EXHIBIT 10.5
EXECUTION VERSION
OPERATING AGREEMENT
OF
LIBERTY/FOX REGIONAL SPORTS LLC
April 29, 1996
THE OWNERSHIP INTERESTS IN THIS LIMITED LIABILITY COMPANY HAVE NOT BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR STATE SECURITIES
AUTHORITIES AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT REGISTRATION IS NOT REQUIRED. THE SALE OR OTHER TRANSFER OF THE
OWNERSHIP INTERESTS IS ALSO RESTRICTED BY PROVISIONS OF THIS AGREEMENT AND
RELATED AGREEMENTS.
TABLE OF CONTENTS
Page
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ARTICLE 1: FORMATION AND DEFINITIONS.......................... 1
1.1 Formation................................... 1
1.2 Name 1
1.3 Initial Members and Ownership Interests..... 1
1.4 Office and Agent............................ 1
1.5 Foreign Qualification....................... 1
1.6 Term 2
1.7 Definitions................................. 2
ARTICLE 2: PURPOSES AND POWERS................................ 9
2.1 Principal Purpose........................... 9
2.2 Other Purposes.............................. 9
2.3 Powers...................................... 9
ARTICLE 3: CAPITAL OF THE COMPANY............................. 9
3.1 Initial Contributions....................... 9
3.2 Additional Contributions.................... 9
3.3 Capital Accounts............................ 10
3.4 Transfer.................................... 10
3.5 Adjustments................................. 10
3.6 Market Value Adjustments.................... 11
3.7 No Withdrawal of Capital.................... 11
3.8 No Interest on Capital...................... 11
3.9 No Drawing Accounts......................... 11
3.10 No Salary................................... 11
ARTICLE 4: PROFITS AND LOSSES.................................. 14
4.1 Determination............................... 14
4.2 Allocation of Profits and Losses Generally.. 14
4.3 Nonrecourse Deductions...................... 15
4.4 Minimum Gain Chargeback..................... 16
4.5 Gain Chargeback............................. 16
4.6 Tax Allocations............................. 16
4.7 Qualified Income Offset..................... 16
4.8 Limit on Loss Allocations................... 16
4.9 (S) 754 Adjustments......................... 16
4.10 Contributed Property........................ 17
4.11 Tax Credits................................. 17
4.12 Allocation on Transfer...................... 17
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4.13 Tier Partnerships........................... 18
ARTICLE 5: DISTRIBUTIONS..................................... 18
5.1 Distributions Generally..................... 18
5.2 Payment..................................... 18
5.3 Withholding................................. 18
5.4 Distribution Limitation..................... 18
ARTICLE 6: MANAGEMENT........................................ 19
6.1 Management.................................. 19
6.2 Actions Requiring a Unanimous Vote.......... 19
6.3 Other Matters............................... 21
6.4 Member Representatives...................... 21
6.5 No Dissolution, Resignation or Retirement... 22
6.6 Officers.................................... 22
6.7 Budgets..................................... 22
6.8 Management Conduct.......................... 23
6.9 Unauthorized Actions........................ 23
ARTICLE 7: MEETINGS OF MEMBERS......................... 23
7.1 Meetings.................................... 23
7.2 Place....................................... 24
7.3 Notice...................................... 24
7.4 Waiver of Notice............................ 24
7.5 Record Date................................. 24
7.6 Quorum...................................... 24
7.7 Manner of Acting............................ 24
7.8 Proxies..................................... 24
7.9 Meetings by Telephone....................... 24
7.10 Action Without a Meeting.................... 25
ARTICLE 8: LIABILITY OF A MEMBER......................... 25
8.1 Limited Liability........................... 25
8.2 Capital Contribution........................ 25
8.3 Capital Return.............................. 25
8.4 Reliance.................................... 25
ARTICLE 9: INDEMNIFICATION......................... 26
9.1 General..................................... 26
9.2 Exception................................... 26
9.3 Expense Advancement......................... 26
9.4 Insurance................................... 26
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9.5 Indemnification of Others................... 27
ARTICLE 10: ACCOUNTING AND REPORTING......................... 27
10.1 Fiscal Year................................. 27
10.2 Accounting Method........................... 27
10.3 Tax Elections............................... 27
10.4 Returns..................................... 27
10.5 Financial Reports........................... 27
10.6 Annual Audit................................ 27
10.7 Books and Records........................... 28
10.8 Information................................. 29
10.9 Banking..................................... 29
10.10 Tax Matters Partner......................... 29
10.11 No Partnership.............................. 30
ARTICLE 11: DISSOLUTION...................................... 30
11.1 Dissolution................................. 30
11.2 Events of Withdrawal........................ 31
11.3 Continuation................................ 31
11.4 Formation of New Company.................... 32
ARTICLE 12: LIQUIDATION...................................... 33
12.1 Liquidation................................. 33
12.2 Tax Termination............................. 33
12.3 Priority of Payment......................... 33
12.4 Liquidating Distributions................... 34
12.5 No Restoration Obligation................... 34
12.6 Timing...................................... 34
12.7 Liquidating Reports......................... 35
12.8 Liquidation if New Company is Formed........ 35
12.9 Certificate of Cancellation................. 35
ARTICLE 13: TRANSFER RESTRICTIONS............................ 35
13.1 General Restriction......................... 35
13.2 No Member Rights............................ 35
13.3 Permitted Transfers......................... 36
13.4 General Conditions on Transfers............. 36
13.5 Rights of Transferees....................... 37
13.6 Admission................................... 38
13.7 Security Interest........................... 38
ARTICLE 14: GENERAL PROVISIONS................................ 38
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14.1 Amendment................................... 38
14.2 Representations............................. 39
14.3 Unregistered Interests...................... 39
14.4 Waiver of Dissolution Rights................ 39
14.5 Waiver of Partition Right................... 40
14.6 Waivers Generally........................... 40
14.7 Equitable Relief............................ 40
14.8 Remedies for Breach......................... 40
14.9 Costs....................................... 40
14.10 Indemnification............................. 40
14.11 Counterparts................................ 41
14.12 Notice...................................... 41
14.13 Deemed Notice............................... 41
14.14 Partial Invalidity.......................... 41
14.15 Entire Agreement............................ 41
14.16 Benefit..................................... 41
14.17 Binding Effect.............................. 41
14.18 Further Assurances.......................... 41
14.19 Headings.................................... 42
14.20 Terms....................................... 42
14.21 Governing Law; Forum........................ 42
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OPERATING AGREEMENT
OF
LIBERTY/FOX REGIONAL SPORTS LLC
This OPERATING AGREEMENT is made as of the 29th day of April, 1996 by and among
LIBERTY/FOX U.S. SPORTS LLC, a Delaware limited liability company, LIBERTY
SPORTS MEMBER, INC., a Delaware corporation, and FOX REGIONAL SPORTS MEMBER,
INC., a Delaware corporation, such parties being all the Members of LIBERTY/FOX
REGIONAL SPORTS LLC, a Delaware limited liability company.
In consideration of the mutual promises and covenants contained in this
Agreement and intending to be legally bound, the parties agree as follows:
ARTICLE 1: FORMATION AND DEFINITIONS
1.1 FORMATION. The Company was formed on April 11, 1996 by filing a
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Certificate of Formation with the Delaware Secretary of State pursuant to the
Act and on behalf of the initial Members of the Company.
1.2 NAME. The name of the Company is LIBERTY/FOX REGIONAL SPORTS LLC.
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The business of the Company will be conducted under such name, as well as any
other name or names as the Company may from time to time determine.
1.3 INITIAL MEMBERS AND OWNERSHIP INTERESTS. The name and address of each
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initial Member and its initial Ownership Interest are set forth in Schedule 1.3.
1.4 OFFICE AND AGENT.
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[a] The initial registered office of the Company in Delaware will be at 0000
Xxxxxx Xxxx, Xxxxxxxxxx, Xxxxxxxx 00000-0000, and its initial registered
agent will be The Xxxxxxxx-Xxxx Corporation System, Inc. The Company may
change its registered office or registered agent in Delaware in accordance
with the Act.
[b] The initial principal office of the Company will be at 0000 Xxxxx Xxxxxx
Xxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000. The Company may change its
principal office upon the unanimous Vote of the Members.
1.5 FOREIGN QUALIFICATION. Promptly after the execution of this
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Agreement, the Company will apply for any required certificate of authority to
do business in any other
state or jurisdiction, as required or appropriate. The Company will file such
other certificates and instruments as may be necessary or desirable in
connection with its formation, existence and operation.
1.6 TERM. The Company will be effective from the date of filing of its
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Certificate of Formation with the Delaware Secretary of State and will continue
until its termination pursuant to 12.9.
1.7 DEFINITIONS. The following terms, when used in this Agreement, have the
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meanings set forth below:
Act: the Delaware Limited Liability Company Act, as amended
from time to time.
Additional Contribution: a capital contribution (other than the Initial
Contribution) that a Member makes to the Company, as
described in 3.2.
Adjusted Capital Account
Deficit: as to any Member, the deficit balance (if any) in such
Member's Capital Account as of the end of the Fiscal
Year, after [a] crediting to such Capital Account any
amount that such Member is obligated to restore
pursuant to this Agreement or is deemed obligated to
restore pursuant to the minimum gain chargeback
provisions of the (S) 704(b) Regulations and [b]
charging to such Capital Account any adjustments,
allocations or distributions described in the
qualified income offset provisions of the (S) 704(b)
Regulations that are required to be charged to such
Capital Account pursuant to this Agreement.
Affiliate: with respect to any Person, any Person that directly
or indirectly Controls, is Controlled by, or is under
common Control with such Person. For purposes of this
definition, Twentieth Holdings Corporation and its
subsidiaries will be deemed to be Affiliates of Fox,
Inc., a Colorado corporation, and of The News
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Corporation Limited, a South Australia corporation.
Agreement: this Operating Agreement, also known as a limited
liability company agreement under the Act, as amended
from time to time.
Agreement Regarding
Ownership Interests: the Agreement Regarding Ownership Interests dated as
of the date hereof among Liberty Media Corporation,
News America Holdings Incorporated, LMC Newco U.S.,
Inc., Fox Regional Sports Holdings, Inc., and
Liberty/Fox Sports Financing LLC.
Available Cash: for any Fiscal Year or other period, net income (or
loss) of the Company determined in accordance with
GAAP, adjusted, without duplication, by adding [a]
depreciation, amortization and other non-cash charges
to the extent deducted in determining net income and
deducting [b] [i] the current portion of indebtedness
of the Company, [ii] payments required to be paid by
the Company within one year after the date of
calculation, [iii] prepaid expenses and other cash
expenditures to the extent not deducted in determining
net income or loss and [iv] reasonable reserves for
working capital and contingent liabilities as
determined by the unanimous Vote of the Members.
Bankruptcy: of a Member will be deemed to have occurred upon the
happening of any of the following:
[a] the making by such Member of a general assignment
for the benefit of creditors;
[b] the filing by such Member of a voluntary petition
in bankruptcy;
[c] the adjudication of such Member as bankrupt or
insolvent, or the entry of an order,
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judgment or decree by any court of competent
jurisdiction, granting relief against such Member in
any bankruptcy or insolvency proceeding;
[d] the filing by such Member of a petition or answer
seeking for such Member any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law
or regulation;
[e] the filing by such Member of an answer or other
pleading admitting or failing to contest the material
allegations of a petition filed against such Member in
any proceeding for reorganization, arrangement,
composition, readjustment, liquidation, dissolution or
similar proceeding under any statute, law or
regulation;
[f] the valid appointment, with the consent of such
Member, of a receiver, trustee or liquidator to
administer all or a substantial portion of such
Member's assets or its Ownership Interest; or
[g] the valid appointment, without the consent of
such Member, of a receiver, trustee or liquidator to
administer all or a substantial portion of such
Member's assets or its Ownership Interest, if such
appointment is not vacated or stayed within 90 days
after such appointment or, if stayed, such appointment
is not vacated within 90 days after such stay.
