[ARTICLE] 5
[MULTIPLIER] 1
CONFIDENTIAL TREATMENT REQUESTED
[*] Denotes information for which confidential
treatment has been requested. Confidential portions
omitted have been filed separately with the Commission.
GENERAL PARTNERSHIP AGREEMENT (this "Agreement"), dated as of
October 23, 1995, between ATOR Corp., a New York corporation (the "AT&T
Partner"), and Ciror, Inc., a California corporation (the "Cirrus Partner"). The
AT&T Partner and the Cirrus Partner are sometimes referred to herein as the
"Partners" or individually as a "Partner."
WHEREAS, the parties hereto desire to enter into a cooperative
arrangement with respect to the expansion and operation of certain wafer
fabrication facilities for the purpose of processing silicon wafers; and
WHEREAS, the parties hereto consider it mutually beneficial to
establish a partnership (the "Partnership") and the parties hereto are parties
to a Joint Venture Formation Agreement, dated as of October 23,1995 (the "Joint
Venture Agreement").
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants, representations, warranties and agreements hereinafter set
forth, and intending to be legally bound hereby, the parties hereto agree,
subject to the conditions contained herein, as follows:
ARTICLE I
DEFINITIONS
1.01. Definitions. For the purpose hereof, the following terms
will have the following meanings:
"Additional Capital Contributions" will have the
meaning set forth in Section 3.05
hereof.
"Adjusted Capital Account Deficit" means, with
respect to any Partner, the deficit balance, if any, in the Capital Account (as
hereinafter defined) of such Partner as of the end of the relevant Fiscal Year
(as hereinafter defined), after giving effect to the following adjustments:
(a) credit to such Capital Account any
amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to restore
pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations (as hereinafter defined); and
(b) debit to such Capital Account the items
described in Sections 1.704- 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5)
and 1.704-1(b)(2)(ii)(d)(6) of the Regulations.
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The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and will be interpreted consistently therewith.
"Affiliate" means any Person, directly or indirectly
controlled by, controlling or under common control with (as hereinafter defined)
another Person (as hereinafter defined); "controlled by, controlling or under
common control with" means the power to direct the management and policies of a
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Board of Governors" will have the meaning set forth in
Section 6.01 hereof.
"Capital Account" means, with respect to each Partner, the
account maintained for each Partner on the books of account for the Partnership
in accordance with the provisions of Section 3.02 hereof (which Capital Account
will be adjusted as otherwise required by Section 1.704-1(b) of the
Regulations).
"Chairman of the Board of Governors" has the meaning set forth
in Section 7.01 hereof.
"Code" means the United States Internal Revenue Code of 1986,
codified at Title 26 of the United States Code, as amended from time to time (or
any corresponding provisions of succeeding law).
"Depreciation" means for each Fiscal Year (as hereinafter
defined) of the Partnership, an amount equal to the depreciation, amortization,
or other cost recovery deduction allowable with respect to an asset for such
Fiscal Year, except that if the Gross Asset Value (as hereinafter defined) of an
asset differs from its adjusted basis for federal income tax purposes at the
beginning of such Fiscal Year, Depreciation will be an amount which bears the
same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation will be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Partners.
"Extended Term" will have the meaning set forth in Article XI
hereof.
"Fiscal Year" means (i) the period commencing on the effective
date of this Agreement and ending on December 31, (ii) any subsequent twelve
(12) month period commencing on January 1, and (iii) any portion of the period
described in the immediately preceding clause (ii) for which the Partnership is
required to allocate Profits (as hereinafter defined), Losses (as hereinafter
defined) and other items of Partnership income, gain, loss, deduction or credit
pursuant to Article VIII hereof.
"GPL" will have the meaning set forth in Section 2.01 hereof.
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"Governor" or "Governors" will have the meaning set forth in
Section 6.02 hereof.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any
asset contributed by a Partner to the Partnership will be the gross
fair market value of such asset, as determined by the Partners;
(b) The Gross Asset Values of all
Partnership assets will be adjusted to equal their respective gross
fair market values, as determined by the Partners, as of the following
times: (i) the acquisition of an additional Partnership interest by any
new or existing Partner in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Partnership to a Partner of
more than a de minimis amount of Partnership property as consideration
for a Partnership interest; and (iii) the liquidation of the
Partnership within the meaning of Section 1.704-1(b)(2)(ii)(g) of the
Regulations; provided, however, that, except as otherwise provided
herein, adjustments pursuant to the immediately preceding clauses (i)
and (ii) will be made only if the Partners reasonably determine that
such adjustments are necessary or appropriate to reflect the relative
economic interests of the Partners in the Partnership;
(c) The Gross Asset Value of any
Partnership asset distributed to any Partner will be adjusted to equal
the gross fair market value of such asset on the date of distribution
as determined by the Partners;
(d) The Gross Asset Values of Partnership
assets will be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Section 734(b) or Section
743(b) of the Code, but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Section
1.704-1(b)(2)(iv)(m) of the Regulations and Section 7.04 hereof;
provided, however, that Gross Asset Values will not be adjusted
pursuant to this paragraph (d) to the extent the Partners determine
that an adjustment pursuant to paragraph (b) hereof is necessary or
appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (d); and
(e) If the Gross Asset Value of an asset
has been determined or adjusted pursuant to the immediately preceding
subparagraph (a), (b) or (d), such Gross Asset Value will thereafter be
adjusted by the Depreciation taken into account with respect to such
asset for purposes of computing Profits and Losses (as hereinafter
defined).
"Hedge/Swap Transaction" means any transaction which is a rate
hedge/swap transaction, basis swap, forward rate transaction, commodity swap,
commodity option, interest rate option, forward foreign exchange transaction,
cap transaction, floor transaction, collar transaction, currency swap
transaction, cross- currency rate swap transaction, currency option or any other
similar transaction (including any option with respect to any of any of the
foregoing) or any combination of the foregoing.
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"IRS" means the United States Internal Revenue Service.
"Initial Capital" will have the meaning set forth in Section
3.01 hereof.
"Land" will have the meaning set forth in the Lease.
"Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations. The amount of Nonrecourse Deductions for a
Fiscal Year of the Partnership will be determined according to the provisions of
Section 1.704-2(c) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" has the meaning set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
"Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"Percentage Interests" means the respective interests of the
Partners as shown on Schedule A attached hereto.
"Premises" will have the meaning set forth in the Lease.
"Profits and Losses" means, for each Fiscal Year, an amount
equal to the Partnership's taxable income or loss for such Fiscal Year,
determined in accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code will be included in taxable income or
loss), with the following adjustments:
(a) Any income of the Partnership that is
exempt from federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition will be added
to such taxable income or loss;
(b) Any expenditures of the Partnership
described in Section 705(a)(2)(B) of the Code or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Section 1.704-
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1(b)(iv)(i) of the Regulations, and not otherwise taken into account in
computing Profits and Losses pursuant to this definition, will be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of
any Partnership asset is adjusted pursuant to paragraph (b) or (c) of
the definition of "Gross Asset Value", the amount of such adjustment
will be taken into account as gain or loss from the disposition of such
asset for purposes of computing Profits or Losses;
(d) Gain or loss resulting from any
disposition of property with respect to which gain or loss is
recognized for federal income tax purposes will be computed by
reference to the Gross Asset Value of the property disposed of,
notwithstanding that the adjusted tax basis of such property differs
from its Gross Asset Value;
(e) In lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in
computing such taxable income or loss, there will be taken into account
Depreciation for such Fiscal Year or other period;
(f) To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b)
or Section 743(b) of the Code is required pursuant to Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations to be taken into account in
determining Capital Accounts as a result of a distribution other than
in liquidation of a Partner's interest in the Partnership, the amount
of such adjustment will be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and
will be taken into account for purposes of computing Profits or Losses;
and
(g) Notwithstanding any other provision of
this definition, any items which are specially allocated pursuant to
Section 8.02 hereof will not be taken into account in computing Profits
and Losses.
The amounts of the items of Partnership income, gain, loss, or deduction
available to be specially allocated pursuant to Section 8.02 hereof will be
determined by applying rules analogous to those set forth in the immediately
preceding subparagraphs (a) through (f).
"Purchasing Partner or Partners" will have the meaning set
forth in Section 5.03hereof.
"Regulations" means Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Regulatory Allocation" will have the meaning set forth in
Section 8.02 hereof.
