EXHIBIT 10.10
DONTECH II PARTNERSHIP AGREEMENT
This DonTech II Partnership Agreement ("Agreement") is
effective as of this 19th day of August, 1997, by and between THE XXXXXX X.
XXXXXXXXX CORPORATION, a Delaware corporation ("Donnelley"), and AMERITECH
PUBLISHING OF ILLINOIS, INC., a Delaware corporation ("API/IL"). Donnelley
and API/IL are hereafter sometimes referred to individually or collectively as
a "Partner" or the "Partners."
W I T N E S S E T H:
WHEREAS, the Partnership intends to enter into the Exclusive
Sales Agency Agreement;
WHEREAS, each of the Partners desires to contribute certain
assets and liabilities to the Partnership subject to the terms and conditions
of this Partnership Agreement;
WHEREAS, the execution and delivery of this Agreement is a
condition to the execution and delivery of the Exclusive Sales Agency
Agreement; and
WHEREAS, the Partners wish to adopt this Agreement as the
Partnership's Articles of Partnership as of the Effective Date.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and benefits herein set forth and contemplated, the Partners
agree as follows:
ARTICLE 1
Definitions
Section 1.1. "Accountants" means the firm of recognized
independent certified public accountants for the Partnership that is appointed
pursuant to this Agreement.
Section 1.2. "Advisory Director" has the meaning set forth in
Section 8.1(b).
Section 1.3. "Affiliate" of any Person means any other Person
directly or indirectly Controlling, directly or indirectly Controlled by, or
under common direct or indirect Control with, such Person. "Control" in this
Section has the same meaning as "control" in Rule 12b-2 under the Securities
Exchange Act of 1934 as in effect on the Effective Date.
Section 1.4. "Ameritech" means Ameritech Corporation, a
Delaware corporation.
Section 1.5. "Board of Directors" has the meaning set forth in
Section 8.1(a).
Section 1.6. "Book Value" has the meaning set forth in Section
4.6(f)(ii).
Section 1.7. "Breaching Partner" has the meaning set forth in
Section 9.2(b).
Section 1.8. "Business Day" means Monday, Tuesday, Wednesday,
Thursday, or Friday, unless the day is a federal or Illinois legal holiday.
Section 1.9. "Business Plan" means a business plan (including
an operating budget and a capital budget) for the Partnership for the three
succeeding Fiscal Years, as amended in accordance with this Agreement.
Section 1.10. "Capital Account" has the meaning set forth in
Section 4.5.
Section 1.11. "Code" means the Internal Revenue Code of 1986,
as amended.
Section 1.12. "Confidential Information" has the meaning set
forth in Section 12.2(a).
Section 1.13. "D&B" means The Dun & Bradstreet Corporation, a
Delaware corporation.
Section 1.14. "Debt" of any Person means (a) obligations of
such Person for borrowed money, (b) obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments, (c) obligations of such
Person to pay the deferred purchase price of property or services, (d)
obligations of such Person as lessee under capital leases, (e) Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
assumed by such Person, and (f) Debt of others guaranteed directly or
indirectly by such Person or as to which such Person has an obligation
substantially the economic equivalent of a guarantee.
Section 1.15. "Donnelley Revenue Participation Interests"
means the Revenue Participation Interests as defined in the Revenue
Participation Agreement between APIL Partners Partnership and Donnelley dated
August 19, 1997, which have not been transferred by Donnelley prior to its
Change of Control.
Section 1.16. "Effective Date" means August 19, 1997.
Section 1.17. "Exclusive Sales Agency Agreement" means the
agreement by that title between APIL Partners Partnership and the Partnership
dated August 19, 1997.
Section 1.18. "Fiscal Year" has the meaning set forth in
Section 3.2.
Section 1.19. "GAAP" means generally accepted accounting
principles, consistently applied.
Section 1.20. "Governmental Authority" means any federal,
state, local or foreign governmental Person, authority or agency, court,
regulatory commission, stock exchange or other body, whether governmental or
private, and any arbitrator acting within the scope of his authority.
Section 1.21. "Governmental Rule" means any statute, law,
treaty, rule, code, ordinance, regulation, permit, certificate or order of any
Governmental Authority or any judgment, decree, injunction, writ, order or
like action of any court, arbitrator or other judicial or quasijudicial
tribunal.
Section 1.22. "Impasse" has the meaning set forth in Section
8.6(a).
Section 1.23. "Interest" has the meaning set forth in Section
4.1.
Section 1.24. "IRS" means the Internal Revenue Service.
Section 1.25. "Lien" means any lien, mortgage, encumbrance,
pledge, charge, lease restriction, easement, servitude, right of others or
security interest of any kind, including any thereof arising under conditional
sales or other title retention agreements.
Section 1.26. "Losses" has the meaning set forth in Section
4.6(a).
Section 1.27. "Net Loss" has the meaning set forth in Section
4.6(a).
Section 1.28. "Net Profit" has the meaning set forth in Section
4.6(a).
Section 1.29. "Parent" means Ameritech in the case of API/IL
and D&B in the case of Donnelley.
Section 1.30. "Partner" means API/IL or Donnelley. "Partners"
means API/IL and Donnelley.
Section 1.31. "Partnership" means the general partnership
formed pursuant to this Agreement.
Section 1.32. "Person" means any individual; corporation;
partnership; joint venture; association; joint-stock company; trust; limited
liability company; unincorporated organization; federal, state, local or
foreign governmental agency, authority, court, or regulatory commission; or
other regulatory body, whether governmental or private.
Section 1.33. "Profits" has the meaning set forth in Section
4.6(a).
Section 1.34. "Proprietary Rights" means patents, patent
applications, patent disclosures and inventions, and any reissue,
continuation, continuation-in-part, division, extension, or reexamination
thereof; trademarks, service marks, trade dress, logos, trade names, business
names, and corporate names, and all goodwill associated therewith; copyrights;
mask works; and any registrations or applications with respect to the
foregoing; trade secrets and confidential business information (including
ideas, formulas, compositions, inventions (whether patentable or unpatentable
and whether or not reduced to practice), know-how, manufacturing and
production processes and techniques, research and development information,
drawings, specifications, designs, plans, proposals, technical data,
copyrightable works, financial, business and marketing plans and customer and
supplier lists and information); computer software, data and documentation;
other proprietary rights; licenses or other agreements to or from third
parties regarding the foregoing, and all copies and tangible embodiments of
the foregoing (in whatever form or medium).
Section 1.35. "Seconded Employee" means an employee of a
Partner or any of its Affiliates made available to the Partnership while
remaining an employee of such Partner or Affiliate.
Section 1.36. "Subsidiary" of any Person means a corporation,
limited liability company, company or other entity (i) more than 50% of whose
outstanding shares or securities (representing the right to vote for the
election of directors or other managing authority) are, or (ii) which does not
have outstanding shares or securities (as may be the case in a partnership,
joint venture or unincorporated association), but more than 50% of whose
ownership interest representing the right to make decisions for such other
entity is, now or hereafter owned or controlled, directly or indirectly, by
such Person, but such corporation, company or other entity is a Subsidiary
only so long as such ownership or control exists.
Section 1.37. "Tax Matters Partner" has the meaning set forth
in Section 3.5(b)(i).
Section 1.38. "Transfer" means to transfer, sell, assign,
convey, license, sublicense or deliver.