Business Day: any day other than Saturday, Sunday or a day on which
banking institutions in Denver, Colorado, New York,
New York or Los Angeles, California are required or
authorized to be closed.
Capital Account: the capital account of a Member established and
maintained in accordance with 3.3.
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Capital Contribution: any contribution of money or property by a Member to
the Company which is either an Initial Contribution or
an Additional Contribution.
Certificate: the Certificate of Formation of the Company, as
amended from time to time.
Code: the Internal Revenue Code of 1986, as amended from
time to time (including corresponding provisions of
subsequent revenue laws).
Company: the limited liability company formed under the
Certificate and governed by this Agreement.
Company Business: the business of the Company as described in 2.1 and
any other business approved by the Members from time
to time for inclusion in the definition of Company
Business.
Control: the possession, direct or indirect, of the power to
direct or cause the direction of the management and
policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
Dissolution: the happening of any of the events described in 11.1.
Distribution: the amount of any money or the Fair Market Value of
any property distributed by the Company to a Member as
an operating or liquidating distribution in accordance
with this Agreement, reduced by the amount of any
Company liabilities assumed by the distributee or to
which the distributed property is subject.
Fair Market Value: the cash price at which a willing seller would sell
and a willing buyer would buy, both having full
knowledge of the relevant facts and being under no
compulsion to buy or sell, in an arm's-length
transaction without time constraints.
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Fiscal Year: the fiscal and taxable year of the Company, including
both 12-month and short fiscal or taxable years; until
changed as provided in this Agreement, each Fiscal
Year will begin on January 1 of each year and end on
December 31 of such year provided that the first
Fiscal Year will begin on April 29, 1996 and the last
Fiscal Year will end on the date on which Liquidation
of the Company occurs.
Fox Member: Fox Regional Sports Member, Inc. and any successor to
or Transferee of Fox Regional Sports Member, Inc. or
another Fox Member which is admitted as a Member
pursuant to Article 13.
Funding Cure Period: as defined in 3.11[c].
Funding Members: as defined in 3.11[a].
GAAP: generally accepted accounting principles as in effect
from time to time in the United States of America.
Initial Contribution: the initial capital contribution made by a Member to
the Company, as described in Schedule 3.1.
Lien: a mortgage, lien, pledge, security interest or other
encumbrance.
Liquidation: the process of winding up and terminating the Company
after its Dissolution.
LMC Member: Liberty Sports Member, Inc. and any successor to or
Transferee of Liberty Sports Member, Inc. or another
LMC Member which is admitted as a Member pursuant to
Article 13.
Losses: as defined in 4.1.
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Member: an initial member of the Company as listed in Schedule
1.3 and any other Person subsequently admitted to the
Company as an additional or substitute member in
accordance with this Agreement.
New Company: as defined in 11.4.
New Members: as defined in 11.4.
Notice: written notice actually delivered or deemed delivered
under 14.13.
Ownership Interest: with respect to each Person owning an interest in the
Company, all the interests of such Person in the
Company (including an interest in the Profits and
Losses of the Company, a Capital Account interest and
all other rights and obligations of such Person under
this Agreement) expressed as a percentage, as
initially set forth in Schedule 1.3 and as
subsequently adjusted from time to time in accordance
with this Agreement.
Parent LLC: Liberty/Fox U.S. Sports LLC, a Delaware limited
liability company.
Parent Member: Parent LLC and any successor to or Transferee of
Parent LLC or another Parent Member which is admitted
as a Member pursuant to Article 13.
Parent Operating
Agreement: the operating agreement dated as of the date hereof
governing the Parent LLC.
Permitted Transfer: a Transfer described in 13.3.
Person: a human being or a corporation, partnership, limited
liability company, trust, unincorporated organization,
association or other entity.
Pre-Dilution Fair Market
Value: as defined in 3.11[a].
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Prime Rate: the annual rate from time to time publicly announced
by The Bank of New York in New York, New York, as its
prime rate, adjusted as of the day of any change (or
if lower, the maximum rate permitted by law).
Proceeding: any threatened, pending, ongoing, or completed action,
suit or proceeding, whether formal or informal, and
whether civil, administrative, investigative or
criminal.
Profits: as defined in 4.1.
Regulations: the Treasury Regulations (including temporary or
proposed regulations) promulgated under the Code, as
amended from time to time (including corresponding
provisions of succeeding regulations).
Representative: as defined in 6.4.
Service: a programming service offered by the Company.
Tax Matters Partner: as defined in 10.10.
Total Divisional
Interest: the percentage interest determined by [i]
multiplying the aggregate ownership interest
(expressed as a decimal) of a Member and its
Affiliates in Financing LLC by Financing LLC's
ownership interest in Parent LLC, [ii] adding that
product to the aggregate ownership interest of such
Member and its Affiliates in Parent LLC, [iii]
multiplying that sum by Parent LLC's Ownership
Interest (expressed as a decimal) in the Company, and
[iv] adding that product to any Ownership Interests in
the Company held directly by such Member and its
Affiliates.
Transfer: a sale, exchange, assignment, transfer or other
disposition of all or any part of an Ownership
Interest (whether voluntary, involuntary or by
operation of law).
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Transferee: a Person to whom an Ownership Interest is Transferred
in compliance with this Agreement, who will have the
rights specified in 13.5 of this Agreement.
Transferor: a Person who Transfers all or any part of an Ownership
Interest in compliance with this Agreement.
Vote: the action of the Company by the Members in accordance
with the voting requirements set forth in Article 6,
either in meeting assembled or by written consent
without a meeting.
Withdrawal: the occurrence of an event which terminates a Person's
membership in the Company, as provided in 11.2.
ARTICLE 2: PURPOSES AND POWERS
2.1 PRINCIPAL PURPOSE. Subject to the provisions of this Agreement, the
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business and principal purpose of the Company is [a] to own and operate
television programming services and to engage in any business reasonably related
thereto, [b] to acquire, own, hold, sell, or otherwise dispose of interests in
the assets used to operate such services, and [c] to do any and all other acts
or things which may be incidental or necessary to carry on the Company Business
as contemplated by this Agreement.
2.2 OTHER PURPOSES. The Company may engage in activities related or
--------------
incidental to its principal purpose, as well as any other business or investment
activity as may be approved by the affirmative Vote of all Members. However, as
provided in the Act, the Company may not engage in the business of granting
policies of insurance, assuming insurance risks, issuing debt instruments for
circulation as money or receiving deposits of money.
2.3 POWERS. The Company has all the powers granted to a limited
------
liability company under the Act, as well as all powers necessary or convenient
to achieve its purposes and to further its business.
ARTICLE 3: CAPITAL OF THE COMPANY
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3.1 INITIAL CONTRIBUTIONS. Contemporaneously with the execution of this
---------------------
Agreement, each Member will contribute or cause to be contributed to the Company
the assets set forth opposite its name in Schedule 3.1. The Fair Market Value
of such contribution as specified in Schedule 3.1 will be credited to the
applicable Member's Capital Account and such Fair Market Value will be deemed to
be the amount of such Member's Initial Capital Contribution.
3.2 ADDITIONAL CONTRIBUTIONS. Except as required by law, no Additional
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Contributions will be required or permitted to be made by any Member except upon
the affirmative Vote of all Members.
3.3 CAPITAL ACCOUNTS. A Capital Account will be maintained for each
----------------
Member and credited, charged and otherwise adjusted as required by (S) 704(b) of
the Code and the (S) 704(b) Regulations. Each Member's Capital Account will be:
[a] Credited with [i] the amount of money contributed by the Member as an
Initial Contribution or an Additional Contribution, [ii] the Fair Market
Value of assets contributed by the Member as an Initial Contribution or
Additional Contribution (net of liabilities that the Company assumes or
takes subject to), [iii] the Member's allocable share of Profits and [iv]
all other items properly credited to such Capital Account as required by
the (S) 704(b) Regulations;
[b] Charged with [i] the amount of money distributed to the Member by the
Company, [ii] the Fair Market Value of assets distributed to the Member by
the Company (net of liabilities that the Member assumes or takes subject
to), [iii] the Member's allocable share of Losses and [iv] all other items
properly charged to such Capital Account as required by the (S) 704(b)
Regulations; and
[c] Otherwise adjusted as required by the (S) 704(b) Regulations.
Any unrealized appreciation or depreciation with respect to any asset
distributed in kind will be allocated among the Members in accordance with the
provisions of Article 4 as though such asset had been sold for its Fair Market
Value on the date of Distribution and the Members' Capital Accounts will be
adjusted to reflect both the deemed realization of such appreciation or
depreciation and the Distribution of such property.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts are intended to comply with the
(S) 704(b) Regulations and will be interpreted and applied in a manner
consistent with such Regulations and any amendment or successor provision
thereto. The Members will cause appropriate modifications to be made if
unanticipated events might otherwise cause this Agreement not to comply with the
(S) 704(b) Regulations, so long as such
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modifications do not cause a material change in the relative economic benefits
of the Members under this Agreement.
3.4 TRANSFER. If all or any part of an Ownership Interest is Transferred in
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accordance with this Agreement, the Capital Account of the Transferor that is
attributable to the Transferred Ownership Interest will carry over to the
Transferee.
3.5 ADJUSTMENTS.The Members intend to comply with the (S) 704(b)
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Regulations in all respects, and the Capital Accounts of the Members will be
adjusted to the full extent that the (S) 704(b) Regulations may apply (including
applying the concepts of qualified income offsets and minimum gain chargebacks).
3.6 MARKET VALUE ADJUSTMENTS. Appropriate Capital Account adjustments will
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be made upon any Transfer of an Ownership Interest, including those that apply
upon the constructive Liquidation of the Company under (S) 708(b) of the Code,
all in accordance with the (S) 704(b) Regulations. Similarly, if optional basis
adjustments are made under (S) 734 or (S) 743 of the Code, appropriate Capital
Account adjustments will be made as required by the (S) 704(b) Regulations.
3.7 NO WITHDRAWAL OF CAPITAL. Except as specifically provided in this
------------------------
Agreement, no Member will be entitled to withdraw all or any part of its Capital
Contribution from the Company prior to the Company's Dissolution and Liquidation
or, when such withdrawal of capital is permitted, to demand a Distribution of
property other than money or as otherwise provided in this Agreement.
3.8 NO INTEREST ON CAPITAL. No Member will be entitled to receive interest
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on such Person's Capital Account or Capital Contribution.
3.9 NO DRAWING ACCOUNTS. The Company will not maintain a drawing
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account for any Member. All Distributions to Members will be governed by
Article 5 (relating to Distributions not in Liquidation of the Company) and by
Article 12 (relating to Distributions in Liquidation of the Company).
3.10 NO SALARY. Except upon the affirmative Vote of all Members, no
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Member or Affiliate will be entitled to any salary or other form of compensation
paid by the Company for services rendered to the Company. The foregoing
prohibition will not apply to a Member's allocation of any Profits pursuant to
Article 4 or receipt of any Distribution contemplated by this Agreement pursuant
to Article 5 or Article 12.
3.11 FUNDING OF ADDITIONAL CONTRIBUTIONS.
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[a] Unless otherwise agreed by the Members, all Additional Contributions
approved by the Members will be made by the Fox Member and the LMC Member
(the "Funding Members") in proportion to their relative Ownership
Interests. In the event that the Funding Members make Additional
Contributions in proportion to their Ownership Interests, then a
determination of the Fair Market Value of the Company (taking into account
all indebtedness of the Company but excluding the Additional Contributions
made by the Funding Members) ("Pre-Dilution Fair Market Value") will be
made. Each Funding Member's Ownership Interest in the Company will be
increased to the percentage obtained by dividing [i] the sum of [A] the
Additional Contribution made by such Funding Member, plus [B] the product
of the Pre-Dilution Fair Market Value of the Company and the Ownership
Interest in the Company of such Funding Member (prior to adjustment under
this sentence), by [ii] the sum of [A] the Additional Contributions made by
all Funding Members, plus [B] the Pre-Dilution Fair Market Value of the
Company. The Ownership Interest of each Member that is not a Funding
Member will be reduced by an amount equal to the total increase in the
Ownership Interests of the Funding Members multiplied by the ratio of such
non-Funding Member's Ownership Interest to the aggregate Ownership
Interests of all non-Funding Members (prior to adjustment under this
sentence).