"Schedule of Authorizations" will have the meaning set forth
in Section 7.07 hereof.
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"Selling Partner" will have the meaning set forth in Section
5.03 hereof.
"Tax Matters Partner" will have the meaning
set forth in Section 10.03 hereof.
1.02. Capitalized Terms. Capitalized terms used but not defined herein
will have the respective meanings assigned to them in the Joint Venture
Agreement.
ARTICLE II
FORMATION
2.01. Formation. The Partners hereby form the Partnership pursuant to
the provisions of the General Partnership Law of the State of New York (the
"GPL") and upon the terms and subject to the conditions of this Agreement. The
rights and liabilities of the Partners will be, except as herein otherwise
expressly provided, as provided in the GPL. Neither Partner will have the power
or authority to bind the other Partner except as specifically provided in this
Agreement. Neither the Partnership (in the case of either Partner) nor any
Partner (in the case of any other Partner) will be responsible or liable for any
activity, liability, indebtedness or obligation of any Partner incurred prior to
the execution of this Agreement or following the termination of this Agreement,
except as to the joint responsibilities, liabilities, indebtedness and
obligations incurred after the date hereof, and only pursuant to, and as limited
by, the terms of the Joint Venture Agreement or the Material Agreements.
2.02. Name. The name of the Partnership will be "[AT&T/Cirrus]".
ARTICLE III
CAPITAL
3.01. Initial Capital. (a) The initial capital (the "Initial Capital")
of the Partnership will be the sums of cash or the agreed fair market value of
the property (or combination of cash and property) contributed to the
Partnership by the Partners in such amounts or value as are set out opposite the
name of each of the Partners on Schedule A attached hereto and incorporated
herein by this reference.
3.02. Capital Accounts. A Capital Account will be established for each
Partner.
(a) To each Partner's Capital Account there will be credited
such Partner's capital contributions, such Partner's distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Section 8.02 hereof, and the amount of any Partnership
liabilities assumed by such Partner or which are secured by any Property
distributed to such Partner;
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(b) To each Partner's Capital Account there will be debited
the amounts of cash and the Gross Asset Value of any Property distributed to
such Partner pursuant to any provision of this Agreement, such Partner's
distributive share of Losses and any items in the nature of expenses or losses
which are specially allocated pursuant to Section 8.02 hereof and the amount of
any liabilities of such Partner assumed by the Partnership or which are secured
by any Property contributed by such Partner to the Partnership;
(c) In the event any Partnership interest is transferred in
accordance with the terms of this Agreement, the transferee will succeed to the
Capital Account of the transferor to the extent it relates to the transferred
Partnership interest;
(d) In determining the amount of any liability for purposes of
paragraphs (a) and (b) hereof, there will be taken into account Section 752(c)
of the Code and any other applicable provisions of the Code and Regulations; and
(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Section 1.704-1(b) of the Regulations, and will be interpreted and applied
in a manner consistent with such Regulations. In the event the Partners will
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities that are secured by contributed or distributed
Property or which are assumed by the Partnership or one or more of the
Partners), are computed in order to comply with such Regulations, the Partners
may make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Partner pursuant to Section 9.02 of
the Agreement upon the dissolution of the Partnership. The Partners also will
(i) make any adjustments that are necessary or appropriate to maintain equality
between the Capital Accounts of the Partners and the amount of Partnership
capital reflected on the Partnership's balance sheet, as computed for book
purposes in accordance with Section 1.704-1(b)(2)(iv)(g) of the Regulations, and
(ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Section 1.704-1(b) of the
Regulations.
3.03. Admissions of New Partners. New Partners may be admitted to the
Partnership as partners in the Partnership with the unanimous written consent of
the existing Partners. A new Partner must agree to be bound by the terms and
provisions of this Agreement, as amended. Upon admission, a new Partner will
have all rights and duties of a Partner of the Partnership.
3.04. Interest. No interest will be paid or credited to the Partners on
their Capital Accounts or upon any undistributed profits left on deposit with
the Partnership.
3.05. Additional Capital Contributions. (a) Except as otherwise
provided in this Section 3.05, no Partner will be required to make additional
capital contributions ("Additional Capital Contributions") to the Partnership.
However, the Partners authorize the Partnership to receive addi tional capital
contributions from the Partners and the Partnership may solicit Additional
Capital Contributions from the Partners, in an amount and in such proportions
from the Partners as is autho-
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rized by the unanimous vote of the Partners. The Partners acknowledge and agree
that they will vote in favor of such solicitation and receipt of Additional
Capital Contributions to the extent of the capital requirements specified in the
Annual Plan.
(b) Notwithstanding the provisions of paragraph (a) of this Section
3.05, upon receipt of at least five (5) business days written notice from the
Board of Governors, [*] will make Additional Capital Contributions from time to
time [*], up to an aggregate amount equal to the lesser of: (i)[*]; or (ii) [*].
ARTICLE IV
PARTNERS
4.01. Matters Requiring the Consent of the Partners; Restrictions on
Actions by the Partners. (a) Matters Requiring the Consent of the Partners. No
action may be taken by or on behalf of the Partnership in connection with any of
the following matters without the prior written consent of each Partner:
(i) approval of the initial Annual Plan;
(ii) any amendments, waivers or other changes to this
Agreement;
(iii) changes to the composition of the Board of Governors
(i.e., the number of Governors to be nominated by each Partner);
(iv) a change in fiscal year of the Partnership;
(v) the incurrence of any indebtedness that increases the
total indebtedness of the Partnership above the level existing at the end of the
prior fiscal year, excluding indebtedness for short-term trade financing, unless
included in the Annual Plan;
(vi) the winding up, dissolution or liquidation of the
Partnership in a manner other than as contemplated by the terms of this
Agreement;
(vii) the extension of the term of the Partnership's existence
beyond its initial or any extended term;
(viii) the merger, reorganization, consolidation of the
Partnership or other form of business combination with respect to the
Partnership;
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(ix) any change in the objects or purposes of the Partnership
or the scope of its activities;
(x) the approval of any transactions between the Partnership
and any Partners not specifically provided for in the Annual Plan;
(xi) with respect to the Partnership, (a) the acquisition of
or investment in any corporation, partnership, or joint venture with any person,
(b) the creation of any direct or indirect subsidiary of the Partnership, or (c)
the acquisition or sale of assets in a single transaction or series of
transactions (other than as set forth in the Preliminary Implementation Plan,
the Implementation Plan or the Annual Plan);
(xii) with respect to the Partnership, (a) the voluntary
commencement of any proceeding or the voluntary filing of any petition seeking
relief under Title 11 of the United States Code, as amended from time to time,
or any other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (b) the consent to the institution of, or the failure to contest in
a timely and appropriate manner, any involuntary proceeding or any involuntary
filing of any petition of the type described in the immediately preceding clause
(a), (c) the application for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for it or for
a substantial portion of its property or assets, (d) the filing of an answer
admitting the material allegations of a petition filed against it in any such
proceeding, (f) the making of a general assignment for the benefit of creditors,
(g) the admission in writing of its inability to, or the failure generally, to
pay its debts as they become due, or (h) the taking of any action for the
purpose of effecting any of the foregoing;
(xiii) the admission of another partner to the Partnership;
and
(xiv) any other matters with respect to which applicable law
requires the approval of more than a majority vote of the Partners.
(b) Restrictions on Actions by the Partners. Neither Partner may
without the prior written consent of the other Partner:
(i) confess a judgment against the Partnership;
(ii) except as otherwise provided by this Agreement, the Joint
Venture Agreement or the Material Agreements, make any agreement on behalf of or
otherwise purport to bind the other Partner or the Partnership;
(iii) do any act, or fail to take any act, in contravention of
this Agreement, the Joint Venture Agreement or the Material Agreements;
(iv) except as contemplated by this Agreement, the Joint
Venture Agreement, or the Material Agreements, dispose of the Business;
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(v) assign the property of the Partnership in trust for
creditors or on the assignee's promise to pay any indebtedness of the
Partnership;
(vi) submit a Partnership claim or liability to arbitration or
reference, except as contemplated by this Agreement, the Joint Venture
Agreement, or the Material Agreements;
(vii) settle, waive, release or initiate any claim, demand,
action, suit, or other proceeding by or against the Partnership; or
(viii) incur any indebtedness in connection with, or otherwise
engage in, any Hedge/Swap Transaction; provided, however, if the AT&T Partner
consents to incurring any indebtedness in connection with, or otherwise engaging
in, a Hedge/Swap Transaction, the Partnership must also receive the written
consent of the Treasurer of AT&T Corp., an Assistant Treasurer of AT&T Corp., or
a Treasury Manager of AT&T Corp. designated by the Treasurer of AT&T Corp.,
prior to incurring any such indebtedness or engaging in any such Hedge/Swap
Transaction; and further provided that if the Cirrus Partner consents to
incurring any indebtedness in connection with, or otherwise engaging in, a
Hedge/Swap Transaction, the Partnership must also receive such consents, if any,
as may be required by applicable Cirrus financing policies then in existence,
prior to incurring any such indebtedness or engaging in any such Hedge/Swap
Transaction.
