Exhibit 3.32
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
VALOR TELECOMMUNICATIONS, LLC
a Delaware limited liability company
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
VALOR TELECOMMUNICATIONS, LLC
TABLE OF CONTENTS
Page
----
ARTICLE I THE COMPANY - FORMATION AND PURPOSES............................................. 3
1.1 Formation and Continuation................................................... 3
1.2 Name......................................................................... 3
1.3 Principal Office............................................................. 3
1.4 Effective Date; Duration..................................................... 3
1.5 Fiscal Year.................................................................. 3
1.6 Purposes..................................................................... 4
1.7 Organizational Expenses...................................................... 4
1.8 Seal of the Company.......................................................... 4
ARTICLE II MANAGEMENT AND OPERATION OF THE COMPANY......................................... 4
2.1 Power and Authority of Members............................................... 4
2.2 Power and Authority of Directors............................................. 4
2.3 Members...................................................................... 5
2.4 Liability of Members and Directors........................................... 7
2.5 Certain Duties and Liabilities of Members and Directors...................... 8
2.6 Reliance by Third Parties.................................................... 8
2.7 Directors; Number, Appointment, Removal, Qualifications, Etc................. 8
2.8 Directors; Meetings; Committees and Delegation............................... 11
2.9 Officers..................................................................... 13
2.10 Interested Directors; Transactions with Affiliates of WCAS Investors......... 15
2.11 Books and Records............................................................ 16
2.12 Indemnification.............................................................. 17
ARTICLE III CAPITAL CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS........................... 20
3.1 Form of Contribution......................................................... 20
3.2 Contributions by the Initial Members......................................... 20
3.3 Contributions by the Additional Members and the Kerrville Members............ 21
3.4 [Intentionally Omitted]...................................................... 21
i
Page
----
3.5 Determination of Book Value of Company Assets ............................... 21
3.6 Withdrawal of Capital; Limitation on Distributions .......................... 22
3.7 Capital Accounts; Allocations of Net Profits and Net Losses ................. 22
3.8 Special Allocations ......................................................... 25
3.9 [Intentionally Omitted] ..................................................... 27
3.10 New Members ................................................................. 27
3.11 [Intentionally Omitted]...................................................... 27
3.12 Distributions, Etc .......................................................... 28
3.13 Withholding ................................................................. 28
3.14 Tax Matters Partner ......................................................... 29
ARTICLE IV INTERESTS AND OTHER SECURITIES ................................................. 29
4.1 Preferred and Common Interests .............................................. 29
4.2 Class A Preferred Interests.................................................. 30
4.3 Class A Common Interests..................................................... 33
4.4 Class B Preferred Interests.................................................. 34
4.5 Class B Common Interests..................................................... 36
4.X Class C Interests............................................................ 37
4.6 Priority of Payments Upon Liquidation and Redemption; Certain Restrictions... 39
4.7 Certain Notices ............................................................. 41
4.8 Issuance of Interests Upon the Admission of Additional Members .............. 41
4.9 Fractional Interests ........................................................ 41
ARTICLE V DISSOLUTION AND WINDING-UP ...................................................... 42
5.1 Dissolution ................................................................. 42
5.2 Resignation of Members ...................................................... 42
5.3 Winding-Up .................................................................. 43
ARTICLE VI RESTRICTIONS ON TRANSFER; CERTAIN SALE AND PREEMPTIVE RIGHTS ................... 43
6.1 General; Tag-Along Rights ................................................... 43
6.2 Right of First Offer ........................................................ 45
6.3 Permitted Transferees ....................................................... 46
6.4 Preemptive Rights ........................................................... 47
6.5 Sale of the Business; Drag-Along Rights ..................................... 47
6.6 Tax-Free Transactions Involving Intermediary Entities ....................... 49
ii
Page
----
ARTICLE VII ADMISSION OF NEW MEMBERS ...................................................... 50
7.1 Admission of New Members .................................................... 50
7.2 Transferees and Assignees ................................................... 52
ARTICLE VIII CERTAIN AGREEMENTS ........................................................... 52
8.1 Mergers, Etc................................................................. 5
8.2 Public Offering ............................................................. 5
8.3 Provisions Relating to Subsidiaries.......................................... 5
8.4 Additional Issuances of Preferred Equity..................................... 5
8.5 Advisory and Monitoring Fees................................................. 5
8.6 Allocation of Expenses ...................................................... 5
ARTICLE IX CERTAIN DEFINITIONS.............................................................
ARTICLE X MISCELLANEOUS PROVISIONS.........................................................
10.1 Entire Agreement ............................................................ 70
10.2 Amendment ................................................................... 70
10.3 Duration of Certain Agreements .............................................. 71
10.4 Interpretation .............................................................. 71
10.5 Severability ................................................................ 71
10.6 Burden and Benefit Upon Successors .......................................... 71
10.7 Further Assurances .......................................................... 72
10.8 Counterparts ................................................................ 72
10.9 Waiver ...................................................................... 72
TESTIMONIUM................................................................................ 66
Schedule Description
-------- -----------
I Initial Member Interests
II Additional Members
III Capital Commitments of Initial and Additional Members
IV Capital Commitments of Kerrville Members
Annex A The Board of Directors
iii
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
VALOR TELECOMMUNICATIONS, LLC
a Delaware limited liability company
Second Amended and Restated Limited Liability Company Agreement
(this "Agreement"), dated as of January 31, 2002, of Valor Telecommunications,
LLC, a Delaware limited liability company (the "Company"), among (i) Xxxx X.
Xxxxxxxx ("Xxxxxxxx"), Xxxxx Xxxxxx ("Xxxxxx"), Xxxxxxx X. Page ("Page") and
Xxxx X. Xxxx ("Xxxx"), as the initial members of the Company (collectively with
their successors and assigns, the Initial Members"), (ii) the persons and
entities named in part 1 of Schedule II hereto (collectively, the "Additional
Members" and, together with the Initial Members, the "Southwest I Members",
which term shall include any other persons or entities admitted as substitute or
additional Southwest I Members after the date of this Agreement, and shall
exclude any persons who cease to be Southwest I Members), and (iii) the persons
and entities named in part 2 of Schedule II hereto (collectively, the "Kerrville
Members", which term shall include any other persons or entities admitted as
substitute or additional Kerrville Members after the date of this Agreement and
shall exclude any persons who cease to be Kerrville Members, and, together with
the Southwest I Members, the "Members") amending and restating the Amended and
Restated Limited Liability Company Agreement of the Company, dated as of
September 3, 1999, as amended prior to the date hereof (the "1999 Agreement"),
by and among the Southwest I Members.
The Company was formed on May 11, 1999 by the Initial Members as a
limited liability company pursuant to the Delaware Limited Liability Company Act
(the "Delaware Act"), Del. Code Xxx. tit. 6 Sections 18-101 et seq., and in
connection therewith the Initial Members executed and delivered the Restated
Limited Liability Company Agreement of dba Communications, LLC, dated as of May
11, 1999 (the "Original Agreement"), pursuant to which each of the Initial
Members contributed to the Company the amounts set forth opposite his or her
name on Schedule I hereto in the column labeled "Description of Initial Capital
Contribution" (with respect to each Initial Member, such Initial Member's
"Initial Investment").
On September 3, 1999, the Initial Members and the Additional Members
entered into the 1999 Agreement which amended and restated the Original
Agreement to provide for (i) the exchange by each Initial Member of his or her
membership interest attributable to his or her Initial Investment for the Class
A Common Interests, Class A Preferred Interests, Class B Common Interests and
Class B Preferred Interests (as such terms are hereinafter defined) of the
Company set forth opposite the name of such Initial Member on Schedule III
hereto (excepting
in the case of Xxxxxxxx, the portion of her Class A Common Interests and Class A
Preferred Interests referred to in the succeeding clause (ii), all in accordance
with the terms of the 1999 Agreement and the Subscription Agreement dated as of
September 3, 1999 (the "Initial Members Subscription Agreement") among the
Company and the Initial Members, (ii) the purchase by Xxxxxxxx of a portion of
the Class A Common Interests and Class A Preferred Interests set forth opposite
her name on Schedule III hereto in accordance with the terms of the 1999
Agreement and the Initial Members Subscription Agreement and (iii) the purchase
by each of the Additional Members of the Class A Common Interests and Class A
Preferred Interests set forth opposite the name of such Additional Member on
Schedule III hereto, all in accordance with the terms of the 1999 Agreement and
the Subscription Agreement dated as of September 3, 1999 (the "Additional
Members Subscription Agreement") among the Additional Members and the Company.
In order to acquire each of the Original Telephone Businesses, the
Company formed Valor Telecommunications Southwest, LLC, a Delaware limited
liability company ("Southwest I") and provided equity funding to Southwest I for
such acquisitions with the proceeds of sale of the Class A Interests purchased
by certain of the Southwest I Members, as aforesaid.
In order to acquire all the issued and outstanding capital stock of
Kerrville Communication Corporation ("Kerrville"), the Company has formed Valor
Telecommunications Southwest II, LLC ("Southwest II"), which has caused one of
its subsidiaries, Valor Enterprises II, LLC, to enter into a Stock Purchase
Agreement, dated as of September 7, 2001 (the "Kerrville Acquisition Agreement")
with BA Capital Company, L.P., Kerrville, and each of the persons listed as
stockholders of Kerrville on Schedule 5.2 of the Kerrville Stock Purchase
Agreement, and desires to provide equity funding to Southwest II to consummate
the transactions contemplated thereby.
In connection therewith, the Southwest I Members and the Kerrville
Members desire to amend and restate the 1999 Agreement to provide for the
purchase by each of the Kerrville Members of the number of Class C Interests set
forth opposite the name of such Kerrville Member on Schedule IV hereto, all in
accordance with the terms of this Agreement and the Subscription Agreement,
dated as of January 31, 2002 (the "Kerrville Members Subscription Agreement"),
among the Kerrville Members and the Company.
Certain capitalized terms used herein have the meanings ascribed to
them in Article IX hereof.
2
ARTICLE I
THE COMPANY - FORMATION AND PURPOSES
1.1 Formation and Continuation.
(a) The Members hereby execute this Agreement for the purpose of
setting forth the rights and obligations of the Members and to continue the
business of the Company. The Certificate of Formation of the Company (the
"Certificate of Formation") was duly executed and filed with the Delaware
Secretary of State pursuant to the Delaware Act on May 11, 1999.
(b) Each Member confirms and agrees to such Member's status as a
Southwest I Member or a Kerrville Member or both, as the case may be, and has
acquired or subscribes for the acquisition of the Interests described herein
upon the terms and conditions set forth in this Agreement, the Initial Members
Subscription Agreement, the Additional Members Subscription Agreement or the
Kerrville Members Subscription Agreement, as the case may be.
(c) The Members hereby execute and adopt this Agreement as a
limited liability company agreement of the Company pursuant to Section 18-201 of
the Delaware Act.
1.2 Name. The name of the Company shall be "Valor
Telecommunications, LLC".
1.3 Principal Office. The principal office of the Company shall be
located at Las Colinas Tower I, 000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx, Xxxxxx, Xxxxx
00000. The location of the principal office may be changed to such other place
and the Company may have such other offices wherever located as the Board of
Directors may from time to time determine.
The Company shall have and maintain a registered office in the State
of Delaware, which shall be located in the City of Dover. The Company shall also
have a registered agent for service of process on the Company in the State of
Delaware, and the registered agent in Delaware initially shall be United States
Corporation Service Company, 0000 Xxxxxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
1.4 Effective Date; Duration. This Agreement shall take effect
upon the execution and delivery of this Agreement by the parties hereto and
shall continue until terminated in accordance with Article V. The term of the
Company commenced on May 11, 1999, the date upon which the Certificate of
Formation of the Company was duly filed and recorded in the office of the
Secretary of State of the State of Delaware.
1.5 Fiscal Year. The fiscal year of the Company shall be the
calendar year.
3
1.6 Purposes. The Company has been formed for the purposes of (i)
acquiring, holding and exercising all rights, powers, privileges and other
incidents of ownership or possession with respect to, and selling or otherwise
disposing of for value, assets of companies or equity interests in (A) companies
conducting local telephone exchange operations in New Mexico, Texas and Oklahoma
(each of said local telephone exchange operations being referred to as an
"Original Telephone Business"), (B) Kerrville and (C) companies conducting such
other telephone operations in such areas of the United States as may be
determined by the Board in accordance with this Agreement, including, without
limitation, limited liability companies, limited partnerships or other entities
to be formed to conduct such operations as successors in interest to GTE
Southwest Incorporated, the stockholders of Kerrville or other sellers of
telephone operations or related businesses, and one or more additional entities
to be organized and operated from time to time by the Company or such limited
liability company, limited partnership or other entity at the discretion of the
Board of Directors, (ii) carrying on any other lawful business, purpose or
activity permitted to be carried on by limited liability companies under the
Delaware Act, and (iii) possessing and exercising all the powers and privileges
granted by Section 18-106(b) of the Delaware Act so far as necessary or
convenient to the attainment of the purposes set forth in the foregoing clauses
(i) and (ii).
1.7 Organizational Expenses. The Company shall be solely
responsible for the expenses of organizing the Company.
1.8 Seal of the Company. The Board of Directors may adopt a seal,
alter such seal at its pleasure and authorize it to be used by causing it or a
facsimile to be affixed or impressed or reproduced in any other manner.
ARTICLE II
MANAGEMENT AND OPERATION OF THE COMPANY
2.1 Power and Authority of Members. The Members shall manage the
Company only through their designated Directors on the Board of Directors, and
the Members, in their capacity as such, shall have no authority or right to act
on behalf of or bind the Company in connection with any matter.
2.2 Power and Authority of Directors. The business and affairs of
the Company shall be managed by or under the direction of the Board of Directors
(the "Board"), except as may be otherwise provided in this Agreement. The Board
shall have the power on behalf and in the name of the Company to carry out any
and all of the objects and purposes of the Company contemplated by Section 1.6
and to perform all acts which the Board may deem necessary or advisable in
connection therewith. The Members agree that, subject to the terms of this
Agreement, all determinations, decisions and actions made or taken by the Board
(or its designee(s)) shall be conclusive and absolutely binding upon the
Company, the Members (but
4
only in their capacity as such) and their respective successors, assigns and
personal representatives.
2.3 Members.
(a) Names and Addresses of Members. The name and present mailing
address of each Member are set forth on Schedules I and II hereto, as
applicable.
(b) Rights and Obligations. Each Member shall have the rights,
powers, duties and obligations provided herein for a Member.
(c) Annual Meetings. An annual meeting of the Members shall be
held each year within 120 days after the close of the immediately preceding
fiscal year of the Company for the purpose of conducting such proper business as
may come before the meeting. The date, time and place of the annual meeting
shall be determined by the Board.
(d) Special Meetings. Special meetings of Members or any Class of
Members may be called for any purpose and may be held at such time and place,
within or without the State of Delaware, as shall be stated in a notice of
meeting or in a duly executed waiver of notice thereof. Such meetings may be
called at any time by at least three Directors, the Chairman of the Board, the
President or a Majority Vote of the Class A Common Members and the Class C
Members, voting together as a single Class or, in the case of a meeting of any
Class, by Majority Vote of such Class.
(e) Place of Meetings. The Board may designate any place, either
within or outside of the State of Delaware, as the place of meeting for any
annual meeting or for any special meeting called by the Directors. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal executive office of the Company or such other
place as shall be stated in the notice of such meeting.
(f) Notice. Whenever Members or any Class of Members are required
or permitted to take action at a meeting, written or printed notice stating the
place, date, time, and, in the case of special meetings, the purpose or
purposes, of such meeting, shall be given to each Member entitled to vote at
such meeting and to each Director not less than five nor more than 30 days
before the date of the meeting. All such notices shall be delivered, either
personally, by overnight courier service, by mail, or, if any Member has
notified the Company in writing of an electronic mail address that may be used
for such purpose, by electronic mail, by or at the direction of the Directors,
the Chairman of the Board, the Chief Executive Officer, the President or the
Secretary. If sent by overnight courier service, such notice shall be deemed to
be delivered on the day following the day when delivered to such service and if
mailed, such notice shall be deemed to be delivered two days after the date when
deposited in the United States mail, first-class mail postage prepaid, addressed
to the Member at his, her or its address as the same appears
5
on the records of the Company; and if sent by electronic mail, such notice shall
be deemed to be delivered on the day when sent to the electronic mail address
last notified by the Member to the Company as aforesaid. Attendance of a person
at a meeting shall constitute a waiver of notice of such meeting, except when
the person attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened.
(g) Quorum. The holders of a majority of the aggregate number of
Class C Interests and Class A Common Interests entitled to vote, present in
person or represented by proxy, shall constitute a quorum at all meetings of the
Members, and the holders of a majority of the Interests of any Class, present in
person or represented by proxy, shall constitute a quorum at all meetings of
such Class. If a quorum is not present, the holders of a majority of the
Interests present in person or represented by proxy at the meeting, and entitled
to vote at the meeting, may adjourn the meeting to another time and/or place.
When a quorum is once present to commence a meeting of Members, or any Class of
Members, the quorum shall not be broken by the subsequent withdrawal of any
Members or their proxies, unless the requisite Members whose affirmative vote
with respect to any particular matter is required to vote on such matters shall
not be present at the time such vote is to be taken.
(h) Adjourned Meetings. If at any meeting of Members or any Class
of Members there shall be, with respect to a particular matter, less than a
quorum present, a majority of the Members present in person or by proxy and
entitled to vote thereat on such matter may without further notice, following
the completion of such action, if any, with respect to other matters as the
Members present in person or by proxy and constituting a quorum to vote thereat
on such matters desire to take, adjourn the meeting from time to time until a
quorum with respect to such matter shall be present. When a meeting is adjourned
to another time and place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Company may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than 30 days, or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
Member entitled to vote at the meeting.
(i) Vote Required. When a quorum is present, a Majority Vote of
the Class A Common Members and the Class C Members, voting together as a single
Class, present in person or represented by proxy at a duly called meeting and
entitled to vote on the subject matter shall be the act of the Members, unless
the question is one upon which by express provisions of an applicable law or of
this Agreement a different vote is required, in which case such express
provision shall govern and control the decision of such question. Where a
separate vote by Class is required, a Majority Vote of such Class, present in
person or represented by proxy at the meeting of such Class shall be the act of
such Class, unless the question is one upon which by
6
express provisions of an applicable law or of this Agreement a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
(j) Proxies. Each Member entitled to vote at a meeting of Members
or any Class of Members or to express consent or dissent to any action in
writing without a meeting may authorize another person or persons to act for him
or her by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. At each
meeting of Members or any Class of Members, and before any voting commences, all
proxies filed at or before the meeting shall be submitted to and examined by the
Secretary or a person designated by the Secretary, and no Interests may be
represented or voted under a proxy that have been found to be invalid or
irregular.
(k) Action by Written Consent. Unless otherwise provided in the
Delaware Act, any action required to be taken at any annual or special meeting
of Members, or at any meeting of any Class of Members, or any action that may be
taken at any annual or special meeting of such Members or Class of Members, may
be taken without a meeting, without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken and bearing
the dates of signature of the Members who signed the consent or consents, shall
be signed by the holders of not less than the minimum Interests or Class of
Interests that would be necessary to authorize or take such action at a meeting
at which all Interests entitled to vote thereon were present and voted and shall
be delivered to the Company by delivery to the Company's principal place of
business, or an officer or agent of the Company having custody of the book or
books in which proceedings of meetings of the Members are recorded. If action is
so taken without a meeting by less than unanimous written consent of the Members
or of any Class of Members, a copy of such written consent shall be delivered
promptly to all Members or all Members of such Class, who have not consented in
writing. Any action taken pursuant to such written consent or consents of the
Members or any Class of Members shall have the same force and effect as if taken
by the Members at a meeting of the Members or such Class.
(l) Record Dates. For purposes of determining the Members entitled
to notice of or to vote at a meeting of Members or any Class of Members or to
give approvals without a meeting as provided in Section 2.3(k), the Board may
set a record date, which shall not be less than two nor more than 60 days before
(a) the date of the meeting or (b) in the event that approvals are sought
without a meeting, the date by which Members are requested in writing by the
Board to give such approvals.
(m) Conference Participation. The Members may participate in and
act at any meeting of Members or any Class of Members through the use of a
conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other, and participating in
the meeting pursuant to this Section 2.3(m) shall constitute presence in person
at the meeting.
7
2.4 Liability of Members and Directors. No Member or Director
shall have any liability under this Agreement or under the Delaware Act except
as provided in Section 2.5 or elsewhere herein or as required by the Delaware
Act. Except as required by the Delaware Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise
(including without limitation those arising as member, owner or shareholder of
another company, partnership or entity), shall be solely the debts, obligations
and liabilities of the Company, and no Member or Director shall be obligated
personally for any such debt, obligation or liability of the Company solely by
reason of being a Member or acting as a Director of the Company. No Member or
Director shall be liable for any debts, obligations and liabilities, whether
arising in contract, tort or otherwise, of any other Member or Director.
2.5 Certain Duties and Liabilities of Members and Directors.
(a) Duties of Members and Directors. Except as otherwise
specifically provided in this Agreement, the duties and obligations owed to the
Company and to the Members by the Directors and officers of the Company, and any
such duties that may be owed by any Member or by any Affiliates of any Member,
shall be the same as the respective duties and obligations owed to a corporation
organized under the Delaware General Corporation Law by its directors and
officers and any such duties that may be owed to such corporation by any
similarly situated stockholder or affiliate thereof, respectively.
(b) Limitations on Liability of Members, Directors and Officers.
To the extent that any Member, Director or officer has duties (including
fiduciary duties) and liabilities relating thereto to the Company or to a Member
(i) any such Member, Director or officer acting under this Agreement shall not
be liable to the Company or to any other Member for the Member's, Director's or
officer's good faith reliance on the provisions of this Agreement, the records
of the Company and such information, opinions, reports or statements presented
to the Company by any of the Company's officers or employees, or committees of
the Board, or by any other person as to matters the Member, Director or officer
reasonably believes are within such other person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Company, and (ii) the Member's, Director's or officer's duties and liabilities
are restricted by the provisions of this Agreement to the extent that such
provisions restrict the duties and liabilities of the Members, Directors or
officers otherwise existing at law or in equity.
2.6 Reliance by Third Parties, Persons dealing with the Company
are entitled to rely conclusively upon the power and authority of the Directors
and officers as herein set forth. Persons dealing with the Company are entitled
to rely conclusively upon a certificate of any Secretary or Assistant Secretary
as to the incumbency of any Director, officer or other personnel of the Company.