[b] If the Members unanimously approve Additional Contributions (including
Additional Contributions approved as part of the approved budget under
which the Company is then operating), but a Funding Member does not
contribute its share of such Additional Contributions, the other Funding
Member, at its option, may make a loan in the amount of the deficiency to
Parent LLC to enable Parent LLC to make a loan in the amount of the
deficiency to the Company. Such loan to Parent LLC will bear simple
interest at the Prime Rate, will be payable only from available cash of
Parent LLC, and will be prepayable in whole or in part without penalty.
Such loan to the Company will be on the same terms as such loan to Parent
LLC. Such loan to the Company will be repaid in full from Available Cash
of the Company before any Distribution is made by the Company to its
Members, and such loan to the Parent LLC will be repaid from available cash
of the Parent LLC before any distribution is made by the Parent LLC to its
members. All such loans to the Company will be due and payable at the
closing of a transaction pursuant to Section 2.2, 2.3, 2.4, or 2.5 of the
Agreement Regarding Ownership Interests whereby the lender and its
Affiliates sell all their interests in the Company.
[c] If a loan is made to the Parent LLC as described in [b] above, the
defaulting Funding Member will have six months (the "Funding Cure Period")
after the date such Additional Contributions were due within which to pay
to the nondefaulting Funding Member the amount equal to all unpaid
principal of and interest on such
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loan, in exchange for all the nondefaulting Funding Member's rights to
repayment of such loan, which the nondefaulting Funding Member immediately
will forgive and, upon such repayment, the loan from the Parent LLC to the
Company will also be forgiven and the defaulting Funding Member will be
deemed to have made an Additional Contribution to the Company equal to the
principal amount of the loan.
[d] If no such loan was made by the nondefaulting Funding Member, the
defaulting Funding Member must within the Funding Cure Period fulfill its
obligation to make its share of the Additional Contributions. If either a
Funding Member defaults in its obligation to make Additional Contributions
and such default
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continues uncured after expiration of the Funding Cure Period, or a loan
made by the nondefaulting Funding Member remains outstanding after the
Funding Cure Period, the Total Divisional Interest of the nondefaulting
Funding Member and its Affiliates in the Company will be increased such
that the Total Divisional Interest of the nondefaulting Member and its
Affiliates equals the percentage obtained by dividing [i] the sum of [A]
the Additional Contribution made by the nondefaulting Funding Member, plus
[B] the product of the Pre-Dilution Fair Market Value of the Company and
the Total Divisional Interest of the Funding Member (prior to adjustment
under this sentence), by [ii] the sum of [A] the Additional Contribution
made by the nondefaulting Funding Member, plus [B] the Pre-Dilution Fair
Market Value of the Company. The Total Divisional Interest of the
defaulting Funding Member and its Affiliates will be reduced by the amount
of the increase in the Total Divisional Interest of the nondefaulting
Funding Member and its Affiliates. The adjustment described in this
3.11[d] will be made by increasing the Funding Member's Ownership Interest
and decreasing the Ownership Interests of the other Members in proportion
to their relative Ownership Interests. For example, if [i] the Total
Divisional Interest of each Funding Member and its Affiliates in the
Company is 50%, [ii] the Pre-Dilution Fair Market Value of the Company is
$400,000,000, and [iii] a nondefaulting Funding Member makes an Additional
Contribution of $20,000,000, the Total Divisional Interest of the
nondefaulting Funding Member and its Affiliates in the Company will be
increased to 52.38%, calculated as follows:
$20,000,000 + ($400,000,000 x 50%) = 52.38%
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$20,000,000 + $400,000,000
and the Total Divisional Interest of the defaulting Funding Member and its
Affiliates in the Company will be decreased to 47.62%.
[e] If, and for so long as, the Total Divisional Interest of a Funding Member
and its Affiliates is less than 40% but more than 25% as a result of one or
more defaults in meeting its obligation to make Additional Contributions,
that Funding Member and its Affiliates will cease to have the right to Vote
on the actions described in subsections [b], [c] and [d] of 6.2 with
respect to the Company and any Business Company in which the Company owns
an interest.
[f] The Total Divisional Interest of a Funding Member and its Affiliates in the
Company will not be reduced to less than 25% as a result of the application
of the foregoing provisions of this 3.11. If, but for the provisions of
the foregoing sentence, the Total Divisional Interest of a Funding Member
and its Affiliates in the Company would be reduced to 25% or less, the
ownership interest of such Funding Member and its Affiliates in the Company
will be adjusted such that the
14
Total Divisional Interest of such Funding Member and its Affiliates will be
25% and will be converted into a non-voting interest, subject only to the
right to Vote with respect to an amendment of this Agreement, Dissolution
and Liquidation of the Company, and as otherwise may be required by law.
[g] No Member will be subject to any claim by the Company or any other Member
for failure to make any Additional Contributions, it being agreed that
reduction of the Total Divisional Interest of a Funding Member and its
Affiliates in the Company as provided in this 3.11 will be the exclusive
remedy for such failure.
[h] Notwithstanding the foregoing provisions of this 3.11, the Members may
agree that, in lieu of the Members making Additional Contributions, one or
more Members will lend money to the Company (other than a loan pursuant to
3.11[b]), on terms agreed by the Members, to fund the operations of the
Company. Any such loan will not be treated as an Additional Contribution
to the Company, and the provisions of 3.11[a] through [f] will not apply to
the making or repayment of such loan.
ARTICLE 4: PROFITS AND LOSSES
4.1 DETERMINATION. The terms "Profits" and "Losses" mean, respectively, the
-------------
net profits and losses of the Company determined for each Fiscal Year in
accordance with the method of accounting adopted by the Company for federal
income tax purposes, except that such net profit or loss will be determined [a]
by including as an item of income any income that is exempt from taxation, [b]
by deducting as an expense any expenditure of the Company not deductible in
computing its taxable income and not properly chargeable to any Capital Account,
or deemed not deductible in computing its taxable income and not properly
chargeable to any Capital Account in accordance with the (S) 704(b) Regulations
and [c] by calculating the gain, loss, depreciation and amortization on property
which is reflected in the Capital Accounts at a book basis different from the
basis of such property for federal income tax purposes based on the book basis
of such property in accordance with the (S) 704(b) Regulations. Any allocation
of Profits or Losses will be considered a pro rata allocation of each item
entering into the computation of Profits and Losses.
4.2 ALLOCATION OF PROFITS AND LOSSES GENERALLY. Except as provided in 4.3
------------------------------------------
through 4.12, Profits or Losses, as the case may be, for each Fiscal Year will
be allocated to the Members as follows:
15
[a] Profits will be allocated:
[i] first, as to Profits allocated subsequent to the Preferred Allocation
Date (as defined in the Parent Operating Agreement), 99% to the Parent
Member, 0.5% to the LMC Member, and 0.5% to the Fox Member until the
allocation required under 4.2[a][i] of the Parent Operating Agreement
has been completed;
[ii] second, as to Profits allocated in any Fiscal Year, to the Members to
the extent of, and in proportion to, Losses previously allocated to such
Members pursuant to 4.2[b][iii]. To the extent that a prior allocation
of Losses has been offset by a prior allocation of Profits pursuant to
this 4.2[a][ii], Profits will not be further allocated under this
4.2[a][ii] to offset such Losses; and
[iii] thereafter, as to Profits allocated in any Fiscal Year, to the
Members in proportion to their Ownership Interests.
[b] Losses will be allocated:
[i] first, as to Losses allocated subsequent to the Preferred Allocation
Date (as defined in the Parent Operating Agreement), 99% to the Parent
Member, 0.5% to the LMC Member), and 0.5% to the Fox Member until the
cumulative amount so allocated for all Fiscal Years equals the
cumulative amount of Profits previously allocated under 4.2[a][i] above;
[ii] second, as to Losses allocated in any Fiscal Year, to the Members to
the extent of, and in proportion to, Profits previously allocated to
such Members pursuant to 4.2[a][iii]. To the extent that a prior
allocation of Profits has been offset by a prior allocation of Losses
pursuant to this 4.2[b][ii], Losses will not be further allocated under
this 4.2[b][ii] to offset such Profits; and
[iii] thereafter, as to Losses allocated in any Fiscal Year, to the
Members in proportion to their Ownership Interests.
4.3 NONRECOURSE DEDUCTIONS. Losses attributable to any Company nonrecourse
----------------------
liability (for which no Member or related Person (within the meaning
of the (S) 752 Regulations) bears the economic risk of loss) will be allocated
in the same manner as Losses are allocated pursuant to 4.2, and Losses of the
Company attributable to any Member nonrecourse liability (which is nonrecourse
to the Company, but for which one or more Members or related Persons bear the
economic risk of loss) will be allocated in
16
accordance with the (S) 704(b) Regulations to those Members bearing (or who,
because of their relationship to Persons who bear such economic risk of loss,
are deemed to bear) the economic risk of loss for the liability. The allocation
of liabilities to a property, the determination of nonrecourse deductions, the
effect of property revaluations and all other issues affecting the allocation of
nonrecourse deductions will be determined in accordance with the (S) 704(b)
Regulations.
4.4 MINIMUM GAIN CHARGEBACK. Notwithstanding the general rule on allocation
-----------------------
of Profits stated in 4.2, if there is a net decrease in Company minimum gain for
any Fiscal Year, each Member will be allocated items of Profits for such year
equal to such Member's share of the net decrease in Company minimum gain. If
there is a net decrease in Member nonrecourse debt minimum gain for any Fiscal
Year, each Member having a share of such minimum gain will be allocated items of
Profits equal to such Member's share of such net decrease in Company nonrecourse
minimum gain. The determination of net decreases in Company minimum gain and
Member nonrecourse debt minimum gain, allocations of such net decreases,
exceptions to minimum gain chargebacks and all other issues affecting the
minimum gain chargeback requirements will be determined in accordance with the
(S) 704(b) Regulations.
4.5 GAIN CHARGEBACK. Notwithstanding the general rule stated in 4.2 but
---------------
subject to the prior application of the minimum gain chargeback rule stated in
4.4, Profits of the Company incident to Dissolution and Liquidation will be
allocated among the Members in the following order and priority: [a] if any
Members have negative Capital Account balances, to such Members in proportion to
and to the extent of such negative balances until all such negative balances are
eliminated; and [b] the balance to the Members in proportion to their Ownership
Interests.
4.6 TAX ALLOCATIONS. Allocation of items of income, gain, loss and
---------------
deduction of the Company for federal income tax purposes for a Fiscal Year will
be allocated, as nearly as is practicable, in accordance with the manner in
which such items are reflected in the allocations of Profits and Losses among
the Members for such Fiscal Year. To the extent possible, principles identical
to those that apply to allocations for federal income tax purposes will apply
for state and local income tax purposes.
4.7 QUALIFIED INCOME OFFSET. Notwithstanding any other provision of
-----------------------
this Agreement to the contrary (except 4.4, which will be applied first), if in
any Fiscal Year or other period a Member unexpectedly receives an adjustment,
allocation or distribution described in the qualified income offset provisions
of the (S) 704(b) Regulations, such Member will be specially allocated items of
income in an amount and manner sufficient to eliminate, to the extent required
by the (S) 704(b) Regulations, the Adjusted Capital Account Deficit of such
Member as quickly as possible.
17
4.8 LIMIT ON LOSS ALLOCATIONS. Notwithstanding the provisions of 4.2
-------------------------
or any other provision of this Agreement to the contrary, Losses (or items
thereof) will not be allocated to a Member if such allocation would cause or
increase a Member's Adjusted Capital Account Deficit and will be reallocated to
the other Members in proportion to their Ownership Interests, subject to the
limitations of this 4.8.