4.02. Actions by the Partners; Meetings; Quorum; Majority.
Each Partner will designate one person who will be authorized to act on behalf
of such Partner in connection with the consents or approvals required pursuant
to Section 4.01, provided that all such acts on behalf of a Partner will be in
writing. Each Partner will notify the other Partner or Partners of the identity
of such person, or any replacement thereof, pursuant to the terms of Section
14.01 of the Joint Venture Agreement. Each Partner agrees to provide any consent
or approval required under Section 4.01 hereof, or to indicate that such consent
or approval will not be provided, within twenty (20) days of written request of
the other Partner of the Partnership.
4.03. Other Ventures. The parties hereto acknowledge and agree
that the Partners, or any of them, may engage in other business ventures of
every nature and description, independently or with others, and neither the
Partnership nor the Partners will have any rights in and to any independent
venture or activity or the income or profits derived therefrom.
ARTICLE V
TRANSFER OF PARTNERS' INTERESTS
5.01. Personal Property; Transferee's Interest. Subject to the
provisions of the Joint Venture Agreement with respect to disposal of a
Partner's interest in the Partnership, the interest of each Partner is personal
property and may be transferred only in accordance with the terms of Section
5.02 hereof. If all the Partners other than the Partner proposing to dispose of
its interest agree to a proposed transfer by unanimous written consent, but do
not agree by unanimous written consent to
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admit the transferee as a Partner such transferee will have no right to
participate in the management of the business and affairs of the Partnership or
to become a Partner and will only be entitled to receive the share of profits or
other compensation by way of income and the return of contributions, to which
the transferor Partner would otherwise be entitled. If the transfer is approved
by the other Partners by unanimous written consent and the admission of the
transferee as a Partner is also approved by unanimous written consent, such
transferee will have all the rights and powers and be subject to all the
restrictions and liabilities of its assignor, will have the right to participate
in the management of the business and affairs of the Partnership and will become
a substituted Partner.
5.02. Restrictions on Transfer. Unless the non-transferring
Partner agrees, or the Partners agree by unanimous written consent, to the
contrary, no Partner may transfer, assign, pledge or otherwise dispose of its
interest in the Partnership, except to such other Partner or Partners.
5.03. Buy/Sell. (a) In the event a Partner wishes to dispose
of its interest pursuant to Section 5.02 hereof or upon termination of this
Agreement, the Partner wishing to dispose of its interest in the Partnership
will notify the non-transferring Partner or Partners who will be under no
obligation to acquire the interest, nor to permit the sale to a third party who
is not then a Partner. In the event a Partner wishes or Partners wish to
purchase the interest of another Partner it or they will notify such other
Partner who will be under no obligation to sell such interest. If a Partner
wishes to dispose of its interest and the other Partner or Partners wishes to
purchase the interest (the "Purchasing Partner or Partners"), the Purchasing
Partner or Partners will acquire the interest from the transferring Partner (the
"Selling Partner") at an agreed upon price, or if no price can be agreed upon,
the fair market value of such interest as determined by an independent qualified
appraiser appointed by the Purchasing Partner or Partners and the Selling
Partner. If they cannot agree on an appraiser, the Purchasing Partner or
Partners, on the one hand, and the Selling Partner, on the other hand, will each
choose an appraiser and the two appraisers will choose one additional appraiser.
The fair market value of the interest of the Selling Partner will be determined
by the three appraisers or, if they cannot agree, will be the average of the
three appraisers' valuation. At the consummation of the sale of the interest in
the Partnership of the Selling Partner, the fair market value of the Selling
Partner's interest will be paid in cash or in the form of a promissory note with
such terms, interest rates, payment amounts and other terms as will be mutually
agreed upon by the Selling Partner and the Purchasing Partner or Partners.
(b) The Partners hereby agree that in the event of a
sale pursuant to this Section 5.03:
(i) for purposes of this Section 5.03 only,
the interest in the Partnership of the AT&T Partner will be deemed to include
the AT&T Assets, the other assets of AT&T Corp. and the AT&T Partner comprising
XX0, XX0, and the Premises and the Land;
(ii) for purposes of this Section 5.03
only, the interest in the Partnership of the Cirrus Partner will be deemed to
include the Cirrus Assets and the other assets of Cirrus and the Cirrus Partner
comprising OR2; and
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(iii) such sale will be consummated as soon
as reasonably practicable. In the event of any such sale, the Selling Partner
will use its reasonable best efforts to cause all leases and other agreements
covering the AT&T Assets, if the AT&T Partner is the Selling Partner, or the
Cirrus Assets, if the Cirrus Partner is the Selling Partner, to be assigned to
the Purchasing Partner or the third-party purchaser, as the case may be, and the
Purchasing Partner or the third-party purchaser, as the case may be, will assume
all obligations under any such leases and other agreements. The par ties hereto
acknowledge and agree that AT&T and its Affiliates may, in its or their sole
discretion, enter into transactions, agreements, understandings or arrangements
with respect to the Premises and/or the Land , including but not limited to
those which may give rise to sales, over-leases, mortgages, security interests,
liens or encumbrances; provided, however, that in the event of any such
transactions, agreements, understandings or arrangements, the Lease will not be
terminated other than in accordance with the terms thereof.
ARTICLE VI
GOVERNORS
6.01. The Board of Governors. (a) Upon the terms and subject to the
conditions of this Agreement and the provisions of the GPL, the Partners
acknowledge and agree that complete and exclusive power to direct and control
the Partnership is delegated hereby to the governing committee of five persons
appointed as provided in this Article VI (the "Board of Governors"). The
Partnership will be operated on a day to day basis by its officers and
employees, governed by the Board of Governors.
(b) The Governors may exercise all powers of the Partnership
and do all such lawful acts and things as are not by the GPL or this Agreement
directed or required to be exercised or done by the Partners. Following proper
notice therefor, a vote of the Board of Governors will be required with respect
to the following matters and will be conducted in accordance with the terms of
this Agreement:
(i) amendments to the Annual Plan, including periodic
updates and amendments thereto (as set forth in Section 3.02 of the Joint
Venture Agreement) and approval of the annual operating and capital budgets of
the Partnership;
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(ii) expenditures which, in the aggregate, for any
transaction or series of related transactions, are in excess of [*] if such
expenditures were not approved in the Annual Plan;
(iii) execution of any agreement involving payments
in excess of [*] over its term or having a term longer than one (1) year if such
agreement was not approved in the Annual Plan;
(iv) approval of limits of authority for officers of
the Partnership if such limits were not set forth in the Annual Plan;
(v) borrowing (including the provision of any
guarantee) in excess of borrowings authorized pursuant to the Annual Plan and
any encumbering of assets of the Partnership not provided for in the Annual
Plan;
(vi) the amendment or modification of the Bonus Plan;
and
(vii) any other matters which by the terms hereof are
reserved to the Board of Governors.
(c) Each Governor will be obliged to devote only as much of
his or her time to the Partnership's business as will be reasonably required in
light of the Partnership's business and objec tives. A Governor will perform his
or her duties as a Governor in good faith, in a manner he or she reasonably
believes to be in the best interests of the Partnership, and with such care as
an ordinarily prudent person in a like position would use under similar
circumstances.
(d) Subject to the provisions of this Agreement, the Board of
Governors is authorized and directed, as soon as practicable, to delegate to the
President and Chief Executive Officer responsibility for the day to day
operation of the Business.