8
2.7 Directors: Number, Appointment, Removal, Qualifications, Etc.
(a) Board. The number of Directors shall be such number as shall
be determined from time to time by the Board but shall not be less than seven
(7) nor more than thirteen (13) and currently shall be eleven (11). The
Directors shall be elected by Majority Vote of the Class A Common Members and
Class C Members, voting together as a single Class. The persons referred to on
Annex A hereto are hereby approved by the Class A Common Members and the Class C
Members as the current members of the Board of the Company. Directors appointed
pursuant to this Agreement shall be managers for purposes of the Delaware Act.
(b) Alternate Directors. Subject as set forth in Section 2.7(d),
an alternate Director may be appointed by Majority Vote of the Class A Common
Members and Class C Members, voting together as a single Class, to act for and
fulfill the obligations of each Director in the event that such Director is
unable to attend any meeting of the Board or any committee thereof Any such
alternates shall be specified in writing by such Class A Common Members and
Class C Members to the Secretary of the Company. Any appointment of an alternate
Director may be changed by Majority Vote of the Class A Common Members and Class
C Members, voting together as a single Class.
(c) Removal and Resignation. Subject as set forth in Section
2.7(d) any Director or the entire Board may be removed, with or without cause,
at any time, by Majority Vote of the Class A Common Members and Class C Members,
voting together as a single Class acting (i) in person or by proxy at a meeting
of Class A Common Members and Class C Members or (ii) by a consent in writing in
the manner contemplated in Section 2.3(k), and the vacancy or vacancies in the
Board caused by any such removal may be filled by Majority Vote of the Class A
Common Members and Class C Members, voting together as a single Class, at such
meeting or at any subsequent meeting or by consent. Any Director of the Company
may resign at any time by giving written notice to the Chairman of the Board, if
any, the President, the Vice President or the Secretary of the Company. The
resignation of any Director shall take effect upon receipt of notice thereof or
at such later time as shall be specified in such notice; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Subject to Section 2.7(d), any vacancy or vacancies in the
Board caused by any such resignation may be filled by Majority Vote of the Class
A Common Members and Class C Members, voting together as a single Class, at any
subsequent meeting of Class A Common Members and Class C Members or by a consent
in writing in the manner contemplated in Section 2.3(k).
(d) Certain Voting Arrangements Relating to the Company.
Notwithstanding the foregoing, for so long as (i) with respect to the rights
granted to the WCAS Investors in this clause (d), the WCAS Investors hold not
less than 25%, and (ii) with respect to the rights granted to the Vestar
Investors in this clause (d), the Vestar Investors hold not less than 25% of the
Class A Common Interests, in each case, acquired by each of them pursuant to the
Additional
9
Members Subscription Agreement, at each annual or special meeting called for
such purpose, and whenever the Members of the Company act by written consent
with respect to the election or removal of Directors, each of the Members agrees
to vote or otherwise give such Member's consent in respect of all Class A Common
Interests, Class C Interests and other equity securities of the Company (whether
now or hereafter acquired) owned by such Member or as to which such Member is
entitled to vote, and the Company shall take all necessary and desirable actions
within its control, in order to cause:
(i) the authorized number of directors on the Board to be
established and remain at eleven;
(ii) the election to the Board of:
(A) six individuals designated by the WCAS Investors;
(B) three individuals designated by the Vestar Investors;
(C) the Chief Executive Officer of the Company; and
(D) the Chairman of the Board
all of which individuals shall hold office, subject to their earlier
removal in accordance with clause (iii) below, this Agreement and the
Delaware Act, until their respective successors shall have been elected
and shall have qualified;
(iii) the removal from the Board of Directors (with or without
cause) of any representative designated hereunder by the person or persons
entitled to make such designation hereunder, upon such person's or
persons' written request for removal as to its designee, but only upon
such written request;
(iv) upon any vacancy in the Board as a result of any individual
elected as provided in clause (ii) above ceasing to be a member of the
Board, whether by resignation or otherwise, the election to the Board of
an individual designated by the WCAS Investors or the Vestar Investors, as
the case may be, who designated the individual who shall have so ceased to
be a member of the Board or the individual who is the Chief Executive
Officer of the Company;
(v) the appointment of any alternate Director designated by the
WCAS Investors or the Vestar Investors, as the case may be, who designated
the Director for whom such alternate Director is appointed; and
10
PARENT LLC
(vi) the appointment of an individual designated by the Vestar
Investors to the Compensation Committee, the Audit Committee and to each
other Committee of the Board of the Company.
(e) Certain Voting Arrangements Relating to Subsidiaries. With
respect to the rights granted to the WCAS Investors in this clause (e) and with
respect to the rights granted to the Vestar Investors in this clause (e),
respectively, so long as the WCAS Investors or the Vestar Investors, as
applicable, hold not less than 25% of the Class A Common Interests, in each
case, acquired by each of them pursuant to the Additional Members Subscription
Agreement, each of the WCAS Investors and the Vestar Investors agree to cause
their respective designees to the Board to vote or otherwise give such
Director's consent to:
(i) the appointment of one individual designated by the Vestar
Investors, which shall initially be Xxxxxxxx Xxxx to the board of managers
of Southwest I, Southwest II and, at the request of the Vestar Investors,
any other material subsidiary of the Company;
(ii) the appointment of three individuals designated by the WCAS
Investors, to the board of managers of Southwest I, Southwest II and each
other subsidiary of the Company; and
(iii) the grant to the Vestar Investors of the right to have two
observers attend meetings of the board of managers or other governing body
of each of the Company's operating subsidiaries; it being understood and
agreed that the designees of the Company serving on the board of managers
of Valor Telecommunications Southwest, LLC shall, to the extent so
instructed from time to time by the Board with regard to any issue, vote
as directed by the Company on such issue.
(f) Certain Notices. With respect to meetings of the members or
any class of members of the Company's subsidiaries, Valor Telecommunications
Southwest, LLC and Valor Telecommunications Southwest II, LLC, a written or
printed notice stating the place, date, time, and purpose of such meeting shall
be given to the WCAS Investors, the Vestar Investors and the CVC Investors
concurrently with the notice of such meeting required to be given to the members
or such class of members of such subsidiary.
2.8 Directors; Meetinas; Committees and Delegation.
(a) Regular and Special Meetings. Regular meetings of the Board
may be held at such place, within or without the State of Delaware, as shall
from time to time be determined by the Board. After there has been such
determination, and notice thereof has once been given to each member of the
Board as hereinafter provided for special meetings, regular meetings may be held
without further notice being given. Special meetings of the Board shall be
11
held whenever called by the Chairman of the Board, if any, the President or by
at least three Directors. Notice of each such meeting shall be mailed to each
Director, addressed to such Director at his or her residence or usual place of
business, at least five days before the date on which the meeting is to be held,
or shall be sent to such Director at such place by telecopier or delivered
personally or by telephone, not later than five days (or, in the case of
meetings held by telephone, one day) before the day on which such meeting is to
be held. Each such notice shall state the time and place of the meeting and, as
may be required, the purposes thereof. Notice of any meeting of the Board need
not be given to any Director if such Director shall sign a written waiver
thereof either before or after the time stated therein for such meeting, or if
such Director shall be present at the meeting. Unless limited by law, this
Agreement or the terms of the notice thereof, any and all business may be
transacted at any meeting without the notice thereof having specifically
identified the matters to be acted upon.
(b) Quorum and Manner of Acting. Unless otherwise provided by law
or this Agreement, the presence of Directors constituting a majority of the
whole Board shall be necessary to constitute a quorum for the transaction of
business. In the absence of a quorum, a majority of the Directors present may
adjourn the meeting from time to time until a quorum shall be present. Notice of
any adjourned meeting need not be given. At all meetings of Directors, a quorum
being present, all matters shall be decided by the affirmative vote of a
majority of the Directors present, except as otherwise required by law or by
this Agreement.
(c) Committees. The Board may, by resolution passed by a majority
of all the Directors, designate one or more committees, each committee to
consist of two or more of the Directors, which to the extent provided in such
resolution shall have and may exercise the powers of the Board in the management
and affairs of the Company except as otherwise limited by law or this Agreement.
The Directors may designate one or more Directors as alternate members of any
such committee, who may replace any absent or disqualified Director at any
meeting of such committee. Such committee or committees shall have such name or
names as may be determined from time to time by the resolution of the Board
designating such committee. Each committee of Directors may fix its own rules of
procedure and shall hold its meetings as provided by such rules, except as may
otherwise be provided by a resolution of the Board designating such committee.
Unless otherwise provided in such a resolution, the presence of at least a
majority of the members of the committee shall be necessary to constitute a
quorum.
(d) Conference Participation. Members of the Board and any
committee thereof may participate in and act at any meeting of Directors or
committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this Section 2.8(d)
shall constitute presence in person at the meeting.
(e) Waiver of Notice and Presumption of Assent. Any Director or
any member of a committee of the Board who is present at a meeting shall be
conclusively presumed
12
to have waived notice of such meeting except when such member attends for the
express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting is not lawfully called or convened. Such
member shall be conclusively presumed to have assented to any action taken
unless his or her dissent shall be entered in the minutes of the meeting or
unless his or her written dissent to such action shall be filed with the person
acting as the secretary of the meeting before the adjournment thereof or shall
be forwarded by registered mail to the Secretary of the Company immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
any member who voted in favor of such action.
(f) Action by Written Consent. Unless otherwise restricted by this
Agreement or the Delaware Act, any action required or permitted to be taken at
any meeting of the Board, or of any committee thereof, may be taken without a
meeting if all the Directors or members of the committee thereof, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
(g) Compensation of Directors. Directors, as such, shall not
receive any stated salary for their services, but, by resolution of the Board, a
specific sum fixed by the Board plus expenses may be allowed for attendance at
each regular or special meeting of the Board; provided, however, that nothing
herein contained shall be construed to preclude any Director from serving the
Company or any parent or subsidiary corporation thereof in any other capacity
and receiving compensation therefor.
2.9 Officers.
(a) Establishment, Nomination and Election. The officers of the
Company shall be elected by the Board and shall consist of a Chairman, a Chief
Executive Officer, a President, a Chief Operating Officer, a Secretary and a
Treasurer, and may, at the discretion of the Board, also consist of one or more
Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other
officers and assistant officers as may be deemed necessary or desirable by the
Board. One person may hold, and perform the duties of, any two or more of said
offices. In their discretion, the Directors may choose not to fill any office
for any period as they may deem advisable.
(b) Election and Term of Office. The officers of the Company shall
be elected annually by the Board at the annual meeting thereof. Each such
officer shall hold office until his or her successor shall have been elected and
shall qualify, or until his or her earlier death, resignation or removal.
(c) Removal. Subject to the terms of any employment agreement
between the Company and any officer of the Company, any officer may be removed,
either with or without cause, at any time, by resolution adopted by the Board at
any regular meeting of the Board, or at any special meeting of the Board called
for that purpose, at which a quorum is present.
13
(d) Resignations. Any officer may resign at any time by giving
written notice to the Chairman of the Board, the President, the Secretary or the
Board. Any such resignation shall take effect upon receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
(e) Vacancies. A vacancy in any office may be filled for the
unexpired portion of the term in the manner prescribed in this Agreement for
election or appointment to such office for such term.
(f) Chairman. The Chairman shall preside at all meetings of the
Board and of the Members. The Chairman shall perform such other duties as may be
prescribed by the Board or provided in this Agreement.
(g) Chief Executive Officer, The Chief Executive Officer shall
serve as the chief executive officer of the Company and shall in general
supervise all the business affairs of the Company, subject to the powers of the
Chairman of the Board and the Board. In the absence of the Chairman of the
Board, the Chief Executive Officer shall preside at meetings of the Board and of
the Members and shall have such other powers and perform such other duties
consistent with such position as may be prescribed by the Board or provided in
this Agreement.
(h) President. The President shall, subject to the powers of the
Board and the Chief Executive Officer, have general charge of the business,
affairs and property of the Company, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the Board are
carried into effect. The President shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Company, except where required
or permitted by law to be otherwise signed and executed and except where the
signing and execution thereof shall be expressly delegated by the Board to some
other officer or agent of the Company. The President shall have such other
powers and perform such other duties as may be prescribed by the Board or as may
be provided in this Agreement.
(i) Vice President. Each Vice President shall have such powers and
shall perform such duties as shall be assigned to him or her by the President or
the Board.
(j) Treasurer. The Treasurer shall have charge and custody of, and
be responsible for, all funds and securities of the Company. The Treasurer shall
exhibit at all reasonable times the Company's books of account and records to
any of the Directors upon application during business hours at the office of the
Company where such books and records shall be kept; when requested by the Board,
the Treasurer shall render a statement of the condition of the finances of the
Company at any meeting of the Board or at the annual meeting of Members; the
Treasurer shall receive, and give receipt for, moneys due and payable to the
Company from any source whatsoever; in general, the Treasurer shall perform all
the duties
14
incident to the office of Treasurer and such other duties as from time to time
may be assigned to him or her by the President or the Board. The Treasurer shall
give such bond, if any, for the faithful discharge of the Treasurer's duties as
the Board may require.
(k) Secretary. The Secretary, if present, shall act as secretary
at all meetings of the Board and of the Members and keep the minutes thereof in
a book or books to be provided for that purpose; the Secretary shall see that
all notices required to be given by the Company are duly given and served; the
Secretary shall have charge of the records of Interests in the Company, shall
see that all reports, statements and other documents required by law are
properly kept and filed; and in general the Secretary shall perform all the
duties incident to the office of Secretary and such other duties as from time to
time may be assigned to the Secretary by the President or the Board.
(1) Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in this Agreement, shalt have such authority and perform such
duties as may from time to time be prescribed by resolution of the Board.
(m) Compensation, Compensation of all officers shall be fixed by
the Board or a duly authorized Committee thereof, and no officer shall be
prevented from receiving such compensation by virtue of his or her also being a
Director of the Company.
(n) Absence or Disability of Officers. In the case of the
prolonged absence or disability of any officer of the Company and of any person
hereby authorized to act in such officer's place during such officer's absence
or disability, the Board may by resolution delegate the powers and duties of
such officer to any other officer or to any Director, or to any other person
whom it may select.
2.10 Interested Directors; Transactions with Affiliates of WCAS
Investors.
(a) Contracts Permitted. No contract or transaction between the
Company and one or more of its Directors or officers, or between the Company and
any other limited liability company, corporation, partnership, association, or
other organization in which one or more of its directors or officers, are
Directors or officers of the Company, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the Director or
officer is present at or participates in the meeting of the Board or committee
which authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if:
(i) the material facts as to such Director's or officer's
relationship or interest and as to the contract or transaction are
disclosed or are known to the Board or the committee, and the Board or
committee in good faith authorizes the contract or
15
transaction by the affirmative vote of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum;
or
(ii) the material facts as to the relationship or interest and as
to the contract or transaction are disclosed or are known to the Members
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the Members entitled to vote; or
(iii) the contract or transaction is fair as to the Company as of
the time it is authorized, approved or ratified by the Board, a committee
or the Members.
(b) Quorum. Interested Directors may be counted in determining the
presence of a quorum at a meeting of the Board or of a committee which
authorizes the contract or transaction.
(c) Transactions with Affiliates of WCAS Investors. Prior to the
closing of a firm commitment underwritten public offering by which equity
securities of the Company are sold to the public in a public offering registered
under the Securities Act of 1933 and lead managed by a nationally recognized
investment banking firm, resulting in proceeds to the Company (after deducting
underwriting discounts and commissions) of not less than $75,000,000
(d) "Qualified Public Offering"), and for so long as Vestar
Investors shall own at least 50% of the Class A Common Interests or the Class C
Interests held by the Vestar Investors as of the date of this Agreement, any
material transaction between the Company or any direct or indirect subsidiary of
the Company, on the one hand, and any of the WCAS Investors or any Affiliate of
any WCAS Investors, on the other hand, will require the consent of the Vestar
Investors; it being understood that no such consent shall be required in the
case of additional equity financings for the Company in an all-cash transaction
on fair market terms and, subject to compliance with Section 6.4, transactions
contemplated by Article VI hereof or the issuance of Interests to the WCAS
Investors pursuant to their Capital Commitments.
2.11 Books and Records.
(a) Books and Records to be Kept. The Company shall keep (i)
correct and complete books and records of account, (ii) minutes of the
proceedings of meetings of the Members, the Board and any committee thereof, and
(iii) a current list of the Directors and officers and their residence
addresses; and the Company shall also keep at its principal executive office a
record containing the names and addresses of all Members, the total Interests
held by each Member, the number thereof that are Class A Common Interests, Class
A Preferred Interests, Class B Common Interests, Class B Preferred Interests and
Class C Interests, and the dates when they respectively became the owners of
record thereof (the "Members' Interest Register"). Any of the foregoing books,
minutes or records may be in written form or in any other form capable of being
converted into written form within a reasonable time.
16
(b) Inspection of Books and Records. Any Member, in person or by
attorney or other agent, shall, upon written demand under oath stating the
purpose thereof, have the right during the usual hours for business to inspect
for any proper purpose the Members' Interest Register and its other books and
records, and to make copies of extracts therefrom. A proper purpose shall mean
any purpose reasonably related to such Person's interest as a Member. In every
instance where an attorney or other agent shall be the Person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing which authorizes the attorney or other agent to
so act on behalf of the Member. The demand under oath shall be directed to the
Company at its registered office in the State of Delaware or at its principal
place of business.
(c) Directors' Rights to Inspect. Any Director shall have the
right to examine the Members' Interest Register and the Company's other books
and records for a purpose reasonably related to his/her position as a Director.
2.12 Indemnification.
(a) Third Party Actions, Suits and Proceedings. Each person who
was or is made a party or is threatened to be made a party to or is involved in
or participates as a witness with respect to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company), by reason of the fact that he or she, or a
person of whom he or she is the legal representative, is or was a Director or
officer of the Company (which shall include, without limitation, each of the
Initial Members), or is or was serving at the request of the Company as a
manager, director, officer, employee, fiduciary, or agent of another limited
liability company or of a corporation, partnership, joint venture, trust or
other enterprise (hereinafter a "proceeding"), shall be indemnified and held
harmless by the Company at all times to the fullest extent permitted by law as
in effect from time to time against all expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such person in connection with such proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed to
the best interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Company, or, with respect to any criminal
action or proceeding that the person had reasonable cause to believe that his or
her conduct was unlawful.
(b) Actions by the Company. The Company shall indemnify at all
times to the fullest extent permitted by law as in effect from time to time any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that such
person,
17
or a person of whom he or she is the legal representative, is or was a Director
or officer of the Company (which shall include, without limitation, each of the
Initial Members), or is or was serving at the request of the Company as a
manager or director, officer, employee, fiduciary or agent of another limited
liability company or of a corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
Company and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Company unless and only to the extent that the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
(c) Procedure for Indemnification. Any indemnification of a
Director or officer of the Company under Section 2.12(a) or Section 2.12(b) or
advance of expenses under Section 2.12(f) shall be made promptly, and in any
event within 30 days, upon the written request of the Director or officer. If a
determination by the Company, by action of its Board, that the Director or
officer is entitled to indemnification pursuant to this Section 2.12 is
required, and the Company fails to respond within 30 days to a written request
for indemnity, the Company shall be deemed to have approved the request. If the
Company denies a written request for indemnification or advancing of expenses,
in whole or in part, or if payment in full pursuant to such request is not made
within 30 days, the right to indemnification or advances as granted by this
Section 2.12 shall be enforceable by the Director or officer in any court of
competent jurisdiction. Such person's costs and expenses incurred in connection
with successfully establishing his or her right to indemnification, in whole or
in part, in any such action shall also be indemnified by the Company. It shall
be a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
Company) that the claimant has not met the standards of conduct that would make
it permissible under the Delaware General Corporate Law if the Company were a
corporation for the Company to indemnify the claimant for the amount claimed,
but the burden of such defense shall be on the Company. Neither the failure of
the Company (including its Directors, independent legal counsel or Members) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he or she
has met the standard of conduct set forth for a director or officer of a
corporation in the Delaware General Corporate Law, nor an actual determination
by the Company (including its Directors, independent legal counsel or Members)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard of conduct.
18
(d) Rights Non-exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section 2.12 shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of this Agreement, agreement, vote of Members or disinterested
Directors or otherwise.
(e) Insurance. The Company shall purchase and maintain insurance,
in such amounts as may be obtained by the Company at reasonable expense, on its
own behalf and on behalf of any person who is or was a Director, officer,
employee, fiduciary, or agent of the Company or was serving at the request of
the Company as a manager, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him or her and incurred by him
or her in any such capacity, whether or not the Company would have the power to
indemnify such person against such liability under this Section 2.12.
(f) Expenses. Expenses incurred by any person described in Section
2.12(a) or 2.12(b) in defending a proceeding shall be paid by the Company in
advance of such proceeding's final disposition upon receipt of an undertaking by
or on behalf of the Director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board deems appropriate.
(g) Employees and Agents. Persons who are not covered by the
foregoing provisions of this Section 2.12 and who are or were Members, employees
or agents of the Company, or who are or were serving at the request of the
Company as employees or agents of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise, may be
indemnified to the extent authorized at any time or from time to time by the
Board.
(h) Contract Rights. The provisions of this Section 2.12 shall be
deemed to be a contract right between the Company and each Director or officer
who serves in any such capacity at any time while this Section 2.12 and the
relevant provisions of the Delaware Act or other applicable law are in effect,
and any repeal or modification of this Section 2.12 or any such law shall not
affect any rights or obligations then existing with respect to any state of
facts or proceeding then existing. The indemnification and other rights provided
for in this Section 2.12 shall inure to the benefit of the heirs, executors and
administrators of any person entitled to such indemnification. Except as
provided in Section 2.12(c) hereof, the Company shall indemnify any such person
seeking indemnification in connection with a proceeding initiated by such person
only if such proceeding was authorized by the Directors.
(i) Merger or Consolidation: Other Enterprises. For purposes of
this Section 2.12, references to "the Company" shall include, in addition to the
resulting company,
19
any constituent company (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its managers, directors, officers, and
employees or agents, so that any person who is or was a manager, director,
officer, employee or agent of such constituent company, or is or was serving at
the request of such constituent company as a director, officer, employee or
agent of another company, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Section 2.12 with respect to the
resulting or surviving company as he or she would have with respect to such
constituent company if its separate existence had continued. For purposes of
this Section 2.12, references to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to any employee benefit plan; and references to "serving
at the request of the Company" shall include any service as a manager, director,
officer, employee or agent of the Company that imposes duties on, or involves
services by, such manager, director, officer, employee, or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Section 2.12.