4.9 (S) 754 ADJUSTMENTS. To the extent an adjustment to the adjusted tax
-------------------
basis of any Company asset under (S) 734(b) or (S) 743(b) of the Code is
required to be taken into account in determining Capital Accounts under the (S)
704(b) Regulations, the amount of the adjustment to the Capital Accounts will be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis), and the gain or loss will be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted under the (S) 704(b)
Regulations.
4.10 CONTRIBUTED PROPERTY. All items of gain, loss and deduction with
--------------------
respect to property that is reflected in the Capital Accounts of the Members at
a basis different from such property's adjusted tax basis will be allocated,
solely for tax purposes, among the Members to take into account the variation
between the adjusted tax basis of the property and the basis reflected in the
Member's Capital Account according to the principles of the (S) 704(c)
Regulations. For example, if there is built-in gain with respect to certain
property at the time of such property's contribution to the Company, upon the
Company's sale of that property the pre-contribution taxable gain (as
subsequently adjusted under the (S) 704(c) Regulations during the period such
property was held by the Company) would be allocated to the contributing Member
(and such pre-contribution gain would not again create a Capital Account
adjustment because the property was credited to Capital Account upon
contribution at its Fair Market Value). Except as limited by the following
sentence, the allocation of tax items with respect to (S) 704(c) property to
Members that do not reflect a basis difference with respect to such property in
their Capital Accounts will, to the extent possible, be equal to the allocation
of the corresponding book items made to such Members with respect to such
property. All tax allocations made under this 4.10 will be made in accordance
with (S) 704(c) of the Code and (S) 1.704-3(b) of the Regulations.
4.11 TAX CREDITS. To the extent that the federal income tax basis of an
-----------
asset is allocated to the Members in accordance with the Regulations promulgated
under (S) 46 of the Code, any tax credit attributable to such tax basis will be
allocated to the Members in the same ratio as such tax basis. With respect to
any other tax credit, to the extent that a Company expenditure gives rise to an
allocation of loss or deduction, any tax credit attributable to such expenditure
will be allocated to the Members in the same ratio as such loss or deduction.
Consistent principles will apply in determining the Members' interests in tax
credits that arise from taxable or non-taxable receipts of the Company.
18
All allocations of tax credits will be made as of the time such credit arises.
Any recapture of a tax credit will be allocated, to the extent possible, to the
Members in the same manner as the tax credit was allocated to them. Except as
otherwise specifically provided in the (S) 704(b) Regulations (such as the
adjustments required when there is an upward or downward adjustment in the tax
basis of investment credit property), allocations of tax credits and their
recapture will not be reflected by any adjustment to Capital Accounts.
4.12 ALLOCATION ON TRANSFER. If any Ownership Interest is transferred
----------------------
during any Fiscal Year of the Company (whether by liquidation of an Ownership
Interest, Transfer of all or part of an Ownership Interest or otherwise), the
books of the Company will be closed as of the effective date of Transfer. The
Profits or Losses attributed to the period from the first day of such Fiscal
Year through the effective date of Transfer will be allocated to the Transferor
and the Profits or Losses attributed to the period commencing on the day after
the effective date of Transfer will be allocated to the Transferee. In lieu of
an interim closing of the books of the Company and with the agreement of the
Transferor and the Transferee, the Company may allocate Profits and Losses for
such Fiscal Year between the Transferor and the Transferee based on a daily
proration of items for such Fiscal Year or any other reasonable method of
allocation (including an allocation of extraordinary Company items, as
determined by the Company, based on when such items are recognized for federal
income tax purposes).
4.13 TIER PARTNERSHIPS. Rules similar to those stated in this Article will
-----------------
apply to the extent the Company is an owner of an interest in another Person
which is classified as a partnership for federal income tax purposes, all in
accordance with the (S) 704(b) Regulations.
ARTICLE 5: DISTRIBUTIONS
5.1 DISTRIBUTIONS GENERALLY. Except for Distributions incident to the
-----------------------
Company's Dissolution and Liquidation (which will be governed by 12.4), and
except as provided in Section 3.11, Available Cash will be distributed quarterly
to the Members in the following order and priority:
[a] First, 100% to the Parent Member until the distribution required under
5.1[a] of the Parent Operating Agreement has been completed; and
[b] Thereafter, to the Members in accordance with their Ownership Interests.
19
5.2 PAYMENT. All Distributions will be made to Members owning
-------
Ownership Interests on the date of record, such date being the last day of the
calendar month preceding the date of Distribution, as reflected on the books of
the Company.
5.3 WITHHOLDING. If required by the Code or by state or local law, the
-----------
Company will withhold any required amount from Distributions to a Member for
payment to the appropriate taxing authority. Any amount so withheld from a
Member will be treated as a Distribution by the Company to such Member. Each
Member will timely file any agreement that is required by any taxing authority
in order to avoid any withholding obligation that would otherwise be imposed on
the Company.
5.4 DISTRIBUTION LIMITATION. Notwithstanding any other provision of
-----------------------
this Agreement, the Company will not make any Distribution to the Members if,
after the Distribution, the liabilities of the Company (other than liabilities
to Members on account of their Ownership Interests) would exceed the Fair Market
Value of the Company's assets. With respect to any property subject to a
liability for which the recourse of creditors is limited to the specific
property, such property will be included in assets only to the extent the
property's Fair Market Value exceeds its associated liability, and such
liability will be excluded from the Company's liabilities.
ARTICLE 6: MANAGEMENT
6.1 MANAGEMENT. Management of the business and affairs of the Company
----------
is reserved to, and vested in, the Members and no manager (as defined in the
Act) will be elected by the Members unless this Agreement is appropriately
amended. Each Member will cause the Company to be managed and operated with the
intent to maximize the cash flow and long-term asset value of the Company. The
Members will exercise their management control by Vote; provided that any Member
whose Ownership Interest has been converted to a limited voting interest
pursuant to 3.11[e] will not be entitled to Vote with respect to the actions
described in 6.2[b], [c], and [d], and any Member whose Ownership Interest has
been converted to a non-voting interest pursuant to 3.11[f] will be entitled to
Vote only with respect to an amendment of this Agreement, Dissolution and
Liquidation of the Company, and as otherwise required by law. No Member has the
authority to act on behalf of the Company unless authorized by a Vote.
Notwithstanding the foregoing, Persons dealing with the Company are entitled to
rely conclusively on the power and authority of any Member. From time to time,
on the request of a Member authorized to act in accordance with this Agreement,
the Company will confirm to Third Parties that Persons dealing with the Company
may rely on powers and authorities of such Member as set forth in this
Agreement.
20
6.2 ACTIONS REQUIRING A UNANIMOUS VOTE. Subject to any restriction on a
----------------------------------
Member's right to Vote pursuant to 3.11[e] and [f], in addition to those actions
described elsewhere in this Agreement as requiring the Vote of, or approval by,
all the Members, the following actions or decisions by the Company will be made
only by the affirmative unanimous Vote of the Members:
[a] entry into areas of business other than the Company Business;
[b] the approval of each (or any amendment to any previously approved) three-
year business plan or annual operating and capital budget for the Company;
if the Members are unable unanimously to approve an annual budget for the
Company, then, until a new budget is approved, the annual budget for the
Company for the immediately preceding Fiscal Year will remain in effect,
adjusted (without duplication) to reflect the following increases or
decreases: [i] the operation of escalation or de-escalation provisions in
contracts in effect at the time of approval of the budget solely as a
result of the passage of time or due to operations or undertakings approved
in the budget or the occurrence of events beyond the control of the
Company, to the extent such contracts are still in effect; [ii] elections
made in any prior year under contracts contemplated by the budget for the
prior year regardless of which party to such contracts makes such election;
[iii] the effect of the existence of any multi-year contract entered into
in accordance with a previous budget to the extent not fully reflected in
the prior year's budget; [iv] increases or decreases in expenses
attributable to the annualized effect of employee additions or reductions
during the prior year contemplated by the budget for the prior year; [v]
interest expense attributable to any loans; [vi] increases or decreases in
overhead expenses in an amount equal to the total of overhead expenses
reflected in the budget for the prior year (excluding non-recurring items)
multiplied by the percentage increase or decrease in the U.S. Department of
Labor Bureau of Labor Statistics Consumer Price Index for all Urban
Consumers ("CPI-U") or a successor index for the prior Fiscal Year (but in
no event will such change be more than 10% of the corresponding items in
the prior budget); and [vii] decreases in expenses attributable to non-
recurring items reflected in the prior year's budget;
[c] engaging in any non-budgeted transaction which, when added to all other
non-budgeted transactions during the same Fiscal Year, would cause the
aggregate amount of non-budgeted transactions for such Fiscal Year to
exceed US $3,750,000;
[d] approval of any programming rights acquisition agreement involving more
than US $3,750,000 per year or US $11,250,000 in the aggregate (unless
provided for in the approved budget under which the Company is then
operating);
21
[e] acquiring an interest in or the assets of any business for an acquisition
price of more than US $3,750,000;
[f] amendment of this Agreement or any other organizational document of the
Company or any Person directly or indirectly controlled by the Company or
in which the Company has an interest directly or indirectly entitling it to
vote on such amendment;
[g] any action relating to the merger, sale, consolidation, reorganization,
dissolution, winding up, liquidation or similar transaction involving all
or any portion of the Company or the Company Business;
[h] incurrence of any debt exceeding US $3,750,000 (excluding normal trade
debt), or the issuance of any guarantee, or the creation of any Lien,
unless provided for in the approved budget under which the Company is then
operating;
[i] appointment or removal of auditors of the Company, approval or adoption of
accounting principles applicable to the Company, and any change in the
Fiscal Year of the Company;
[j] any decision to require Additional Contributions to the Company (except
pursuant to funding requirements set forth in the approved budget under
which the Company is then operating);
[k] any decision to distribute cash or other assets of the Company, except any
Distribution pursuant to Article 5 or pursuant to Section 2.4 of the
Agreement Regarding Ownership Interests;
[l] the admission of additional Members (except as provided in 13.3) or the
grant by the Company of any right to acquire any interest in the Company or
any stock or equity appreciation or similar right;
[m] any transaction involving the Company, on the one hand, and a Member or an
Affiliate of a Member, on the other (including the provision of management
or other services and charges therefor or allocations of general and
administrative costs by a Member or an Affiliate of a Member to the
Company);
[n] any change in programming direction or philosophy or operating principles
(including budget compliance) of the Company or of any Service offered by
the Company;
[o] appointment or removal of the Tax Matters Partner; or
22
[p] the decision to advance expenses to a Member pursuant to 9.3 or to
indemnify an officer, employee or agent of the Company pursuant to 9.5;
[q] any employment agreement providing for compensation on termination of
employment other than in accordance with severance policies generally
applicable to employees of the Company.
[r] any agreement by the Company to take any of the foregoing actions.
6.3 OTHER MATTERS. Unless otherwise restricted by a unanimous Vote of the
-------------
Members, any action not requiring a unanimous Vote will be deemed approved by
the Company if such action is taken by an officer of the Company in the ordinary
course of business in a manner consistent with a business plan or budget
approved by the Members.
6.4 MEMBER REPRESENTATIVES. The Fox Member and the LMC Member each
----------------------
will be entitled to designate one individual, and the Parent Member will be
entitled to designate two individuals, to act as such Member's duly authorized
representatives and agents (each a "Representative") for purposes of exercising
such Member's Vote on any matter involving the Company. A Member will designate
its Representatives by Notice to each other Member and may change any such
designation at any time upon similar Notice.
6.5 NO DISSOLUTION, RESIGNATION OR RETIREMENT. No Member will voluntarily
-----------------------------------------
dissolve, resign from or retire from the Company, except by a Permitted Transfer
or following Dissolution and Liquidation of the Company. If any such voluntary
dissolution, resignation or retirement occurs in contravention of this
Agreement, the withdrawing Member will, without further act, become a Transferee
of such Member's Ownership Interest (with the limited rights of a Transferee as
set forth in 13.5). Any Member who dissolves, resigns or retires from the
Company in contravention of this Agreement will be liable to the Company and the
other Members for monetary damages (but any such action or proposed action will
not be subject to any equitable action for injunctive relief or specific
performance).