6.02. Members of the Board of Governors; Voting; etc. (a) The AT&T
Partner will nominate three persons to serve on the Board of Governors, which
nominees will be reasonably acceptable to Cirrus. The Cirrus Partner will
nominate two persons to serve on the Board of Governors, which nominees will be
reasonably acceptable to AT&T. Neither Partner will unrea sonably withhold its
consent to the election of the nominees of the other Partner or Partners. All
such persons elected by the Partners to serve on the Board of Governors are
referred to in this Agreement collectively as the "Governors" and individually
as a "Governor." Each Governor will, at all times, be an employee or officer of
his or her nominating Partner or of its Affiliates. The Partners hereby elect
those persons identified on Schedule B attached hereto to be the initial
Governors.
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(b) Each Partner will be entitled to name an alternate person
(who will be reasonably satisfactory to the other Partner) to serve in the place
of any Governor appointed by such Partner should any such Governor not be able
to attend a meeting or meetings.
(c) Each Governor or alternate person will serve at the
pleasure of the appointing Partner and may be removed as such, with or without
cause, and his or her successor appointed, by the appointing Partner.
(d) Each Partner will bear any cost incurred by any Governor
designated by it to serve on the Board of Governors, and no member of the Board
of Governors will be entitled to compensation from the Partnership for serving
in such capacity.
(e) Each Partner will notify the other Partner or Partners and
the Partnership of the name, business address and business telephone and
facsimile numbers of each Governor and each alternate person and such Partner
will promptly notify the other Partner or Partners and the Partnership of any
change in such Partner's appointments or of any change in any such address or
numbers.
(f) For purposes of any approval or action taken by the Board
of Governors, each member of the Board of Governors will have one vote. A
majority of the votes eligible to be cast at any meeting will be required for
purposes of approving any action to be taken by the Board of Governors at such
meeting; provided, however, that a majority of the votes eligible to be cast at
a meeting required for purposes of approving the matters described in Sections
6.01(b)(i) through 6.01(b)(vi) hereof must include the vote of at least one (1)
Governor appointed by the AT&T Partner and one (1) Governor appointed by the
Cirrus Partner are present.
(g) At any meeting of the Board of Governors, a Governor, in
the absence of another Governor appointed by the same Partner or an alternate
person serving in the place of such absent Governor, may cast the vote such
absent Governor would otherwise be entitled to cast.
(h) The quorum necessary for any meeting of the Board of
Governors will be those members entitled to cast a majority of the votes held by
the members of the Board of Governors; provided, however, that a quorum
necessary for approval by the Board of Governors of the matters described in
Sections 6.01(b)(i) through 6.01(b)(vi) hereof must include at least one (1)
Governor appointed by the AT&T Partner and one (1) Governor appointed by the
Cirrus Partner are present. A quorum will be deemed not to be present at any
meeting for which notice was not properly given under Section 6.01(c) hereof,
unless the member or members as to whom such notice was not properly given
attend such meeting without protesting the lack of notice or duly execute and
deliver a written waiver of notice or a written consent to the holding of such
meeting.
(i) Any action by a Governor of the Board of Governors in such
Governor's capacity as such will, so far as the Partners are concerned, be
deemed to have been duly authorized by the Partner that appointed such Governor;
provided, however, that any such action will not be deemed to be an approval,
consent or agreement of such Partner for any purposes of this Agreement
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(including under Section 4.01 hereof), for which approval, consent or agreement
must be separately obtained in writing.
(j) Each appointment by a Partner to the Board of Governors
will remain in effect until the Partner making such appointment notifies the
other Partner of a change in such appointment. A Governor may resign from his or
her position as a Governor at any time by notice to the Partners. Such
resignation will be effective as set forth in such notice. The resignation or
removal of a member of the Board of Governors will not invalidate any act of
such member taken before the giving of such written notice of the removal or
resignation of such member.
6.03. Meetings, Notice, etc. (a) Meetings of the Board of Governors
will be held at the principal offices of the Partnership or at such other place
as may be determined by the Board of Governors.
(b) Regular meetings of the Board of Governors will be held at
least quarterly on such dates and at such times as will be determined by the
Board of Governors.
(c) Notice of any regular meeting or special meeting pursuant
to paragraph (d) of this Section 6.03 will be given to each member and alternate
member of the Board of Governors by the Partnership or any Partner at least ten
business days prior to such meeting in the case of a meeting in person or at
least five days prior to such meeting in the case of a meeting by conference
telephone or similar communications equipment pursuant to paragraph (f) of this
Section 6.03.
(d) Special meetings of the Board of Governors may be called
by any Governor by notice given in accordance with the notice requirements set
forth in paragraph (c) of this Section 6.03, which notice will state the purpose
or purposes for which such meeting is being called. No action may be taken and
no business may be transacted at such special meeting which is not identified in
such notice unless (a) such action or business is incidental to the action or
business for which the special meeting is called or (b) such action or business
does not materially adversely affect either Partner or the Partnership.
(e) The actions taken by the Board of Governors at any
meeting, however called and noticed, will be as valid as though taken at a
meeting duly held after regular call and notice if (but not until), either
before, at or after the meeting, any Governor as to whom it was improperly held
duly executes and delivers a written waiver of notice or a written consent to
the holding of such meeting; provided, however, that any Governor that is
present at a meeting will be deemed to have received adequate notice thereof. A
vote of the Board of Governors may be taken either in a meeting of the Board of
Governors or by written consent of the Governors eligible to cast a majority of
the votes on the Board of Governors without a meeting, which majority for a
written consent will be required to include, at a minimum, one (1) member of the
Board of Governors appointed by each Partner.
(f) A meeting of the Board of Governors may be held by
conference telephone or similar communications equipment by means of which all
members participating in the meeting can be heard by all other participants. Any
member of the Board of Governors may elect to participate in a
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meeting by conference telephone or similar communications equipment upon
sufficient advance notice to permit arrangements therefor to be made.
(g) The Board of Governors will, from time to time, elect one
of the Governors to preside at its meetings. Such elected Governor is referred
to herein as the "Chairman of the Board of Governors." The Board of Governors
may establish reasonable rules and regulations to (a) require officers and
employees to call meetings and perform other administrative duties, (b) limit
the number and participation of observers, if any, and require such persons to
observe confidentiality obligations and (c) otherwise provide for the keeping
and distribution of minutes and internal Board of Governors governance matters
not inconsistent with the terms of this Agreement.
6.04. Partners May Act. Notwithstanding anything to the contrary set
forth in this Article VI, the Partners will retain all powers which may not be
so delegated pursuant to the GPL and the powers specified in this Agreement, and
further provided, that nothing in this Article VI will derogate from the power
of the Partners, which is absolute, to agree in writing to cause the Partnership
to act or refrain from acting as to any specific item or matter.
ARTICLE VII
OFFICERS
7.01. Number; Titles; Election; Term; Qualification. The officers of
the Partnership will be a President and Chief Executive Officer (one person),
one or more Vice Presidents (and, in the case of each Vice President with such
descriptive title, if any, as the Governors will determine), a secretary, and a
Treasurer and Chief Financial Officer (one person). The Partnership may also
have a Chairman of the Board of Governors, one or more Assistant Treasurers, one
or more Assistant Secretaries, and such other officers and such agents as the
Governors may from time to time elect or appoint. The AT&T Partner will
recommend a President and Chief Executive Officer and a Treasurer and Chief
Financial Officer. The Partners will then elect a President and Chief Executive
Officer and a Treasurer and Chief Financial Officer at the first meeting at
which a quorum will be present or whenever a vacancy exists; provided that any
such election will require the unanimous vote of the Partners. The President
then, or from time to time thereafter, will recommend one or more other
officers, and the Board of Governors will appoint such officers as they will
deem advisable; provided that any such election will require the unanimous vote
of the Governors. Each officer will hold office for the term for which he or she
is elected or appointed and until his or her successor has been elected or
appointed and qualified. Any person may hold any number of offices. No officer
or agent need be a Governor.
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7.02. Removal. Any officer or agent elected or appointed by
the Governors may be removed by the unanimous vote of the Partners or the
unanimous vote of the Governors whenever intheir judgment the best interest of
the Partnership will be served thereby. Election or appointment of any officer
or agent will not of itself create contract rights. [*]
7.03. Vacancies. Any vacancy occurring in any office of the
Partnership may be filled by the unanimous vote of the Governors.