Section 1.39. "Treas. Reg." has the meaning set forth in
Section 4.6(f)(i).
Section 1.40. "Voting Director" has the meaning set forth in
Section 8.1(b).
ARTICLE 2
Organization of the Partnership
Section 2.1. Formation. The Partnership has been formed as a
general partnership under the Illinois Uniform Partnership Act for the purposes
and scope set forth herein, and the Partners hereby adopt this Agreement as
the Partnership's Articles of Partnership.
Section 2.2. Illinois Uniform Partnership Act. Except to the
extent otherwise provided herein, the rights and liabilities of the Partners
and the conduct and termination of the Partnership shall be governed by the
Illinois Uniform Partnership Act.
Section 2.3. Execution of Documents. The Partners will
promptly execute all certificates and other documents, and make all such
filings and recordings and perform such other acts as may now or hereafter be
necessary or desirable, to comply with the requirements of Illinois law for the
organization and formation of the Partnership and the carrying on of its
business.
Section 2.4. General Partner Status. Subject to the
limitations on each Partner's authority contained in Section 7.2, each Partner
shall be a general partner.
Section 2.5. Name; Qualification of Partners. The
Partnership's name is "DonTech II." The Partnership may also do business
under other names agreed to by both Partners. If required by an applicable
Governmental Rule, (a) the Partnership shall cause appropriate partnership
certificates or fictitious business name certificates to be filed with the
appropriate Governmental Authorities and (b) each Partner shall as
expeditiously as possible qualify to do business as a foreign corporation in
all appropriate jurisdictions.
Section 2.6. Principal Office. The principal office and place
of business of the Partnership shall be 000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxxxx,
Xxxxxxxx, or such other location within Illinois as the Partnership may
designate.
Section 2.7. Purpose and Scope. (a) The purposes of the
Partnership shall be to engage in certain activities, including activities
required by the Exclusive Sales Agency Agreement, any other businesses which
the Partners agree to undertake, and disbursing profits relating to such
businesses.
(b) The Partnership shall have the right, authority, and
power to do any act to accomplish, and to enter into any contract incidental
to attain, the purposes of the Partnership specified in this Agreement and to
manage the business of the Partnership.
(c) The Partners agree that they will conduct the business
of the Partnership to maximize the profitability of the Partnership and
will cooperate in sharing information and resources with each other to
further that objective. Unless the Partners otherwise agree, each member
of the Board of Directors and each Seconded Employee must prefer the
interests of the Partnership over the interests of a Partner or any of its
Affiliates.
ARTICLE 3
Tax Accounting Method, Tax Elections, and Tax Year
Section 3.1. Reporting Income. The Partnership shall report
its income for income tax purposes on the accrual method on a calendar-year
basis. The Partnership shall elect to treat any research and development
expenses incurred by the Partnership as current expenses.
Section 3.2. Fiscal Year. The fiscal year of the Partnership
shall be the calendar year.
Section 3.3. Books and Records. The Partnership shall cause
to be prepared and maintained in Illinois complete books and records, on an
accrual basis, regarding all phases of its business including, without
limitation, construction, lease acquisition and maintenance, marketing,
procurement and purchasing, contract administration, financial planning,
accounting, reporting, legal expenditures, capital expenditures, taxes,
royalties and other operating expenses, capital and operating budgets, and
other reporting procedures. Each Partner shall have the right (at its own
expense) to inspect, audit, and copy any and all such books and records at all
reasonable times, which right may be exercised through any agent or employee
of such Partner designated by such Partner or by an independent certified
public accountant designated by such Partner.
Section 3.4. Financial Statements. (a) Annual Statements.
As soon as practicable following the end of each Fiscal Year (and in any event
not later than 90 days after the end of such Fiscal Year), the Partnership
shall prepare and deliver to each Partner and the Board of Directors, a
balance sheet of the Partnership as of the end of such Fiscal Year and the
related statements of operations, changes in Partners' equity and cash flow of
the Partnership for such Fiscal Year, together with appropriate notes to such
financial statements, all of which shall be prepared in accordance with GAAP
and certified by the Accountants. At the same time, the Partnership shall
deliver (at its sole expense) to each Partner a report indicating such
Partner's share of all items of income, gain, loss, deduction, and credit of
the Partnership for such Fiscal Year and any other financial information
related to the Partnership which is requested by either Partner for federal,
state, local or foreign income or franchise tax purposes.
(b) Quarterly Statements. As soon as practicable following
the end of each fiscal quarter (and in any event not later than 20 Business
Days after the end of such fiscal quarter), the Partnership shall prepare
and deliver to each Partner and the Board of Directors a balance sheet of
the Partnership as of the end of such fiscal quarter and the related
statements of operations and cash flow of the Partnership for such fiscal
quarter and for the Fiscal Year to date and an estimate of each Partner's
share of all items of income, gain, loss, deduction, and credit of the
Partnership for such fiscal quarter and for the Fiscal Year to date for
federal income tax purposes, in each case together with (i) a certificate
of the Chief Financial Officer to the effect that such financial statements
have been prepared under such officer's supervision and that, although such
financial statements do not contain the footnotes and other disclosures
required by GAAP, such financial statements, in such officer's judgment,
fairly present the interim financial position and results of operations of
the Partnership as of the date and for the periods indicated, subject to
normal recurring year-end audit adjustments, and (ii) a report of the
Accountants with respect thereto based on a limited review not constituting
an audit pursuant to Statement of Auditing Standards No. 36.
Section 3.5. Taxation. (a) Characterization. The Partners
intend that the Partnership shall be treated as a partnership for federal,
state, local, and foreign income and franchise tax purposes and shall take all
reasonable action, including the amendment of this Agreement and the execution
of other documents, as may be required to qualify for and receive treatment as
a partnership for federal income tax purposes.
(b) Tax Matters Partner.
(i) The Board of Directors shall designate from time to time
one of the Partners to serve as the Tax Matters Partner of the Partnership
under Section 6231(a)(7) of the Code and in any similar capacity under state,
local, or foreign law (the "Tax Matters Partner"). The Tax Matters Partner
shall take no action (other than ministerial action) without the prior
approval of the Board of Directors. The Tax Matters Partner shall not be
required to take any action or incur any expenses for the prosecution of any
administrative or judicial remedies in its capacity as the Tax Matters Partner
unless both Partners agree on a method of sharing expenses incurred in
connection with the prosecution of such remedies and on appropriate tax
counsel or other tax advisors to represent the Partnership in connection with
such matters. As long as the Tax Matters Partner is not grossly negligent and
acts in good faith pursuant to instructions it receives from the Board of
Directors, (A) the Tax Matters Partner shall be fully protected in acting as
such and (B) the Partnership shall indemnify and hold harmless the Tax Matters
Partner from and against any and all expenses incurred by the Tax Matters
Partner in connection with any activities or undertakings taken by it in its
capacity as the Tax Matters Partner. If the other Partner enters into a
settlement or closing agreement with the IRS or any comparable Governmental
Authorities with respect to any Partnership tax item, then the other Partner
shall notify the Tax Matters Partner of such agreement and its terms within 30
days of the execution of such agreement.