ARTICLE III
CAPITAL CONTRIBUTIONS,
ALLOCATIONS AND DISTRIBUTIONS
3.1 Form of Contribution. The contribution with respect to each
Member of the Company may, as determined by the Board in its discretion, be made
in cash or other legal consideration.
3.2 Contributions by the Initial Members. As described in this
Agreement and the Initial Members Subscription Agreement, and in each case in
accordance with the terms of such agreements, each of the Initial Members has
made the Capital Contribution described in this Section 3.2.
(a) Initial Members other than Xxxxxxxx. Each of Xxxxxx, Page and
Xxxx made a Capital Contribution of his membership interest in the Company
attributable to his Initial Investment in exchange for the number of Class A
Common Interests and Class A Preferred Interests (excepting, in the case of
Xxxxxx, the number of Class A Interests referred to in the succeeding sentence)
and all of the Class B Common Interests and Class B Preferred Interests set
forth opposite his name on Schedule III hereto, and shall be considered to have
made a Capital Contribution equal to the fair market value of such membership
interest as determined pursuant to Section 3.7(a)(i) hereof; provided, however,
that such Class B Common Interests and the Class B Preferred Interests of Xxxxxx
and Page shall be deemed to have been issued as of June 30, 2000. In addition,
Xxxxxx made a Capital Contribution to the Company in cash in the
20
PARENT LLC
aggregate amount of $ 61,275 in consideration of the issuance to him of the
9,191 of the Class A Common Interests and 52,084 Class A Preferred Interests set
forth opposite his name on Schedule III hereto. The aggregate amount of Mathew's
Capital Contribution shall be equal to the aforesaid $61,275 in cash and the
fair market value (determined pursuant to Section 3.7(a)(i) hereof) of his
membership interest attributable to his Initial Investment.
(b) Xxxxxxxx. Xxxxxxxx also made a Capital Contribution of her
membership interest in the Company attributable to her Initial Investment in
exchange for the number of Class A Common Interests and Class A Preferred
Interests (excepting the number of Class A Interests referred to in the
succeeding sentence) and all of the Class B Common Interests and Class B
Preferred Interests set forth opposite her name on Schedule III hereto;
provided, however, that such Class 13 Common Interests and Class 13 Preferred
Interests of Xxxxxxxx shall be deemed to have been issued as of June 30, 2000.
In addition, Xxxxxxxx made Capital Contributions to the Company in cash in the
amount of (i) $2,000,000 in consideration of the issuance to her of 470,000
Class A Common Interests and 1,530,000 Class A Preferred Interests, as set forth
opposite her name on Schedule III hereto and (ii) $295,016 in consideration of
the issuance to her of 44,252 Class A Common Interests and 250,764 Class A
Preferred Interests as set forth opposite her name on Schedule III hereto. The
aggregate amount of Xxxxxxxx'x Capital Contribution shall be equal to the
$2,295,016 in cash described in clauses (i) and (ii) of the preceding sentence,
and the fair market value (determined pursuant to Section 3.7(a)(i) hereof) of
her membership interest attributable to her Initial Investment.
3.3 Contributions by the Additional Members and the Kerrville
Members.
(a) Additional Members. Each Additional Member made a Capital
Contribution in cash to the Company in the aggregate amount set forth opposite
such Additional Member's name on Schedule III hereto in the column labeled
"Capital Commitment" in consideration of the number of Class A Interests
purchased by such Additional Member set forth opposite the name of such
Additional Member on Schedule III hereto, in each case in accordance with the
terms of this Agreement and the Additional Members Subscription Agreement.
(b) Kerrville Members. Each Kerrville Member has agreed to make a
Capital Contribution in cash to the Company in the aggregate amount set forth
opposite such Kerrville Member's name on Schedule IV hereto in the column
labeled "Capital Commitment" in consideration of the number of Class C Interests
being purchased by such Kerrville Member set forth opposite the name of such
Kerrville Member on said Schedule IV, in each case in accordance with the terms
of this Agreement and the Kerrville Members Subscription Agreement.
3.4 [Intentionally Omitted]
3.5 Determination of Book Value of Company Assets.
21
PARENT LLC
(a) Book Value. Except as set forth below, the book value ("Book
Value") of any Company asset shall be its adjusted basis for federal income tax
purposes.
(b) Initial Book Value. The initial Book Value of any assets
contributed by a Member to the Company shall be the gross fair market value of
such assets at the time of such contribution.
(c) Adjustments. The Book Values of all of the Company's assets
shall be adjusted by the Company to equal their respective gross fair market
values, as determined by the Board, as of the following times: (i) the admission
of a new Member to the Company or the acquisition by an existing Member of an
additional Interest in the Company from the Company; (ii) the distribution by
the Company of money or property to a retiring or continuing Member in
consideration for all or a portion of such Member's Interests in the Company;
(iii) the liquidation of the Company; and (iv) such other times as determined by
the Board in its reasonable discretion.
(d) Depreciation and Amortization. The Book Value of a Company
asset shall be adjusted (i) for the depreciation and amortization of such asset
taken into account in computing Net Profits and Net Losses and (ii) for Company
expenditures and transactions that increase or decrease the asset's federal
income tax basis.
3.6 Withdrawal of Capital; Limitation on Distributions. No Member
shall be entitled to withdraw any part of its Capital Contribution to, or to
receive any distribution from the Company except as provided in Article IV and
Section 3.12 hereof No Member shall be entitled to demand or receive, except as
otherwise permitted herein, (i) interest on its Capital Contribution or (ii) any
property from the Company other than cash.
3.7 Capital Accounts; Allocations of Net Profits and Net Losses.
(a) Establishment of Capital Accounts.
(i) There was established on September 3, 1999 and
maintained for each Southwest I Member on the books of the Company a capital
account (collectively, the "Southwest I Capital Accounts") which was initially
equal (x) in the case of any Initial Member, to the fair market value of his or
her membership interest attributable to his or her Initial Investment as of the
date such membership interest was contributed to the Company and (y) in the case
of Xxxxxxxx, Xxxxxx and each of the Additional Members (collectively with their
respective successors and assigns, the "Cash investors"), to the amount of their
initial cash Capital Contribution; it being understood that Xxxxxxxx'x and
Mathew's initial Capital Account shall equal the sum of the amounts determined
in clauses (x) and (y) with respect to each of them, as applicable. It is
further understood that the fair market value of the membership interests of the
Initial Members attributable to their Initial Investments as of the date such
22
PARENT LLC
membership interests were contributed to the Company were deemed, in the case of
Xxxxxxxx to be $2,885,000, in the case of Xxxxxx and Page to be $1,250,000 each,
and in the case of Xxxx, to be $250,000.
(ii) There shall be established and maintained for each
Kerrville Member on the books of the Company a capital account (the "Kerrville
Capital Accounts" and, together with the Southwest I Capital Accounts, the
"Capital Accounts") which shall initially equal the amount of their respective
initial Capital Contributions;
(b) Additions to Capital Accounts. Each Member's Southwest I
Capital Account or Kerrville Capital Account shall be increased, as appropriate,
by:
(i) the amount of any money contributed by such Member to
the Company with respect to such Member's Class A Interests, Class B
Interests or Class C Interests, as the case may be;
(ii) the fair market value of any property contributed by
such Member to the Company with respect to such Member's Class A
Interests, Class B Interests or Class C Interests, as the case may
be;
(iii) the amount of Net Profits or items thereof allocated to
such Member under Section 3.7(c)(i) or Section 3.7(d), as the case
maybe; and
(iv) the amount of any Company liabilities assumed by such
Member (or taken subject to) if property is distributed to such
Member by the Company with respect to such Member's Class A
Interests, Class B Interests or Class C Interests, as the case may
be;
and shall be decreased by:
(v) the amount of any money distributed to such Member by
the Company with respect to such Member's Class A Interests, Class B
Interests or Class C Interests, as the case may be;
(vi) the fair market value of any property distributed to
such Member by the Company with respect to such Member's Class A
Interests, Class B Interests or Class C Interests, as the case may
be;
(vii) the amount of Net Losses or items thereof allocated to
such Member under Section 3.7(c)(ii) or Section 3.7(d), as the case
may be; and
23
PARENT LLC
(viii) the amount of any Member liabilities assumed by the
Company (or taken subject to) if property is contributed to the
Company by such Member with respect to such Member's Class A
Interests, Class B Interests or Class C Interests, as the case may
be.
The Capital Accounts shall be adjusted by all other adjustments required by
Treasury Regulations section 1.704-1(b)(2)(iv). The foregoing provisions and the
other provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Treasury Regulations under Section 704(b)
of the Code and, to the extent not inconsistent with the provisions of this
Agreement, shall be interpreted and applied in a manner consistent with such
Treasury Regulations.
(c) Allocation of Southwest I Net Profits and Net Losses.
(i) Allocation of Southwest I Net Profits. Net Profits and
items thereof attributable to all sources other than [Southwest II] ("Southwest
I Net Profits") shall be allocated among the Southwest I Members in the
following order and following priority:
(A) First, to eliminate any Southwest I Net Losses, and in
reverse order of any Southwest I Net Losses allocated under Section 3
.7(c)(ii);
(B) Second, to holders of Class A Preferred Interests and
Class B Preferred Interests in an equal amount in respect of each such
Interest to the extent that any Class A Preferred Appreciation Amount and
Class B Preferred Appreciation Amount shall have accrued on such Interests
pursuant to Sections 4.2(b)(ii) and 4.4(b) hereof; and
(C) Third, to holders of Class A Common Interests and Class
B Common Interests in an equal amount in respect of each such Interest.
(ii) Allocation of Southwest I Net Losses. Net Losses and
items thereof attributable to all sources other than Southwest II ("Southwest I
Net Losses") shall be allocated among the Southwest I Members in the following
order and following priority:
(A) First, with respect to any Southwest I Net Losses
incurred prior to June 30, 2000, to the Additional Members in proportion
to their respective Capital Commitments;
(B) Second, to holders of Class A Common Interests and Class
B Common Interests in an equal amount in respect of each such Interest
until all Southwest I Net Profits allocated under Section 3.7(c)(i)(C)
have been eliminated;
24
PARENT LLC
(C) Third, to holders of Class A Preferred Interests and
Class B Preferred Interests in an equal amount in respect of each such
Interest until all Southwest I Net Profits allocated under Section
3.7(c)(i)(B) have been eliminated;
(D) Fourth, to holders of Class A Common Interests in
proportion to the amount of their Capital Accounts attributable to such
Class A Common Interests, until the amount of such Capital Accounts
attributable to such Class A Common Interests has been eliminated;
(E) Fifth, to holders of Class A Preferred Interests in
proportion to the amount of their Capital Accounts attributable to such
Class A Preferred Interests, until the amount of such Capital Accounts
attributable to such Class A Preferred Interests has been eliminated;
(F) Sixth, to holders of Class A Common Interests and Class
B Common Interests in an equal amount to each such Interest.
(d) Allocation of Kerrville Net Profits and Kerrville Net Losses.
(i) Allocation of Kerrville Net Profits. Net Profits and
items thereof attributable to Southwest II ("Kerrville Net Profits") shall be
allocated among the holders of the Class C Interests in the following order and
following priority:
(A) First, to eliminate any Kerrville Net Losses, and in
reverse order of any Kerrville Net Losses allocated under Section
3.7(d)(ii);
(B) Second, to holders of Class C Interests in an equal
amount in respect of each such Interest.
(ii) Allocation of Kerrville Net Losses. Net Losses and items
thereof attributable to Southwest II ("Kerrville Net Losses") shall be allocated
among the holders of Class C Interests in the following order and following
priority:
(A) First, to holders of Class C Interests in an equal
amount in respect of each such Interest until all Kerrville Net Profits
allocated under Section 3 .7(d)(i)(B) have been eliminated;
(B) Second, to holders of Class C Interests in proportion to
the amount of their Capital Accounts attributable to such Class C
Interests, until the amount of such Capital Accounts attributable to such
Class C Interests has been eliminated;
25
PARENT LLC
(C) Third, to holders of Class C Interests in an equal
amount to each such Interest.
(e) Tax Allocations; Book/Tax Differences. For federal income tax
purposes, Net Profit and Net Loss and any items thereof shall be allocated among
the Southwest I Members or the Kerrville Members, as the case may be, during any
Fiscal Year in accordance with the allocations of the corresponding items for
Capital Account purposes under Section 3.7(c) or Section 3.7(d), as applicable,
provided, however, that if the Book Value of a Company asset differs from its
tax basis for federal income tax purposes, then solely for purposes of computing
the relevant tax and not for purposes of computing Capital Account balances,
income, gain, loss, deduction and credit shall be allocated among such Members
under the traditional method without curative allocations under Treasury
Regulation Section 1.704-3(b).
3.8 Special Allocations. Notwithstanding the general allocation
rules set forth in Section 3.7, the following special allocation rules (the
"Regulatory Allocations") shall apply under the circumstances described therein:
(a) Deficit Capital Account and Nonrecourse Debt Rules. The
special rules in this Section 3.8(a) apply, in the following order, to take into
account the possibility that one or more Members will have a deficit Capital
Account balance for which such Member is not economically responsible (or deemed
responsible under the Treasury Regulations) and the effect on the Company or any
entity taxed as a partnership in which the Company has an ownership interest
incurring nonrecourse debt.
(i) Minimum Gain Chargeback. If there is a net decrease in
"partnership minimum gain" during any year, to be determined in accordance with
Treasury Regulations Section 1.704 2, including the tiered-partnership rules of
Treasury Regulations Section 1.704-2(k), each Member shall be allocated items of
income and gain for such year equal to such Member's share of the net decrease
in partnership minimum gain within the meaning of Treasury Regulations Section
1.704-2(g)(2), except to the extent not required by Treasury Regulations Section
1.704-2(f). To the extent that this Section 3.8(a)(i) is inconsistent with
Treasury Regulations section 1.704-2(f) or 1.704-2(k) or incomplete with respect
to such regulations, the minimum gain chargeback provided for herein shall be
applied and interpreted in accordance with such regulations.
(ii) Member Non-Recourse Debt Minimum Gain Chargeback. If
there is a net decrease in "partner nonrecourse debt minimum gain" during any
year, within the meaning of Treasury Regulations Section 1.704-2(i)(2), each
Member who has a share of the partner nonrecourse debt minimum gain attributable
to such partner nonrecourse debt, determined in accordance with Treasury
Regulations Section 1.704-2(i)(5), shall be allocated items of income and gain
for such year (and, if necessary, subsequent years) equal to such Member's share
of the net decrease in partner nonrecourse debt minimum gain. This allocation
will be made in accordance
26
with Treasury Regulations Section 1.704-2(i)(4) and Section 1.704-20)(5). To the
extent that this Section 3.8(a)(ii) is inconsistent with Treasury Regulation
1.704-2(i) or 1.704-2(k) or incomplete with respect to such regulations, the
partner nonrecourse debt minimum gain chargeback provided for herein shall be
applied and interpreted in accordance with such regulations.
(iii) Deficit Capital Account Chargeback and Qualified Income
Offset. If any Member has a deficit balance in its Capital Account in excess of
such Member's share of "partnership minimum gain" and "partner non-recourse debt
minimum gain" at the end of any year as defined in the Treasury Regulations,
including a deficit balance for such Member caused or increased by an
adjustment, allocation or distribution described in Treasury
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), such Member shall be
allocated items of income and gain (consisting of a pro rata portion of each
item of Company income, including gross income and gain) in an amount and manner
sufficient to eliminate such deficit balance in its Capital Account as quickly
as possible to the extent required by Treasury Regulations Section
1.704-2(b)(2)(ii). This Section 3.8(a)(iii) is intended to constitute a
"qualified income offset" pursuant to Treasury Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(iv) Partner Nonrecourse Deductions. Any "partner nonrecourse
deductions" (as defined in Treasury Regulations Section 1.704-2) for any year or
other period shall be allocated to the Member 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 Treasury Regulations
Section 1.704-2(i) or 1.704-2(k).
(v) Curative Allocations. The Regulatory Allocations
described in this Section 3.8(a) may not be consistent with the manner in which
the Members intend to divide Net Profits, Net Losses and similar items.
Accordingly, Net Profits, Net Losses and other items will be reallocated among
the Members (in the same Fiscal Year and to the extent necessary, in subsequent
Fiscal Years) in a manner consistent with Treasury Regulations Section
1.704-1(b) and 1.704,2 so as to prevent the Regulatory Allocations from
distorting the manner in which Net Profits, Net Losses and other items are
intended to be allocated among the Members pursuant to Section 3.7 and in making
such reallocations, account shall be taken of future Regulatory Allocations that
will in all likelihood occur.
(vi) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b)
of the Code 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 to the Capital Accounts shall be treated as an
item of Net Profit (if the adjustment increases the basis of the asset) or Net
Loss (if the adjustment decreases such basis) and such item 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.
27
PARENT LLC
(b) Change in Member's Interest. If there is a change in any
Member's share of the Company's Net Profits, Net Losses or other items during
any year, allocations among the Members shall be made in accordance with their
Interests in the Company from time to time during such year in accordance with
Section 706 of the Code, using the closing-of-the-books method or any other
reasonable method allowable by law that is selected by the Tax Matters Partner
in its reasonable discretion.
(c) Nonrecourse Debt Sharing. For purposes of this Agreement, the
Members shall be deemed to be allocated nonrecourse deductions, within the
meaning of Treasury Regulations Section 1.704-2(b)(1), in accordance with their
Applicable Percentages. Solely for purposes of determining a Member's
proportionate share of the "excess nonrecourse liabilities" of the Company
within the meaning of Treasury Regulations Section 1.752-3(a)(3), each Member's
interest in the profits of the Company shall be deemed to equal the Applicable
Percentage of such Member.
3.9 [Intentionally Omitted]
3.10 New Members. Upon the admission of any additional Member to
the Company pursuant to Section 7.1, Schedule III shall be amended to reflect
the Capital Commitment of such Member or the allocation to such Member of such
portions of (i) the Capital Commitments of the Members theretofore admitted to
the Company and (ii) the Interests held by such Members as shall be agreed to by
the Board. The Capital Commitments of the Members in the amounts set forth on
Schedule III, as amended in accordance herewith, shall be deemed for the
purposes of this Agreement as the respective Capital Commitments of the Members.
3.11 [Intentionally Omitted]
3.12 Distributions, Etc.
(a) Distributions and Redemptions. Distributions and redemptions
shall be made at such time and in such amounts as determined by the Board of the
Company and shall be made among the Members on the same basis as set forth in
Article IV with respect to payments following a Liquidation Event or, in the
case of a redemption of Preferred Interests, with respect to payments to be made
upon such redemption.
(b) Special Tax Distributions. Notwithstanding any other provision
of this Section 3.12, if any Member has net taxable income for federal income
tax purposes for any taxable year of the Company, then the Company shall first
distribute (i) in the case of any Class A Member or Class B Member, out of
proceeds arising from or assets attributable to all sources other than Southwest
II and (ii) in the case of any Class C Member out of proceeds arising from or
assets attributable to Southwest II, at least an amount of cash (a "Tax
28
PARENT LLC
Distribution") to each such Member which, when combined with all other
distributions to such Member in the current and all preceding taxable years of
the Company, equals the product of (A) the highest combined federal, state and
local income tax rate applicable to a resident of New York City at the time of
such Tax Distribution (assuming the full deductibility for federal tax purposes
of any state and local income taxes) and (B) the excess, if any, of (i) the
aggregate net taxable income allocated to such Member under this Agreement in
the current and all preceding taxable years of the Company over (ii) the
aggregate net taxable loss allocated to such Member under this Agreement in all
preceding taxable years of the Company.
(c) Restoration of Funds. Except as otherwise provided by law, no
Member shall be required to restore to the Company any funds properly
distributed to it pursuant to Sections 3.12(a) and (b).
3.13 Withholding. The Company shall comply with withholding
requirements under U.S. federal, state and local law and shall remit amounts
withheld to and file required forms with applicable jurisdictions. To the extent
that the Company is required to withhold and pay over any amounts to any
authority with respect to distributions or allocations to any Member, the amount
withheld shall be deemed to be a distribution in the amount of the withholding
to the Member. To the fullest extent permitted by law, in the event of any
claimed over-withholding, Members shall be limited to an action against the
applicable jurisdiction. If the amount to be withheld was not withheld from
actual distributions, the Company may reduce subsequent distributions by the
amount of such withholding. Each Member, by its acceptance of an Interest in the
Company, shall be deemed to agree to furnish the Company with any
representations and forms as shall reasonably be requested by the Company to
assist it in determining the extent of, and in fulfilling, its withholding
obligations.
3.14 Tax Matters Partner.
(a) SCD Sharing Partnership, L.P. shall be the tax matters partner
(the "Tax Matters Partner") of the Company and, as such, shall assume all the
rights and duties of a Tax Matters Partner as set forth in the Code and in the
Treasury Regulations promulgated thereunder. The Tax Matters Partner agrees to
act as a liaison between the Company and the IRS in connection with all
administrative and judicial proceedings involving tax controversies regarding
the Company.
(b) The Tax Matters Partner agrees that it shall not take any of
the following actions without the written consent of the Board:
(i) settle any significant claims by the IRS against the Company;
(ii) initiate judicial proceedings contesting adverse
determinations by the IRS against the Company; and
29
PARENT LLC
(iii) enter into an agreement to extend the statute of limitations.
(c) The Tax Matters Partner shall not be required to take any
action or incur any expenses for the prosecution of any administrative or
judicial remedies in its capacity as Tax Matters Partner unless the Members
agree on a method of sharing expenses incurred in connection with the
prosecution of such remedies. As long as the Tax Matters Partner is not grossly
negligent and acts in good faith pursuant to instructions it receives from the
Members, the Tax Matters Partner shall be fully protected in acting as such and
the Company shall indemnify and hold harmless the Tax Matters Partner from and
against any and all expenses incurred by the Tax Matters Partner in connection
with any activities or undertakings taken by it in its capacity as the Tax
Matters Partner. The Tax Matters Partner shall take such action as may be
reasonably necessary to constitute the other Members as "notice partners" within
the meaning of Section 6231(a)(8) of the Code.