7.04. Authority. Officers will have such authority and perform
such duties in the management of the Partnership as are provided in this
Agreement or as may be determined by resolution of the Governors not
inconsistent with the Regulations.
7.05. Compensation. The compensation, if any, of officers and
agents will be fixed from time to time by the Governors; provided, that the
Governors may by resolution delegate to any one or more officers of the
Partnership the authority to fix such compensation.
7.06. Chairman. The Chairman of the Board of Governors will
have such powers and duties as may be prescribed by the Governors.
7.07. President and Chief Executive Officer. Unless and to the
extent that such powers and duties are expressly delegated to the Chairman of
the Board of Governors by the Governors, the President will be the Chief
Executive Officer of the Partnership and, subject to the supervision of the
Governors and the Partners, will have general management and control of the
business and property of the Partnership in the ordinary course of its business
with all such powers with respect to such general management and control as may
be reasonably incident to such responsibilities, including, but not limited to,
the power to employ, discharge, or suspend employees and agents of the
Partnership, and to suspend, with or without cause, any officer of the
Partnership pending final action by the Governors with respect to continued
suspensions, removal, or reinstatement of such officer. The President may,
without limitation, agree upon and execute all division and transfer orders,
bonds, contracts and other obligations in the name of the Partnership. The
President will have, in addition to the powers and authorities normally incident
to the office of president and the powers and duties set forth in this
Agreement, the following authorities and accountabilities:
(a) accountability to the Board of Governors to cause
the Partnership to achieve its milestones, requirements and objectives as set
forth in the Annual Plan or otherwise;
(b) day to day administration of the operation of the
Partnership and coordination of the subcontractors;
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(c) representing the Partnership in dealings with the
Partners, their Affiliates and third parties;
(d) proposing to the Board of Governors updates and
amendments to the Annual Plan;
(e) delegating authority pursuant to the Schedule of
Authorizations (as hereinafter defined); and
(f) managing the personnel resources of the
Partnership within the parameters of the Annual Plan including appointment and
removal of officers and personnel other than the officers appointed by the Board
of Governors. The Board of Governors will adopt unanimously at or imme diately
following the execution and delivery of this Agreement, and may amend from time
to time unanimously, the Schedule of Authorizations. As used herein, "Schedule
of Authorizations" will mean a schedule of authorizations pursuant to which the
President of the Partnership may act or delegate to other officers and employees
of the Partnership authority to conduct the business of, and enter into
transactions in the name of, the Partnership, consistent with this Agreement.
7.08. Vice Presidents. Each Vice President will have such
powers and duties as may be prescribed by the Governors or as may be delegated
from time to time by the President and (in the order as designated by the
Governors, or in the absence of such designation, as determined by the length of
time each has held the office of Vice President continuously) will exercise the
powers of the President during the President's absence or inability to act. As
between the Partnership and third parties, any action taken by a Vice President
in the performance of the duties of the President will be conclusive evidence of
the absence or inability to act of the President at the time such action was
taken.
7.09. Treasurer and Chief Financial Officer. The Treasurer
will have custody of the Partnership's funds and securities, will keep full and
accurate accounts of receipts and disbursements, and will deposit all moneys and
valuable effects in the name and to the credit of the Partnership in such
depository or depositories as may be designated by the Governors. The Treasurer
will be the chief financial officer of the Partnership. The Treasurer will audit
all payrolls and vouchers of the Partnership, receive, audit, and consolidate
all operating and financial statements of the Partnership and its various
departments, will supervise the accounting and auditing practices of the
Partnership, and will have charge of matters relating to taxation. Additionally,
the Treasurer will have the power to endorse for deposit, collection, or
otherwise all checks, drafts, notes, bills of exchange, and other commercial
paper payable to the Partnership and to give proper receipts and discharges for
all pay ments to the Partnership. The Treasurer will perform such other duties
as may be prescribed by the Governors or as may be delegated from time to time
by the president.
7.10. Assistant Treasurers. Each Assistant Treasurer will have
such powers and duties as may be prescribed by the Board of Governors or as may
be delegated from time to time by the President. The Assistant Treasurers (in
the order as designated by the Governors or, in the absence of such designation,
as determined by the length of time each has held the office of Assistant
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Treasurer continuously) will exercise the powers of the treasurer during that
officer's absence or inability to act. As between the Partnership and third
parties, any action taken by an Assistant Treasurer will be conclusive evidence
of the absence or inability to act of the Treasurer at the time such action was
taken.
7.11. Secretary. The Secretary will maintain minutes of all
meetings of the Governors, of any committee, and of the Partners, or consent in
lieu of such minutes in the Partnership's minute books, and will cause notice of
such meetings to be given when requested by any person authorized to call such
meetings. The Secretary may sign with the president, in the name of the
Partnership, all contracts of the Partnership and affix the seal of the
Partnership thereto. The Secretary will have charge of the certificate books,
transfer records, ledgers, and such other books and papers as the Governors may
direct, all of which will at all reasonable times be open to inspection by any
Governor at the office of the Partnership during business hours. The Secretary
will perform such other duties as may be prescribed by the Governors or as may
be delegated from time to time by the president.
7.12. Assistant Secretaries. Each Assistant Secretary will
have such powers and duties as may be prescribed by the Governors or as may be
delegated from time to time by the President. The Assistant Secretaries (in the
order designated by the Governors or, in the absence of such designation, as
determined by the length of time each has held the office of Assistant Secretary
continuously) will exercise the powers of the secretary during that officer's
absence or inability to act. As between the Partnership and third parties, any
action taken by an Assistant Secretary in the performance of the duties of the
Secretary will be conclusive evidence of the absence or inability to act of the
Secretary at the time such action was taken.
ARTICLE VIII
ALLOCATION OF PROFITS AND LOSSES
8.01. Allocation of Profits and Losses. Subject to the
provisions of Sections 8.02, 8.03 and 8.04 hereof, the Profits and Losses of the
Partnership for each Fiscal Year will be allocated among the Partners in the
following manner.
(a) Profits will be allocated among the Partners in
the following manner:
(i) First, the Profits derived from, or
attributable to, the operation of OR1 will be allocated to the AT&T Partner; and
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(ii) Second, the Profits derived from, or
attributable to, the operation of OR2 will be allocated among the Partners pro
rata in proportion to their Percentage Interests.
(b) Losses will be allocated among the Partners in
the following manner:
(i) First, any Losses derived from, or
attributable to, OR1 will be allocated to the AT&T Partner; and
(ii) Second, in the event that [*] makes
Additional Capital Contributions pursuant to Section 3.05(b) hereof, Losses
derived from, or attributable to, OR2 will be allocated to [*] in an amount
equal to such additional Capital Contributions; and
(iii) Third, any remaining Losses derived
from, or attributable to, OR2 will be allocated to the Partners pro rata in
proportion to their Percentage Interests.
8.02. Special Allocations. (a) Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(f) of the Regulations, notwithstanding any
other provision of this Section 8.02, if there is a net decrease in Partnership
Minimum Gain during any Fiscal Year of the Partnership, each Partner will be
specially allocated items of Partnership income and gain for such Fiscal Year of
the Partnership (and, if necessary, subsequent Fiscal Year of the Partnerships)
in an amount equal to that Partner's share of the net decrease in Partnership
Minimum Gain. These allocations will be deter mined in accordance with Section
1.704-2(f) of the Regulations. The items to be so allocated will be determined
in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations.
This Section 8.02(a) is intended to comply with the minimum gain charge back
requirement in Section 1.704-2 of the Regulations and will be interpreted
consistently therewith. Where such a minimum gain chargeback would cause a
distortion in the economic arrangement of the Partners and it is not expected
that the Partnership will have sufficient other income to correct that
distortion, the Partnership will apply for a waiver of the minimum gain charge
back requirement in accordance with Section 1.704-2(f) of the Regulations.