(ii) The Tax Matters Partner shall take such action as may be
reasonably necessary to constitute the other Partner a "notice partner" within
the meaning of Section 6231(a)(8) of the Code. The Tax Matters Partner shall
notify the other Partner of all material matters that come to its attention in
its capacity as Tax Matters Partner, and the other Partner and the Partnership
shall notify the Tax Matters Partner of all material matters that come to
their attention relevant to the Tax Matters Partner's acting as such. This
Section 3.5(b) is not intended to authorize the Tax Matters Partner to
exercise or limit any right that is exercisable by the other Partner under
Sections 6222 through 6233 of the Code.
(c) Tax Returns. The Tax Matters Partner shall cause the
Accountants to prepare and file on a timely basis the federal tax returns of
the Partnership for each fiscal year for which such Tax Matters Partner is
responsible. On or before the earliest of (i) July 1, (ii) 45 days before the
due date (determined with regard to any extension) of each such return, and
(iii) such date as is requested by either Partner, the Tax Matters Partner
shall transmit copies thereof to the other Partner for review. The Tax Matters
Partner shall not cause any such tax return to be filed by or on behalf of the
Partnership unless the other Partner has consented to its filing; provided,
however, that if the other Partner does not consent to the filing of any such
tax return at least 15 days before the due date, the Tax Matters Partner (a)
shall promptly submit any disputed issues to the Accountants for resolution,
such resolution to be binding upon the Partners and (b) may, in the event that
the Accountants are unable to resolve such dispute at least five days before
the due date, (1) file such return after making a good faith effort to
incorporate in such return any comments previously received from such Partner
and (2) incorporate the Accountants' resolution into an amended return within a
reasonable time after the Accountants resolve such dispute.
The Tax Matters Partner shall cause state, local, and any other
required tax returns of the Partnership to be prepared and filed on a timely
basis. To the extent appropriate in connection with such preparation and
filing, (i) the Accountants or other accounting firms shall assist and (ii)
the Partners shall be consulted.
Section 3.6. Deposit of Funds. All funds of the Partnership
not otherwise employed shall be (a) deposited from time to time to its credit
in such banks or trust companies or other depositories or (b) invested in such
other short-term investments as the Board of Directors shall select, or as may
be selected by any authorized officer or agent of the Partnership. The funds
of the Partnership shall not be commingled with the funds of either Partner or
any Affiliate of either Partner.
Section 3.7. Independent Accountants. The Board of Directors
shall select the Accountants for the Partnership from a recognized firm of
public accountants to provide general outside accounting services to the
Partnership and to perform the annual audit of the Partnership. In the event
such firm resigns or is otherwise unable to continue to serve as the
Partnership's outside Accountants, then the Board of Directors shall select
successor Accountants. Nothing in this section shall be construed to preclude
the Board of Directors from selecting a nationally recognized accounting firm
performing services for either Partner.
ARTICLE 4
Initial Capital, Contributions, Distributions, and Allocations
Section 4.1. Partnership Interest. Each Partner's interest
("Interest") is fifty percent (50%).
Section 4.2. Initial Capital Contribution. The initial
capital of the Partnership shall consist of the contributions set forth in the
Initial Capital Schedule. All non-cash contributions to the Partnership shall
be valued at their net book value as determined by the Board of Directors.
The Partners agree that the fair market value of the contributed assets is as
set forth in the Initial Capital Schedule hereto.
Section 4.3. Additional Capital Contributions. From time to
time during the term of the Partnership, the Board of Directors may call for
additional capital contributions in equal amounts or otherwise from each of the
Partners if, in the opinion of the Board of Directors, additional capital is
required for the operation of the Partnership. Notice of any capital call
shall be delivered to each Partner not less than five Business Days prior to
the date payment is required to be made pursuant to the capital call.
Section 4.4. Distributions. Periodically, as determined by
the Board of Directors, the Partnership, whether from Partnership operations or
otherwise, shall distribute to the Partners in proportion to their respective
Interests or otherwise (a) the Partnership's net profits for the period
completed reduced by any funds which the Board of Directors determines to be
necessary to satisfy existing or future obligations of the Partnership and (b)
other assets.
Section 4.5. Partner Capital Accounts. The term "Capital
Account" means the account maintained for each Partner in accordance with the
following provisions:
(a) To each Partner's Capital Account there shall be credited
such Partner's capital contributions pursuant to Article 4 (with any property
contributed in kind valued at the net book value thereof as determined by the
Board of Directors net of any Partner liabilities assumed or taken subject to
by the Partnership), such Partner's allocation of Net Profits, and the amount
of any Partnership liabilities assumed by such Partner (excluding guarantees
and loans made by such Partner);
(b) From each Partner's Capital Account there shall be
debited the amount of cash and the fair market value of any property of the
Partnership distributed to such Partner (as determined by the Board of
Directors) pursuant to any provision of this Agreement net of Partnership
liabilities retained or assumed by the Partner, such Partner's allocation of
Net Losses, and the amount of any liabilities of such Partner assumed by the
Partnership;
(c) If any interest in the Partnership is Transferred in
accordance with the terms of this Agreement, the Transferee shall succeed to
the Capital Account of the Transferor to the extent it relates to the
Transferred interest in the Partnership; and
(d) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to
comply with the requirements of Treas. Reg. Section 1.704-1(b) and shall be
interpreted and applied in a manner consistent therewith.
Section 4.6. Allocations of Partnership Profit and Loss. (a)
"Profits" means items of Partnership income and gain determined according to
Section 4.6(b). "Losses" means items of Partnership loss and deduction
determined according to Section 4.6(b). The "Net Profit" of the Partnership
for a fiscal period shall mean the excess of Partnership Profits over
Partnership Losses. The "Net Loss" of the Partnership for a fiscal period
shall mean the excess of Partnership Losses over Partnership Profits.
(b) For purposes of computing the amount of any item of
Partnership income, gain, loss or deduction the determination, recognition
and classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes except that:
(i) items of income and gain exempt from federal income tax
shall be included;
(ii) Partnership expenditures not deductible for federal
income tax purposes and not chargeable to Capital Accounts (including any
losses on Partnership property sold to a related person that are disallowed
for federal income tax purposes) shall be included as items of loss or
deduction;
(iii) items of income, gain, loss or deduction attributable to
the disposition of Partnership property having a Book Value that differs from
its adjusted basis for federal income tax purposes shall be computed by
reference to the Book Value of such property;
(iv) items of depreciation, amortization and other cost
recovery deductions with respect to Partnership property having a Book Value
that differs from its adjusted tax basis for federal income tax purposes shall
be computed by applying the same method and rate or depreciable life used to
recover adjusted tax basis for federal income tax purposes to the property's
Book Value; and
(v) if Partnership property is distributed to a Partner,
such property shall be treated as if it were sold for amount equal to its
net book value.
(c) Except as otherwise provided in Section 4.6(e), the Net
Profit of the Partnership for any fiscal period shall be allocated to all
Partners in proportion to their Interests.
(d) Except as otherwise provided in Section 4.6(e), the Net
Loss of the Partnership for any fiscal period shall be allocated to all
Partners in proportion to their Interests.
(e) The following special allocations shall be made:
(i) If there is a net decrease in the partnership minimum
gain (as defined by Treas. Reg. Section 1.704-2(d)) or partner nonrecourse
debt minimum gain (as defined by Treas. Reg. Section 1.704-2(i)(2)) during any
taxable year, each Partner shall be allocated Profits for such taxable year
(and, if necessary, for subsequent taxable years) in the amounts and of such
character as determined according to Treas. Reg. Section Section 1.704-2(f)
or 1.704-2(i)(4). This Section 4.6(e)(i) is intended to be a minimum gain
chargeback and partner nonrecourse debt minimum gain chargeback that complies
with the requirements of Treas. Reg. Section 1.704-2, and shall be
interpreted in a manner consistent therewith.