ARTICLE IV
INTERESTS AND OTHER SECURITIES
4.1 Preferred and Common Interests.
(a) The Interests in the Company shall be divided into five
classes: Class A Preferred Interests (the "Class A Preferred Interests"), Class
B Preferred Interests (the "Class B Preferred Interests", Class A Common
Interests (the "Class A Common Interests"), Class B Common Interests (the "Class
B Common Interests") and Class C Interests (the "Class C Interests", and,
collectively with the Class A Preferred Interests, the Class B Preferred
Interests, the Class A Common Interests and the Class B Common Interests, the
"Interests"), Interests may, at the discretion of the Board, be represented by
certificates evidencing any number of whole Class A Preferred Interests, Class B
Preferred Interests, Class A Common Interests, Class B Common Interests or Class
C Interests, as the case may be. The total number of Interests which the Company
has the authority to issue is 500,000,000 Class A Preferred Interests,
29,305,106 Class B Preferred Interests, 500,000,000 Class A Common Interests,
5,184,255 Class B Common Interests and 50,000,000 Class C Interests.
(b) The Board may provide for the issuance of any Interests upon
the exercise, conversion or exchange of rights of any options, warrants,
convertible debt securities or such other interests or instruments as the Board
may determine.
4.2 Class A Preferred Interests.
(a) Dividends. The holders of the Class A Preferred Interests
shall not be entitled to receive dividends.
30
PARENT LLC
(b) Liquidation. Subject to the priorities and restrictions set
forth in Section 4.6(a), upon the occurrence of a Liquidation Event with respect
to, or that includes, any interests or assets other than those of Southwest II
or any of its subsidiaries, the holders of the Class A Preferred Interests,
shall be entitled to be paid out of proceeds arising from or assets attributable
to all sources other than Southwest II the following amounts:
(i) in the case of the Cash Investors, an amount equal to the sum
of (x) $1.00 per Class A Preferred Interest acquired by such Cash Investor
in such capacity, or, if greater or less, the aggregate amount of the
Capital Contribution that shall have been paid to the Company with respect
to such Class A Preferred Interest as of and to the date of such
Liquidation Event, and (y) an amount in respect of each such Class A
Preferred Interest, calculated in the manner of, and equal to, interest on
the aggregate amount of such Capital Contribution from the date each
payment thereof is made through the date of such Liquidation Event (the
aggregate amount of such Capital Contribution being determined daily
throughout the relevant period) at the rate of 20% per annum, compounded
quarterly (meaning that each quarter such interest rate shall be applied
to the sum of the aggregate amount of the Capital Contribution referred to
in clause (x) of this paragraph (i) and the aggregate amount referred to
in clause (y) of this paragraph (i) that shall have accrued with respect
to all previous quarters); provided, however, that any Tax Distribution or
other amounts distributed in respect of any such Class A Preferred
Interest by the Company prior to such Liquidation Event shall be deducted,
first from the aggregate amount of the Capital Contribution referred to in
clause (x) of this paragraph (i), and then from the accrued amount
referred to in clause (y) of this paragraph (i);
(ii) in the case of the Initial Members, an amount equal to the sum
of (x) $1.00 per Class A Preferred Interest acquired by such Initial
Member in such capacity, and (y) an amount in respect of each such Class A
Preferred Interest, calculated in the manner of, and equal to, interest on
$1.00 at the rate of 20% per annum, compounded quarterly (meaning that
each quarter such interest rate shall be applied to the sum of $1.00 and
the amount referred to in clause (y) of this paragraph (ii) that shall
have accrued with respect to all previous quarters); provided, however,
that any Tax Distribution or other amounts distributed in respect of any
such Class A Preferred Interest by the Company prior to such Liquidation
Event shall be deducted, first from the $1.00 referred to in clause (x) of
this paragraph (ii) and then from the accrued amount referred to in clause
(y) of this paragraph (ii); and provided, further, however, that no
payment of any amount shall be made under this paragraph (ii) with respect
to any such Class A Preferred Interest prior to June 30, 2000.
The amount payable to the holders of Class A Preferred Interests in respect of
each such Interest as described in clause (x) of each of paragraph (i) and
paragraph (ii) of this Section 4.2(b) is referred to herein as the "Class A
Preferred Capital Amount"; the amount payable to such holders in respect of each
such Interest as described in clause (y) of each such paragraph is referred to
31
PARENT LLC
herein as the "Class A Preferred Appreciation Amount"); and the aggregate amount
payable to such holders in respect of each such Interest as described in each
such paragraph is referred to herein as the "Class A Preferred Liquidation
Amount".
(c) Redemption.
(i) Subject to the priorities and restrictions set forth in
Section 4.6(b) and to any restrictions (including without limitation any
requirements as to the use of proceeds) contained in the Loan Agreements,
the Class A Preferred Interests are redeemable, out of proceeds arising
from or assets attributable to all sources other than Southwest II, at a
redemption price equal to the Class A Preferred Liquidation Amount as of
and to the date fixed for redemption, as if such date were the date upon
which a Liquidation Event with respect to, or that includes, any interests
or assets other than those of Southwest II or any of its subsidiaries
occurred, as follows:
(A) The Class A Preferred Interests may be redeemed in whole or
from time to time in part at any time (in amounts which shall be 100,000
Class A Preferred Interests or an integral multiple thereof), at the
option of the Company.
(B) The Company shall redeem all of the Preferred Interests then
outstanding on September 3, 2011.
(C) The Company shall, subject to the provisions of Section 8.2,
upon the occurrence of a Redemption Event, redeem all of the Class A
Preferred Interests then outstanding (or, if the Company is not permitted
by any Loan Agreement to redeem all such Interests, the maximum number of
Class A Preferred Interests so permitted to be redeemed).
(ii) The date of any redemption of any Class A Preferred Interests
pursuant to this Section 4.2(c) and of any Class B Preferred Interests
pursuant to Section 4.4(c) is referred to herein as a "Preferred Interest
Redemption Date."
(iii) Any Class A Preferred Interests redeemed pursuant to this
Section 4.2(c) or otherwise acquired by the Company in any manner
whatsoever shall be permanently retired and shall not under any
circumstances be reissued; and the Company may from time to time take such
appropriate action as may be necessary to reduce the authorized Class A
Preferred Interests accordingly.
(iv) In case of the redemption, purchase or retirement, for any
reason, of only a part of the outstanding Class A Preferred Interests on a
Preferred Interest Redemption Date, subject to the priorities and
restrictions set forth in Section 4.6, all Class A Preferred Interests to
be redeemed, purchased or retired shall be selected pro rata, such
32
that there shall be redeemed, purchased or retired from each registered
holder in whole Class A Preferred Interests, as nearly as practicable to
the nearest whole Class A Preferred Interest, the proportion of all the
Class A Preferred Interests to be redeemed, purchased or retired which the
number of Class A Preferred Interests held of record by such holder bears
to the total number of Class A Preferred Interests at the time
out-standing.
(d) Voting Rights. Except as otherwise provided in this Agreement
and by law, the holders of Class A Preferred Interests shall have no vote on any
matters to be voted on by the Members of the Company.
(e) Restrictions. Subject to the restrictions contained in Section
8.4, at any time when Class A Preferred Interests are outstanding, except where
the vote or written consent of the holders of a greater number of Interests is
required by law or by this Agreement, and in addition to any other vote required
by law, without a Majority Vote of the Class A Preferred Members, given in
person or by proxy, either in writing or at a special meeting of the Class A
Preferred Members called for that purpose:
(i) With respect to dividends payable or distributions of assets
on liquidation to be made out of proceeds arising from or assets
attributable to any source other than Southwest II, the Company will not
(x) create or authorize the creation of any additional class of limited
liability company interests unless the same ranks junior to the Class A
Preferred Interests both as to such dividends and as to the distribution
of such assets on liquidation, or (y) increase the authorized amount of
the Class A Preferred Interests, or increase the authorized amount of any
additional class of limited liability company interests unless the same
ranks junior to the Class A Preferred Interests both as to dividends and
as to the distribution of assets on liquidation, or (z) create or
authorize any obligations or securities convertible into Class A Preferred
Interests or into limited liability company interests of the Company of
any other class unless the same ranks junior to the Class A Preferred
Interests both as to such dividends and as to the distribution of such
assets on liquidation, in each case, whether any such creation or
authorization or increase shall be by means of amendment of this
Agreement, merger, consolidation or otherwise.
(ii) The Company will not amend, alter or repeal this Agreement in
any manner which affects the respective preferences, voting power,
qualifications, special or relative rights or privileges of the Class A
Preferred Interests, the Class A Common Interests, the Class B Preferred
Interests, the Class B Common Interests or the Class C Interests or which
in any manner adversely affects the Class A Preferred Interests or the
holders thereof.
33
PARENT LLC
(iii) The Company will not amend, alter or repeal this Agreement in
any manner that affects the respective preferences, voting power,
qualifications, special or relative rights or privileges of any Member
holding Class A Preferred Interests in a manner different from the
treatment of any other Member holding Class A Preferred Interests without
the consent of the Member differently treated.
4.3 Class A Common Interests.
(a) Dividends. To the extent permitted under the Delaware Act and
subject to the priorities and restrictions set forth in Section 4.6(a),
dividends may be paid on the Class A Common Interests out of proceeds arising
from or assets attributable to all sources other than Southwest II, as and when
declared by the Board of the Company; provided, however, that no dividend shall
be declared or paid on the Class A Common Interests unless there shall be
concurrently declared or paid a dividend on the Class B Common Interests, equal
in amount per Class B Common Interest to the amount of the dividend declared or
paid on each Class A Common Interest, it being understood that distributions to
the holders of Class A Common Interests with respect to the Class A Common
Capital Amounts shall not be considered dividends for purposes hereof.
(b) Liquidation. Subject to the priorities and restrictions set
forth in Section 4.6(a), upon the occurrence of a Liquidation Event with respect
to, or that includes, any interests or assets other than those of Southwest II
or any of its subsidiaries, the holders of the Class A Common Interests, shall
be entitled to be paid out of proceeds arising from or assets attributable to
all sources other than Southwest II, the following amounts:
(i) in the case of the Cash Investors, an amount equal to the sum
of (x) $1.00 per Class A Common Interest acquired by such Cash Investor in
such capacity, or, if less, the aggregate amount of the Capital
Contribution that shall have been paid to the Company with respect to such
Class A Common Interest as of and to the date of such Liquidation Event;
provided, however, that any Tax Distribution or other amounts (other than
dividends) distributed in respect of any such Class A Common Interest by
the Company prior to such Liquidation Event shall be deducted, first from
the aggregate amount of the Capital Contribution referred to in this
clause (x), and then from the amount referred to in clause (y) of this
paragraph (i); and (y) an amount equal to such Cash Investor's ratable
share of all remaining net assets of the Company available for
distribution, to the extent arising from or attributable to all sources
other than Southwest II, as provided in said Section 4.6, based on the
number of Class A Common Interests held by such Cash Investor relative to
all Common Interests (both Class A and Class B) then outstanding.
(ii) in the case of the Initial Members, an amount equal to the sum
of (x) $1.00 per Class A Common Interest acquired by such Initial Member
in such capacity,
34
PARENT LLC
provided, however; that any Tax Distribution or other amounts (other than
dividends) distributed in respect of any such Class A Common Interest by
the Company prior to such Liquidation Event shall be deducted first from
the $1.00 referred to in this clause (x), and then from the amount
referred to in clause (y) of this paragraph (i); and (y) an amount equal
to such Initial Member's ratable share of all remaining net assets of the
Company available for distribution, to the extent arising from or
attributable to all sources other than Southwest II, as provided in said
Section 4.6, based on the number of Class A Common Interests held by such
Initial Member relative to all Common Interests (both Class A and Class B)
then outstanding.
The amount payable to the holders of Class A Common Interests in respect of each
such Interest as described in clause (x) of each of paragraph (i) and paragraph
(ii) of this Section 4.3(b) is referred to herein as the "Class A Common Capital
Amount".
(c) Voting Rights. Subject to the rights of holders of Preferred
Interests and Class C Interests, and except as otherwise provided herein and in
the Delaware Act, all voting rights of the Members shall be vested exclusively
in the Class A Common Interests and the Class C Interests. Each Class A Common
Interest shall entitle the holder thereof to one vote upon all matters upon
which Members have the right to vote (other than matters subject to a Class vote
of a Class other than the Class A Common Interests).
4.4 Class B Preferred Interests.
(a) Dividends. The holders of the Class B Preferred Interests
shall not be entitled to receive dividends.
(b) Liquidation. Subject to the priorities and restrictions set
forth in Section 4.6(a), upon the occurrence of a Liquidation Event with respect
to, or that includes, any interests or assets other than those of Southwest II
or any of its subsidiaries, the holders of the Class B Preferred Interests, in
their capacity as Southwest I Members, shall be entitled to be paid, out of
proceeds arising from or assets attributable to all sources other than Southwest
II, an amount (the "Class B Preferred Appreciation Amount") per Class B
Preferred Interest as follows:
(i) in the case of Class B Preferred Interests issued on or prior
to June 30, 2000, the Class B Preferred Appreciation Amount shall be equal
to the Class A Preferred Appreciation Amount that would have accrued
through the date of such Liquidation Event, calculated in accordance with
Section 4.2(b)(ii), on a single Class A Preferred Interest issued on June
30, 2000 and in respect of which the entire capital amount paid to the
Company was $1.00, all of which was received on that date; and
(ii) in the case of Class B Preferred Interests issued at any time
after June 30, 2000, the Class B Preferred Appreciation Amount shall be
equal to the Class A
35
PARENT LLC
Preferred Appreciation Amount that would have accrued through the date of
such Liquidation Event, calculated in accordance with Section 4.2(b)(ii),
on a single Class A Preferred Interest issued on the respective dates of
issuance of such Class 13 Preferred Interests and in respect of which the
entire capital amount paid to the Company was $1.00, all of which was
received on date of issuance of the relevant Class B Preferred Interests;
provided, however, that by resolution of the Board, any Class B Preferred
Interests may he deemed, for the purpose of calculating the Class B
Preferred Appreciation Amount accrued thereon, to have been issued on any
other date specified in such resolution, and provided, further, however,
in the case of clause (i) above and this clause (ii), that any Tax
Distribution or other amounts distributed in respect of any Class B
Preferred Interest by the Company prior to such Liquidation Event shall be
deducted from the Class B Preferred Appreciation Amount to which the
holder of such Class B Preferred Interest is entitled hereunder.
(c) Redemption.
(i) Subject to the priorities and restrictions set forth in
Section 4.6(b) and any restrictions (including without limitation any
requirements as to the use of proceeds) contained in the Loan Agreements,
the Class B Preferred Interests are redeemable out of proceeds arising
from or assets attributable to all sources other than Southwest II, at a
redemption price equal to the Class B Preferred Appreciation Amount to the
date fixed for redemption, as if such date were the date upon which a
Liquidation Event with respect to, or that includes, any interests or
assets other than those of Southwest II or any of its subsidiaries
occurred as follows:
(A) The Class B Preferred Interests may be redeemed in whole or
from time to time in part at any time (in amounts which shall be 100,000
Class B Preferred Interests or an integral multiple thereof), at the
option of the Company.
(B) The Company shall redeem all of the Class B Preferred
Interests then outstanding on September 3, 2011.
(C) The Company shall, subject to the provisions of Section 8.2,
upon the occurrence of a Redemption Event, redeem all of the Class B
Preferred Interests then outstanding (or, if the Company is not permitted
by any Loan Agreement to redeem all such Interests, the maximum number of
Class B Preferred Interests so permitted to be redeemed).
(ii) Any Class B Preferred Interests redeemed pursuant to this
Section 4.4(c) or otherwise acquired by the Company in any manner
whatsoever shall be permanently retired and shall not under any
circumstances be reissued; and the Company may from
36
time to time take such appropriate action as may be necessary to reduce
the authorized Class B Preferred Interests accordingly.
(iii) In case of the redemption, purchase or retirement, for any
reason, of only a part of the outstanding Class B Preferred Interests on a
Preferred Interest Redemption Date, subject to the priorities and
restrictions set forth in Section 4.6, all Class B Preferred Interests to
be redeemed, purchased or retired shall be selected pro rata, such that
there shall be redeemed, purchased or retired from each registered holder
in whole Class B Preferred Interests, as nearly as practicable to the
nearest Class B Preferred Interest, the proportion of all the Class B
Preferred Interests to be redeemed, purchased or retired which the number
of Class B Preferred Interests held of record by such holder bears to the
total number of Class B Preferred Interests at the time outstanding.
(d) Voting Rights. Except as otherwise provided in this Agreement
and by law, the holders of Class B Preferred Interests shall have no vote on any
matters to be voted on by the Members of the Company.
4.5 Class B Common Interests.
(a) Dividends. To the extent permitted under the Delaware Act and
subject to the priorities and restrictions set forth in Section 4.6(a),
dividends maybe paid on the Class B Common Interests out of proceeds arising
from or assets attributable to all sources other than Southwest II as and when
declared by the Board of the Company; provided, however, that no dividend shall
be declared or paid on the Class B Common Interests unless there shall be
concurrently declared or paid a dividend on the Class A Common Interests, equal
in amount per Class A Common Interest to the amount of the dividend declared or
paid on each Class B Common Interest, it being understood that distributions to
the holders of Class A Common Interests with respect to the Class A Common
Capital Amounts shall not be considered dividends for purposes hereof.
(b) Liquidation. Subject to the priorities and restrictions set
forth in Section 4.6(a), upon the occurrence of a Liquidation Event with respect
to, or that includes, any interests or assets other than those of Southwest II
or any of its subsidiaries, the holders of the Class B Common Interests, in
their capacity as Southwest I Members, and the holders of the Class A Common
Interests shall be entitled to share ratably, based upon the number of Common
Interests held by them, in all remaining net assets of the Company, to the
extent arising from or attributable to all sources other than Southwest II and
available for distribution to the holders of Common Interests, as provided in
said Section 4.6(a); provided, however, that any Tax Distribution or other
amounts distributed in respect of any such Class B Common Interest by the
Company prior to such Liquidation Event shall be deducted from any amount
referred to in this paragraph (b) to which such holders are entitled.
37
PARENT LLC
(c) Voting Rights. Except as otherwise provided by law, the
holders of Class B Common Interests shall have no vote on any matters to be
voted on by the Members of the Company.
4.X Class C Interests.
(a) Dividends. To the extent permitted under the Delaware Act,
dividends may be paid on the Class C Interests out of proceeds arising from or
assets attributable to Southwest II, as and when declared by the Board of the
Company.
(b) Liquidation. Upon the occurrence of a Liquidation Event with
respect to, or that includes, any interests or assets of Southwest II or any of
its subsidiaries, the holders of the Class C Interests, shall be entitled to be
paid out of proceeds arising from or assets attributable to Southwest II, an
amount equal to the sum of (x) $1.00 per Class C Interest acquired by such
Member in such capacity, or, if less, the aggregate amount of the Capital
Contribution that shall have been paid to the Company with respect to such Class
C Interest as of and to the date of such Liquidation Event; provided, however,
that any Tax Distribution or other amounts (other than dividends) distributed in
respect of any such Class C Interest by the Company prior to such Liquidation
Event shall be deducted, first from the aggregate amount of the Capital
Contribution referred to in this clause (x), and then from the amount referred
to in clause (y) of this paragraph (b); and (y) an amount equal to such Class C
Member's ratable share of all remaining net assets of the Company available for
distribution, to the extent arising from or attributable to Southwest II, as
provided in said Section 4.6, based on the number of Class C Interests held by
such Class C Member relative to all Class C Interests then outstanding.
The amount payable to the holders of Class C Interests in respect of each such
Interest as described in clause (x) of this Section 4.X(b) is referred to herein
as the "Class C Capital Amount".
(c) Voting Rights. The voting rights of the Class C Members are as
set forth in Section 4.3(c). Each Class C Interest shall entitle the holder
thereof to one vote upon all matters upon which Members have the right to vote.
(d) Restrictions. Subject to the restrictions contained in Section
8.4, at any time when Class C Interests are outstanding, except where the vote
or written consent of the holders of a greater number of Interests is required
by law or by this Agreement, and in addition to any other vote required by law,
without a Majority Vote of the Class C Members, given in person or by proxy,
either in writing or at a special meeting of the Class C Members called for that
purpose:
(i) With respect to dividends payable or distributions of assets
on liquidation to be made out of proceeds arising from or assets
attributable to Southwest II, the Company will not (x) create or authorize
the creation of any additional class of limited
38
PARENT LLC
liability company interests, or (y) increase the authorized amount of the
Class C Interests, or increase the authorized amount of any additional
class of limited liability company interests, or (z) create or authorize
any obligations or securities convertible into Class C Interests or into
limited liability company interests of the Company of any other class , in
each case, whether any such creation or authorization or increase shall be
by means of amendment of this Agreement, merger, consolidation or
otherwise.
(ii) The Company will not amend, alter or repeal this Agreement in
any manner which affects the respective preferences, voting power,
qualifications, special or relative rights or privileges of the Class A
Interests, and the Class B Interests, on the one hand, and the Class C
Interests, on the other hand, which in any manner adversely affects the
Class C Interests or the holders thereof.
(iii) The Company will not amend, alter or repeal this Agreement in
any manner that affects the respective preferences, voting power,
qualifications, special or relative rights or privileges of any Member
holding Class C Interests in a manner different from the treatment of any
other Member holding Class C Interests without the consent of the Member
differently treated.
(iv) The Company will not consent to any liquidation, dissolution
or winding up of Southwest II or any of its material subsidiaries, or
cause Southwest II or any such subsidiary to consolidate or merge into or
with any other entity (other than a merger with or into a wholly-owned
subsidiary of Southwest II) or sell or transfer all or substantially all
the assets of Southwest II or any such subsidiary as an entirety to any
other person or enter into any other material transaction out of the
ordinary course of business with respect to Southwest II.
4.6 Priority of Payments Upon Liquidation and Redemption; Certain
Restrictions.