6.6 OFFICERS.
--------
[a] The Parent Member will nominate a chief executive officer ("CEO"), chief
financial officer ("CFO") and a chief operating officer ("COO") for the
Company, provided that, at any time when the Ownership Interest of the
Parent Member does not exceed 20%, the Fox Member will have the right to
nominate a CEO, a CFO, and a COO for the Company, subject, in each case, to
the LMC Member's approval, which approval will not unreasonably be
withheld. The
23
CEO will have the authority to select such other officers (other than a CFO
or a COO) as may be necessary or desirable to carry out the day-to-day
management and policies of the Company Business, subject to the provisions
of this Agreement.
[b] The Parent Member will have the right, in its sole discretion, to terminate
the CEO, the CFO, or the COO, provided that, at any time when the Ownership
Interest of the Parent Member does not exceed 20%, each of the LMC Member
and the Fox Member will have the right, in its sole discretion, to
terminate the CEO, the CFO, or the COO. In case of any such termination,
the terminated officer will be required to leave his or her position within
24 hours after receiving a notice of termination.
[c] Appointment of a Person as an officer or agent of the Company will not, in
itself, create any contract rights. The officers of the Company, acting in
their capacities as such, will be agents acting on behalf of the Company as
principal.
6.7 BUDGETS. The Members will require the appropriate officers and
-------
employees of the Company to prepare and present to the Members annual operating
and capital budgets for the Company at least 90 days in advance of the
beginning of the applicable Fiscal Year. Such budgets will be based upon and
conform to the then-applicable budgets approved by the members of Parent LLC for
the same period. Until the first annual operating and capital budgets are
approved by the Members, the Company will be operated in accordance with the 12-
month budgets attached to this Agreement as Schedules 6.7[i] and 6.7[ii],
respectively.
6.8 MANAGEMENT CONDUCT. The Members each will cause the officers
------------------
and employees of the Company promptly and diligently to perform the duties
contemplated by this Agreement. If a Member willfully fails to perform its
obligation under the foregoing sentence to the material detriment of the other
Members and fails to cure such failure within 30 days after Notice by another
Member, such Member will cease to have voting rights as to the actions described
in 6.2[b] through 6.2[d] and as to any agreement by the Company to take any of
such actions.
6.9 UNAUTHORIZED ACTIONS. If a Member takes any action that is not
--------------------
authorized under this Agreement and, as a consequence of such action, the
Company incurs any liability or obligation to any Person, at the election of any
other Member, the Member taking such unauthorized action will be solely
responsible for the full amount of such liability or obligation and will
indemnify the Company against any claim for satisfaction thereof. Subject to
receipt of an assumption agreement, duly executed by such Member, to the effect
set forth in the foregoing sentence, which assumption agreement is in form and
substance reasonably satisfactory to the other Members, the Company will assign
24
to such Member all the Company's rights in and to any asset, income or benefit
arising from the incurrence of such liability or obligation (such assignment to
be effected by an assignment duly executed by the Company, which assignment is
in form and substance reasonably satisfactory to such Member). After such
assignment, the Member to which such rights have been assigned may use or
transfer such rights, subject, in any event, to any restriction on the use or
transfer thereof imposed by this Agreement, the Parent Operating Agreement, or
the Parents Agreement.
ARTICLE 7: MEETINGS OF MEMBERS
7.1 MEETINGS.
--------
[a] Regular meetings of the Members will be held quarterly upon at least 10
days' prior Notice by the Member entitled to select the place of the
meeting pursuant to 7.2.
[b] Special meetings of the Members may be called by any Member upon the giving
of at least 10 days' prior Notice by such Member.
7.2 PLACE. The Fox Member will select the place where the first
-----
quarterly meeting of Members is to be held. Thereafter, the LMC Member and the
Fox Member will alternate in selecting the place for each quarterly meeting of
the Members. If no place for a meeting is designated, or if a special meeting
is called, the place of the meeting will be the Company's principal business
office or such other place as the Members may approve.
7.3 NOTICE. Notice of any meeting will be given to at least one
------
Representative of each Member not less than 10 days or more than 30 days before
the date of the meeting. Such Notice will state the place, day and hour of the
meeting and, in the case of a special meeting, the purpose for which the meeting
is called.
7.4 WAIVER OF NOTICE. Any Member may waive, in writing, any Notice
----------------
required to be given to such Member, whether before or after the time for the
meeting stated in such Notice. Any Member who signs minutes of action (or a
written consent) will be deemed to have waived any required Notice with respect
to such action.
7.5 RECORD DATE. For the purpose of determining Members entitled to
-----------
Notice of or to Vote at any meeting of Members, the date on which Notice of the
meeting is first given will be the record date for the determination of Members.
Any such determination of Members entitled to Vote at any meeting of Members
will apply to any adjournment of a meeting.
25
7.6 QUORUM. A quorum at any meeting of Members will be deemed to
------
exist if at least one Representative of each Member entitled to Vote is present
in person or by proxy. Any meeting at which a quorum is not present may be
adjourned to another place, day and hour without further Notice.
7.7 MANNER OF ACTING. If a quorum is present at any meeting of the
----------------
Members, the affirmative Vote of Members as set forth in Article 6 will be the
act of the Company. Prompt Notice describing all actions taken at a meeting
will be provided to all Representatives who were at such meeting.
7.8 PROXIES. At any meeting of Members, a Member may Vote in person
-------
or by written proxy given to another Member. A proxy will be valid if signed by
any Representative of the Member or by a duly authorized attorney-in-fact and
filed with the Company before or at the time of the meeting. No proxy will be
valid after three months from the date of its signing unless otherwise provided
in the proxy. Attendance at the meeting by any Representative of the Member
giving the proxy will be deemed to revoke the proxy during the period of
attendance.
7.9 MEETINGS BY TELEPHONE. The Members may participate in a meeting
---------------------
by means of conference telephone or similar communications equipment by which
all Representatives participating in the meeting can hear each other at the same
time. Such participation will constitute presence in person at the meeting and
waiver of any required Notice.
7.10 ACTION WITHOUT A MEETING. Any action required or permitted to be
------------------------
taken at a meeting of Members may be taken without a meeting if the action is
evidenced by one or more minutes of action or written consents describing the
action taken, signed by all Representatives of those Members entitled to Vote.
Action so taken will be effective when all Representatives of those Members
entitled to Vote have signed the consent, unless the consent specifies a later
effective date. Prompt Notice describing all actions taken without a meeting of
the Members will be provided to all Representatives who have not signed the
written consent authorizing such actions.
ARTICLE 8: LIABILITY OF A MEMBER
8.1 LIMITED LIABILITY. Except as otherwise provided in the Act and in 6.9,
-----------------
the debts, obligations and liabilities of the Company (whether arising in
contract, tort or otherwise) will be solely the debts, obligations and
liabilities of the Company, and no Member of the Company (including any Person
who formerly held such status) is liable or will be obligated personally for any
such debt, obligation or liability of the Company solely by reason of such
status. No Representative, individual trustee, officer, director, employee
26
or agent of any Member will have any personal liability for the performance of
any obligation of such Member under this Agreement.
8.2 CAPITAL CONTRIBUTION. Each Member is liable to the Company for [a]
--------------------
the Initial Contribution agreed to be made under 3.1 and [b] any Capital
Contribution or Distribution that has been wrongfully or erroneously returned or
made to such Person in violation of the Act, the Certificate or this Agreement.
8.3 CAPITAL RETURN. Any Member who has received the return of all or any
--------------
part of such Person's Capital Contribution will have no liability to return such
Distribution to the Company after the expiration of three years from the date of
such Distribution unless Notice of an obligation to return is given to such
Person within such three-year period; provided that if such return of capital
has occurred without violation of the Act, the Certificate or this Agreement,
the three-year obligation to return capital will apply only to the extent
necessary to discharge the Company's liability to its creditors who reasonably
relied on such obligation in extending credit prior to such return of capital.
8.4 RELIANCE. Any Member will be fully protected in relying in good
--------
faith upon the records of the Company and upon such information, opinions,
reports or statements by [a] any of the Company's other Members, employees or
committees or [b] any other Person who has been selected with reasonable care as
to matters such Member reasonably believes are within such other Person's
professional or expert competence. Matters as to which such reliance may be
made include the value and amount of assets, liabilities, Profits and Losses of
the Company, as well as other facts pertinent to the existence and amount of
assets from which distributions to Members might properly be made.
ARTICLE 9: INDEMNIFICATION
9.1 GENERAL. The Company will indemnify each Member from and against any
-------
and all loss, damage, expense (including reasonable fees and expenses of
attorneys and other advisors and any court costs incurred by such Member) or
liability incurred in any Proceeding to which such Member is made a party
because such Person was a Member or acted or failed to act with respect to the
business or affairs of the Company if [a] such Person acted in good faith, [b]
such Person reasonably believed that its conduct in an official capacity was in
the Company's best interests or, if the conduct was not in an official capacity,
that its conduct was at least not opposed to the Company's best interests and
[c] such Person, in the case of any criminal Proceeding, had no reasonable cause
to believe its conduct was unlawful.
27
9.2 EXCEPTION. Notwithstanding the general rule stated in 9.1, the
---------
Company will not indemnify any Person in connection with [a] any Proceeding by
or in right of the Company in which such Member was adjudged liable to the
Company, [b] in connection with any Proceeding charging improper personal
benefit to the Member (whether or not involving action in an official capacity)
in which such Person was adjudged liable on the basis that personal benefit was
improperly received, or [c] any liability or obligation for which such Person is
liable under 6.9.
9.3 EXPENSE ADVANCEMENT. With respect to the reasonable expenses
-------------------
incurred by a Member who is a party to a Proceeding, the Company may provide
funds to such Person in advance of the final disposition of the Proceeding if
[a] the Member furnishes the Company with such Person's written affirmation of a
good-faith belief that it has met the standard of conduct described in 9.1, [b]
the Member agrees in writing to repay the advance (with simple interest at the
Prime Rate) if it is determined that it has not met such standard of conduct and
[c] the Company determines that, based on then known facts, indemnification is
permissible under this Article.
9.4 INSURANCE. The indemnification provisions of this Article do not
---------
limit a Member's right to recover under any insurance policy maintained by the
Company. If, with respect to any loss, damage, expense or liability described
in 9.1, any Member receives an insurance policy indemnification payment which,
together with any indemnification payment made by the Company, exceeds the
amount of such loss, damage, expense or liability, then such Person will
immediately repay such excess to the Company.
9.5 INDEMNIFICATION OF OTHERS. To the same extent that the Company
-------------------------
will indemnify and advance expenses to a Member, the Company may indemnify and
advance expenses to any officer, employee or agent of the Company. In addition,
the Company, in its discretion, may indemnify and advance expenses to any
Company officer, employee or agent to a greater extent than a Member.
ARTICLE 10: ACCOUNTING AND REPORTING
10.1 FISCAL YEAR. For income tax and accounting purposes, the fiscal
-----------
year of the Company will be the Fiscal Year.
10.2 ACCOUNTING METHOD. For income tax and accounting purposes, the Company
-----------------
will use the accrual method of accounting (unless otherwise required by the
Code). The Tax Matters Partner will have the authority to adopt all other
accounting methods for tax purposes.
28
10.3 TAX ELECTIONS. The Tax Matters Partner will have the authority to
-------------
make such tax elections, and to revoke any such election, as the Tax Matters
Partner may from time to time determine. Notwithstanding the preceding
sentence, following any Transfer (within the meaning of (S) 754 of the Code) of
an Ownership Interest, the Tax Matters Partner will make the election under (S)
754 of the Code upon the timely written request of either the Transferor Member
or the Transferee. In addition, the Tax Matters Partner may make the (S) 754
election if the Tax Matters Partner determines that such election is in the best
interests of the Company or any Member.