(ii) Subject to Section 4.6(b), organizational expenses (as
defined in Treas. Reg. Section 1.709-2(a)) shall be allocated to the Partners
to whom such expenses are attributable, in such proportion as the Partners
reasonably determine.
(iii) If, and to the extent that, any Partner is deemed to
recognize any item of income, gain, loss, deduction or credit as a result of
any transaction between such Partner and the Partnership pursuant to Code
Section Section 1272-1274, 7872, 483, 482, 83 or any similar provision, any
corresponding item of Profit or Loss shall be allocated to the Partner who
recognized such item.
(iv) Any gain or loss described in Section 9.4(e) shall be
allocated to each Partner in accordance with Section 4.6(c) and 4.6(d).
(f) The following definitions shall apply for purposes of this
Agreement:
(i) "Treas. Reg." means the federal income tax regulations
promulgated under the Code before the Effective Date. To the extent that such
regulations are subsequently amended, the Partners shall discuss at such time
whether any amendments to this Agreement are necessary or desirable.
(ii) "Book Value" means with respect to any Partnership
property, the Partnership's adjusted tax basis for federal income tax
purposes, except that the Book Value of any property contributed to the
Partnership in kind by a Partner shall be the property's fair market value as
determined by the Board of Directors as of the date of contribution adjusted
by the Partnership's subsequent depreciation, amortization or other cost
recovery with respect to such property computed under Section 4.6(b)(iv).
(g) Except as provided by Section 4.6(e), an allocation of Net
Profit or Net Loss to a Partner shall be deemed to consist proportionately of
each item of Partnership income, gain, loss or deduction determined according
to Section 4.5(b) making up such Net Profit or Net Loss.
(h) For purposes of determining the Partners' share of excess
nonrecourse liabilities under Treasury Reg. Section 1.752-3(a)(3), each
Partner shall be treated as having a 50 percent interest in profits.
Section 4.7. Tax Allocation. (a) Except as otherwise provided
in Section 4.7(b), items of Partnership taxable income, gain, loss and
deduction shall be determined according to Code Section 703 and allocated to
the Partners according to their respective shares of Net Profit and Net Loss
to which such items relate.
(b) Items of Partnership taxable income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership by a Partner shall be allocated between the Partners according
to Code Section 704(c) so as to take account of any variation between its
Book Value and the adjusted tax basis of such property to the Partnership
for federal income tax purposes using such method as determined by the
Board of Directors.
(c) Allocations pursuant to this Section 4.7 are solely for
purposes of federal, state and local income taxes and shall not affect or
be taken into account in computing any Partner's Capital Account or share
of Profits, Losses, distributions or other Partnership items.
Section 4.8. Curative Allocations. If the Partners determine,
after consultation with competent tax counsel, that the allocation of any item
of Partnership income, gain, loss, deduction or credit is not specified in this
Article 4 (an "unallocated item"), or that the allocation of any item of
Partnership income, gain, loss, deduction or credit hereunder is clearly
inconsistent with the Partners' economic interests in the Partnership
(determined by reference to the general principles of Treas. Reg. Section
Section 1.704-1(b) and 1.704-2(b) and the factors set forth in Treas. Reg.
Section 1.704-1(b)(3)(ii)) (a "misallocated item"), then the Partners shall
allocate such unallocated items, or reallocate such misallocated items, to
reflect such economic interests. In the event of disagreement between the
Partners as to a curative allocation, the matter shall be referred for
resolution to competent tax counsel designated by the Board of Directors.
Section 4.9. Indemnification and Reimbursement for Payments on
Behalf of a Partner. If the Partnership is required by law to make any
payment on behalf of any Partner in its capacity as such or as a result of such
Partner's status (including federal withholding taxes, state personal property
taxes, and state unincorporated business taxes), then such Partner shall
indemnify the Partnership in full for the entire amount paid (including
interest, penalties and related expenses). The Partnership may offset
distributions to which a Partner is otherwise entitled hereunder against such
Partner's obligation to indemnify the Partnership under this Section 4.9.
Section 4.10. No Interest. No interest shall be payable to the
Partners on their capital contributions or otherwise in respect of the capital
of the Partnership.
Section 4.11. Payroll Taxes. The Partners and the Partnership
agree that responsibilities for payroll taxes shall be assigned under the
Alternative Procedure described in Section 5 of Rev. Proc. 83-66, to the
extent applicable.
ARTICLE 5
Partnership Expenses
The Partnership shall take whatever steps are necessary to pay
the expenses related to conducting its business, including, but not limited to,
performing all of its obligations under the Exclusive Sales Agency Agreement,
borrowing funds, and making capital calls on the Partners.
ARTICLE 6
Business Operations
Section 6.1. Business Dealings with the Partnership. A
Partner or any Affiliate thereof may enter into contracts or agreements,
including loans, with the Partnership and otherwise enter into transactions or
dealings with the Partnership on an arm's-length or other reasonable basis and
derive and retain profits therefrom, provided that any such contract or
agreement or other transaction or dealing is approved by the Board of
Directors in accordance with this Agreement. The Board of Directors may cause
the Partnership to enter into contracts or agreements with a Partner with or
without competitive bidding. The validity of any such contract, agreement,
transaction, or dealing or any payment or profit related thereto or derived
therefrom shall not be affected by any relationship between the Partnership
and such Partner or any of its Affiliates. All loans from one Partner to the
Partnership shall be made with full recourse to each Partner.
Section 6.2. Conflicts of Interest. The Partners agree that
if a conflict of interests arises, each conflicted Partner, member of the
Board of Directors ("Board Member"), or Seconded Employee may act
inconsistently with the Partnership's interests only after (i) the Partner
that has the conflict of interest or the Partner that appointed the conflicted
Board Member or conflicted Seconded Employee fully discloses the conflict to
the other Partner and (ii) the other Partner explicitly waives the conflict in
writing.