(a) Liquidation - Southwest I. Upon the occurrence of a
Liquidation Event with respect to, or that includes, any interests or assets
other than those of Southwest II or any of its subsidiaries, the entire amount
of assets or proceeds, to the extent arising from or attributable to all sources
other than Southwest II, available to be distributed among the holders of
Interests (other than holders of Class C Interests) shall be distributed,
subject to Section 4.6(d), as follows:
(i) first, ratably among the holders of Class A Preferred
Interests, based on, and up to the maximum amount of, the Class A
Preferred Capital Amounts to which they are respectively entitled as
provided in Section 4.2(b)(i);
39
(ii) then, to the extent that there are such net assets of the
Company remaining after payment in full of the Class A Preferred Capital
Amounts as aforesaid, ratably among the holders of the Class A Common
Interests, based on, and up to the maximum amount of, the Class A Common
Capital Amounts to which they are respectively entitled as provided in
Section 4.3(b);
(iii) then, to the extent that there are such net assets of the
Company remaining after payment in full of the Class A Preferred Capital
Amounts and the Class A Common Capital Amounts as aforesaid, ratably among
the holders of the Class A Preferred Interests and Class B Preferred
Interests, based on, and up to the maximum amount of, the Preferred
Appreciation Amounts to which they are respectively entitled as provided
in Section 4.2(b)(ii) and Section 4.4(b); and
(iv) finally, to the extent of the entire remaining net assets of
the Company arising from or attributable to all sources other than
Southwest II, after payment in full of the Class A Preferred Capital
Amounts, the Class A Common Capital Amounts and the Preferred Appreciation
Amounts as aforesaid, ratably among the holders of the Common Interests,
based on their respective number of Common Interests.
(b) Redemption - Southwest I. In the case of a redemption of any
Preferred Interests on any Preferred Interest Redemption Date as provided in
Section 4.2(c) and Section 4.4(c), the amount of assets or proceeds arising from
or attributable to all sources other than Southwest II to be distributed among
the holders of Preferred Interests to be redeemed shall be distributed as
follows:
(i) first, ratably among the holders of the Class A Preferred
Interests to be redeemed, based on, and up to the maximum amount of, the
Class A Preferred Capital Amounts to which they are respectively entitled
as provided in Section 4.2(b)(i); and
(ii) then, to the extent that there are such net assets of the
Company remaining after payment in full of such Class A Preferred Capital
Amounts, ratably among the holders of the Class A Preferred Interests and
Class B Preferred Interests to be redeemed, based on, and up to the
maximum amount of, the Preferred Appreciation Amounts to which they are
respectively entitled as provided in Section 4.2(b)(ii) and Section
4.4(b).
After payment in full of the Class A Preferred Capital Amounts as aforesaid, any
redemption of Class A Preferred Interests shall be subject to the simultaneous
redemption of all or, in the ease of a partial redemption of the Class A
Preferred Interests, of a pro rata portion, of the Class B Preferred Interests;
and any redemption of Class B Preferred Interests shall be subject to the
simultaneous redemption of all of the Class A Preferred Interests or, in the
case of a partial redemption of the Class B Preferred Interests, of a pro rata
portion of the Class A Preferred Interests, in each case, as provided in Section
4.2(c) and Section 4.4(c).
40
(c) Restrictions on Certain Distributions and Dividends. As long
as any Class A Preferred Interests shall remain outstanding, without a Majority
Vote of the Class A Preferred Members, no dividend shall be declared or paid
upon, nor shall any distribution be made upon, any Class A Common Interests or
Class B Common Interests pursuant to Section 4.3(a) or Section 4.5(a) other than
a dividend or distribution payable solely in Common Interests or a Tax
Distribution, nor shall any Class A Common Interests or Class B Interests be
purchased or redeemed by the Company (other than redemptions of Class B
Preferred Interests that comply with Section 4.4(c) and 4.6(b)) and repurchases
of Common Interests from employees of the Company (or from Valor Management
HoldingCo, LLC for the benefit of employees of the Company) following
termination of their employment), nor shall any moneys be paid to or made
available for a sinking fund for the purchase or redemption of any Class A
Common Interests or Class B Interests (other than redemptions of Class B
Preferred Interests that comply with Section 4.4(c) and 4.6(b) as aforesaid).
(d) Liquidation - Southwest II. Upon the occurrence of a
Liquidation Event with respect to, or that includes, any interests or assets of
Southwest II or any of its subsidiaries, the entire amount of assets or
proceeds, to the extent arising from or attributable to Southwest II, available
to be distributed among the holders of Class C Interests shall be distributed as
follows:
(i) first, ratably among the holders of Class C Interests, based
on, and up to the maximum amount of, the Class C Capital Amounts to which
they are respectively entitled as provided in clause (x) of Section
4.X(b);
(ii) then, to the extent of the entire remaining net assets of the
Company arising from or attributable to Southwest II, after payment in
full of the Class C Capital Amounts, as aforesaid, ratably among the
holders of the Class C Interests, based on their respective number of such
Interests.
4.7 Certain Notices.
(a) Notice of Liquidation. Written notice of any Liquidation
Event, stating a payment date, the amount payable upon such Liquidation Event as
provided in this Article IV to which each holder of Interests is entitled with
respect to each Class of Interest, and the place where said sums shall be
payable, shall be given by mail, postage prepaid, not less than 30 or more than
60 days prior to the payment date stated therein to the extent possible and in
any event as far in advance of such payment date as is reasonably practicable,
to all holders of record of Interests, such notice to be addressed to each such
holder at such holder's post office address as shown by the records of the
Company.
(b) Notice of Redemption. Not less than 30 or more than 60 days
before any Preferred Interest Redemption Date to the extent possible and in any
event as far in advance of such payment date as is reasonably practicable,
written notice shall be given by mail, postage
41
prepaid, to the holders of record of the Preferred Interests to be redeemed,
addressed to each such holder at such holder's post office address as shown by
the records of the Company, specifying the number of Preferred Interests to be
redeemed, the redemption price to be paid for such Preferred Interests, the
place and the date (which date shall not be a day on which banks in The City of
New York are required or authorized to close) on which the Preferred Interests
will be re-deemed. If such notice of redemption shall have been duly given and
if on or before such Preferred Interest Redemption Date the funds necessary for
redemption shall have been set aside so as to be and continue to be available
therefor, then, notwithstanding that any certificate for Preferred Interests to
be redeemed shall not have been surrendered for cancellation, after the close of
business on such Preferred Interest Redemption Date, such Preferred Interests
shall no longer be deemed outstanding, and all rights with respect to such
Preferred Interests shall forthwith after the close of business on the Preferred
Interest Redemption Date, cease, except only the right of the holders thereof to
receive the redemption price for such Preferred Interests, without interest. A
notice of redemption may be revoked by the Company, in whole or in part, if it
determines that funds previously expected to be available for such redemption
will not be available.
4.8 Issuance of Interests Upon the Admission of Additional
Members. Subject to the rights of the existing Members as set forth in this
Agreement, additional Interests may be issued to additional Members only upon
the admission of such additional Member pursuant to Article VII of this
Agreement.
4.9 Fractional Interests. The Company may, but shall not be
required to, issue fractions of an Interest. If the Company does not issue
fractions of an Interest, it shall (a) arrange for the disposition of fractional
Interests by those entitled thereto, (b) pay in cash the fair value of fractions
of an Interest as of the time when those entitled to receive such fractions are
determined or (c) issue scrip or warrants in registered form (either represented
by a certificate or uncertificated) which shall entitle the holder to receive a
full Interest upon the surrender of such scrip or warrants aggregating a full
Interest. A certificate for a fractional Interest or an uncertificated
fractional Interest shall, but scrip or warrants shall not unless otherwise
provided therein, entitle the holder to exercise voting rights, to receive
dividends thereon and to participate in any of the assets of the Company in the
event of liquidation. The Board may cause scrip or warrants to be issued subject
to the conditions that they shall become void if not exchanged for certificates
representing the full Interests or uncertificated full Interests before a
specified date, or subject to the conditions that the Interests for which scrip
or warrants are exchangeable may be sold by the Company and the proceeds thereof
distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board may impose. Notwithstanding the foregoing, if any
reverse split, recapitalization, exchange or other transaction affecting the
number of Interests outstanding or the number of interests or other securities
of a successor to the Company that any Member would receive or hold that is
followed by a redemption of fraction interests would result in any Member being
required to relinquish all or a substantial portion of its interests then such
42
PARENT LLC
interests will not be disposed of as contemplated by the second sentence of this
Section 4.9 without the written consent of each Member so affected.
ARTICLE V
DISSOLUTION AND WINDING-UP
5.1 Dissolution. The Company shall be dissolved and its affairs
wound up upon the occurrence of the earliest of following events:
(a) the dissolution or liquidation of the Company;
(b) a vote of each of the Class A Common Members and the Class C
Members, voting together as a single Class, in each case, holding not less
than two-thirds of the Interests entitled to vote in favor of the
dissolution and termination of the Company; or
(c) as otherwise required by the Delaware Act.
5.2 Resignation of Members. A Member may resign from the Company
only by transferring such Member's interests pursuant to Article VI hereof. No
Member shall be able to resign or be deemed to resign if such Member ceases to
be a Member (a "Former Member") due to bankruptcy or for any other reason except
upon the Majority Vote of the Common Members, if the Company continues to exist.
Such Former Member, if not permitted or deemed to resign, shall not be entitled
to any of the rights granted to a Member hereunder or under applicable law but
shall be, to the extent not otherwise provided by this Agreement or applicable
law, entitled to receive distributions and allocations of items of income, gain,
loss, deduction, expense and credit as if such Former Member continued to be a
Member hereunder.
5.3 Winding-Up.
(a) Upon dissolution of the Company, the Company's affairs shall
be wound up by the Chairman of the Board (as liquidating trustee) or, if there
is no Chairman of the Board, by the Chief Executive Officer (as liquidating
trustee), or, if there is no Chairman of the Board or Chief Executive Officer,
by the person who may be elected by Majority Vote of the Class A Common Members
and the Class C Members, voting together as a single Class.
(b) Upon the winding-up of the Company, any amounts permitted to
be distributed to Members shall be distributed in accordance with Section 4.6.
43
PARENT LLC
ARTICLE VI
RESTRICTIONS ON TRANSFER; CERTAIN
SALE AND PREEMPTIVE RIGHTS
6.1 General; Tag-Along Rights.
(a) No Member shall be permitted to directly or indirectly sell,
exchange or in any other manner (other than (i) as contemplated by Section 6.2
(in which case such transfer shall require approval by the Board)), (ii) in a
manner permitted by Section 6.3 or (iii) as contemplated by Section 6.5 or
Section 6.6) dispose of any Interest in the Company held by such Member (and in
the case of the WCAS Investors, no interest in a WCAS Investor held directly or
indirectly by WCAS VIII or WCAS IX may be transferred which indirectly transfers
an interest in the Company) other than in an Approved Transaction or in a
Permitted Transfer.
(b) If the WCAS Investors (including for this purpose the transfer
of any interest held directly or indirectly by WCAS VIII or WCAS IX in a WCAS
Investor that results in an indirect transfer of an interest in the Company)
propose at any time to sell, exchange or in any other manner (other than in a
Permitted Transfer) dispose of any Interests in the Company held directly or
indirectly by such WCAS Investors, then the WCAS Investors shall give written
notice (a "Notice of Intention to Sell") to the Vestar Investors, the CVC
Investors, Xxxxxxxx (in her capacity as a Cash Investor and an Initial Member)
and the other Initial Members (but, in the case of the Initial Members, only as
to their Class A Interests or their Class C Interests, as the case may be)
(collectively, the "Other Investors") setting forth in reasonable detail the
terms and conditions of and rights to be obtained in connection with such
proposed transaction. To the extent that there is any material change to such
terms and conditions or rights, the WCAS Investors shall notify the Other
Investors.
(c) Each of the Other Investors shall have the right, exercisable
upon written notice to the WCAS Investors within fifteen (15) days after receipt
of any Notice of Intention to Sell, to participate in the proposed disposition
of Interests by the WCAS Investors to the proposed purchaser on the terms and
conditions set forth in such Notice of Intention to Sell. Each of the Other
Investors may participate with respect to all or any part of that number of
Interests of the same Class or Classes as the Interests covered by the proposed
disposition which is equal to the product obtained by multiplying (i) the
aggregate number of Interests of such Class covered by the proposed disposition
(treating, for purposes of such calculation, any Interests of such Class
issuable upon conversion of any convertible securities of the Company or upon
exercise of any options or rights covered by the proposed disposition as
representing the Interests of such Class then issuable upon such conversion or
exercise) by (ii) a fraction, the numerator of which is the number of Interests
of such Class owned by such Other Investor (treating, for purposes of such
calculation, any Interests of such Class issuable upon conversion of any
convertible securities of the Company or upon exercise of any options or rights
then held
44
PARENT LLC
by such Other Investor as being issued and outstanding and held by such Other
Investor as of such date) and the denominator of which is the sum of the total
number of Interests of such Class at the time owned by the WCAS Investors and
the Other Investors participating in such sale combined (treating, for purposes
of such calculation, any Interests of such Class issuable upon conversion of any
convertible securities of the Company or upon exercise of any options or rights
then held by the WCAS Investors and the Other Investors as being issued and
outstanding and held by such investors as of such date).
(d) Each of the Other Investors participating in the proposed
disposition shall deliver to the Company, as agent for such Other Investor, for
transfer to the proposed acquiror, one or more certificates (if such Interests
are certificated), properly endorsed for transfer or accompanied by transfer
powers duly endorsed for transfer, with all transfer taxes paid and stamps
affixed, which represent the Interests that such Other Investor elects to
dispose of pursuant to this Section 6.1. The consummation of such proposed
disposition shall be subject to the sole discretion of the WCAS Investors, which
shall have no liability whatsoever to any Other Investor participating therein
other than (i) to obtain for such Other Investor the same terms and conditions
and rights as those obtained by the WCAS Investor as set forth in the Notice of
Intention to Sell or any amendment thereof communicated to the Other Investors
in the manner provided for in Section 6.1(b) (ii) above; it being understood,
however, that any consideration payable or otherwise deliverable to the Members
participating in such disposition shall be shared among the Members in a manner
consistent with the respective Interests being sold of the Members in effect
immediately prior to the consummation of such disposition above and (ii) to use
reasonable efforts to procure for the Other Investors the opportunity to
participate in any other ancillary transaction (such as consulting agreements or
agreements for the payment of any fees) to which any WCAS Investor or any of its
Affiliates is a party in connection with such disposition of Interests intending
to confer value on such WCAS Investor or Affiliate, and if any Other Investor is
not included in any such ancillary transaction, WCAS shall alternatively pay to
such Other Investor a p pro rata portion, based on the Interests sold in the
related transaction, of any compensation received by WCAS in connection with
such ancillary transaction. To the extent that there is to be granted any
indemnification or other post-closing liability assumed, the Selling Members
shall do so severally and not jointly.
(e) The Interests delivered by each of the Other Investors to the
Company pursuant to Section 6.1(d), or with respect to which instructions shall
have been so given, shall be transferred by the Company to the purchaser, in
consummation of the disposition to such purchaser, pursuant to the terms and
conditions specified in Section 6.1(b) above, and the Company shall promptly
thereafter remit to such Other Investor that portion of the proceeds of
disposition to which such Other Investor is entitled by reason of such
participation.
45
PARENT LLC
6.2 Right of First Offer.
(a) Notice of Transfer. If any Member other than the WCAS
Investors (a "Selling Investor") proposes at any time (other than during any
90-day period as described in Section 6.2(f) below) to sell, exchange or in any
other manner (other than in a Permitted Transfer or as contemplated by Section
6.1, Section 6.5 or Section 6.6 hereof) dispose of any Interests or other equity
interests in the Company held by such Member, then such Member shall give
written notice (a "Notice of Intention to Sell") to the Company, the WCAS
Investors and, unless the transferor is a Vestar Investor, the Vestar Investors,
setting forth in reasonable detail the terms and conditions of such proposed
transaction.
(b) Right of the Company. The Company shall have the right,
exercisable upon written notice to the Selling Investor, with a copy to the WCAS
Investors and, unless the transferor is a Vestar Investor, the Vestar Investors,
within fifteen (15) days after receipt of any Notice of Intention to Sell, to
purchase any or all of the Interests or other equity interests covered by any
Notice of Intention to Sell from the Selling Investor on the terms and
conditions set forth therein. Such written notice from the Company to the
Selling Investor shall state the number of Interests or other equity interests
in the Company to be purchased by the Company and that the Company will purchase
such Interests or other equity interests within 45 days thereafter (or such
longer period as is necessary to obtain any necessary consents or approvals or
to otherwise comply with applicable law).
(c) Right of the WCAS Investors and the Vestar Investors. In the
event that the Company shall elect not to exercise its rights under Section 6(b)
above as to any Interests or other equity interests in the Company covered by
any Notice of Intention to Sell, the WCAS Investors and Vestar Investors shall
have the right, exercisable upon written notice to the Selling Investor within
thirty (30) days after receipt of any Notice of Intention to Sell, to purchase,
subject to clause 6.2(f) below, any or all of the Interests or other equity
interests in the Company from the Selling Investor that the Company shall have
not elected to purchase on the terms and conditions set forth therein, such
purchase right to be allocated pro rata between the WCAS Investors and the
Vestar Investors based upon their relative ownership of the Class of Interests
or other equity interests to be sold. Such written notice from any WCAS Investor
or Vestar Investor to the Selling Investor shall state the number of Interests
or other equity interests in the Company to be purchased by such WCAS Investor
or Vestar Investor and that such WCAS Investor or Vestar Investor will purchase
such Interests or other equity interests within 45 days thereafter (or such
longer period as is necessary to obtain any necessary consents or approvals or
to otherwise comply with applicable law). In the event that the right pursuant
to this paragraph (c) to purchase Interests or other equity interests in the
Company is exercised by more than one WCAS Investor or Vestar Investor, the
allocation among such WCAS Investors or Vestar Investors of such Interests or
other equity interests shall be as agreed among them.
46
(d) Delivery of Interests. Prior to the closing date set for such
disposition, the Selling Investor shall deliver to the Company, as agent for
such Selling Investor, for transfer to the Company or the purchasing WCAS
Investors and Vestar Investors, as the case may be (collectively, the
"Purchaser"), one or more certificates (if such Interests or other equity
Interest are certificated), properly endorsed for transfer or accompanied by
transfer powers duly endorsed for transfer, with all transfer taxes paid and
stamps affixed, which represent the Interests or other equity Interests that the
Purchaser has agreed to purchase pursuant to this Section 6.2.
(e) Delivery of Proceeds. The interests or other equity interests
delivered by the Selling Investor to the Company pursuant to Section 6.2(d)
shall be transferred by the Company to the Purchaser, in consummation of the
disposition to the Purchaser, pursuant to the terms and conditions specified in
Section 6.2(a) above, and the Company shall promptly thereafter remit to the
Selling Investor the proceeds of disposition to which such Selling Investor is
entitled by reason of such disposition.
(f) Sale of Unpurchased Interests. During the ninety (90) days
following the expiration of such 30-day offering period, the Selling Investor
shall be entitled to sell the Interests or other equity securities which the
Company, the WCAS Investors and the Vestar Investors shall not have agreed to
purchase as described in Section 6.2(b) or Section 6.2(c) above or if the
Company and the WCAS Investors and the Vestar Investors have not elected to
purchase all of the Interests or other equity interests offered then the Selling
Investor may elect to sell all of the Interests and other equity interests
offered, on terms and conditions no more favorable to the purchasers thereof
than those offered to the Company, the WCAS Investors and Vestar Investors. Any
Interests or other equity securities offered or sold by any Member after such
90-day period must be reoffered to the Company, the WCAS Investors and Vestar
Investors pursuant to the terms of this Section 6.2.
6.3 Permitted Transferees. Anything herein to the contrary
notwithstanding, Section 6.1 and Section 6.2 shall not apply to (i) any transfer
by any Member to one or more Affiliates of such Member or any investment limited
partnership under common management with any Member, (ii) any distributions or
transfers by any Member to any of its partners (including any of its limited
partners) or if such Member is a limited liability company to any of its
members, or by any Member to any present or former officer, director or employee
who is co-investing with such Member in the Company, (iii) any transfer by a
Member to such Member's spouse or lineal descendants, or to a trust for the
benefit of any of the foregoing, (iv) any transfer that complies with Section
7.1(d), (v) any transfer by any WCAS Investor, Vestar Investor or CVC Investor
to another WCAS Investor, Vestar Investor or CVC Investor, as the case may be or
(vi) a transfer to any person in a Public Sale; provided, in the case of clauses
(i)-(iv), that any such transferee shall agree in writing with the parties
hereto to be bound by, and to comply with, all applicable provisions of this
Agreement and, provided further, that in the case of any such transfer by any
WCAS Investor, Vestar Investor, CVC Investor or Initial Member, any such
47
transferee shall agree in writing to be deemed to be a WCAS Investor, a Vestar
Investor, a CVC Investor or an Initial Member, as the case may be, for purposes
of this Agreement. Each Person who acquires an interest in the Company in the
manner contemplated by this Section 6.3 and Section 6.4 shall be a "Permitted
Transferee."
6.4 Preemptive Rights.
(a) Offer to Sell. If the Company authorizes the issuance or sale
of any securities of the Company in an Eligible Offering, then the Company shall
first offer to sell to each Class A Member a portion of the securities offered
in the Eligible Offering equal to all or any portion of such Class A Member's
Applicable Percentage thereof; provided, however, that if some or all of the
proceeds of such Eligible Offering is or will be used to make a capital
contribution to or purchase additional securities of Southwest II, then a
portion of the total number of securities to be offered in such Eligible
Offering equal to (i) the amount of such capital contribution to Southwest II,
divided by (ii) the aggregate proceeds of the entire Eligible Offering shall not
be offered to the Class A Members but shall be reserved for offering to the
Class C Members, and the Company shall first offer to sell to each Class C
Member a portion of such reserved securities equal to all or any portion of such
Class C Member's Applicable Percentage thereof. With respect to the issuance of
the Class C Interests and any subsequent issuance of securities in an Eligible
Offering (i) any Member may exercise some or all of such Member's rights under
this Section 6.4 for the benefit of one or more of such Member's Permitted
Transferees of the kind described in clauses (i)-(v) of the definition thereof
contained in Section 6.3, subject, in each case, to compliance by such Permitted
Transferee with the applicable conditions contained in the proviso to said
definition and (ii) any WCAS Investor, Vestar Investor or CVC Investor may
exercise some or all of the rights of any other WCAS Investor, Vestar Investor
or CVC Investor that has elected not to exercise such rights. Each Class A
Member whose name does not appear on Schedule IV hereto hereby confirms (without
prejudice to such Member's rights with respect to issuances after the date
hereof in an Eligible Offering) that such Member has elected not to exercise
such Member's right, pursuant to this Section 6.4, to purchase such Member's
Applicable Percentage of the Class C Interests issued on the date hereof or, in
the case of SCD Sharing Partnership, L.P., SCE Sharing Partnership, L.P. and
certain other WCAS Investors, has elected to cause such rights to be exercised
by a Permitted Transferee, as permitted hereby.