(b) Partner Minimum Gain Chargeback. Except as otherwise
provided in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other
provision of this Section 8.02, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse Debt during
any Fiscal Year of the Partnership, each Partner that has a share of the Partner
Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the Regulations, will be
specially allocated items of Partnership income and gain for such Fiscal Year of
the Partnership (and, if necessary, subsequent Fiscal Year of the Partnerships)
in an amount equal to the portion of such Partner's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner Nonrecourse
Debt, determined in
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accordance with Section 1.704-2(i)(4) of the Regulations. Allocations pursuant
to the previous sen tence will be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be so
allocated will be determined in accordance with Sections 1.704- 2(i)(4) and
1.704-2(j)(2) of the Regulations. This Section 8.02(b) is intended to comply
with the minimum gain charge back requirement of Section 1.704-2(i)(4) of the
Regulations and will be interpreted consistently therewith. In addition, rules
consistent with the provisions of Section 1.704- 2(f)(2), (3), (4) and (5) of
the Regulations (including rules regarding a waiver of the type discussed in
Section 8.02(a) hereof), will apply to the special allocation required by this
Section 8.02(b).
(c) Gross Income Allocation. In the event any Partner has an
Adjusted Capital Account Deficit at the end of any Fiscal Year of the
Partnership, such Partner will be specially allo cated items of Partnership
income and gain in the amount and in the manner necessary to eliminate the
deficit as quickly as possible, provided that an allocation pursuant to this
Section 8.02(c) will be made only and to the extent that such Partner would have
an Adjusted Capital Account Deficit after all other allocations provided for in
this Article VIII have been made as if Section 8.02(g) hereof and this Section
8.02(c) were not in this Agreement. The allocations contained in this Section
8.02(c) are intended to satisfy the "qualified income offset" provisions of
Section 1.704-1(b)(2)(ii)(d) of the Regulations and will be interpreted
consistently therewith.
(d) Section 754 Adjustment. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken into account in
determining Capital Accounts as a result of a distribution to a Partner in
complete liquidation of his interest in the Partnership, the amount of such
adjustment to the Capital Accounts will be treated as an item of gain (if the
adjustment increases the basis in the asset) or loss (if the adjustment
decreases such basis) and such gain or loss will be specially allocated to the
Partners in proportion to the Percentage Interest of each Partner in the event
Section 1.702-1(b)(2)(iv)(m)(2) of the Regulations applies, or to the Partners
to which such distribution was made in the event that Section
1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year of the Partnership or other period will be specially allocated among
the Partners in proportion to their Percentage Interests.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year of the Partnership or other period will be
specially allocated to the Partner who bears the economic risk of loss with
respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Section 1.704-2(i)(1) of the
Regulations.
(g) Curative Allocations. The allocations set forth in
Sections 8.02(a) through (f) hereof (the "Regulatory Allocations") are intended
to comply with certain requirements of the Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations will be offset
either with Regulatory Allocations or with special allocations of other items of
Partnership income, gain, loss or deduction pursuant to this Section 8.02(g).
Therefore, notwithstanding any
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other provisions of this Article VIII (other than the Regulatory Allocations),
the Partners will make such offsetting special allocations of Partnership
income, gain, loss, or deduction in whatever manner they determine appropriate
so that, after such offsetting allocations are made, each Partner's Capital
Account balance is, to the extent possible, equal to the Capital Account balance
such Partner would have had if the Regulatory Allocations were not part of this
Agreement and all Partnership items were allocated pursuant to Section 8.01
hereof. In exercising their discretion under this Section 8.02(g), the Partners
will take into account future Regulatory Allocations under Section 8.02(a) and
(b) hereof that, although not yet made, are likely to offset Regulatory
Allocations made under Sections 8.02(e) and (f) hereof.
8.03. Other Allocation Rules. (a) The Partners are aware of
the income tax consequences of the allocations made by this Article VIII and
hereby agree to be bound by the provisions of this Article VIII in reporting
their shares of partnership income and loss for income tax purposes.
(b) Income and loss for financial reporting
purposes will be allocated among the Partners in a manner consistent with the
allocations of the Profits and Losses for federal income tax purposes and in
accordance with the accounting standards set forth in Section 10.01 hereof.
(c) For purposes of determining Profits,
Losses, or any other items allocable to any period, Profits, Losses, and any
such other items will be determined on a daily, monthly, or other basis, as
determined by the Partners using any permissible method under Section 706 of the
Code and the Regulations thereunder.
(d) Solely for purposes of determining a
Partner's proportionate share of the "excess nonrecourse liabilities" of the
Partnership within the meaning of Section 1.752-(3) of the Regulations, the
Partners' interests in Partnership profits will be their respective Percentage
Interests.
(e) To the extent permitted by Section
1.704-2(h)(3) of the Regulations, the Partners will endeavor to treat
distributions as having been made from the proceeds of Nonrecourse Liability or
a Partner Nonrecourse Debt only to the extent that such distributions would
cause or increase an Adjusted Capital Account Deficit for any Partner.
8.04. Code Section 704(c). (a) In accordance with Section
704(c) of the Code and the Regulations thereunder, items of income, gain, loss,
and deduction with respect to any property (other than money) contributed to the
capital of the Partnership will, solely for tax purposes, be allocated among the
Partners so as to take account of any variation between the adjusted basis of
such property to the Partnership for federal income tax purposes and its initial
Gross Asset Value.
(b) In the event the Gross Asset Value of
any Partnership asset is adjusted pursuant to the definition thereof, subsequent
allocations of income, gain, loss, and deduction with respect to such asset will
take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same manner as
under Section 704(c) of the Code and the Regulations thereunder.
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(c) Any elections or other decisions
relating to such allocations will be made by the Partners in any manner that
reasonably reflects the purpose and intention of this Agreement and are
otherwise allowable under Section 1.704-3 of the Regulations.
8.05. Federal Income Tax. The parties hereto intend that the
Partnership will be governed by the applicable provisions of Subchapter K, of
Chapter 1, of the Code.
8.06. Allocation of Income and Loss in Respect of Transferred
Interests. (a) If any interest in the Partnership is transferred, or upon the
admission or withdrawal of a Partner, in accordance with the provisions of this
Agreement during any calendar year, the income or loss attributable to such
interest for such calendar year will be divided and allocated between the
Partners based upon an interim closing of the Partnership's books or on a daily
basis, as determined in the sole discretion of the Governors. For the purpose of
accounting convenience and simplicity, the Partnership will treat a transfer of,
or any increase or decrease in, an interest in the Partnership which occurs at
any time during a semi-monthly period (commencing with the semi-monthly period
including the date hereof) as having been consummated on the first day of such
semi-monthly period, regardless of when during such semi-monthly period such
transfer, increase, or decrease actually occurs (e.g., sales and disposi tions
made during the first 15 days of any month will be deemed to have been made on
the first day of the month and sales and dispositions thereafter will be deemed
to have been made on the 16th day of the month). Notwithstanding any provision
above to the contrary, gain or loss of the Partnership realized in connection
with a sale or other disposition of any of the assets of the Partnership will be
allocated solely to the Partners owning interests in the Partnership as of the
date such sale or other disposition occurs.
8.07. Reallocations Between the Partnership and a Partner. Any
redistribution, reapportionment or reallocation of income, deductions, credits
or allowances between the Partnership and a Partner (or Affiliate of such
Partner) effected pursuant to Section 482 of the Code or any similar provision
of state law (along with any penalties, charges, interest or additions relating
thereto) with respect to any transaction between the Partnership and such
Partner (or Affiliate of such Partner) will be allocated in full to such
Partner. The Partner to which reallocations under this Section 8.07 are made (as
well as such Partner's Affiliates) will indemnify and hold harmless the other
Partner (as well as Affiliates of such Partner) from any effects (including any
taxes, interest, penalties, charges or other additions) arising from any such
redistributions, reapportionment or reallocation. If, as a result of any such
redistribution, reapportionment or reallocation, the Capital Accounts of the
Partners are not in the same proportion to each other as immediately prior to
such redistribution, reapportionment or reallocation, the Capital Accounts will
be adjusted to achieve such relative proportions using the mechanism specified
in Section 9.05 hereof.
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ARTICLE IX
DISTRIBUTIONS
9.01. Operating Distributions. The Partnership's cash
available for distribution will, at such times as the Board of Governors deem
advisable, be distributed among the Partners in such amounts as the Governors
will unanimously determine. Except as otherwise expressly provided in this
Agreement, such operating distributions will be allocated among the Partners as
follows: (a) all operating distributions derived from the operation of OR1 will
be paid to the AT&T Partner, and (b) all operating distributions derived from
the operation of OR2 will be allocated among the Partners pro rata in proportion
to their Percentage Interests.