ARTICLE 7
Actions by Partners of by the Board of Directors
Section 7.1. Matters Requiring the Consent of the Board of
Directors. The Partnership may not act in connection with any of the
following matters without the Board of Directors' consent expressed in a
formal resolution:
(a) any change in the amount of capital contributions
provided in Sections 4.2 or 4.3 or in the allocation of profits, losses,
deductions, or credits between the Partners;
(b) the sale, lease, exchange, or other disposition
(including by license) of substantially all of the assets or properties of the
Partnership;
(c) the release of either Partner from any of its obligations
under this Agreement;
(d) the sale or license of any of the Partnership's
Proprietary Rights;
(e) (i) the filing of a petition in bankruptcy or for
reorganization or rehabilitation under the federal bankruptcy law or any state
law for the relief of debtors, having an order for relief entered against it
under the federal bankruptcy law or otherwise having the Partnership
adjudicated bankrupt or insolvent, the making of an assignment for the benefit
of creditors, or the suffering of the appointment of a receiver, trustee, or
custodian for a substantial portion of its business or properties by virtue of
an allegation of insolvency or (ii) any similar action under any foreign law;
(f) the dissolution or liquidation of the Partnership;
(g) any change in or departure from the purposes of the
Partnership;
(h) an incurrence of (i) obligations for borrowed money
(whether secured or unsecured), (ii) obligations exceeding $250,000 at any
time that represent the deferred purchase price of property or services other
than accounts payable arising in the ordinary course of business, (iii)
obligations that would be shown as a liability on a balance sheet of the
Partnership under GAAP in respect of leases of property that would be
capitalized on such balance sheet, (iv) obligations evidenced by any bond,
note, debenture, or other evidence of Debt, and (v) guarantees (direct or
indirect and however named) in respect of any obligations of third parties
referred to in clauses (i) through (iv); provided, however, that the
authorization called for by this Section 7.1 shall not be required in respect
of the Partnership actions referred to in clauses (i), (iii), (iv), and (v) if
(A) the aggregate amount outstanding at any time under all such clauses does
not exceed $250,000 and (B) such obligations are incurred under banking
arrangements previously authorized;
(i) the making of any loan or advance to any Person, except
for loans and advances to employees and consultants in the ordinary course of
business at any time not exceeding $250,000 outstanding in the aggregate to
all employees and consultants, excluding salespersons' commission overdrafts;
(j) other than in the ordinary course of business, (i) the
sale, lease, exchange, or other disposition (including by license) of less than
substantially all of the assets or properties of the Partnership or (ii) the
acquisition of any assets or properties (including by license), in each case
if it has a value to or effect on the Partnership of $100,000 or more;
(k) the entering into or the amendment or termination (other
than automatic termination pursuant to the terms thereof) of any (i)
agreement, contract, or commitment between the Partnership and either Partner
or any Affiliate of either Partner or (ii) any agreement, contract, or
commitment between the Partnership and any third party that benefits either
Partner (other than in its capacity as a Partner) or any Affiliate of either
Partner (other than by benefiting such Affiliate by benefiting such Partner in
its capacity as a Partner), in each case if it has a value to or effect on the
Partnership in excess of $50,000;
(l) any capital expenditure (including research and
development expenditures), or any related group of capital expenditures, in
excess of $125,000 or the making of any capital expenditures in any one year
aggregating in excess of the approved capital budget;
(m) the appointment or removal of the Accountants;
(n) the commencement (including the filing of a counterclaim)
or settlement of any claim or litigation, regulatory proceeding, or
arbitration to which the Partnership is, or is to be, a party, if the claim
or litigation, regulatory proceeding, or arbitration has a value to or effect
on the Partnership of more than $100,000;
(o) the creation of any Liens upon any assets or properties
of the Partnership, other than (i) any imperfections of title or other Liens
that, individually or in the aggregate, are not substantial in character or
amount and do not materially impair the value of or materially interfere with
the use of any of the assets or properties subject thereto, (ii) Liens
relating to obligations approved under this Section 7.1, and (iii) software
escrows in the ordinary course of business and for ordinary purposes if the
Partnership's general form therefor has been previously approved by the Board
of Directors and the particular software escrow does not materially differ
from such form;
(p) the entering into of any partnership or formal joint
venture, or the acquisition of any capital stock of or other ownership
interest in any Person, other than investments in marketable securities that
are held as cash equivalents;
(q) any merger or consolidation of the Partnership;
(r) any declaration or payment of any distribution to either
Partner;
(s) the delegation of authority to any Person to approve the
taking of any action set forth in this Section 7.1;
(t) (i) the hiring or firing of any officer or (ii) the
hiring of any individual who was an employee of any Partner or Affiliate
thereof within two years of his leaving any Partner's or Partner Affiliate's
employ;
(u) other than matters in the ordinary course of business,
any delegation of authority to the President or any other officer of the
Partnership;
(v) the setting or changing of the annual compensation of any
officer;
(w) the adoption or amendment of any long-range plans of the
Partnership, including the Business Plan;
(x) the creation of any Subsidiary or material business
alliance;
(y) the creation of any committee of the Board of Directors;
(z) the adoption, amendment, or termination of any (i)
collective bargaining agreement, (ii) plan, policy, arrangement, or
understanding providing any of the following benefits to any current or former
employee of the Partnership or any Subsidiary of the Partnership; bonuses,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, equity or quasi-equity purchase, equity or quasi-equity option,
equity or quasi-equity appreciation rights, phantom equity or quasi-equity,
retirement, vacation, severance, disability, death benefit, hospitalization, or
insurance, or (iii) other material personnel practices or policies of the
Partnership; provided, however, that the approval otherwise required by clause
(ii) of this Section 7.1(z) does not apply to an ad hoc grant of cash bonuses,
vacation leave, and the like to individual employees that otherwise does not
violate this Agreement;
(aa) the entering into or amendment or termination (other than
automatic termination pursuant to the terms thereof) of any agreement,
contract, or commitment (i) pursuant to the approved Business Plan (A) having
a duration of one year or more and representing a value to or commitment of
the Partnership of $1,000,000 or more, other than as otherwise contemplated by
this Section 7.1, or (B) representing a value to or commitment of the
Partnership of $3,000,000 or more and (ii) if not pursuant to the approved
Business Plan, having a value to or commitment of the Partnership of $200,000
or more;
(bb) any public announcement (including in interviews) (i) of
any new Partnership product (as opposed to any minor modification of or
improvement to any existing product) or (ii) describing either Partner's or
any of its Affiliates' relationship with the Partnership in other than
previously approved general terms;
(cc) the setting or changing of the royalties to be charged
under any license agreement of or for Proprietary Rights;
(dd) any filings with or public comments to be made to any
Governmental Authority;
(ee) any change in the Partnership's fiscal year;
(ff) the entering into of any agreement or commitment to take
any action set forth in Sections 7.1(a) through 7.1(ae), unless such agreement
or commitment and each counterparty thereto acknowledges in writing that it is
subject to approval and failure to receive such approval does not result in a
penalty or adverse effect (other than loss of the promise of the
counterparty's performance) to the Partnership; or
(gg) the (i) taking of any action set forth in Sections 7.1(a)
through 7.1(ae) by the Partnership as owner of any Subsidiary, or otherwise
with respect to any Subsidiary, assuming for this purpose that references to
the Partnership in such clauses include a reference to any Subsidiary of the
Partnership, (ii) amendment of the charter, by-laws, or other governing
document of any Subsidiary, or (iii) causing or permitting of the
Partnership's direct or indirect ownership of any of its Subsidiaries to
change.
Section 7.2. Restrictions on Partners. Neither Partner may,
without the consent of the other Partner:
(a) confess a judgment against the Partnership;
(b) make any agreement on behalf of or otherwise purport to
bind the other Partner or (except as required by Governmental Rule) the
Partnership;
(c) do any act in contravention of this Agreement;
(d) do any act that would make it impossible to carry on the
business of the Partnership;
(e) dispose of the goodwill or the business of the
Partnership;
(f) assign the property of the Partnership in trust for
creditors or on the assignee's promise to pay the Debts of the Partnership; or
(g) release a Partner or any of its Affiliates from any
obligation under this Agreement or any obligation that a Partner or any of its
Affiliates owes with respect to the Partnership.
Each partner agrees that it will indemnify the Partnership and
the other Partner against any and all claim, loss, or damage to which the
Partnership or such other Partner may be or become subject arising or
resulting from the breach by such Partner of this Section 7.2.