(b) Right to Purchase. In order to accept an offer under Section
6.4(a), a Member must, within 15 days after receipt of written notice from the
Company describing in reasonable detail the Interests or other securities being
offered, the purchase price thereof, the payment terms and such Member's
Applicable Percentage, deliver a written notice to the Company accepting such
offer with respect to all or any portion of the securities being offered to such
Member.
48
(c) Sale of Unsubscribed Interests. During the ninety (90) days
following the expiration of such 15-day offering period, the Company shall be
entitled to sell any Interests or other securities which have not been
subscribed for by Members as described in Section 6.4(b) above on terms and
conditions no more favorable to the purchasers thereof than those offered to
such Members. Any Interests or other securities offered or sold by the Company
in an Eligible Offering after such 90-day period must be reoffered to the
Members pursuant to the terms of this Section 6.4.
6.5 Sale of the Business; Drag-Along Rights.
(a) If the WCAS Investors approve any transaction or series of
related transactions negotiated with an unaffiliated bona fide third party on an
arm's-length basis and approved by a majority of the Board that would result in
an Approved Transaction, then each Member covenants and agrees (x) to vote all
of the Class A Common Interests, Class C Interests and other voting securities
of the Company held by such Member in favor of such Approved Transaction if such
a vote shall be required and (y) to sell all of its Interests and other equity
securities of the Company to the purchaser in such Approved Transaction if such
sale shall be required by the WCAS Investors or otherwise as part of such
Approved Transaction; provided, however, that (i) all holders of the same class,
type or series of interests in the Company shall receive the same form and
proportionate share of consideration as all other holders of such class, type or
series of interests, and have the ability, whether directly or indirectly, to
exercise all material contractual rights (such as registration rights, tag-along
rights, etc.) that are received by the WCAS Investors in connection with the
Approved Transaction, (ii) any consideration payable or otherwise deliverable to
the Members in such Approved Transaction shall be valued, and the allocation
thereof as being attributable to Southwest I or Southwest II shall be
determined, by the Board in its reasonable discretion and be distributed among
the Members according to the respective Interests of the Members in the Company
as in effect immediately prior to the consummation of such Approved Transaction
and in a manner consistent with Section 4.6(a) and Section 4.6(d) hereof, as
applicable, and (iii) the WCAS Investors shall use reasonable efforts to procure
for the Other Investors the opportunity to participate in any other ancillary
transaction (such as consulting agreements or agreements for the payment of any
fees) to which any WCAS Investor or any of its Affiliates is a party in
connection with such Approved Transaction intending to confer value on such WCAS
Investor or Affiliate, and if any Other Investor is not included in any such
ancillary transaction, the WCAS Investors and/or their Affiliates shall
alternatively pay to such Other Investors a pro rata portion, based on Interests
sold in the related transactions, of any compensation received by the WCAS
Investors and/or their Affiliates in connection with such ancillary
transactions. To the extent that there is to be granted any indemnification or
other post-closing liability assumed, the selling Members shall do so severally
and not jointly and the potential liability thereunder shall not exceed the
proceeds received, except for indemnification for matters for which it may be
customary not to limit liability, such as representations as to title to
interests conveyed, legal authority and capacity and non-contravention of other
agreements. To the extent that the Members are to receive cash or cash
equivalents in connection with a
49
PARENT LLC
transaction contemplated by this Section 6.5 to the extent such cash or cash
equivalents arise from or are attributable to sources other than Southwest II,
at the election of the holders of a majority of the Class A Preferred Interests,
such cash and cash equivalents shall be distributed, first in accordance with
the priorities established by Section 4.6(a), followed by the distribution of
other forms of property. In the event that any Member holding not less than 10%
of the Class A Preferred Interests and Class A Common Interests or not less than
10% of the Class C Interests, as the case may be, shall disagree with the
valuation of any property to be received by the Members in connection with any
transaction contemplated by this Section 6.5, or the allocation of any such
property as between the Class A Members and the Class B Members, on the one
hand, and the Class C Members on the other hand, then such disagreement shall be
resolved by a third party who shall have substantial experience in valuing
property of such type and who shall be reasonably acceptable to the Company and
such Member.
(b) In furtherance of the covenants of the Members in Section
6.5(a), each Member hereby agrees to cooperate fully with the WCAS Investors and
the Company in any such Approved Transaction and to execute and deliver all
documents (including purchase agreements) and instruments as the WCAS Investors
and the Company reasonably request to effect such Approved Transaction,
including, without limitation, the making of all commercially reasonable
representations, warranties and indemnifications (including participating in any
escrow arrangements) and similar arrangements (which arrangements shall not,
however, include entering into any non-competition agreement) relating to such
Approved Transaction and consistent with the other provisions of this Section
6.5.
6.6 Tax-Free Transactions Involving Intermediary Entities. Each of
the Members (and each of WCAS VIII, WCAS IX and WCAS CP III), Vestar and CVC
understands and acknowledges that, in connection with a Liquidation Event that
relates to (i) a sale of all or substantially all of the assets or Interests of
the Company, (ii) a sale of all or substantially all of the assets or interests
of Southwest I or Southwest II or (iii) to a Redemption Event, such Members, and
the equityholders of one or more of the Intermediary Entities may, in order to
avoid the current or eventual incurrence of taxes by such Intermediary Entities,
desire to exchange the Interests and the stock or other equity securities of
such Intermediary Entities for shares of Capital Stock to a new or existing
corporation ("Newco") on a tax-free basis prior to the occurrence of any such
Liquidation Event or Redemption Event; provided that Newco may only be an
existing corporation if the WCAS Investors and the Vestar Investors are
reasonably satisfied that such corporation does not have any material
obligations or liabilities. The capital stock of such Newco, rather than the
Interests of the Company, would then become the subject of any such Liquidation
Event or Redemption Event. Upon the written request of the WCAS Investors made
reasonably in advance, and in any case not later than 30 days in advance of a
Liquidation Event or a Redemption Event, each of the Members (and each of WCAS
VIII, WCAS IX and WCAS CP III, Vestar and CVC) hereby agrees to use its
commercially reasonable efforts to facilitate any such tax-free exchange,
including, without limitation, through the contribution of all such Member's
Interests (or all of such entity's capital stock or other equity
50
PARENT LLC
securities in any Intermediary Entity) to any such Newco in a transaction
qualifying for tax-free treatment under Section 351 of the Code or otherwise;
provided that the WCAS Investors will consult with the other Members to evaluate
the proposed structure of the exchange and will consider other structures
recommended by any one or more Members holding at least 10% of the Class A
Preferred Interests and Class A Common Interests and/or 10% of the Class C
Interests, as the case may be; provided, however, (x) all holders of the same
class, type or series of interests in the Company shall receive the same form
and proportionate share of consideration as all other holders of such class,
type or series of interests, and have the ability, whether directly or
indirectly, to exercise all material contractual rights (such as registration
rights, tag-along rights, etc.) that are received by the WCAS Investors in
connection with the Liquidation Event giving rise to the exchange of Interests
for capital stock of Newco, (y) that the shares of capital stock of Newco shall
be distributed among the Members according to the respective Interests of the
Members in the Company as in effect immediately prior to the consummation of
such exchange of Interests for capital stock of Newco and in a manner consistent
with Section 4.6(a) and Section 4.6(d) hereof, as applicable; provided, further,
however, that unless otherwise agreed by Members holding sufficient Interests of
the requisite Classes to amend or modify this Agreement as contemplated by and
in accordance with all provisions of Section 10.2 hereof, the Members are in the
same contractual, governance and economic position with respect to the capital
stock of Newco as they were immediately prior to such contribution of Interests
with respect to their respective Interests in the Company (including, without
limitation, as such economic position is described in Section 4.6(a)(iii) and
Section 4.6(a)(iv) or Section 4.6(d), as applicable). In that regard, in
connection with Newco's issuance of securities in return for any interests in
the Company, the Board shall determine a cash value for such securities and an
allocation of the value thereof as being attributable to Southwest I or
Southwest II, as the case may be, on a reasonable basis and such securities
shall be allocated among the Members based on their relative interests and the
relative priority of such interests in the Company in accordance with the
provisions of Section 4.6(a) or 4.6(d), as applicable. In the event that any
Member holding at least 10% of the Class A Common Interests and the Class A
Preferred Interests or 10% of the Class C Interests, as the case may be, shall
disagree with the valuation of any securities of Newco to be issued in
connection with any such reorganization, or the allocation of any such
securities as between the Class A Members and the Class B Members, on the one
hand, and the Class C Members, on the other hand, then such disagreement shall
be resolved by a third party who shall have substantial experience in valuing
similar securities and who shall be reasonably acceptable to the Company and
such Member. In addition, in connection with any such reorganization the parties
will use their reasonable efforts to assure that any Member who receives
securities of Newco will be able to include in such Member's holding period for
purposes of Rule 144 promulgated under the Securities Act the period during
which such Member held the Interests in the Company that are being exchanged for
or otherwise relinquished in order to receive Newco securities.
51
PARENT LLC
ARTICLE VII
ADMISSION OF NEW MEMBERS
7.1 Admission of New Members.
(a) Admission of Members. With the consent given by Majority Vote
of the Class A Common Members and the Class C Members, voting together as a
single Class, the Board may at any time cause the Company to admit additional
Members ("New Members"); provided, however, that, subject to compliance with the
provisions of Section 7.2, each Permitted Transferee of a Member shall
automatically be admitted as a Member hereunder with respect to the Interests
transferred.
(b) Time of Admission. A New Member shall be deemed admitted as a
member upon the later of: (i) the later of (a) the written request by such
Person that the Members' Interest Register reflect such admission and (b) the
execution by such Person of this Agreement or a counterpart hereof whereby such
person agrees to be bound by the provisions of this Agreement, and (ii) the time
such Person is listed as a Member in the Members' Interest Register of the
Company which the Company shall do promptly following receipt of notice of
transfer.
(c) Required Contribution. The Board shall determine the
contribution the New Member needs to make and the number and class of interests
to be issued to such Member. The Board may provide that the required
contribution may be paid prior to, at the time of, or subsequent to, the
issuance of any interest to such Member and that any subsequent contribution may
be made from distributions paid or payable in respect of such interest. If any
portion of a required contribution is payable after the issuance of the
interest, the Board may determine that any rights otherwise incident to such
interest (including, without limitation, voting, distribution, inspection and
transfer rights) will not come into effect until such required contribution has
been made. At any time that the voting rights in respect of such interest have
been suspended, in determining whether a required percentage of Class A Common
Interests and Class C Interests have approved any action, such Interests shall
be excluded from both the numerator and the denominator of such percentage
computation.
(d) Regulatory Compliance Cooperation.
(i) In the event that any CVC Investor determines that it has a
Regulatory Problem, the Company agrees to take, at such CVC Investor's cost and
expense, all such actions as are reasonably requested by such CVC Investor in
order (i) to effectuate and facilitate any transfer of any securities of the
Company then held by such CVC Investor and by any other CVC Investor required to
transfer securities of the Company as a result thereof (all such affected CVC
Investors being referred to herein collectively as the "Affected CVC
Investors"), to any Affiliate of CVC or other Person designated by the Affected
CVC Investors and reasonably acceptable to
52
the WCAS Investors and the Vestar Investors, (ii) to permit each Affected CVC
Investor (or any of its Affiliates) to exchange all or any portion of the voting
securities then held by such Affected CVC Investor on a one-for-one basis for
interests of a class of non-voting securities of the Company, which non-voting
securities shall be identical in all respects to such voting securities, except
that such new securities shall be non-voting and shall be convertible on a
one-to-one basis into voting securities on such terms as are requested by such
Affected CVC Investor in light of regulatory considerations then prevailing, and
(iii) to continue and preserve the respective allocations of the voting
interests with respect to the Company arising out of each such Affected CVC
Investor's ownership of voting securities or provided for in this Agreement
before the transfers and amendments referred to above (including entering into
such additional agreements as are requested by such Affected CVC Investor to
permit any Affiliate designated by it to exercise any voting power which is
relinquished by any such Affected CVC Investor upon any exchange of voting
securities for non-voting securities of the Company). If any Affected CVC
Investor elects to transfer securities of the Company to a Regulated Holder in
order to avoid a Regulatory Problem and is in compliance with this Section
7.1(d), the Company shall enter into such agreements with such Regulated Holder
as such Regulated Holder may reasonably request in order to assist such
Regulated Holder in complying with applicable laws and regulations to which it
is subject; provided, however, that such agreements shall not adversely affect
the rights of any other holders of Interests.
(ii) In the event any CVC Investor has the right to acquire any of
the Company's securities from the Company (pursuant to Section 6.4 or
otherwise), at such CVC Investor's request, the Company will offer to sell to
such CVC Investor non-voting securities on the same terms as would have existed
had such CVC Investor acquired the securities so offered and immediately
requested their exchange for equivalent non-voting securities pursuant to
paragraph (i) above.
7.2 Transferees and Assignees.
(a) Except as expressly provided herein, any transferee or
assignee of any Interest in the Company shall be subject to all of the
restrictions on transfer of an interest in the Company imposed upon a Member,
even if such transferee or assignee is not admitted to the Company as a Member.
Any transferee or assignee of an interest in the Company who is not admitted to
the Company as a Member shall nevertheless be entitled to the share of Company
profits, losses and distributions attributable to the interest acquired by such
transferee or assignee.
(b) As a condition to any person's admission to the Company as a
new or substitute Member, such person shall be required to execute an amendment
to this Agreement, in such form as may be required by the Board, under which
such person agrees to be bound by all of the terms, provisions and obligations
of this Agreement.
53
PARENT LLC
ARTICLE VIII
CERTAIN AGREEMENTS
8.1 Mergers, Etc. Subject to the terms and conditions of this
Agreement, the Company may merge or consolidate with one or more limited
liability companies, corporations, business trusts or associations, real estate
investment trusts, common law trusts or unincorporated businesses, including a
general partnership or limited partnership, formed under the laws of the State
of Delaware or any other jurisdiction, pursuant to a written agreement of merger
or consolidation ("Merger Agreement") in accordance with this Section 8.1.
(a) Procedure for Merger or Consolidation. Merger or consolidation
of the Company pursuant to this Section 8.1 requires the prior approval of the
Board. If the Board shall determine, in the exercise of its sole discretion, to
consent to the merger or consolidation, the Board shall approve the Merger
Agreement, which shall set forth:
(i) the names and jurisdictions of formation or organization of
each of the business entities proposing to merge or consolidate;
(ii) the name and jurisdiction of formation or organization of the
business entity that is to survive the proposed merger or consolidation
(the "Surviving Business Entity");
(iii) the terms and conditions of the proposed merger or
consolidation (including those specifically required by this Agreement);
(iv) the manner and basis of exchanging or converting the equity
securities of each constituent business entity for, or into, cash,
property or limited partnership or limited liability company interests,
rights, securities or obligations of the Surviving Business Entity,
provided that holders of Interests shall not receive general partnership
interests in any such merger or consolidation; and (A) if any limited
partnership or limited liability company interests, rights, securities or
obligations of any constituent business entity are not to be exchanged or
converted solely for, or into, cash, property or limited partnership or
limited liability company interests, rights, securities or obligations of
the Surviving Business Entity, the Merger Agreement will specify the cash,
property or limited partnership or limited liability company interests,
rights, securities or obligations of any limited partnership, limited
liability company, corporation, trust or other entity (that is not the
Surviving Business Entity) that the holders of such interests, rights,
securities or obligations of the constituent business entity are to
receive in exchange for, or upon conversion of, their interests, rights,
securities or obligations of the Company and (B) in the case of securities
represented by certificates, upon the surrender of such certificates, the
Merger Agreement will specify which cash, property or limited partnership
or limited liability company interests, rights, securities or obligations
of the
54
Surviving Business Entity or any limited partnership, limited liability
company, corporation, trust or other entity (that is not the Surviving
Business Entity), or evidences thereof, are to be delivered;
(v) that all holders of the same class, type or series of
interests in the Company shall receive the same form and proportionate
share of consideration as all other holders of such class, type or series
of interests. In addition, in order to determine the distribution among
the Members of the consideration to be received by the Members in
connection with such merger, all of the cash, securities and other
property of whatever nature to be received by the Members in such merger,
shall be valued, and the allocation thereof as being attributable to
Southwest I or Southwest II shall be determined, by the Board in its
reasonable discretion and be distributed among the Members according to
their respective interests in the Company in accordance with Section
4.6(a) and Section 4.6(d), as the case may be. To the extent that Members
are to receive cash or cash equivalents in connection with a transaction
contemplated by this Section 8.1, to the extent such cash or cash
equivalents arise from or are attributable to sources other than Southwest
II, at the election of the holders of a majority of the Class A Preferred
Interests, such cash and cash equivalents shall be distributed first in
accordance with the priorities established by Section 4.6(a), followed by
the distribution of other forms of property, In the event that any Member
holding not less than 10% of the Class A Preferred Interests and the Class
A Common Interests or not less than 10% of the Class C Interests, as the
case may be, shall disagree with the valuation of any property to be
received by the Members in connection with any transaction contemplated by
this Section 8.1 or the allocation of any such property as between the
Class A Members and the Class B Members, on the one hand, and the Class C
Members, on the other hand, then such disagreement shall be resolved by a
third party who shall have substantial experience in valuing property of
such type and who shall be reasonably acceptable to the Company and such
Member. The WCAS Investors shall use reasonable efforts to procure for the
Other Investors the opportunity to participate in any other ancillary
transaction (such as consulting agreements or agreements for the payment
of any fees) to which any WCAS Investor or any of its Affiliates is a
party in connection with any such merger intending to confer value on such
WCAS Investor or Affiliate, and if any Other Investor is not included in
any such ancillary transaction, the WCAS Investors and/or their Affiliates
shall alternatively pay to the Other Investors a pro rata portion, based
on Interests exchanged in such merger, of any compensation received by the
WCAS Investors and/or their Affiliates in connection with such ancillary
transaction(s);
(vi) unless otherwise agreed by Members holding sufficient
interests to amend or modify this Agreement as contemplated by Section
10.2 hereof, to the extent that securities in any other entity are issued
to the Members in connection with any merger or combination contemplated
by this Section 8.1, then such securities, together with any agreements
entered into by the recipients of such securities in connection with the
receipt
55
PARENT LLC
of such securities, shall entitle the holders to the same economic
interests in the successor entity and provide the holders with the same
material contractual and governance rights including, without limitation,
the rights contemplated by Article VI hereof, that such holders are
entitled to by virtue of their ownership of their respective Interests
hereunder and pursuant to the other agreements contemplated hereby or
otherwise entered into in connection with the acquisition of their
respective Interests; and
(vii) such other provisions with respect to the proposed merger or
consolidation as are deemed necessary or appropriate by the Board and that
are not otherwise inconsistent with the terms of this Agreement.
(b) Approval by the Members of Merger or Consolidation.
(i) General. The Board, upon its approval of the Merger Agreement,
shall direct that the Merger Agreement be submitted to a vote of the Class
A Common Members and Class C Members, voting together as a single Class,
whether at a meeting or by written consent, in either case in accordance
with the requirements of Section 2.3. A copy or a summary of the Merger
Agreement shall be included in or enclosed with the notice of a meeting or
the written consent.
(ii) Required Vote. The Merger Agreement shall be approved upon
receiving the Majority Vote of the Class A Common Members and Class C
Members, voting together as a single Class unless the Merger Agreement
contains any provision which, if contained in an amendment to this
Agreement, the provisions of this Agreement or the Delaware Act would
require the vote or consent of a greater percentage of the Interests or of
any Class thereof, in which case such greater percentage vote or consent
shall be required for approval of the Merger Agreement.
(iii) Abandonment of Merger or Consolidation. After such approval by
Majority Vote of the Class A Common Members and the Class C Members, as
aforesaid, and at any time prior to the filing of the certificate of
merger or consolidation pursuant to Section 8,4, the merger or
consolidation may be abandoned pursuant to provisions therefor, if any,
set forth in the Merger Agreement. The Merger Agreement shall also require
the approval of any other class of Members if such approval is
specifically required by this Agreement.
(c) Certificate of Merger or Consolidation. Upon the required
approval by the Board and the Class A Common Members and the Class C
Members of a Merger Agreement, a certificate of merger or consolidation
shall be executed and filed with the Secretary of State of the State of
Delaware in conformity with the requirements of the Delaware Act.
56
PARENT LLC
(d) Effect of Merger or Consolidation.
(i) Effect of Merger. At the effective time of the certificate of
merger or consolidation:
(A) all of the rights, privileges and powers of each of the
business entities that has merged or consolidated, and all property, real,
personal and mixed, and all debts due to any of those business entities
and all other things and causes of action belonging to each of those
business entities shall be vested in the Surviving Business Entity and
after the merger or consolidation shall be the property of the Surviving
Business Entity to the extent they were property of each constituent
business entity;
(B) the title to any real property vested by deed or otherwise in
any of those constituent business entities shall not revert and is not in
any way impaired because of the merger or consolidation;
(C) all rights of creditors and all liens on or security interest
in property of any of those constituent business entities shall be
preserved unimpaired; and
(D) all debts, liabilities and duties of those constituent
business entities shall attach to the Surviving Business Entity, and may
be enforced against it to the same extent as if the debts, liabilities and
duties had been incurred or contracted by it.
(ii) No Transfer of Assets or Liabilities. A merger or
consolidation effected pursuant to this Section 8.1 shall not be deemed to
result in a transfer or assignment of assets or liabilities from one
entity to another having occurred.