10.4 RETURNS. At the expense of the Company, the Tax Matters Partner
-------
will cause the preparation and timely filing of all tax returns required to be
filed by the Company pursuant to the Code, as well as all other tax returns
required in each jurisdiction in which the Company does business.
10.5 FINANCIAL REPORTS. The Members will cause the appropriate officers or
-----------------
employees of the Company, at the expense of the Company, to cause to be prepared
and distributed to the Members such financial statements, budgets, plans and
schedules as are required for the reporting purposes of and/or are from time to
time reasonably requested by the Members.
10.6 ANNUAL AUDIT.
------------
[a] At the request of any Member, for each Fiscal Year in which the financial
statements of the Company are not consolidated with the audited financial
statements of Parent LLC, or if required to satisfy Third Party reporting
requirements, any Member may require that an audit be made by the
Company's accountants at the expense of the Company. The audit will be
conducted in accordance with generally accepted auditing standards, and
will cover all of the assets, properties, liabilities and net worth of the
Company as well as its dealings, transactions and operations during such
Fiscal Year, together with all other matters customarily included in such
accountings and audits or as may be reasonably required by the Members As
to any Member whose fiscal year does not coincide with the Fiscal Year of
the Company, the Company will bear the cost of [i] any review that is
required to be conducted by such Member's independent auditor for the
purpose of permitting such independent auditor to rely on any audit opinion
issued by the Company's independent auditor for the Fiscal Year ended
within the fiscal year of the Member and [ii] if applicable, any review
that is required to permit such Member to comply with Regulation S-X of the
Securities Act of 1934, as amended, such cost not to exceed a reasonable
amount.
29
[b] At the expense of the Company, within 60 days after the end of each Fiscal
Year for which an audit is done pursuant to 10.6[a], the Company will
furnish the Members with audited financial statements prepared by the
Company's accountants on an accrual basis in accordance with GAAP
consistently applied which will contain a balance sheet as of the end of
the Fiscal Year, statements of income, changes in the Capital Accounts and
cash flow for the Fiscal Year then ended. The timing of the annual audit
of each Fiscal Year will be such that the Company's accountants are in a
position to render a conclusion as to the probable fairness of presentation
of the financial statements of the Company for such Fiscal Year (which will
have been furnished pursuant to the foregoing provisions of this 10.6) by
the 60th day following the close of the Fiscal Year.
10.7 BOOKS AND RECORDS.
-----------------
[a] The following books and records of the Company will be kept at its
principal office: [i] a current list of the full name and last known
business, residence or mailing address of each Member; [ii] originals of
the Certificate and of this Agreement, as amended (as well as any signed
powers of attorney pursuant to which any such document was executed); [iii]
a copy of the Company's federal, state and local income tax returns and
reports and annual financial statements of the Company, for the six most
recent years; and [iv] minutes, or minutes of action or written consent, of
every meeting of Members of the Company.
[b] At the Company's expense, there will be kept at the Company's principal
office separate books of account for the Company Business which will be a
true and accurate record of all costs and expenses incurred, all credits
made and received and all income derived in connection with the operation
of the Company Business in accordance with GAAP consistently applied.
[c] Each Member, at its sole expense, will have the right, at any time without
notice to the other, to examine, copy and audit the Company's books and
records during normal business hours.
10.8 INFORMATION.
-----------
[a] Each Member has the right, from time to time and upon reasonable demand for
any purpose reasonably related to such Person's interest as a Member of the
Company, to obtain from the Company: [i] a current list of the full name
and last known business, residence or mailing address of each Member; [ii]
a copy of the Certificate and of this Agreement, as amended (as well as any
signed powers of attorney pursuant to which any such document was
executed); [iii] a copy of the Company's federal, state and local income
tax returns and reports and annual
30
financial statements of the Company, for the six most recent years; [iv]
minutes, or minutes of action or written consent, of every meeting of the
Members of the Company; [v] true and full information regarding the amount
of money and a description and statement of the agreed value of any other
property or services contributed or to be contributed by each Member, and
the date on which each became a Member; [vi] true and full information
regarding the status of the business and financial condition of the
Company; and [vii] other information regarding the affairs of the Company
as reasonably may be requested by such Member.
[b] The Members will cause the Company [i] to deliver to each Member, for its
review and approval, a copy of each tax return or report required to be
filed by the Company at least 30 days before the required filing date and
[ii] to provide to each Member, not more than 135 days after each Fiscal
Year end, such information for such Fiscal Year as the Member reasonably
requires to prepare tax returns or reports required to be filed by it or
one or more of its Affiliates, including federal and state tax information
and projections and estimates.
10.9 BANKING. The Company may establish and maintain one or more
-------
accounts or safe deposit boxes at banks or other financial institutions. The
Company may authorize one or more individuals to sign checks on and withdraw
funds from such bank or financial accounts and to have access to such safe
deposit boxes, and may place such limitations and restrictions on such authority
as the Company deems advisable. No funds of the Company will be commingled with
funds of any Member or any other Person.
10.10 TAX MATTERS PARTNER. Until further action by the Company, the Fox Member
-------------------
is designated as the Tax Matters Partner under (S) 6231(a)(7) of the Code. The
Tax Matters Partner will take no action which is reasonably expected to have a
material adverse effect on one or more of the Members unless such action is
approved by the unanimous Vote of the Members. The Tax Matters Partner will be
responsible for notifying all Members of ongoing proceedings, both
administrative and judicial, and will represent the Company throughout any such
proceeding. The Members will furnish the Tax Matters Partner with such
information as it may reasonably request to provide the Internal Revenue Service
with sufficient information to allow proper notice to the Members. If an
administrative proceeding with respect to a partnership item under the Code has
begun, and the Tax Matters Partner so requests, each Member will notify the Tax
Matters Partner of its treatment of any partnership item on its federal income
tax return, if any, which is inconsistent with the treatment of that item on the
partnership return for the Company. Any settlement agreement with the Internal
Revenue Service will be binding upon the Members only as provided in the Code.
The Tax Matters Partner will not bind any other Member to any extension of the
statute of limitations or to a settlement
31
agreement without such Member's written consent. Any Member who enters into a
settlement agreement with respect to any partnership item will notify the other
Members of such settlement agreement and its terms within 30 days after the date
of settlement. If the Tax Matters Partner does not file a petition for
readjustment of the partnership items in the Tax Court, federal District Court
or Claims Court within the 90-day period following a notice of a final
partnership administrative adjustment, any notice partner or 5-percent group (as
such terms are defined in the Code) may institute such action within the
following 60 days. The Tax Matters Partner will timely notify the other Members
in writing of its decision. Any notice partner or 5-percent group will notify
the other Members of its filing of any petition for readjustment.
10.11 NO PARTNERSHIP. The classification of the Company as a partnership will
--------------
apply only for federal (and, as appropriate, state and local) income tax
purposes. This characterization, solely for tax purposes, does not create or
imply a general partnership between the Members for state law or any other
purpose. Instead, the Members acknowledge the status of the Company as a
limited liability company formed under the Act.
ARTICLE 11: DISSOLUTION
11.1 DISSOLUTION. Dissolution of the Company will occur upon the
-----------
happening of any of the following events:
[a] The sale or other disposition of all or substantially all of the Company's
assets;
[b] An event of Withdrawal (as defined in 11.2) of a Member, unless there are
at least two remaining Members and the Company is continued as provided in
11.3;
[c] The affirmative Vote of all Members; or
[d] The last day of the Fiscal Year ending in 2095, unless prior to such date
the Company is continued under the Act and this Agreement by the unanimous
Vote of all Members.
11.2 EVENTS OF WITHDRAWAL. An event of Withdrawal of a Member occurs when
--------------------
any of the following occurs:
[a] With respect to any Member, upon the Transfer of all of such Member's
Ownership Interest (which Transfer is treated as a resignation);
32
[b] With respect to any Member, upon the voluntary withdrawal (including any
resignation or retirement in contravention of 6.5) of the Member;
[c] With respect to any Member that is a corporation, upon filing of articles
of dissolution of the corporation;
[d] With respect to any Member that is a partnership, a limited liability
company or a similar entity, upon dissolution and liquidation of such
entity (but not solely by reason of a technical termination under (S)
708(b)(1)(B) of the Code);
[e] With respect to any Member that is a trust, upon termination of the trust;
[f] With respect to any Member, the Bankruptcy of the Member; or
[g] Any other event which terminates the continued membership of a Member in
the Company.
Within 10 days after the occurrence of any event of Withdrawal with respect to a
Member, such Member will give Notice of the date and the nature of such event to
the Company. Any Member failing to give such Notice will be liable in damages
for the consequences of such failure as otherwise provided in this Agreement.
11.3 CONTINUATION.
------------
[a] In the event of Withdrawal of a Member, the Company will be continued if
there are two or more Members remaining and if, within 90 days after such
event, there is an affirmative Vote of a majority in interest of the
remaining Members to continue the Company's business as a limited liability
company under the Act and this Agreement. For this purpose, "a majority in
interest of the remaining Members" means Members owning, in the aggregate,
a majority of the interests in the Profits of the Company (determined and
allocated based upon a reasonable estimate of Profits from the date of the
event of Withdrawal to the projected termination of the Company) and a
majority of the interests in the capital of the Company (determined as of
the date of the event of Withdrawal) held by all Members other than the
Member with respect to which the event of Withdrawal occurred. If the
business of the Company is so continued, an event of Withdrawal of one or
more Members will not cause the Dissolution of the Company. If the Company
is so continued, with respect to any Member as to which an event of
Withdrawal has occurred, such Member or such Member's Transferee or other
successor-in-interest (as the case may be) will, without further act,
become a Transferee of such Ownership Interest (with the limited rights of
a Transferee as set forth in 13.5, unless admitted as a substitute
33
Member). If the Company is not continued as above provided, the Company
will be treated as dissolved as of the end of such 90-day period.
[b] If the Company is continued as provided in 11.3[a], within 90 days after
the event of Withdrawal one or more additional Members may be admitted by
an affirmative Vote of all remaining Members or non-Bankrupt Members, as
the case may be. The Ownership Interest of such additional Member or
Members will be the percentage determined by the remaining Members or the
non-Bankrupt Members, as the case may be, and will be allocated from the
Ownership Interests held by such remaining Members or non-Bankrupt Members,
as the case may be.
11.4 FORMATION OF NEW COMPANY. Upon Dissolution of the Company caused
------------------------
by an event described in 11.1[b] at a time when there are only two Members, the
remaining Member may elect to reform the Company as a new limited liability
company (the "New Company") upon Liquidation of the Company. If the remaining
Member decides to make such an election, the remaining Member will give Notice
to the withdrawing Member within 10 days after the Company's receipt of Notice
of the event of Withdrawal pursuant to 11.2. The remaining Member will then
cause the formation of the New Company consisting of the remaining Member and
one or more new members (the "New Members") within 60 days of giving such
Notice. The New Company's limited liability company agreement will be in
substantially the same form as this Agreement. The withdrawing Member will have
the rights of a Transferee in the New Company as described in 13.5, and will
therefore have the right to receive allocations and Distributions from the New
Company equivalent to the withdrawing Member's right to receive allocations and
Distributions from the Company as existed prior to the event of Withdrawal. To
the extent that any other Person had rights to receive allocations and
Distributions from the Company at the time the event of Withdrawal of the
withdrawing Member occurred, such Person will have the rights of a Transferee in
the New Company as described in 13.5 equivalent to the rights such Person had in
the Company prior to the occurrence of the event of Withdrawal. The Ownership
Interests and the remaining rights to receive allocations and Distributions from
the New Company will be allocated among the remaining Member and the New Members
as the remaining Member and the New Members may agree at the time the New
Company is formed.