ARTICLE 8
Management and Operation of the Partnership
Section 8.1. The Board of Directors. (a) General. The
Partnership shall have a board of directors consisting of six individuals
appointed by the Partners (the "Board of Directors"). The Board of Directors
shall direct the Partnership in accordance with this Agreement.
(b) Members, Voting, etc.
(i) Each Partner shall appoint two members of the Board of
Directors, one of whom shall be entitled to cast one vote on all matters (the
"Voting Director") and the other of whom may advise the Board of Directors but
shall have no vote (the "Advisory Director"). In addition, the Chief Executive
Officer and a financial officer shall serve on the Board of Directors as
non-voting members. Each Partner shall be entitled to name an alternate
member to serve in the place of any member appointed by such Partner should
any such member not be able to attend a meeting or meetings. Each Voting
Director and Advisory Director shall serve at the pleasure of the designating
Partner.
(ii) If a member should die, resign, or be removed, the
Partner that appointed him or her shall have the right to designate his or her
successor in a writing delivered to the other Partner. Each Partner shall
bear the cost incurred by any individual designated by it to serve on the
Board of Directors, and no such individual shall be entitled to compensation
from the Partnership for serving in such capacity.
(iii) Each Partner shall notify the Partnership and the other
Partner of the name, business address, and business telephone and telecopier
numbers of each member and each alternate member that such Partner has
appointed to the Board of Directors. Each Partner shall promptly notify the
Partnership and the other Partner of any change in such Partner's appointments
or of any change in any such address or number.
(iv) The Board of Directors may take action only by the
affirmative vote of both Voting Directors. The quorum necessary for any
meeting of the Board of Directors shall be the number of members needed to
approve any action.
(v) Any action taken by a member of the Board of Directors
shall, so far as the other Partner is concerned, be deemed to have been duly
authorized by the Partner appointing him or her. Each appointment by a
Partner to the Board of Directors shall remain in effect until the Partner
making such appointment notifies the Partnership and the other Partner of a
change in such appointment. The resignation or removal of a member of the
Board of Directors shall not invalidate any act of such member taken before
the giving of written notice of his or her removal or resignation.
(c) Meetings, etc.
(i) Meetings of the Board of Directors shall be held at the
principal offices of the Partnership or at such other place as may be
determined by the Board of Directors. Regular meetings of the Board of
Directors shall be held quarterly on such dates and at such times as shall be
determined by the Board of Directors.
(ii) Special meetings of the Board of Directors may be called
by either Partner on at least five days' notice to each member thereof, which
notice shall state the purpose or purposes for which such meeting is being
called.
(iii) The actions taken by the Board of Directors at any
meeting, however called and noticed, shall be as valid as if taken at a
meeting duly held after regular call and notice if (but not until) at any time
the member as to whom it was improperly held signs a written waiver of notice
or a consent to the holding of such meeting or an approval of the minutes
thereof. A vote of the Board of Directors may be taken either in a meeting of
the members thereof or by written consent.
(iv) A meeting of the Board of Directors may be held by
conference telephone or similar communications equipment by means of which all
individuals participating in the meeting can be heard.
(v) The Board of Directors may establish reasonable rules and
regulations to (i) require officers to call meetings and perform other
administrative duties, (ii) limit the number and participation of observers
and to require them to observe confidentiality obligations, and (iii)
otherwise provide for the keeping of minutes and other internal Board of
Directors governance.
(d) Partners May Act. Nothing in this Section 8.1
derogates from the power of the Partners to agree in writing to cause the
Partnership to act.
Section 8.2. Officers. (a) General. The officers of the
Partnership shall be a Chief Executive Officer, Chief Financial Officer, and
such other officers as may be designated by the Board of Directors from time
to time to be necessary or advisable in the conduct of the business and
affairs of the Partnership. Subject to the provisions of Section 7.1, the
officers of the Partnership shall be appointed and shall be subject to removal
without cause by the Board of Directors. Any individual may hold more than
one office. Any officer of the Partnership may also serve as an officer,
employee, or agent of a Partner or any of its Affiliates. All officers of the
Partnership shall (i) report to the Chief Executive Officer (except that he or
she shall report to the Board of Directors), (ii) have the powers and duties
set forth in this Section 8.2 or as otherwise prescribed by the Board of
Directors, (iii) serve for the term designated by the Board of Directors,
subject to removal as provided above, and (iv) attend meetings of the Board of
Directors as requested.
(b) Chief Executive Officer. The Chief Executive Officer shall
(i) be the chief executive officer of the Partnership who shall have the usual
powers, duties, and responsibilities incident thereto, subject to additions,
modifications, and deletions thereof from time to time by the Board of
Directors and those powers and responsibilities specifically reserved
hereunder to the Partners and the Board of Directors, (ii) manage the conduct
of the business and affairs of the Partnership, and (iii) see that all orders
and resolutions of the Board of Directors are carried into effect.
(c) Chief Financial Officer. The Chief Financial Officer
shall, subject to the authority of the Chief Executive officer, keep and
maintain, or cause to be kept and maintained, adequate and correct accounts
of the properties and business transactions of the Partnership, and shall
send or cause to be sent to the Partners such financial statements and
reports as required by law or this Agreement to be sent to the Partners or
as may be reasonably requested by a Partner. Subject to the authority of
the Chief Executive Officer and the Board of Directors, the Chief Financial
Officer shall have general and active management of the Partnership's
finances. The Chief Financial Officer shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors.
Section 8.3. Nomination Procedures. All candidates for Chief
Executive Officer and Chief Financial Officer shall be nominated and confirmed
by the Board of Directors.
Section 8.4. Management. The Chief Executive Officer and his
designees shall manage the Partnership's affairs subject to the control of the
Board of Directors. The Board of Directors shall annually approve the
Business Plan. The Chief Executive Officer shall manage the Partnership's
business in accordance with the Business Plan, which he shall annually update
and propose to the Board of Directors.
Section 8.5. Dispute Resolution. (a) Accounting Matters. In
the event of a dispute between the Partners with respect to Partnership
accounting and/or federal or state income tax matters or the time, manner, or
allocation of a distribution under this Agreement, the Partners shall select
an independent accounting firm to resolve the dispute. In the event the
Partners cannot agree upon an accounting firm, each of the Partners shall
select an independent accounting firm. The firms thus selected shall then
select a single independent accounting firm not then engaged by either of the
Partners, or any of their Affiliates, to resolve the dispute. The decision of
the accounting firm selected in accordance with the foregoing procedure is to
be made within 60 days of the firm's selection and shall be final and binding
upon the Partners and not subject to appeal.
(b) Other Matters. Whenever a member of the Board of Directors
proposes in good faith that the Board of Directors consent to an action
described in Section 7.1 and the Board of Directors does not so consent, the
following shall apply:
(i) When the matter arises at the level of the Board of
Directors or in other dealings between Partners, such dispute shall be
submitted, for discussion and possible resolution, to the President of API/IL
(or such senior officer of API/IL designated by the chief executive officer of
API/IL) and the President of Donnelley (or such senior officer of Donnelley
designated by the chief executive officer of Donnelley).
(ii) In the event that such senior officers fail to resolve
the dispute within 45 days, the dispute shall be submitted, for discussion and
resolution, to the chief executive officer of the Parent of each Partner or
the designee of the chief executive officer. Each Partner shall negotiate in
good faith to resolve the dispute.