9.02. Distribution on Dissolution and Liquidation. In the
event of the dissolution and liquidation of the Partnership for any reason other
than pursuant to Article V hereof or pursuant to the terms of the Joint Venture
Agreement with respect to the transfer of the interest of a Partner in the
Partnership to another Partner, after the payment of or provision for creditors
pursuant to applicable law, the Partnership's assets will be distributed among
the Partners in the following manner:
(a) First, all assets related to OR1 shall
be distributed to the AT&T Partner; and
(b) Second, all remaining assets will be
distributed to the Partners pro rata in accordance with their
positive Capital Account balances in accordance with
Regulation Section 1.704-1(b)(2)(ii)(b)(2) (after taking into
account the distribution to the AT&T Partner of the assets
related to OR1).
To the extent consistent with the foregoing provisions of this Section 9.02, the
Partnership's non-monetary assets will be distributed to the Partner which
contributed such asset to the Partnership (or to the successor of such
contributing Partner). In the event of the dissolution and liquidation of the
Partnership pursuant to Article V hereof or pursuant to the terms of the Joint
Venture Agreement with respect to the transfer of the interest of a Partner in
the Partnership to another Partner, after the payment of or provision for
creditors pursuant to applicable law, the Partnership's assets will be
distributed to the Partner or the third party purchasing the interest of the
Selling Partner.
9.03. Deemed Sale of Assets. For all purposes of this
Agreement, any property (other than cash) that is distributed or to be
distributed in kind to one or more Partners for a Fiscal Year, including without
limitation all non-cash assets which will be deemed distributed immediately
prior to the dissolution and winding up of the Partnership so as to permit the
unrealized gain or loss inherent in such assets to be allocated to the Partners,
or that is constructively distributed on termination of the Partnership pursuant
to Section 708(b)(1)(B) of the Code and Section 9.04 hereof, will be deemed to
have been sold for cash equal to its fair market value, and the unrealized gain
or loss inherent in such assets will be treated as recognized gain or loss for
purposes of determining the Profits and Loss of the Partnership to be allocated
pursuant to Section 8.01 hereof for such Fiscal Year.
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9.04. Deemed Termination. Any constructive termination of the
Partnership pursuant to Section 708(b)(1)(B) of the Code will be deemed to be a
winding up and termination of the Partnership pursuant to which: (a) all assets
of the Partnership are deemed to have been sold as provided in Section 9.03
hereof, with the unrealized gain or loss inherent in such assets being allocated
pursuant to Section 8.01 hereof, (b) the proceeds of the deemed sales being
deemed distributed pursuant to Section 9.02 hereof, and (c) such assets being
then deemed to have been recontributed to a new Partnership, and the Capital
Accounts of the Partners will be adjusted appropriately to reflect such deemed
termination, sale, distribution, and reconstitution. This Section 9.04 applies
solely for purposes of adjusting Capital Accounts.
9.05. Distribution In the Event of a Reallocation. In the
event of a reallocation of income from a Partner (or an Affiliate of a Partner)
to the Partnership which is specially allocated to the affected Partner under
Section 8.07 of this Agreement, the Partnership will (at the expense of the
affected Partner) seek approval from the IRS to establish an appropriate account
receivable from the affected Partner (or the Affiliate) under the principles of
Rev. Proc. 65-17. Any payment of an account receivable established under the
principles of Rev. Proc. 65-17 will, when received by the Partnership, be
distributed to the affected Partner. In the event that no such account
receivable is established, the Partnership will be deemed to have distributed an
amount to the affected Partner equal to the income which was specially allocated
to that Partner under Section 8.07 hereof.
ARTICLE X
ACCOUNTING AND RECORDS
10.01. Records and Accounting. The books and records of the
Partnership will be kept on the accrual basis, will reflect all Partnership
transactions and will be appropriate and adequate for the Partnership's
business. The books and records of the Partnership will include separate
accounts for the operations of, and activities associated with, OR1 and OR2. To
the extent appropriate, all items of Profits and Losses will be allocated to
either OR1 or OR2. All items of Profits and Losses which are shared or are not
directly related to either OR1 or OR2 will be allocated between OR1 and OR2 in a
reasonable and consistent manner. The fiscal year of the Partnership for
financial reporting and for Federal income tax purposes will be the Fiscal Year.
10.02. Access to Accounting Records. All books and records of
the Partnership will be maintained at any office of the Partnership or at the
Partnership's principal place of business, and each Partner, and its duly
authorized representatives, will have access to them at such office of the
Partnership and the right to inspect and copy them at reasonable times.
10.03. Taxation. (a) Characterization. The Partners intend
that the Partnership will be treated as a partnership for Federal, state, local
and foreign income and franchise tax purposes and will take all reasonable
action, including the amendment of this Agreement and the execution of other
documents, as may be reasonably required to qualify for and receive treatment as
a partnership for Federal income tax purposes.
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(b) Tax Matters Partner. The AT&T Partner will be the Tax
Matters Partner of the Partnership within the meaning of Section 6231(a)(7) of
the Code and will act in any similar capacity under applicable state, local or
foreign law (in such capacity, the "Tax Matters Partner"). All reasonable
expenses incurred by the AT&T Partner while acting in such capacity will be paid
or reimbursed by the Partnership upon approval of the chief financial officer of
the Partnership; provided, however, that with respect to any matter described in
Section 8.07 hereof, the Partner to which is reallocated any item described in
Section 8.07 hereof (whether or not such reallocation is adjusted, canceled or
revoked by the IRS) will (i) pay or reimburse all expenses incurred by the AT&T
Partner while acting in its capacity as the Tax Matters Partner in connection
with such matter and (ii) pay or reimburse all out of pocket costs incurred by
the Partnership in connection with such matter.
(c) Tax Returns. (1) The Tax Matters Partner will prepare or
cause the Accountants to prepare and file on a timely basis the Federal tax
returns of the Partnership. The Tax Matters Partner will cause state, local and
any other tax returns required to be filed by the Partnership to be prepared and
filed on a timely basis. The Tax Matters Partner will consult with the Cirrus
Partner regarding all non-ministerial decisions described in Section
9.05(c)(2)(iii) hereof. Any disagreement with respect to such consultation will
be resolved in the manner described in Section 9.05(c)(3) hereof. No Partner
will file any tax return that is inconsistent with the tax returns filed by the
Partnership except as provided in Section 9.05(c)(3) hereof.
(2) The Tax Matters Partner will take such action as may be
reasonably necessary to constitute the Cirrus Partner as a "notice partner"
within the meaning of Section 6231(a)(8) of the Code. The Tax Matters Partner
will furnish to each Partner within five days (or within such shorter period as
may be required by the appropriate statutory or regulatory provisions) (i)
copies of all notices or other written communications received by the Tax
Matters Partner form the IRS, (ii) written notice of all material communications
the IRS has had with the tax Matters Partner and (iii) written notice of all
non-ministerial decisions to be made regarding tax elections, tax returns, tax
audits, tax litigation, tax settlements and other tax matters that may come to
the attention of the Tax Matters Partner in its capacity as Tax Matters Partner.
(3) The Tax Matters Partner will deliver to each other Partner
a copy of all written materials (including tax returns) proposed to be filed
with or submitted to the IRS or any other taxing authority at least thirty (30)
days prior to the date such filing or submission is required to be made. If the
Cirrus Partner does not notify the Tax Matters Partner of its objection to such
filing or submission in writing before the fifteenth (15th) day before the date
for such filing or submission, the Cirrus Partner will be considered to have
approved such filing or submission. If the Cirrus Partner provides such timely
notice of objection, the Cirrus Partner and the Tax Matters Partner will
negotiate in good faith to reach agreement with respect to such filing or
submission. If the Cirrus Partner and the Tax Matters Partner are unable to
reach such an agreement within 30 days, the Cirrus Partner and the Tax Matters
Partner will appoint a "Big Six" accounting firm (except any "Big Six"
accounting firm that is an accountant of any of the AT&T Partner, the Cirrus
Partner or the Partnership or any of their respective Affiliates) to determine
the position that should be taken by the Partnership. Each Partner
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will retain the right to take a position inconsistent with such determination to
the extent allowed under Section 6222 of the Code or comparable provisions of
state or local law.