8.2 Public Offering. In the event that the Board approves an
initial public offering and sale of equity securities of the Company
pursuant to an effective registration statement under the Securities Act
(a "Public Offering") or the Company is required to undertake a Public
Offering pursuant to the Registration Rights Agreement, the Members shall
use commercially reasonable efforts to take all necessary or desirable
actions required or deemed advisable by the Board in connection with the
consummation of such Public Offering that are not otherwise inconsistent
with the terms of this Agreement. In the event that (i) such Public
Offering is an underwritten offering and the managing underwriters advise
the Company in writing that in their opinion the existing capital
structure of the Company adversely affects the marketability of the
offering, or (ii) the WCAS Investors so determine, each Member shall
consent to and vote for a recapitalization, reorganization and/or exchange
of such Member's Interests into securities that the managing underwriter
and/or the WCAS Investors find acceptable, which transaction shall occur
immediately prior to the consummation of the Public Offering, and shall
take all necessary or desirable actions in connection with the
consummation of such recapitalization, reorganization and/or exchange,
which may include the elimination of
57
some or all Preferred Interests; provided, however, that the resulting
securities are distributed to the Members in a manner consistent with the
Members' respective Interests in the Company as in effect immediately
prior to such Public Offering in accordance with Section 4.6(a) or 4,6(d)
hereof, as applicable; provided further, however, that unless otherwise
agreed by Members holding sufficient Interests to amend or modify this
Agreement as contemplated by Section 10.2 hereof, the Members are in
substantially the same contractual, governance and economic position with
respect to such resulting securities as they were prior to such
recapitalization, reorganization and/or exchange and in any event all
holders of the same class, type or series of interest of the Company shall
receive the same form and proportionate share of consideration as all
other holders of such class, type or series of interests. In addition, in
connection with any such reorganization the parties will use their
reasonable best efforts, consistent with consummating the planned Public
Offering, to assure that (i) any Member who receives any securities of an
entity other than the Company in connection with any such reorganization
will be able to include in such Member's holding period for purposes of
Rule 144 promulgated under the Securities Act the period during which such
Member held the Interests in the Company that are being exchanged for or
otherwise relinquished in order to receive the securities of any successor
entity, (ii) the material contractual rights, including, without
limitation, the rights contemplated by Article VI hereof, that such
holders are entitled to by virtue of their ownership of their respective
interests hereunder and pursuant to the other agreements contemplated
hereby or otherwise entered into in connection with the acquisition of
their respective Interests shall be preserved, subject to substantially
similar terms and conditions, (iii) any such reorganization will be
achieved in a tax-free manner and that to the extent that it cannot be
achieved in a tax-free manner any member who incurs any tax liability in
connection with such a reorganization will receive a distribution
hereunder or from the successor entity based on the same principles set
forth in Section 3.12(b), whether or not then in effect, in order to
provide liquidity for the payment of such liability, and (iv) in the event
that the entity that is subject to the Public Offering is a subsidiary of
the Company, the Company will distribute the securities of such entity to
the Members in a manner consistent with Section 4.6 hereof and such
distribution will be subject to the provisions of clause (ii) of this
sentence.
8.3 Provisions Relating to Subsidiaries. With respect to each
direct and indirect subsidiary acquired or formed by the Company, the Company
shall comply with the provisions of this Section 8.3.
(a) Equity Securities. All investments by the Company in the
equity securities of such subsidiary in connection with financing such
subsidiary's purchase (whether direct or indirect) of any of the Original
Telephone Businesses shall be funded in the ratio of 85% preferred equity and
15% common equity, in the manner of the Class A Interests issued to the
Additional Members by the Company pursuant to the Additional Members
Subscription Agreement; provided, however that the terms of the preferred and
common equity issued in such proportions shall be determined by the Board and in
any event need not be identical to the Class A Interests issued by the Company.
58
PARENT LLC
(b) Preemptive Rights. The Company will assure that the governance
documents of each subsidiary of the Company that is not directly or indirectly
wholly owned by the Company contains preemptive rights for the benefit of the
Company that are substantially the same as those contained in Section 6.4
hereof. In the event that the Company is given the opportunity to exercise any
such preemptive rights and the Company determines not to exercise all or any
such rights, the Company shall notify each Class A Member (in the case of an
offering of securities by Southwest I or any of its subsidiaries) or Class C
Member (in the case of an offering of securities by Southwest II or any of its
subsidiaries) promptly following receipt of notice from the applicable
subsidiary and in any event not later than five business days following the
receipt of such notice. Each such Member shall be entitled to cause the Company,
at the Company's option, either to assign to such Member a proportional right to
purchase such securities or to purchase on behalf of such Member a portion of
the securities being offered to the Company equal to such Member's relevant
Applicable Percentage thereof. If the Company purchases the securities for a
Member, any Member who elects to cause the Company to exercise its preemptive
rights will purchase additional interests of the appropriate Class of the
Company in an amount and for consideration sufficient to fund the purchase by
the Company of such subsidiary securities. Such interests will have such rights
as are necessary to provide that the economic interest in and voting and other
rights associated with the subsidiary securities so acquired by the Company will
be beneficially owned and exercisable by such Member and shall otherwise be on
such terms and conditions as may be reasonably determined by the Board and such
Member.
(c) Tag-along Rights. The Company will assure that the governance
documents of each subsidiary of the Company that is not directly or indirectly
wholly owned by the Company contains tag-along rights for the benefit of the
Company that are substantially the same as those contained in Section 6.1
hereof. In the event that the Company is given the opportunity to exercise any
such tag-along rights and the Company determines not to exercise such rights,
the Company shall notify each Class A Member, in the case of a transaction
involving Southwest I or any of its subsidiaries, and each Kerrville Member, in
the case of a transaction involving Southwest II or any of its subsidiaries,
promptly following receipt of notice from the applicable subsidiary and in any
event not later than five business days following the receipt of such notice.
Each Class A Member or Class C Member, as the case may be, shall be entitled to
cause the Company to sell on behalf of such Member a portion of such securities
equal to such Member's relevant Applicable Percentage thereof. The Company will
apply the proceeds from the sale of any such subsidiary securities, to the
extent such proceeds arise from or are attributable to sources other than
Southwest II, to the redemption of such corresponding Class of Class A Interests
(pro rata as between such Member's Class A Preferred Interests and Class A
Common Interests) and to the extent such proceeds arise from or are attributable
to Southwest II, to the redemption of Class C interests, in either case, held by
any Member who elects to cause the Company to exercise its tag-along rights as
contemplated hereby. The Interests to be so redeemed shall be reasonably
determined by the Company in order to give economic effect to the reduction of
the selling Member's proportional interest in the economic enterprise of the
59
Company with respect to Southwest I or Southwest II, as the case may be, and
their respective subsidiaries taken as a whole.
(d) Plan Asset Regulations. Each such subsidiary shall qualify as
a majority owned subsidiary for purposes of the Plan Asset Regulations.
8.4 Additional Issuances of Preferred Equity. The Company shall
not offer, agree to sell or issue any class or series of equity securities of
the Company that ranks senior in any respect to the Preferred Interests unless
(i) such transaction shall have been approved by the Board, (ii) the Company
shall have complied with the provisions of Section 6.4 with respect thereto and
(iii) such securities will be issued (x) to a Person that is not an Affiliate of
the Company or (y) to a Person that is an Affiliate of the Company in connection
with an acquisition by the Company (whether by means of asset purchase, stock
purchase, merger, consolidation or otherwise), in which case such senior
preferred equity shall be offered and sold to such Affiliate at its stated value
and shall be entitled to dividends or appreciation rights at an annual
compounding rate not exceeding 15% of such stated value.
8.5 Advisory and Monitoring Fees. On June 30, 2000 and on each
anniversary thereof, the Company shall pay advisory and monitoring fees of (i)
$571,430, plus reasonable expenses, to WCA Management Corporation, or another
entity or entities designated by the WCAS Investors for so long as WCAS
Investors shall hold at least 25% of Common Interests originally subscribed for
by the WCAS Investors (any reduction in the number of Common Interests made
pursuant to Section 3.11 being deemed an adjustment to such original number of
Common Interests) and (ii) $428,570, plus reasonable expenses, to Vestar or
another entity or entities designated by the Vestar Investors for so long as
Vestar Investors shall hold at least 25% of the Common Interests originally
subscribed for the Vestar Investors (any reduction in the number of Common
Interests made pursuant to Section 3.11 being deemed an adjustment to such
original number of Common Interests). To the extent that payment of such
advisory and monitoring fees is prohibited by any provision of any credit
agreement or other debt instrument, the Company shall use commercially
reasonable efforts to cause the lender or holder of such debt instrument to
waive any such prohibition. If, despite such efforts, such lender or holder is
unwilling to permit the Company to pay such advisory and monitoring fees, then
any amounts not so paid shall accrue and shall bear interest at the rate of 13%
per annum until paid, and the Company shall promptly pay such sums when no such
prohibitions exist.
8.6 Allocation of Expenses.
(a) Expenses. The Members agree that expenses of the Company
incurred primarily for the benefit of either Southwest I and its subsidiaries or
Southwest II and its subsidiaries shall be taken into account either in
calculating Southwest I Net Profits and Losses or Kerrville Net Profits and
Losses, as the case may be. Other expenses of the Company, such as franchise
taxes, salaries, and other items attributable to the general overhead of the
Company
60
shall be treated as expenses attributable to Southwest I and Southwest II in
such proportion as the Board may determine in good faith.
(b) Valuation. It is understood and agreed that any third party
that is resolving a disagreement among the Members pursuant to Section 6.5(a),
Section 6.6 or Section 8.1 shall consider the determinations of the Board with
regard to such allocation of expenses in reaching such resolution.
ARTICLE IX
CERTAIN DEFINITIONS
For the purposes of this Agreement, the following terms shall have
the meanings specified in this Article. Additional terms are defined in the text
of this Agreement.
"Act" means the Delaware Limited Liability Company Act, 6 Del. C.
Section 18-101 et seq., as amended from time to time.
"Additional Members" has the meaning set forth in the recitals to
this Agreement.
"Additional Members Aggregate Applicable Percentage" means, at any
time, the total of the Applicable Percentages of all the Additional Members.
"Additional Members Subscription Agreement" has the meaning set
forth in the recitals to this Agreement.
"Affiliate", as applied to any Person, means any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. For purposes of this definition, "control" (including, with
correlative meaning, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" has the meaning set forth in the recitals to this
Agreement.
"Applicable Percentage" means, as of any date, the result (expressed
as a percent-age) obtained by dividing (i) in the case of any Class A Member (x)
the aggregate number of Class A Common Interests held by such Member on such
date (treating the Class A Common Interests issuable upon conversion of any
convertible securities of the Company or upon exercise of any options or rights
then held by such Member as being issued and outstanding and held by such Member
as of such date) by (y) the total number of Class A Common Interests issued and
outstanding as of such date (treating the Class A Common Interests then issuable
upon conversion of all outstanding securities or upon exercise of all
outstanding options or rights as
61
aforesaid as being issued and outstanding as of such date) and (ii)
in the case of any Class C Member, the aggregate number of Class C Interests
held by such Member on such date (treating the Class C Interests issuable upon
conversion of any convertible securities of the Company or upon exercise of any
options or rights then held by such Member as being issued and outstanding and
held by such Member as of such date) by (y) the total number of Class C
Interests issued and outstanding as of such date (treating the Class C Interests
then issuable upon conversion of all outstanding securities or upon exercise of
all outstanding options or rights as aforesaid as being issued and outstanding
as of such date); provided, however, that, as among the Additional Members, in
their capacity as Class A Members, with respect to Eligible Offerings of
Interests or other equity securities of the Company issued at prices equal to or
greater than the prices paid for the Interests issued and sold to the Additional
Members pursuant to the Additional Members Subscription Agreement, the
Applicable Percentage of each Additional Member shall be adjusted by allocating
60% of the Additional Members Aggregate Applicable Percentage to the WCAS
Investors and 25% thereof to the Vestar Investors until such time as the CVC
Investors shall have 15% of the total equity ownership in the Company as
represented by the Class A Interests held by the WCAS Investors, the Vestar
Investors and the CVC Investors as a group.
"Approved Transaction" means a sale of all or substantially all of
(i) the equity interests of the Company, (ii) the Class A Interests, or such
other equity interests (other than Class B Interests) of the Company that are
entitled to participate in the distribution of assets or proceeds, to the extent
such assets or proceeds arise from or are attributable to sources other than
Southwest II, (iii) the Class C Interests, or such other equity interests of the
Company that are entitled to participate in the distribution of assets or
proceeds, to the extent such assets or proceeds arise from or are attributable
to Southwest II, (iv) all or substantially all of the assets of the Company, or
(v) all or substantially all of the Company's equity interests in either
Southwest I or Southwest II.
"Xxxxxxxx" has the meaning set forth in the recitals of this
Agreement.
"Board" has the meaning set forth in Section 2.2.
"Book Value" has the meaning set forth in Section 3.5.
"Capital Account" has the meaning set forth in Section 3.7(a).
"Capital Commitment" means with respect to any Member, the amount
set forth opposite such Member's name on Schedule III and Schedule IV hereto in
the columns labeled "Capital Commitment", as such amount may be adjusted in
accordance with Section 3.11 hereof.
"Capital Contribution" means a contribution by a Member to the
capital of the Company pursuant to this Agreement. A Capital Contribution may be
in cash or in such other
62
form, including tangible and intangible assets, at such valuation as shall be
established by the Board.
"Cash Investor" has the meaning set forth in Section 3.7(a).
"Certificate of Formation" has the meaning set forth in Section
1.1(a).
"Class" means, with respect to any Interests or other equity
interests in the Company, the Class A Common Interests, the Class B Common
Interests, the Class A Preferred Interests, the Class B Preferred Interests, the
Class C Interests, the Common Interests, the Preferred Interests and each other
class of equity interests in the Company that may be issued from time to time in
accordance with this Agreement, and with respect to any Members, the Class A
Common Members, the Class B Common Members, the Common Members, the Class A
Preferred Members, the Class B Preferred Members and the Class C Members.
"Class A Common Capital Amount" has the meaning set forth in Section
4.3(b).
"Class A Common Interest" means an interest in the Company that
represents a "Class A Common" limited liability company interest having the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions specified for Class A Common Interests in Article
IV.
"Class A Common Member" means a Member that owns a Class A Common
Interest.
"Class A Interests" means the Class A Common Interests and the Class
A Preferred Interests.
"Class A Preferred Appreciation Amount" has the meaning set forth in
Section 4.2(b).
"Class A Preferred Capital Amount" has the meaning set forth in
Section 4.2(b).
"Class A Preferred Interest" means an interest in the Company that
represents a "Class A Preferred" limited liability company interest having the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions specified for Class A Preferred Interests in
Article IV.
"Class A Preferred Liquidation Amount" has the meaning set forth in
Section 4.2(b).
63
PARENT LLC
"Class A Preferred Member" means a Member that owns a Class A
Preferred Interest.
"Class B Common Interest" means an interest in the Company that
represents a "Class B Common" limited liability company interest having the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions specified for Class B Common Interests in Article
IV.
"Class B Common Member" means a Member that owns a Class B Common
Interest,
"Class B Interests" means the Class B Common Interests and the Class
B Preferred Interests.
"Class B Preferred Appreciation Amount" has the meaning set forth in
Section 4.4(b).
"Class B Preferred Interest" means an interest in the Company that
represents a "Class B Preferred" limited liability company interest having the
designations, powers, preferences and rights, and the qualifications,
limitations and restrictions specified for Class B Preferred Interests in
Article IV.
"Class B Preferred Member" means a Member that owns a Class B
Preferred Interest.
"Class C Capital Amount" has the meaning set forth in Section
4.6(b).
"Class C Interest" means an interest in the Company that represents
a "Class C " limited liability company interest having the designations, powers,
preferences and rights, and the qualifications, limitations and restrictions
specified for Class C Interests in Article IV.
"Class C Member" means a Member that owns a Class C Interest.
"Code" means the Internal Revenue Code of 1986, as amended. Any
reference to a Section of the Code shall include a reference to any amendatory
or successor provision thereto.
"Common Interests" means the Class A Common Interests and the Class
B Common Interests.
"Common Members" means, collectively, the Class A Common Members and
the Class B Common Members.
64
PARENT LLC
"Company" has the meaning set forth in the recitals to this
Agreement.
"CVC" means Citicorp Venture Capital Limited, a Delaware
corporation.
"CVC Investors" means (i) CVC, (ii) each of the other Additional
Members named under the heading "CVC Investors" in Part 1 and Part 2 of Schedule
II hereto and (iii) each transferee of any of the foregoing that is a Permitted
Transferee as provided in Section 6.3.
"Delaware Act" has the meaning set forth in the recitals to this
Agreement.
"Director" means at any time and from time to time, each person that
shall be a member of the Board at such time in accordance with this Agreement.
"Eligible Offering" means an offer by the Company to sell for cash
(i) to one or more investors Interests or other equity securities of the
Company, or any security or instrument convertible into or exchangeable for,
carrying rights or options to purchase or purchased in conjunction with,
Interests or other equity securities of the Company, or (ii) to one or more Cash
Investors any other security of the Company, other than:
(i) an offering of securities by the Company to or for the benefit
of its employees, consultants, officers and/or directors in connection
with or pursuant to any employee benefit or compensation plan or
arrangement approved by the Board, whether currently in existence or
created hereafter;
(ii) the offering and sale of Interests pursuant to the Initial
Members Subscription Agreement as in effect on the date hereof, the
Additional Members Subscription Agreement as in effect on the date hereof,
or in connection with any bank or other debt financing with a financial
institution;
(iii) the issuance of Interests or other equity securities of the
Company pursuant to the exercise or conversion of any options, warrants or
convertible securities issued in compliance with the preemptive rights set
forth in Section 6.4;
(iv) in connection with any merger of, or acquisition by, the
Company, any corporate partnering, strategic alliance, technology
transfer, equipment financing or similar transaction by the Company or
other transaction by the Company approved by the Board for a consideration
other than cash and that otherwise complied with the provisions of this
Agreement; or
(v) in an underwritten public offering registered under the
Securities Act. (i)
65
PARENT LLC
"Fiscal Year" has the meaning set forth in Section 1.5.
"Former Member" has the meaning set forth in Section 5.2.
"Initial Investment" has the meaning set forth in the recitals to
this Agreement.
"Initial Members" has the meaning set forth in the recitals to this
Agreement.
"Initial Members Subscription Agreement" has the meaning set forth
in the recitals to this Agreement.
"Interests" has the meaning set forth in Section 4.1(a).
"Intermediary Entity" means any of DCS Holding Co., ECS Holding Co.,
SCD Sharing Partnership, L.P. and SCE Sharing Partnership, L.P.
"IRS" means the Internal Revenue Service.
"Kerrville" has the meaning set forth in the recitals to this
Agreement, Agreement.
"Kerrville Acquisition Agreement" has the meaning set forth in the
recitals to this "Kerrville Capital Accounts" has the meaning set forth in
Section 3.7(b).
"Kerrville Members" has the meaning set forth in the recitals to
this Agreement.
"Kerrville Members Subscription Agreement" has the meaning set forth
in the recitals to this Agreement.
"Kerrville Net Profits" and "Kerrville Net Losses" have the meanings
set forth in Section 3.7(d).
"Letter Agreement" means the letter, dated as of September 3, 1999,
addressed by WCAS VIII to Citicorp Venture Capital Limited and Vestar Capital
Partners III, L.P.
"Liquidation Event" means the occurrence of (i) the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the Company,
Southwest I or Southwest II, (ii) the consolidation or merger of the Company
with or into any other entity (other than a merger which will not result in more
than 50% of the voting Interests and economic interests of the Company,
Southwest I or Southwest II outstanding immediately after the effective date of
such merger being owned of record or beneficially by persons other than the
holders of such voting
66
PARENT LLC
Interests and economic interests immediately prior to such merger in the same
proportions in which such Interests were held immediately prior to such merger),
(iii) the sale of all or substantially all of the properties and assets of the
Company, Southwest I or Southwest II as an entirety to any other person other
than WCAS VIII, WCAS IX and/or any of their respective Affiliates, or (iv) the
acquisition of "beneficial ownership" by any "person" or "group" of voting
Interests of the Company representing more than 50% of the voting power of all
outstanding voting Interests, all outstanding Class A Common Interests or all
outstanding Class C Interests, whether by way of merger or consolidation or
otherwise, other than any such acquisition by WCAS VIII, WCAS IX and/or any of
their respective Affiliates, As used in the preceding sentence, (x) the terms
"person" and "group" shall have the meaning set forth in Section 13(d)(3) of the
Exchange Act, whether or not applicable, (y) the term "beneficial owner" shall
have the meaning set forth in Rules 13d-3 and 13d-5 under the Exchange Act,
whether or not applicable, except that a person shall be deemed to have
"beneficial ownership" of all voting Interests of any Class that any such person
has the right to acquire, whether such right is exercisable immediately or only
after the passage of time or upon the occurrence of certain events, and (z) any
"person" or "group" will be deemed to beneficially own any voting Interests of
the Company or any Class thereof so long as such person or group beneficially
owns, directly or indirectly, in the aggregate a majority of the voting stock of
a registered holder of the voting Interests of the Company or of such Class, as
the case may be.
"Loan Agreement" means any of the agreements (including, without
limitation any commitment letter contemplating any of such agreements, to the
extent not superceded thereby) pursuant to which the Company or its direct and
indirect subsidiaries arrange for, secure or obtain (i) loans and a credit
facility from Bank of America, CoBank and the other members of the bank groups
and (ii) subordinated loans from WCAS VIII or its affiliates and other investors
designated by WCAS VIII, or such other source of subordinated loans to the
Company's direct and indirect subsidiaries (in the case of clauses (i) and (ii)
above, as such agreements may be amended, restated, supplemented, replaced or
otherwise modified from time to time, including, without limitation, any
agreement extending the maturity or term of, or refinancing or refunding, all or
any portion of the indebtedness or obligations under, or increasing the amount
to be borrowed or guaranteed under, any such agreements or successor agreements,
whether or not by or among the same parties).
"Majority Vote" means (i), with respect to any vote or written
consent of the Members, the affirmative vote or written consent of Members
holding Interests, representing a majority of the outstanding Interests entitled
to vote on or consent to any matter, and (ii) with respect to any vote or
written consent of one or more Classes of Members, the affirmative vote or
written consent of Members holding any Class or Classes of Interests
representing a majority of the outstanding Interests of such Class or Classes.
"Xxxxxx" has the meaning set forth in the recitals of this
Agreement.
67
"Members" has the meaning set forth in the recitals to this
Agreement.
"Members' Interest Register" has the meaning set forth in Section
2.11(a).
"Merger Agreement" has the meaning set forth in Section 8.1.