ARTICLE 12: LIQUIDATION
12.1 LIQUIDATION. Upon Dissolution of the Company, if the Company has
-----------
not been continued pursuant to 11.3, the Company will immediately proceed to
wind up its affairs and liquidate pursuant to this 12.1 or pursuant to 12.8. If
there is only one remaining Member, that Member will act as the liquidating
trustee. Otherwise, any Person
34
appointed by Members owning more than 50% of the Ownership Interests held by all
Members will act as the liquidating trustee. The Liquidation of the Company will
be accomplished in a businesslike manner as determined by the liquidating
trustee. A reasonable time will be allowed for the orderly Liquidation of the
Company and the discharge of liabilities to creditors so as to enable the
Company to minimize any losses attendant upon Liquidation. Any gain or loss on
disposition of any Company assets in Liquidation will be allocated to Members in
accordance with the provisions of Article 4. Any liquidating trustee is entitled
to reasonable compensation for services actually performed, and may contract for
such assistance in the liquidating process as such Person deems necessary or
desirable. Until the filing of a certificate of cancellation under 12.9, and
without affecting the liability of the Members and without imposing liability on
the liquidating trustee, the liquidating trustee may settle and close the
Company's business, prosecute and defend suits, dispose of its property,
discharge or make provision for its liabilities, and make Distributions in
accordance with the priorities set forth in this Article.
12.2 TAX TERMINATION. In addition to termination of the Company following
---------------
its Dissolution, a termination of the Company will occur, for federal income tax
purposes only, on the date the Company is terminated under (S) 708(b)(1) of the
Code. Under current law, events causing such a termination include the sale or
exchange of 50% or more of the total interest in the capital and profits of the
Company within a 12-month period. Upon the occurrence of a termination under
(S) 708(b)(1) of the Code, a constructive Liquidation and a constructive
reformation of the Company as a tax partnership will be deemed to occur for
federal income tax purposes. All adjustments and computations will be made
under this Agreement as if the constructive transactions had actually occurred,
and the Capital Accounts of the Members in such new tax partnership will be
determined and maintained in accordance with the (S) 704(b) Regulations.
12.3 PRIORITY OF PAYMENT. If the Company is not continued pursuant to 11.3
-------------------
and the remaining Member has not elected to form the New Company as provided in
11.4, the assets of the Company will be distributed in Liquidation in the
following order:
[a] First, to creditors by the payment or provision for payment of the debts
and liabilities of the Company (other than any loans or advances that may
have been made by any Member or Affiliate) and the expenses of Liquidation;
[b] Second, to the setting up of any reserves that are reasonably necessary for
any contingent, conditional or unmatured liabilities or obligations of the
Company;
[c] Third, to the repayment of any loans to the Company that may have been made
by any Member or any Affiliate of a Member (according to the relative
priority
35
of repayment of such loans and proportionally among loans of equal priority
if the amount available for repayment is insufficient for payment in full);
and
[d] Fourth, to the Members in proportion to the positive balances in their
respective Capital Accounts after such Capital Accounts have been adjusted
for all allocations of Profits and Losses and items thereof for the Fiscal
Year during which such Liquidation occurs.
12.4 LIQUIDATING DISTRIBUTIONS. If the Company is not continued
-------------------------
pursuant to 11.3 and the remaining Member has not elected to form the New
Company as provided in 11.4, the liquidating Distributions due to the Members
will be made by selling the assets of the Company and distributing the net
proceeds. Notwithstanding the preceding sentence, but only upon the affirmative
Vote of all Members, the liquidating Distributions may be made by distributing
the assets of the Company in kind to the Members in proportion to the amounts
distributable to them pursuant to 12.3, valuing such assets at their Fair Market
Value (net of liabilities secured by such property that the Member takes subject
to or assumes) on the date of Distribution. Each Member agrees to save and hold
harmless the other Members from such Member's proportionate share of any and all
such liabilities which are taken subject to or assumed. Appropriate and
customary prorations and adjustments will be made incident to any Distribution
in kind. The Members will look solely to the assets of the Company for the
return of their Capital Contributions, and if the assets of the Company
remaining after the payment or discharge of the debts and liabilities of the
Company are insufficient to return such contributions, they will have no
recourse against any other Member. The Members acknowledge that 12.3 may
establish Distribution priorities different from those set forth in the
provisions of the Act applicable to Distributions upon Liquidation, and the
Members agree that they intend, to that extent, to vary those provisions by this
Agreement.
12.5 NO RESTORATION OBLIGATION. Except as otherwise specifically
-------------------------
provided in 8.2 and 8.3, nothing contained in this Agreement imposes on any
Member an obligation to make an Additional Contribution in order to restore a
deficit Capital Account upon Liquidation of the Company.
12.6 TIMING. Final Distributions in Liquidation (except in the case
------
of a constructive Liquidation under 12.2) will be made by the end of the
Company's Fiscal Year in which such actual Liquidation occurs (or, if later,
within 90 days after such event) in the manner required to comply with the (S)
704(b) Regulations. Payments or Distributions in Liquidation may be made to a
liquidating trust established by the Company for the benefit of those entitled
to payments under 12.3, in any manner consistent with this Agreement and the (S)
704(b) Regulations.
36
12.7 LIQUIDATING REPORTS. A report will be submitted with each liquidating
-------------------
Distribution to Members made pursuant to 12.4, showing the collections,
disbursements and Distributions during the period which is subsequent to any
previous report. A final report, showing cumulative collections, disbursements
and Distributions, will be submitted upon completion of the Liquidation.
12.8 LIQUIDATION IF NEW COMPANY IS FORMED. Upon Dissolution of the Company
------------------------------------
caused by an event described in 11.1[b], if the remaining Member forms a New
Company with one or more New Members as provided in 11.4, Liquidation of the
Company will be accomplished by the assignment of all of the Company's assets
and liabilities, whether fixed or contingent, to the New Company and the
assumption by the New Company of all of the Company's assets and liabilities,
whether fixed or contingent.
12.9 CERTIFICATE OF CANCELLATION. Upon Dissolution of the Company and the
---------------------------
completion of the winding up of its business, the Company will file a
certificate of cancellation (to cancel the Certificate of Formation) with the
Delaware Secretary of State pursuant to the Act. At such time, the Company will
also file an application for withdrawal of its certificate of authority in any
jurisdiction where it is then qualified to do business. A certificate of
cancellation will also be filed at any time there is only one Member.
ARTICLE 13: TRANSFER RESTRICTIONS
13.1 GENERAL RESTRICTION. No Person may Transfer all or any part of such
-------------------
Person's Ownership Interest in any manner whatsoever except as set forth in 13.3
or with the unanimous consent of the remaining Members, and only if the
requirements of 13.4 have also been satisfied. Any other Transfer of all or any
part of an Ownership Interest is null and void, and of no effect. Any Member
who makes a Transfer of all of such Person's Ownership Interest will be treated
as resigning from the Company on the effective date of such Transfer. The
rights and obligations of any resigning Member or of any Transferee of an
Ownership Interest will be governed by the other provisions of this Agreement.
13.2 NO MEMBER RIGHTS. Except as otherwise provided in this Agreement, no
----------------
Member has the right or power to confer upon any Transferee the attributes of a
Member in the Company. The Transferee of all or any part of an Ownership
Interest by operation of law does not, by virtue of such Transfer, succeed to
any rights as a Member in the Company.
13.3 PERMITTED TRANSFERS. Subject to the requirements set forth in 13.4,
-------------------
each of the LMC Member and the Fox Member may Transfer all (but not less than
all) of any
37
Ownership Interest held directly by such Member to any Affiliate of such Member
at any time when the aggregate Ownership Interests held directly by the LMC
Member and the Fox Member are less than 80% of the Ownership Interests in the
Company. In case of any such Permitted Transfer, the Transferee will be admitted
as a Member as of the effective date thereof.
13.4 GENERAL CONDITIONS ON TRANSFERS. No Transfer of an Ownership Interest
-------------------------------
will be effective unless all the conditions set forth below are satisfied:
[a] Unless waived by each nontransferring Member, the Transferor signs and
delivers to the Company an undertaking in form and substance satisfactory
to the Company to pay all reasonable expenses incurred by the Company in
connection with the Transfer (including reasonable fees of counsel and
accountants and the costs to be incurred with any additional accounting
required in connection with the Transfer, and the cost and fees
attributable to preparing, filing and recording such amendments to the
Certificate or other organizational documents or filings as may be required
by law);
[b] Unless waived by each nontransferring Member, the Transferor delivers to
the Company [i] an opinion of counsel for the Transferor reasonably
satisfactory in form and substance to the Company to the effect that,
assuming the accuracy of the statement of the Transferee described in [ii]
below, the Transfer of the Ownership Interest as proposed does not violate
requirements for registration under applicable federal and state securities
laws and [ii] a statement of the Transferee in form and substance
reasonably satisfactory to the Company making appropriate representations
and warranties with respect to compliance with the applicable federal and
state securities laws and as to any other matter reasonably required by the
Company;
[c] Unless waived by each nontransferring Member, the Transferor provides an
opinion of counsel for the Transferor reasonably satisfactory in form and
substance to the nontransferring Members or other evidence reasonably
satisfactory to the nontransferring Members that the Transfer of the
Ownership Interest will not result in the termination of the Company within
the meaning of (S) 708(b)(1)(B) of the Code. If the immediate Transfer of
such Ownership Interest would cause such a termination, but the following
action would not cause such a termination, the Transferor will be entitled
[i] immediately to Transfer only that portion of the Ownership Interest as
may be Transferred without causing such a termination and [ii] to enter
into an agreement to Transfer the remainder of its Ownership Interest, in
one or more Transfers, at the earliest date or dates on which such Transfer
or Transfers may be effected without causing such a termination. In
determining whether a particular proposed
38
Transfer will result in a termination of the Company, the Members will take
into account the existence of prior written commitments to Transfer of
which Notice has been given pursuant to this Agreement and those proposed
Transfers will be given precedence over subsequent proposed Transfers. Each
nontransferring Member will waive the foregoing provisions of this 13.4[c]
unless such Member reasonably determines that the termination of the
Company within the meaning of (S) 708(b)(1)(B) of the Code is reasonably
likely to have a material adverse effect on such Member;
[d] The Transferor signs and delivers to the Company a copy of the assignment
of the Ownership Interest to the Transferee substantially in the form of
the attached EXHIBIT A, which assignment will provide that the Transferor
is released from any and all liabilities with respect to the transferred
Ownership Interest (unless the Transferee is an Affiliate of the
Transferor, in which case the assignment will provide that the Transferor
will continue to be liable for the performance of such liabilities);
[e] The Transferee signs and delivers to the Company an agreement
(substantially in the form of the attached EXHIBIT B) to be bound by this
Agreement; and
[f] The Transfer is in compliance with the other provisions of this Article.
The Transfer of an Ownership Interest will be effective as of 12:01 a.m.
(Pacific Time) on the first day of the month following the month in which all of
the above conditions have been satisfied. The Company will amend Schedule 1.3
as of the effective time to reflect the new Ownership Interests.
13.5 RIGHTS OF TRANSFEREES. Any Transferee of an Ownership Interest
---------------------
will, on the effective date of the Transfer, have only those rights of an
assignee as specified in the Act unless and until such Transferee is admitted as
a substitute Member. This provision limiting the rights of a Transferee will
not apply if such Transferee is already a Member; provided that any Member who
resigns or retires from the Company in contravention of 6.5 will have only the
rights of an assignee as specified in the Act. Any Transferee of an Ownership
Interest who is not admitted as a substitute Member in accordance with this
Agreement has no right [a] to participate or interfere in the management or
administration of the Company's business or affairs, [b] to Vote or agree on any
matter affecting the Company or any Member, [c] to require any information on
account of Company transactions or [d] to inspect the Company's books and
records. The only right of a Transferee of an Ownership Interest who is not
admitted as a substitute Member in accordance with this Agreement is to receive
the allocations and Distributions to which the Transferor was entitled (to the
extent of the Ownership Interest Transferred) and to receive all necessary tax
reporting information. In any event, each Transferee of an
39
Ownership Interest (including both immediate and remote Transferees) will be
subject to all of the obligations, restrictions and other terms contained in
this Agreement as if such Transferee were a Member. To the extent of any
Ownership Interest Transferred, the Transferor Member will not possess any right
or power as a Member and may not exercise any such right or power directly or
indirectly on behalf of the Transferee.