(d) Tax Elections. The Governors will make the
following elections on behalf of the Partnership:
(i) to elect the calendar year as the Fiscal
Year of the Partnership if permitted by applicable law;
(ii) to elect a specified method of
accounting;
(iii) if requested by a Partner, to elect,
in accordance with Sections 734, 743 and 754 of the Code and applicable
regulations and comparable state law provisions, to adjust basis in the event
any Partner's interest is transferred in accordance with this Agreement or any
of the Partnership's property is distributed to any Partner;
(iv) to elect to treat all organization and
start-up costs of the Partnership as deferred expenses amortizable over 60
months under Sections 195 and 709 of the Code; and
(v) To elect with respect to such other
Federal, state and local tax matters as the Governors will agree upon from time
to time.
(e) Annual Tax Information. The Governors will cause
the Partnership to deliver to each Partner all information necessary for the
preparation of such Partner's Federal and state income tax returns.
ARTICLE XI
TERM; TERMINATION
11.01. Term; Termination. The term of the Partnership will
begin on the date of this Agreement and will continue until the day immediately
prior that same date ten years following the date of this Agreement (the
"Initial Term"), unless terminated prior thereto: (a) in accordance with the
provisions hereof; (b) by unanimous agreement of the Partners; (c) by the
material breach of the Joint Venture Agreement or any of the Material Agreements
which breach remains uncured in accordance with the terms of the Joint Venture
Agreement or the Material Agreements, as the case may be; or (d) pursuant to the
GPL. Notwithstanding the foregoing, the Partners may elect on or before two (2)
years prior to the expiration of the Initial Term or any Extended Term (as
hereinafter defined) to extend such term for an additional two (2) year period
(each such two (2) year period being referred to herein as an "Extended Term").
If the Partners do not elect to extend the Initial Term as set forth in this
Article XI, the provisions of Section 5.03 hereof will apply.
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ARTICLE XII
DISSOLUTION OF THE PARTNERSHIP AND
TERMINATION OF A PARTNER'S INTEREST
12.01. Dissolution. The Partnership will be dissolved upon the
occurrence of any event which would cause or result in a dissolution of the
Partnership under the GPL or otherwise, unless the Business is continued in
accordance with the terms of the Joint Venture Agreement.
ARTICLE XIII
INDEMNIFICATION
13.01. Indemnity. Subject to the provisions of Section 13.04
hereof, the Partnership will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investi gative,
except an action by or in the right of the Partnership, by reason of the fact
that he or she or it is or was a Partner, Governor, director, officer, employee
or agent of the Partnership, or is or was serving at the request of the
Partnership as a Partner, Governor, director, officer, employee or agent of
another limited liability company, corporation, partnership, joint venture,
trust or other enterprise against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him or it in connection
with the defense or settlement of the action, suit or proceeding if he or she or
it acted in good faith and in a manner which he or she or it reasonably believed
to be in or not opposed to the best interests of the Partnership, and, with
respect to a criminal action or proceeding, had no reasonable cause to believe
his or her or its conduct was unlawful.
13.02. Indemnity for Actions By or In the Right of the
Partnership. Subject to the provisions of Section 13.04 hereof, the Partnership
will indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding by or
in the rights of the Partnership to procure a judgment in his or her or its
favor by reason of the fact that he or she or it is or was a Partner, Governor,
director, officer, employee or agent of the Partnership, or is or was serving at
the request of the Partnership as a Partner, Governor, director, officer,
employee or agent of another limited-liability Partnership, corporation,
partnership, joint venture, trust or other enterprise against expenses,
including amounts paid in settlement and attorneys' fees actually and reasonably
incurred by him or it in connection with the defense or settle ment of the
action, suit or proceeding if he or she or it acted in good faith and in a
manner which he or she or it reasonably believed to be in or not opposed to the
best interests of the Partnership. Indemnification may not be made for any
claim, issue or matter as to which such person has been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals therefrom, to be liable
to the Partnership or for amounts paid in settlement to the Partnership, unless
and only to the extent that the court in which the action or suit was brought or
other court of competent jurisdiction determines upon application that in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnify for such expenses as the court deems proper.
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13.03. Indemnity If Successful. The Partnership will indemnify
a Partner, Governor, director, officer, employee or agent of the Partnership
against expenses, including attorneys' fees, actually and reasonably incurred by
him or it in connection with the defense of any action, suit or proceeding
referred to in Sections 13.01 and 13.02 or in defense of any claim, issue or
matter therein, to the extent that such person or entity has been successful on
the merits.
13.04. Expenses. (a) Any indemnification under Sections 13.01
and 13.02, as well as the advance payment of expenses permitted under Section
13.05 unless ordered by a court or advanced pursuant to Section 13.05 below,
must be made by the Partnership only as authorized in the specific case upon a
determination that indemnification of the Partner, Governor, director, officer,
employee or agent is proper in the circumstances. The determination must be
made:
(b) by the Partners by a majority of a quorum
consisting of Partners who were not parties to the act, suit or proceeding;
(c) if a majority of those Partners who were not
parties to the act, suit or proceeding so order, by independent legal counsel in
a written opinion; or
(d) if a quorum consisting of Partners who were not
parties to the act, suit or proceeding cannot be obtained, by independent legal
counsel in a written opinion.
13.05. Advance Payment of Expenses. The expenses of Partners,
Governors, officers, employees and agents incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Partnership as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the Partner,
Governor, director, officer, employee or agent to repay the amount if it is
ultimately determined by a court of competent jurisdiction that he or she or it
is not entitled to be indemnified by the Partnership. The provisions of this
subsection do not affect any rights to advancement of expenses to which
personnel other than Partners, Governors, officers, employees or agents may be
entitled under any contract or otherwise by law.
13.06. Other Arrangements Not Excluded. The indemnification
and advancement of expenses authorized in or ordered by a court pursuant to this
Article XIII:
(a) does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
the Certificate of Formation or any agreement, vote of the Partners or
otherwise, for either an action in his or her or its official capacity or an
action in another capacity while holding his or her or its office, except that
indemnification, unless ordered by a court pursuant to Section 13.05 hereof, may
not be made to or on behalf of any Partner or Governor if a final adjudication
established that his or her or its acts or omissions involved intentional
misconduct, fraud or a knowing violation of the law and was material to the
cause of action; and
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(b) continues for a person who has ceased to be a
Partner, Governor, director, officer, employee or agent and inures to the
benefit of the heirs, executors and administrators of such a person,
notwithstanding any amendment or subsequent modification of this Article XIII.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.01. Complete Agreement. This Agreement, the Joint Venture
Agreement and the Material Agreements constitute the complete and exclusive
statement of the agreement among the Partners with respect to the subject matter
contained herein and therein. This Agreement, the Joint Venture Agreement and
the Material Agreements replace and supersede all prior agreements by and among
the Partners with respect to the subject matter contained herein and therein.
14.02. Amendments. This Agreement may be amended only in
writing by the Partners at a meeting or by written consent.
14.03. Applicable Law. The Certificate of Formation and this
Agreement, and its application, will be governed exclusively by its terms and
will be construed in accordance with the laws of the State of New York, without
regard to its conflicts of laws principles.
14.04. Headings. The headings in this Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent or intent of this Agreement or any provisions
contained herein.
14.05. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance will be deemed invalid,
illegal or unenforceable to any extent, the remainder of this Agreement and the
application thereof will not be affected and will be enforceable to the fullest
extent permitted by law.
14.06. Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements contained in this Agreement will be binding
upon and inure to the benefit of the existing Partners, all new and substituted
Partners, and their respective assignees, legal representatives, successors and
assigns.
14.07. Assignment. Except to the extent permitted under
Article V hereof, the rights and obligations under this Agreement may not be
assigned by any party to any person; provided, however, the AT&T Partner may
assign this Agreement and its rights and obligations hereunder in connection
with any transaction effecting the Restructuring and any such assignment will
release the AT&T Partner of its obligations and liabilities under this
Agreement. Any other attempted assignment in contravention of this provision
will be void.
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IN WITNESS WHEREOF, this Agreement has been duly executed by
or on behalf of each of the parties hereto as of the date first above written.
ATOR CORP.
By:
---------------------------
Name:
Title:
CIROR, INC.
By:
---------------------------
Name:
Title:
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SCHEDULE A
Schedule of Initial Capital Contributions
INITIAL CAPITAL
PARTNER'S NAME CONTRIBUTION PERCENTAGE INTEREST
-------------- ------------ -------------------
ATOR CORP.
CIROR, INC.
SCHEDULE B
Initial Governors