"Net Profits" and "Net Losses" mean, for any period from the date
hereof through the date of dissolution and liquidation of the Company, the
income and loss of the Company as determined in accordance with the accounting
methods followed by the Company for federal income tax purposes, but (i)
including as an item of profit income exempt from tax and described in Code
Section 705(a)(1)(B), (ii) treating as deductions items of expenditure described
in, or under Treasury Regulations deemed described in, Code Section 705(a)(2)(B)
and (iii) treating as an item of gain (or loss) both any increase (decrease) in
the Book Value of the Company's property under Section 3.5(c) and the excess
(deficit), if any, of the fair market value (taking Section 7701(g) of the Code
into account) of distributed property over (under) its Book Value. Depreciation,
depletion, amortization, income and gain (or loss) with respect to Company
assets shall be computed with reference to their Book Value rather than to their
adjusted bases in an amount consistent with Treasury Regulations Section 1.704-1
(b)(2)(iv)(g). Profit or loss resulting from the disposition of assets shall be
determined by reference to Book Value rather than adjusted tax basis.
"New Members" has the meaning set forth in Section 7.1(a).
"Newco" has the meaning set forth in Section 6.6.
"1999 Agreement" has the meaning set forth in the recitals of this
Agreement,
"Notice of Intention to Sell" has the meanings set forth in Sections
6.1(b) and Section 6.2(a), as applicable.
"Original Agreement" has the meaning set forth in the recitals of
this Agreement.
"Original Telephone Business" has the meaning set forth in Section
1.6.
"Page" has the meaning set forth in the recitals of this Agreement.
"Permitted Transfer" means any transfer to a Permitted Transferee as
contemplated by Section 6.3.
"Permitted Transferee" has the meaning set forth in Section 6.3.
68
"Person" means a natural person, partnership (whether general or
limited), limited liability company, trust, estate, association, corporation,
custodian, nominee or any other individual or entity in its own or any
representative capacity.
"Plan Asset Regulations" means the Department of Labor Regulation
Section 2510.3-101(d).
"Preferred Appreciation Amounts" means the Class A Preferred
Appreciation Amounts and the Class B Preferred Appreciation Amounts.
"Preferred Interest Redemption Date" has the meaning set forth in
Section 4.2(c)(ii).
"Preferred Interests" means the Class A Preferred Interests and the
Class B Preferred Interests.
"Public Offering" has the meaning set forth in Section 8.2.
"Public Sale" means any Public Offering or other sale of equity
securities to the public through a broker, dealer or market maker pursuant to
the provisions of Rule 144 adopted under the Securities Act (or any similar rule
in effect from time to time).
"Purchaser" has the meaning set forth in Section 6.2(d).
"Qualified Public Offering" has the meaning set forth in Section
2.10(c).
"Redemption Event" means the consummation of an underwritten public
offering of Interests (or other equity securities of the Company or any
successor corporation thereto) registered under the Securities Act of 1933, as
amended.
"Regulated Holder" means any holder of securities of the Company
that is (or that is a subsidiary of a bank holding company that is) subject to
various provisions of Regulation Y of the Board of Governors of the Federal
Reserve Systems, 12 C.F.R., Part 225 (or any successor to Regulation Y).
"Regulatory Allocations" has the meaning set forth in Section 3.8.
"Regulatory Problem" means (i) any set of facts or circumstances
wherein it has been asserted by the United States Small Business Administration
(or any CVC Investor reasonably believes that there is a significant risk of
such assertion) that such Person (or any bank holding company that controls such
Person) is not entitled to hold, or exercise any material right with respect to,
all or any portion of the securities of the Company which such Person holds or
69
(ii) when such Person and its Affiliates would own, control or have power
(including voting rights) over a greater quantity of securities of the Company
than is permitted under any law or regulation or any requirement of the United
States Small Business Administration applicable to such Person or to which such
Person is subject.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Investor" has the meaning set forth in Section 6.2(a).
"Southwest I" has the meaning set forth in the recitals to this
Agreement.
"Southwest I Capital Accounts" has the meaning set forth in Section
3.7(a).
"Southwest I Members" has the meaning set forth in the recitals to
this Agreement.
"Southwest I Net Losses" has the meaning set forth in Section
3.7(c).
"Southwest I Net Profits" has the meaning set forth in Section
3.7(c).
"Southwest II" has the meaning set forth in the recitals to this
Agreement.
"Surviving Business Entity" has the meaning set forth in Section
8.1(a)(ii).
"Tax Distribution" has the meaning set forth in Section 3.12(b).
"Tax Matters Partner" has the meaning set forth in Section 3.14(a).
"Transfer" means to sell, transfer, assign, pledge or otherwise
encumber or dispose of (whether with or without consideration and whether
voluntarily or involuntarily or by operation of law), directly or indirectly;
provided, that a lien arising with respect to Interests in connection with a
general lien on all or substantially all of the assets of the holder of
Interests shall not constitute a Transfer.
"Treasury Regulations" means the regulations promulgated by the U.S.
Department of Treasury under the Code, as such regulations may be amended from
time to time.
"Vestar" means Vestar Capital Partners III, L.P.; a Delaware limited
partnership.
"Vestar Investors" means (i) Vestar, (ii) each of the other
Additional Members under the heading "Vestar Investors" in Part 1 and Part 2 of
Schedule II hereto and (iii) each transferee of any of the foregoing that is a
Permitted Transferee as provided in Section 6.3.
70
"WCAS CP III" means WCAS Capital Partners III, L.P., a Delaware
limited partnership.
"WCAS Investors" means (i) SCD Sharing Partnership, L.P., SCE
Sharing Partnership, L.P., each a Delaware limited partnership and subsidiary of
WCAS VIII and WCAS IX, respectively, (ii) WCAS VIII and WCAS IX, (ii) each of
the other Additional Members named under the heading "WCAS Investors" in Part 1
and Part 2 of Schedule II hereto and (iii) each transferee of any of the
foregoing that is a Permitted Transferee as provided in Section 6.3.
"WCAS VIII" means Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P., a
Delaware limited partnership.
"WCAS IX" means Welsh, Carson, Xxxxxxxx & Xxxxx IX, L.P., a Delaware
limited partnership.
"Xxxx" has the meaning set forth in the recitals of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Entire Agreement. This Agreement, including the Exhibits and
other documents and schedules attached hereto or incorporated herein by
reference and the Subscription Agreements, constitute the entire agreement of
the Members with respect to the matters covered herein. This Agreement
supersedes (i) Part A of the Letter Agreement, (ii) the 1999 Agreement and (iii)
all prior agreements and oral understandings among the Members with respect to
such matters except for the Letter Agreement (exclusive of Part A referred to
above), it being understood that if there is a conflict between the provisions
of this Agreement and the surviving provisions of the Letter Agreement, the
provisions of this Agreement shall prevail.
10.2 Amendment. This Agreement may not be modified or amended, and
no provision hereof may be waived, except by Majority Vote of the Class A Common
Members and the Class C Members, voting together as a single Class; provided,
however, that:
(a) this Agreement may not be modified or amended, and no
provision hereof may be waived, in any manner which:
(i) treats any holder of any Interest differently from any other
holder of the same series, class or type of Interest without the consent
of the holder differently treated;
71
(ii) adversely affects the rights of the holders of the Class B
Preferred Interests to share ratably with the holders of the Class A
Preferred Interests, as provided in Section 4.6(a)(iii), except by
Majority Vote of the Class B Preferred Members;
(iii) adversely affects the rights of the holders of the Class B
Common Interests to share ratably with the holders of the Class A Common
Interests in the net assets of the Company as provided in Section
4.6(a)(iv);
(iv) adversely affects the rights of the holders of the Class A
Interests and the Class B Interests, to the exclusion of the Class C
Members, to share the entire amount of assets or proceeds, to the extent
arising from or attributable to all sources other than Southwest II,
except by Majority Vote of the Class A Members;
(v) adversely affects the rights of the holders of the Class C
Interests, to the exclusion of the Class A Members and the Class B
Members, to share the entire amount of assets or proceeds, to the extent
arising from or attributable to Southwest II, except by Majority Vote of
the Class C Members; or
(vi) modifies, amends or waives any provision of Section 2.12, or
clause (i) of this Section 10.2 or increases the Capital Commitment of any
Member, without the consent of each Member affected thereby;
(b) without the consent of the holders of two-thirds of the total
outstanding Class A Common Interests and Class C Interests, voting together as a
single Class, no modification, amendment or waiver may be made of all or any
portion of the following Articles, Sections and paragraphs of this Agreement or
any definition used, directly or indirectly therein: paragraphs (d), (f), (i)
and (m) of Section 2.3, Section 2.8(a), Section 3.2, Section 3.7, Section 3.8,
Section 3.12, Section 7.1(a), the economic terms and priorities established by
Article IV, Article VI, Section 8.3, Section 8.4 and this Section 10.2;
(c) without the consent of the Vestar Investors, no modification,
amendment or waiver in any manner adverse to the rights of the Vestar Investors
may be made of all or any portion of the following Articles, Sections and
paragraphs of this Agreement or any definition used, directly or indirectly
therein: paragraphs (d) and (e) of Section 2.7, Section 2.8(a), Section 2.10(c),
clauses (v) and (vi) and the second proviso to the penultimate sentence of
Section 6.3, Section 6.4, this clause (c) of this Section 10.2 and, for so long
as Vestar Investors shall own at least 50% of the Common Interests originally
subscribed for by the Vestar Investors, Section 8.1 through Section 8.5; and
(d) without the consent of CVC, no modification, amendment or
waiver in any manner adverse to the rights of the CVC Investors may be made of
all or any portion of the following Articles, Sections and paragraphs of this
Agreement or any definition used, directly or (b)
72
indirectly therein: clauses (iv), (v) and (vi) and the second proviso to the
penultimate sentence of Section 6.3, Section 6.4, Section 7.1(d), the proviso to
the last sentence of the definition of "Applicable Percentage" and this clause
(d) of this Section 10.2.
Notwithstanding anything to the contrary in this Agreement, but subject to the
restriction on increasing Capital Commitments without the consent of each Member
affected thereby contained in this Section 10.2, Schedule III attached hereto
may be amended from time to time by the Board to the extent required to reflect
accurately the then current status of the information contained thereon.
10.3 Duration of Certain Agreements. The agreements of the Members
set forth in Section 6.2, Article VII, Section 8.3 and Section 8.4 of this
Agreement shall terminate, (i) with respect to the Class A Members and the Class
C Members, upon the earlier to occur of (x) a Liquidation Event affecting the
Class A Interests or the Class C Interests, as the case may be, and (y) a
Qualified Public Offering and (ii) with respect to any Member, the date on which
such Member, together with its Permitted Transferees that are Affiliates of (or
co-invested with) such Member, no longer own at least 25% of the Common
Interests (or any security received in exchange for or in connection with a
distribution with respect thereto) originally subscribed for by such Person. The
agreements of Members the set forth in Section 6.1 and Section 6.5 shall
terminate upon the earlier of (x) a Liquidation Event affecting the Class A
Interests or the Class C Interests, as the case may be, and (y) the date on
which all of following circumstances exist: (1) the WCAS Investors no longer own
at least 25% of either the Class A Common Interests or the Class C Interests, as
the case may be, (2) a Qualified Public Offering shall have occurred and (3) to
the extent required such that at least 30% of the Common Interests or 30% of the
Class C Interests (or such common equity equivalents of either such Class as
shall then be publicly traded) shall be held by the public, one or more
additional Public Sales shall have occurred.
10.4 Interpretation. Whenever the context may require, any noun or
pronoun used herein shall include the corresponding masculine, feminine or
neuter forms. The singular form of nouns, pronouns and verbs shall include the
plural and vice versa.
10.5 Severability. Each provision of this Agreement shall be
considered severable and if for any reason any provision or provisions hereof
are determined to be invalid and contrary to existing or future law, such
invalidity shall not impair the operation or affect those portions of this
Agreement which are valid, and this Agreement shall remain in full force and
effect and shall be construed and enforced in all respects as if such invalid or
unenforceable provision or provisions had been omitted.
10.6 Burden and Benefit Upon Successors. Except as expressly
otherwise provided herein, this Agreement is binding upon, and inures to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and permitted
assigns.
73
10.7 Further Assurances. Each Member hereby agrees that such Member
shall hereafter execute and deliver such further instruments, provide all
information and take or forbear such further acts and things as may be
reasonably required or useful to carry out the intent and purpose of this
Agreement and as are not inconsistent with the terms hereof.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together will
constitute one instrument, binding upon all parties hereto, notwithstanding that
all of such parties may not have executed the same counterpart.
10.9 Waiver. Any forbearance or failure or delay by any officer,
Director or Member to exercise any rights, powers or remedies hereunder shall
not be deemed to be a waiver of such rights, powers or remedies and any single
or partial exercise of any right, power or remedy hereunder shall not preclude
the further exercise hereof; and every right, power or remedy of any officer,
Director or Member shall continue in full force and effect until such right,
power or remedy is specifically waived by an instrument in writing executed by
such officer, Director or Member.
[Remainder of this page intentionally left blank]
74
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the day and year first written above.
INITIAL MEMBERS
/s/ Xxxx X. Xxxxxxxx
________________________________
Xxxx X. Xxxxxxxx
/s/ Xxxxx Xxxxxx
________________________________
Xxxxx Xxxxxx
/s/ Xxxxxxx X. Page
________________________________
Xxxxxxx X. Page
REVOCABLE TRUST OF XXXX XXXX
______________________________
By: /s/ Xxxx. X. Xxxx
_____________________________
Name: Xxxx X. Xxxx
Title: Trustee
ADDITIONAL MEMBERS
SCD SHARING PARTNERSHIP, LP.
By WCAS VIII Associates LLC, General Partner
By:
Managing Member
SCE SHARING PARTNERSHIP, L.P.
By WCAS VIII Associates LLC, General Partner
By:
Managing Member
Xxxxxxx X. Xxxxx*
Xxxxxxx X. Xxxxxx*
Xxxxx X. Xxxxxxxx*
Xxxxxx X. Xxxx*
Pondfield Holdings, L.P.*
Xxxxxx X. XxXxxxxxx*
Xxxxxx X. Xxxxxxxxx*
Xxxxxxx X. xxXxxxxx*
Xxxx X. Xxxxxxx*
Xxxxxxxx X. Xxxxxx*
D. Xxxxx Xxxxxxx*
Xxxx Xxxxx*
Xxxx X. Xxxxxxx*
Xxxx Xxxxxxx, Xx.*
Xxxxxx Xxxxx*
Xxxx Xxx*
Xxxxxxxx X. Rather*
By:
Xxxxxxxx X. Rather*, Individually and as
Attorney-in-Fact
/s/ Xxxxxx Xxxxxx
______________________________________
Xxxxxx Xxxxxx
WCA MANAGEMENT CORPORATION*
By: ___________________________________
* Also Kerrville Members
PARENT LLC
GUAYACAN PRIVATE EQUITY FUND, L.P.
By
Advent-Mono Equity Partners, Inc.
General Partner
By:
Name:
Title:
77
PARENT LLC
ESTATE OF XXXXXXX X. XXXXXX
By:
Xxxxxxx xx Xxxxxxxxx, Executor
PARENT LLC
VESTAR CAPITAL PARTNERS III, L.P.*
By: Vestar Associates III, LP.
Its: General Partner
By: Vestar Associates Corporation III
Its: General Partner
By:
Name:
Title:
VESTAR CAPITAL PARTNERS IV, L.P.*
By: Vestar Associates IV, LP.
Its: General Partner
By: Vestar Associates Corporation IV
Its: General Partner
By:
Name:
Title:
VESTAR\VALOR, LLC*
By: Vestar Associates IV, LP.,
Its: Managing Member
By: Vestar Associates Corporation IV
Its: General Partner
By:
Name:
Title:
*Also Kerrville Members
PARENT LLC
CITICORP VENTURE CAPITAL LTD.*
By: ________________________________
Name:
Title:
CCT PARTNERS VI, L.P.
By , General Partner
By _________________________________
/s/ Xxxxxxx X. Xxxxxx, Xx.
____________________________________
Xxxxxxx X. Xxxxxx, Xx.*
NATASHA FOUNDATION*
By /s/ Xxxxx X. Xxxx
____________________________________
Xxxxx X. Xxxx*
/s/ Xxxxx X. Xxxxxx
____________________________________
Xxxxx X. Xxxxxx*
/s/ Xxxxxxx X. Xxxxxxxx
____________________________________
Xxxxxxx X. Xxxxxxxx*
/s/ Xxxx X. Xxxxx
____________________________________
Xxxx X. Xxxxx*
*Also Kerrville Members
PARENT LLC
KERRVILLE MEMBERS
WELSH, CARSON, XXXXXXXX & XXXXX VIII, L.P.
By WCAS VIII Associates LLC, General
Partner
By:_______________________________________
Managing Member
WELSH, CARSON, XXXXXXXX & XXXXX IX, L.P.
By WCAS IX Associates LLC, General Partner
By:_______________________________________
Managing Member
81
PARENT LLC
SCHEDULE I
Names and Addresses of Initial Members and Initial Membership Interests
Membership Description of
Interest in the Initial Capital
Members Company (%) Contributions($)
------- ----------- ----------------
Xxxx X. Xxxxxxxx
Valor Telecom 51.20% 5,120.00
0000 00'" Xxxxxx XX
Xxxxxxxxxx, XX 00000
Xxxxx Xxxxxx 22.18% 2,218.00
Valor Telecom - Tower 1
000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Xxxxxxx X. Page 22.18% 2,218.00
Valor Telecom - Tower 1
000 Xxxx Xxxx Xxxxxxxxx Xxxxxxx
Xxxxxx, XX 00000
Revocable Trust of Xxxx Xxxx 4.44% 444.00
c/o Xxxx X. Xxxx 000 X Xxxxxx
Xxx Xxxxxx, XX 00000-0000
TOTALS 100.00% $10,000.00
------ ----------
PARENT LLC
SCHEDULE II
Part 1
Names and Addresses of Additional Members
WCAS Investors
SCD Sharing Partnership, L.P.
SCE Sharing Partnership, L.P.
Xxxxxxx X. Xxxxx Xxxxxxx X. Xxxxxx Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxx Xxxxxxxxx Holdings, L.P.
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. xxXxxxxx
Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxx
D. Xxxxx Xxxxxxx
Xxxx Xxxxx
Xxxx X. Xxxxxxx
Xxxx Xxxxxxx, Xx.
Xxxxxx Xxxxx
Xxxx Xxx
Xxxxxxxx X. Rather
Xxxxxx Xxxxxx
WCA Management Corporation
c/o Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Guyacan Private Equity Fund, L.P.
Advent Morro Equity Partners
Xxxxx Xxxxxxx Xxxxxxxx Xxxxx 000 Xxxxx Xxxxxx Xxx Xxxx, XX
00000 Attention: Xxxxxx Xxxxx
The Estate of Xxxxxxx X. Xxxxxx
c/o Xxxxxxx xx Xxxxxxxxx
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
PARENT LLC
SCHEDULE II
Part 1 (contd.)
Names and Addresses of Additional Members
Vestar Investors
Vestar Capital
Partners III, L.P. 000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Vestar Capital Partners IV, L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Vestar\Valor, LLC
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
PARENT LLC
SCHEDULE II
Part 1 (contd.)
CVC Investors
Citicorp Venture Capital Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
CCT PARTNERS VI, LP.
Xxxxxxx X. Xxxxxx, Xx.
NATASHA FOUNDATION
Xxxxx X. Xxxx Xxxxxxx X.
Xxxxxxxx Xxxxx X. Xxxxxx
Xxxx X. Xxxxx
c/o Citicorp Venture Capital Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
PARENT LLC
SCHEDULE II
Part 2
Names and Addresses of Kerrville Members
Initial Members
Xxxx X. Xxxxxxxx
Valor Telecom
0000 00'x Xxxxxx XX
Xxxxxxxxxx, XX 00000
Xxxxx Xxxxxx
Valor Telecom - Tower 1
000 Xxxx Xxxx Xxxxxxxxx
Xxxxxxx Xxxxxx, XX 00000
Xxxxxxx X. Page
Valor Telecom - Tower 1
000 Xxxx Xxxx Xxxxxxxxx
Xxxxxxx Xxxxxx, XX 00000
Revocable Trust of Xxxx Xxxx
c/o Xxxx X. Xxxx 000 X 0xx Xxxxxx
Xxx Xxxxxx, XX 00000-0000
PARENT LLC
WCAS Investors
Welsh, Carson, Xxxxxxxx & Xxxxx VIII, L.P.
Welsh, Carson, Xxxxxxxx & Xxxxx IX, L.P.
SCD Sharing Partnership, L.P.
SCE Sharing Partnership, L.P.
Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxxx
Xxxxxx X. Xxxx
Xxxxxxxxx Holdings, L.P.
Xxxxxx X. XxXxxxxxx
Xxxxxx X. Xxxxxxxxx
Xxxxxxx X. xxXxxxxx
Xxxx X. Xxxxxxx
Xxxxxxxx X. Xxxxxx
D. Xxxxx Xxxxxxx
Xxxx Xxxxx
Xxxx X. Xxxxxxx
Xxxx Xxxxxxx, Xx.
Xxxxxx Xxxxx
Xxxx Xxx
Xxxxxxxx X. Rather
Xxxxxx Xxxxxx
WCA Management Corporation
c/o Welsh, Carson, Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000-0000
Guyacan Private Equity Fund, L.P.
Advent Morro Equity Partners
Xxxxx Xxxxxxx Xxxxxxxx
Xxxxx 000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxx
The Estate of Xxxxxxx X. Xxxxxx
c/o Xxxxxxx xx Xxxxxxxxx
000 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000
PARENT LLC
SCHEDULE II
Part 2 (contd.)
Names and Addresses of Kerrville Members
Vestar Investors
Vestar Capital Partners III, L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Vestar Capital Partners IV, L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Vestar\Valor, LLC
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
PARENT LLC
SCHEDULE II
Part 2 (contd.)
Names and Addresses of Kerrville Members
CVC Investors
Citicorp Venture Capital Ltd.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
CCT PARTNERS VI, L.P.
Xxxxxxx X. Xxxxxx, Xx.
NATASHA FOUNDATION
Xxxxx X. Xxxx Xxxxxxx X. Xxxxxxxx Xxxxx X.
Xxxxxx Xxxx X. Xxxxx
c/o Citicorp Venture Capital Ltd.
000 Xxxx Xxxxxx 00xx Xxxxx
Xxx Xxxx, XX 00000
PARENT LLC
SCHEDULE III
Capital Commitments - Southwest I Members
[Excel document # 548894]
SCHEDULE IV
Capital Commitments - Kerrville Members
[Excel document # 549317]
PARENT LLC
ANNEX A
Board of Directors
Name
The Chairman of the Board
The Chief Executive Officer of the Company
Six Persons designated in writing to the Company by the WCAS Investors
Three Persons designated in writing to the Company by the Vestar Investors