13.6 ADMISSION. Except as set forth in 11.3 or 13.3, a Transferee of
---------
an Ownership Interest will not become a substitute Member of the Company unless
such substitution is consented to by all Members, which consent may be granted
or withheld in the sole discretion of the Members and which consent may be
arbitrarily withheld, effective upon a date specified (which must be on or after
the effective date of the Transfer, as determined under 13.4).
13.7 SECURITY INTEREST. The pledge or granting of a Lien affecting all or
-----------------
any part of a Member's Ownership Interest will not cause the Member to cease to
be a Member. Except as otherwise provided in the Agreement Regarding Ownership
Interests, in no event will any secured party be entitled to foreclose upon (or
receive a Transfer in lieu of foreclosure of) any such secured interest or to
exercise any rights of a Member under this Agreement (unless and until such
Person is admitted as a substitute Member), and such secured party may look only
to such Member for the enforcement of any of its rights as a creditor. In no
event will the Company have any liability or obligation to any Person by reason
of the Company's payment of a Distribution to any secured party as long as the
Company makes such payment in reliance upon written instructions from the Member
to whom such Distributions would be payable. Except as otherwise provided in
the Agreement Regarding Ownership Interests, any secured party will be entitled,
with respect to the security interest granted, only to the allocations and
Distributions to which the assigning Member would be entitled under this
Agreement, and only if, as and when such allocations and Distributions are made
by the Company, and to receive any necessary tax reporting information. Neither
the Company nor any Member will owe any fiduciary duty of any nature to a
secured party.
ARTICLE 14: GENERAL PROVISIONS
14.1 AMENDMENT. This Agreement may be amended only by the affirmative
---------
Vote of all Members. Any amendment will become effective upon such approval,
unless otherwise provided. Notice of any proposed amendment must be given at
least five days in advance of the meeting at which the amendment will be
considered (unless the approval is evidenced by duly signed minutes of action or
written consent). Any duly adopted amendment to this Agreement is binding on,
and inures to the benefit of, each Person who holds an Ownership Interest at the
time of such amendment, without the
40
requirement that such Person sign the amendment or any republication or
restatement of this Agreement.
14.2 REPRESENTATIONS. Each Member represents and warrants to each other
---------------
Member that, as of the signing of this Agreement:
[a] Such Member is duly organized, validly existing and in good standing under
the laws of the jurisdiction where it purports to be organized, and is a
United States Person;
[b] Such Member has full power and authority as a corporation or limited
liability company to enter into and perform its obligations under this
Agreement;
[c] All actions necessary to authorize the signing and delivery of this
Agreement, and the performance of obligations under it, have been duly
taken;
[d] This Agreement has been duly signed and delivered by a duly authorized
officer or other representative of such Member and constitutes the legal,
valid and binding obligation of such Member enforceable in accordance with
its terms, except as such enforceability may be affected by applicable
bankruptcy, insolvency or other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies is
subject to judicial discretion;
[e] No consent or approval of any other Person is required in connection with
the signing, delivery and performance of this Agreement by such Member; and
[f] The signing, delivery and performance of this Agreement do not violate the
organizational documents of such Member or any material agreement to which
such Member is a party or by which such Member is bound.
14.3 UNREGISTERED INTERESTS. Each Member [a] acknowledges that the
----------------------
Ownership Interests are being offered and sold without registration under the
Securities Act of 1933, as amended, or under similar provisions of state law,
[b] acknowledges that such Member is fully aware of the economic risks of an
investment in the Company, and that such risks must be borne for an indefinite
period of time, [c] represents and warrants that such Member is acquiring an
Ownership Interest for such Member's own account, for investment, and with no
view to the distribution of the Ownership Interest, and [d] agrees not to
Transfer, or to attempt to Transfer, all or any part of its Ownership Interest
without registration under the Securities Act of 1933, as amended, and any
applicable state securities laws, unless the Transfer is exempt from such
registration requirements.
41
14.4 WAIVER OF DISSOLUTION RIGHTS. The Members agree that irreparable
----------------------------
damage would occur if any Member should bring an action for judicial dissolution
of the Company. Accordingly, each Member accepts the provisions under this
Agreement as such Person's sole entitlement on Dissolution of the Company and
waives and renounces such Person's right to seek a court decree of dissolution
or to seek the appointment by a court of a liquidator for the Company. Each
Member further waives and renounces any alternative rights which might otherwise
be provided by law upon the withdrawal of such Person and accepts the provisions
under this Agreement as such Person's sole entitlement upon the happening of
such event.
14.5 WAIVER OF PARTITION RIGHT. Each Member waives and renounces any
-------------------------
right that it may have prior to Dissolution and Liquidation to institute or
maintain any action for partition with respect to any property held by the
Company.
14.6 WAIVERS GENERALLY. No course of dealing will be deemed to amend or
-----------------
discharge any provision of this Agreement. No delay in the exercise of any
right will operate as a waiver of such right. No single or partial exercise of
any right will preclude its further exercise. A waiver of any right on any one
occasion will not be construed as a bar to, or waiver of, any such right on any
other occasion.
14.7 EQUITABLE RELIEF. Except as provided in 6.5, if any Member proposes
----------------
to Transfer all or any part of its Ownership Interest in violation of the terms
of this Agreement, the Company or any Member may apply to any court of competent
jurisdiction for an injunctive order prohibiting such proposed Transfer except
in compliance with the terms of this Agreement, and the Company or any Member
may institute and maintain any action or proceeding against the Person proposing
to make such Transfer to compel the specific performance of this Agreement. Any
attempted Transfer in violation of this Agreement is null and void, and of no
force and effect. The Person against whom such action or proceeding is brought
waives the claim or defense that an adequate remedy at law exists, and such
Person will not urge in any such action or proceeding the claim or defense that
such remedy at law exists.
14.8 REMEDIES FOR BREACH. The rights and remedies of the Members set forth
-------------------
in this Agreement are neither mutually exclusive nor exclusive of any right or
remedy provided by law, in equity or otherwise. Except as provided in 6.5, all
legal remedies (such as monetary damages) as well as all equitable remedies
(such as specific performance) will be available for any breach or threatened
breach of any provision of this Agreement.
14.9 COSTS. If the Company or any Member retains counsel for the
-----
purpose of enforcing or preventing the breach or any threatened breach of any
provision of this Agreement or for any other remedy relating to it, then the
prevailing party will be entitled to be reimbursed by the nonprevailing party
for all costs and expenses so incurred
42
(including reasonable attorney's fees, costs of bonds and fees and expenses for
expert witnesses).
14.10 INDEMNIFICATION. Each Member hereby indemnifies and agrees to hold
---------------
harmless the Company and each other Member from any liability, cost or expense
arising from or related to any act or failure to act of such Member which is in
violation of this Agreement.
14.11 COUNTERPARTS. This Agreement may be signed in multiple counterparts (or
------------
with detachable signature pages). Each counterpart will be considered an
original instrument, but all of them in the aggregate will constitute one
agreement.
14.12 NOTICE. All Notices under this Agreement will be in writing and will be
------
either delivered or sent addressed as follows: [a] if to the Company, at the
Company's principal office in Los Angeles, California, and [b] if to any Member,
at such Person's address as then appearing in the records of the Company. In
computing time periods, the day of Notice will be included.
14.13 DEEMED NOTICE. Any Notices given to any Member in accordance with
-------------
this Agreement will be deemed to have been duly given: [a] on the date of
receipt if personally delivered, [b] five days after being sent by U.S. mail,
postage prepaid, [c] the date of receipt, if sent by registered or certified
U.S. mail, postage prepaid, [d] one Business Day after receipt, if sent by
confirmed facsimile or telecopier transmission or [e] one Business Day after
having been sent by a nationally recognized overnight courier service.
14.14 PARTIAL INVALIDITY. Wherever possible, each provision of this Agreement
------------------
will be interpreted in such manner as to be effective and valid under applicable
law. However, if for any reason any one or more of the provisions of this
Agreement are held to be invalid, illegal or unenforceable in any respect, such
action will not affect any other provision of this Agreement. In such event,
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had never been contained in it.
14.15 ENTIRE AGREEMENT. This Agreement (including its Schedules and Exhibits)
----------------
contains the entire agreement and understanding of the Members concerning its
subject matter.
14.16 BENEFIT. The contribution obligations of each Member will inure solely
-------
to the benefit of the other Members and the Company, without conferring on any
other Person any rights of enforcement or other rights.
43
14.17 BINDING EFFECT. This Agreement is binding upon, and inures to the
--------------
benefit of, the Members and their permitted Transferees, provided that any
Transferee will have only the rights specified in 13.5 unless admitted as a
substitute Member in accordance with this Agreement.
14.18 FURTHER ASSURANCES. Each Member will sign and deliver, without
------------------
additional consideration, such other documents of further assurance as may
reasonably be necessary to give effect to the provisions of this Agreement.
14.19 HEADINGS. Article and section titles have been inserted for convenience
--------
of reference only. They are not intended to affect the meaning or
interpretation of this Agreement.
14.20 TERMS. Terms used with initial capital letters will have the meanings
-----
specified, applicable to both singular and plural forms, for all purposes of
this Agreement. All pronouns (and any variation) will be deemed to refer to the
masculine, feminine or neuter, as the identity of the Person may require. The
singular or plural includes the other, as the context requires or permits. The
word include (and any variation) is used in an illustrative sense rather than a
limiting sense. The word day means a calendar day.
14.21 GOVERNING LAW; FORUM. This Agreement will be governed by, and construed
--------------------
in accordance with, [a] the laws of the State of Delaware, insofar as any matter
at issue is governed by, or is addressed in, the Act, and [b] the laws of the
State of New York, as to any other matter. Any conflict or apparent conflict
between this Agreement and the Act will be resolved in favor of this Agreement,
except as otherwise required by the Act. Any action to enforce any provision of
this Agreement may be brought only in a court in the state of New York or in the
United States District Court for the Southern District of New York. Each party
[i] agrees to submit to the general jurisdiction of such courts and to accept
service of process at its address for notices pursuant to this Agreement in any
such action or proceeding and [ii] irrevocably waives any objection it may have
to the laying of venue of such action or proceeding brought in any such court
and any claim that such action or proceeding brought in any such court has been
brought in an inconvenient forum.
[Signature Page Follows]
44
IN WITNESS WHEREOF, all of the MEMBERS have signed this OPERATING AGREEMENT of
LIBERTY/FOX REGIONAL SPORTS LLC, to be effective from the date first above
mentioned, notwithstanding the actual date of signing.
LIBERTY SPORTS MEMBER, INC.
May 9, 1996
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Its: President & Chief Executive Officer
------------------------------------
FOX REGIONAL SPORTS MEMBER, INC.
May 9, 1996
By: /s/ Xxx Xxxxxxxxx
------------------------------------
Its: Senior Vice President
------------------------------------
LIBERTY/FOX U.S. SPORTS LLC
May 9, 1996
By: LMC Newco U.S., Inc., a member
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Its: President & Chief Executive Officer
------------------------------------
By: Fox Regional Sports Holdings, Inc.,
a member
By: /s/ Xxx Xxxxxxxxx
-------------------------------------
Its: Senior Vice President
------------------------------------
By: Liberty/Fox Sports Financing LLC, a
member
By: LMC Newco U.S., Inc., a member
By: /s/ Xxxxx X. Xxxxxx
-------------------------------------
Its: President & Chief Executive Officer
------------------------------------
By: News America Holdings Incorporated, a
member
By: /s/ Xxx Xxxxxxxxx
--------------------------------
Its: Senior Vice President
--------------------------------
