agreement shall be in writing and shall be deemed
to have been duly delivered and received (a) on the date of personal delivery,
or (b) on the date of receipt (as shown on the return receipt) if mailed by
registered or certified mail, postage prepaid and return receipt requested, or
if sent by Federal Express or similar courier service, with all charges prepaid,
in each case addressed to the Member or Principal at the address set forth on
Schedule I or at the last address furnished by the Member or Principal to the
other parties by notice pursuant to this Section 15.7. Nothing in this Section
15.7 shall preclude the delivery of notices by appropriate means other than
those described above, including telex or facsimile.
15.8 Severability.
If any provision or part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such provision or part of any provision
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provision of this Agreement.
15.9 Counterparts.
This Agreement may be signed in counterparts with the same effect as if
the signature on each counterpart were upon the same instrument.
15.10 Governing Law.
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of Delaware (without regard to the choice of law
provisions thereof).
15.11 No Third-Party Beneficiaries.
This Agreement is not intended to, and shall not be construed to,
create any right enforceable by any Person that is not a party to this
Agreement, including any creditor of the Company or of any of the Members or
Principals.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
MEMBERS:
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By: /s/
------------------------------
Name:
-----------------------------
Title:
----------------------------
INSIGHT HOLDINGS OF OHIO, LLC
By: Insight Communications Company, L.P., its
member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general
partner
By: /s/
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PRINCIPALS:
/s/ Barry Silverstein
----------------------------------
Barry Silverstein
/s/ Dennis McGillicuddy
----------------------------------
Dennis McGillicuddy
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/s/ D. Stevens McVoy
______________________________
D. Stevens McVoy
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SCHEDULE I
TO
OPERATING AGREEMENT
ADDRESSES OF THE PARTIES
Insight Holdings of Ohio, LLC
c/o Insight Communications, Inc.
126 E. 56th Street
New York, New York 10022
Coaxial Communications of Central
Ohio, Inc.
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Barry Silverstein
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Dennis McGillicuddy
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
D. Stevens McVoy
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
SCHEDULE II
TO
OPERATING AGREEMENT
INITIAL MEMBERS OF THE MANAGEMENT COMMITTEE
1. Initial Representatives designated by a majority of the outstanding
Voting Interests pursuant to Section 8.1(a):
Sidney R. Knafel
Michael S. Willner
Kim D. Kelly
2. Initial Representative designated by the Principals pursuant to Section
8.1(a):
Dennis J. McGillicuddy
SCHEDULE III
TO
OPERATING AGREEMENT
TERMS RELATING TO PREFERRED INTERESTS
"Guaranteed Payment Amount" means $2,991,791.38.
"Guaranteed Payment Date" means each February 15 and August 15 of each
year.
"Management Return Payment Date" means each February 15 and August 15
of each year.
"Preferred A Distribution Date" means each February 15 and August 15 of
each year.
"Preferred A Rate" means ten percent per year; provided, however, that
the Preferred A Rate shall be increased by the amount of any increase in the
interest rate payable with respect to the Senior Notes pursuant to Section 4 of
the Senior Notes Registration Rights Agreement, dated as of August 21, 1998.
"Preferred B Distribution Date" means each February 15 and August 15 of
each year.
"Preferred B PIK Termination Date" means August 15, 2003.
"Preferred B Rate" means twelve and seven-eighths percent per year;
provided, however, that the Preferred B Rate shall be increased by the amount of
any increase in the interest rate payable with respect to the Discount Notes
pursuant to Section 4 of the Discount Notes Registration Rights Agreement, dated
as of August 21, 1998.