Section 8.6. Unresolved Disputes. (a) In the event that the
chief executive officers of the Partner's Parents fail to resolve a dispute
pursuant to Section 8.5(b)(ii) within 30 days, either Partner may declare an
impasse (an "Impasse") by written notice to the other Partner. Following
declaration of an Impasse the Partners shall, for a period of 90 days,
negotiate in good faith to resolve the Impasse. During such negotiations and
until a resolution through arbitration or otherwise, the Partnership shall
conduct its business in the ordinary course.
(b) If the Impasse is not resolved by negotiation pursuant
to (a) above, the Partners shall submit all disputes, except those disputes
that include a demand for emergency equitable relief, arising out of this
Agreement to arbitration in accordance with the Commercial Rules of the
American Arbitration Association ("AAA") then in effect. Unless otherwise
agreed by the Partners, the dispute shall be resolved by the AAA within
sixty (60) days of submission, and the AAA shall be informed of the sixty
(60) day resolution requirement when the submission is made to the AAA.
Judgment on the award may be entered in any court having jurisdiction. The
location of the arbitration proceeding shall be in the greater metropolitan
area of Chicago, Illinois.
(c) Notwithstanding the procedures set forth in Sections
8.5(b) and 8.6(a) and (b), any dispute that includes a demand for emergency
equitable relief shall be brought in a court of competent jurisdiction in
the State of Illinois, and each Partner hereby submits to the jurisdiction
of such courts for the purpose of any such suit, action, or proceeding.
Section 8.7. Insurance. The Partnership shall at its expense
maintain insurance against such liabilities and other risks associated with
the conduct by the Partnership of its operations and in such amounts as is
generally maintained by companies engaged in a business similar to that of the
Partnership. In addition, the Partnership may, to the fullest extent permitted
by law, purchase and maintain insurance against any liability that may be
asserted against any Person entitled to indemnity pursuant to Section 10.1.
Section 8.8. Employee and Other Confidentiality Agreements.
The Partnership shall enter into confidentiality agreements with each of its
officers and each Seconded Employee sufficient to enable the Partnership to
fully comply with its obligations of confidentiality set forth in Article 12.
ARTICLE 9
Term, Dissolution, and Termination
Section 9.1. Effective Date and Term. The Partnership shall
exist as of the Effective Date and shall continue in perpetuity until
dissolved by the occurrence of an event described and in accordance with the
provisions of this Article. No Partner shall have the right to, and each
Partner agrees not to, dissolve, terminate or liquidate, or to petition a
court for the dissolution, termination, or liquidation of, the Partnership,
except as provided in this Agreement. Each Partner agrees that dissolution,
termination, or liquidation of the Partnership or the filing of a petition to
put the Partnership in bankruptcy are not matters subject to the impasse and
arbitration provisions of Article 8 of this Agreement. Neither Partner shall
permit to exist any event of dissolution hereunder or under any applicable law
within its control (other than a technical dissolution caused by a transfer to
an Affiliate pursuant to Section 11.2 or after an Impasse pursuant to Section
8.6).
Section 9.2. Events of Dissolution. (a) The Partnership shall
be dissolved upon the earliest of any of the following events to occur:
(i) The unanimous written agreement of the Partners to
dissolve the Partnership; or
(ii) If (A) a Partner or its Parent shall (1) apply for or
consent to the appointment of a receiver, trustee, or liquidator, of its
Partner or its Parent, or of all or a substantial part of the Partner's or its
Parent's assets, (2) have been adjudicated a bankrupt or insolvent, or file a
voluntary petition in bankruptcy, or admit its inability to pay its debts as
they come due, (3) make a general assignment for the benefit of creditors, (4)
file a petition or answer seeking reorganization or arrangement with creditors
or otherwise take advantage of any insolvency law, or (5) file an answer
admitting the material allegations, or consent to, or default in answering the
petition filed against the Partner or its Parent in any bankruptcy,
reorganization, or insolvency proceedings; or (B) an order, judgment, or
decree shall be entered by any court of competent jurisdiction approving a
petition seeking reorganization of a Partner or its Parent or an arrangement
with creditors (or any call of creditors) of a Partner or its Parent or
appointing a receiver, trustee, or liquidator of a Partner or its Parent or
of all or a substantial part of the assets of a Partner or its Parent, and
such order, judgment, or decree shall continue unstayed and in effect for any
period of 60 consecutive days; or
(iii) The acquisition by one Partner of the entire Interest of
the other Partner in the Partnership;
(iv) A Transfer of a Partner's Interest in contravention of
Article 11 of this Agreement;
(v) A decision by the Board of Directors, in the exercise of
their business judgment, to dissolve the Partnership because they have
determined in good faith that (A) changes in any applicable law or regulation
would have a material adverse effect on the continuation of the Partnership or
(B) such action is necessary in order for the Partnership not to be in
material violation of any material law or regulation;
(vi) By either Partner, upon thirty (30) days prior written
notice to the other Partner, if such other Partner is in material breach of
any of its obligations under this Agreement which breach is not cured to the
reasonable satisfaction of the non-breaching Partner within such thirty day
period or, if such breach is not capable of being cured within thirty (30)
days, then the failure to commence immediately and to proceed with diligence
to cure such breach, or if such breach is incapable of being cured, then any
subsequent repetition of such breach; or
(vii) Occurrence of any act (whether or not in contravention of
this Agreement) that would, under provisions of the Illinois Uniform
Partnership Act, cause a dissolution of the Partnership.
Without limitation on, but subject to, the other provisions
hereof, the Transfer or assignment of all or any part of a Partner's Interest
permitted hereunder will not result in the dissolution of the Partnership.
Except as specifically provided in this Agreement, each Partner agrees that,
without the consent of the other Partner, no Partner may withdraw from or
cause a voluntary dissolution of the Partnership. In the event any Partner
withdraws from or causes a voluntary dissolution of this Agreement, such
withdrawal or the causing of a voluntary dissolution shall not affect such
Partner's liability for obligations to the Partnership.
(b) (i) If the Partnership is dissolved pursuant to Section
9.2(a)(ii), (iv) or (vi), then the Partner whose breach gave rise to such
dissolution (the "Breaching Partner") shall immediately cease to be a Partner,
and the other Partner (the "Non-Breaching Partner") may elect either (A) to
purchase the Interest of the Breaching Partner for an amount equal to the
positive Capital Account of the Breaching Partner (or in the case of a Parent
causing dissolution under Section 9.2(a)(ii), for an amount equal to the
Interest's fair market value) at the time of the dissolution and continue the
business of the Partnership as provided in Section 9.2(c) hereof, or (B) to
liquidate the Partnership in the manner described in Section 9.4, in which
case the Breaching Partner shall continue to receive allocations of Net Profit
and Net Loss and shall continue to be obligated to restore any deficit Capital
Account under Section 9.4(d) and pay its share of any shortfall under Section
9.4(c).
(ii) If the Partnership is dissolved under Sections 9.2(a)(i),
(v), or (vii) of this Agreement, the provisions contained in Section 9.4
hereof shall apply.
(c) In the event of a dissolution pursuant to either Section
9.2(a)(ii), (iv), or (vi) and the remaining Partner or the Non-Breaching
Partner, as the case may be, elects to reconstitute and continue the business
of the Partnership, it shall take all necessary actions to cancel this
Agreement and form a new partnership (the "Reconstituted Partnership") on the
same terms and conditions as are set forth in this Agreement by entering into
a new Partnership Agreement with a successor partner (the "Successor Partner")
approved by the remaining partner or the Non-Breaching Partner, as the case
may be, to continue the business and operations of the Partnership; provided,
however, that upon such approval of the Successor Partner (i) the remaining
Partner or the Non-Breaching Partner, as the case may be, and the Successor
Partner shall have the same general liability in the Reconstituted Partnership
pursuant to Illinois Uniform Partnership Act as the Partners in the
Partnership, and (ii) neither the Partnership nor the Reconstituted
Partnership will be treated as a corporation, an association taxable as a
corporation or on a similar basis for federal income tax purposes. The
Reconstituted Partnership shall have the right to continue the business and
affairs of the Partnership with the property of the Partnership and under the
same Partnership name and subject to the same terms and conditions of this
Agreement.
Section 9.3. Buyout of a Partner. When one Partner acquires
the Interest of the other Partner or when the Partnership acquires the
Interest of one of the Partners:
(a) the Partner whose Interest is purchased shall have no
further right, title and interest in, to or under this Agreement or the
Partnership other than the right to receive any purchase price for such
Interest; and
(b) the continuing Partner shall have the following rights:
(i) the continuing Partner shall have the right at all
times, after complying with any requirement of law, to continue the business
and affairs of the Partnership with the property of the Partnership and under
the same Partnership name and subject to the terms and conditions, of this
Agreement;
(ii) the continuing Partner may send such notices of the
termination or dissolution of the Partnership as it may deem appropriate and
necessary under the circumstances; and
(iii) the goodwill of the Partnership (including the
name, records and files) shall belong to and remain solely vested in the
continuing Partner.
Section 9.4. Liquidation of the Partnership. (a) If the
Partnership is dissolved by agreement pursuant to Section 9.2 the Board of
Directors shall proceed with the winding up of the Partnership, and the assets
of the Partnership shall be applied and distributed as provided in this
Section 9.4 If the Partnership is dissolved at the election of one of the
Partners pursuant to Section 9.2, the electing Partner shall control the
winding up and distribution of the assets of the Partnership.
(b) (i) The assets of the Partnership shall first be applied to
the payment of the liabilities of the Partnership, including, without
limitation, any loan to the Partnership by a Partner. A reasonable time shall
be allowed for the orderly liquidation of the assets of the Partnership and the
discharge of liabilities to creditors so as to enable the Board of Directors to
minimize the normal losses attendant upon a liquidation. The Partnership may
set aside assets of the Partnership to establish reasonable reserves to provide
for any contingent liabilities of the Partnership; any assets remaining after
the discharge of such contingent liabilities shall be distributed pursuant to
(ii) of this subsection.
(ii) The assets of the Partnership remaining after the
payments provided in (i) are made shall be distributed to the Partners in
accordance with the Partners' Capital Accounts. Any assets distributed in
kind shall be valued at fair market value. Prior to any distribution under
this Section 9.4(b)(ii), if the Partners' Capital Accounts are not equal, the
Partner having the lesser Capital Account must pay to the Partnership an
amount sufficient to cause the Partners' Capital Accounts to be equal.
(c) If the Partnership's assets are insufficient to make the
payments required under (b)(i), the Partners shall make up any shortfall in
proportion to their relative Interests. Such payments shall be considered
capital contributions to the Partnership. Any Partner that pays more than its
proportionate amount of Partnership liabilities shall have a right of
contribution against the other Partner.
(d) If any Partner's Capital Account has a deficit balance
(after giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which the Partnership
liquidated), such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
the manner and within the time provided in Treas. Reg. Section 1.704-
1(b).
(e) Gain or loss on any Partnership assets transferred to
creditors, sold or distributed to the Partners in the liquidation shall be
allocated in accordance with Section 4.6.
(f) Each Partner (and any Breaching Partner) shall be
furnished with a statement certified by the Partnership's independent
public accountant, which shall set forth the assets and liabilities of the
Partnership as of the date of complete liquidation. Upon compliance with
the foregoing distribution plan, the Partnership shall terminate, and the
Partners shall execute any and all documents necessary with respect to
termination and cancellation.
ARTICLE 10
Indemnification
Section 10.1. Indemnification. The Partnership shall, to the
fullest extent permitted by applicable law, indemnify any individual made, or
threatened to be made, a party to an action or proceeding whether civil or
criminal, by reason of the fact that such individual or such individual's
testator or intestate was a member of the Board of Directors or officer of the
Partnership, against judgments, fines, amounts paid in settlement, and
reasonable expenses, including attorneys' fees actually and necessarily
incurred as a result of such action or proceeding, or any appeal therein, in
each case except to the extent that such individual's actions or inactions
constituted gross negligence or willful misconduct. Such indemnification shall
be a contract right and shall include the right to be paid advances of any
expenses incurred by such individual in connection with such action, suit, or
proceeding, consistent with the provisions of applicable law in effect at any
time. Indemnification shall be deemed to be "permitted" within the meaning of
the first sentence of this Section 10.1 if it is not expressly prohibited by
applicable law.
Section 10.2. Indemnification of Partners. (a) Each Partner
agrees to, and does hereby, indemnify and hold harmless the other Partner,
and, to the extent set forth below, each Affiliate of the other Partner, from
and against all claims, causes of action, liabilities, payments, obligations,
expenses (including without limitation reasonable fees and disbursements of
counsel) or losses (collectively "claims, liabilities, and losses") arising
out of a liability or obligation of the Partnership to the extent necessary to
accomplish the result that neither Partner (together with its Affiliates)
shall bear any portion of a liability or obligation of the Partnership in
excess of such Partner's Interest.
(b) Without limiting the generality of the foregoing, a claim,
loss, or liability shall be deemed to arise out of a Partnership liability or
obligation if it arises out of or is based upon the conduct of the business of
the Partnership or the ownership of the property of the Partnership.
(c) The foregoing indemnification shall be available to an
Affiliate of either Partner with respect to a claim, liability, or loss
arising out of a Partnership liability or obligation which is paid or incurred
by such Affiliate as a result of such Affiliate directly or indirectly owning
or controlling a Partner or as a result of the fact that an individual
employed or engaged by the Partnership is also a director, officer, or
employee of such Affiliate.
(d) The foregoing indemnification shall not inure to the
benefit of either Partner (or any Affiliate of either Partner) in respect
of any claim, liability, or loss which (i) arises out of or is based upon
the gross negligence or willful misconduct of such Partner (or an Affiliate
of such Partner) or (ii) is a tax, levy, or similar governmental charge not
imposed upon the Partnership or on its property. For the purposes of this
subsection, no claim, liability, or loss shall be deemed to arise out of or
be based upon the gross negligence or willful misconduct of any Partner (or
any of its Affiliates) solely because it arises out of or is based upon the
gross negligence or willful misconduct of a director, officer, or employee
of such Partner or such Affiliate if at the time of such negligence or
misconduct such director, officer, or employee was a Seconded Employee or
was a member of the Board of Directors.
ARTICLE 11
Transfer of or Liens on Assets
Section 11.1. General Rule. Subject to Section 11.2, a
Partner may not Transfer, or subject to or suffer to exist any Lien on, all or
any part of its Interest except with the consent of the other Partner (which
may be withheld at that Partner's sole discretion) or as otherwise permitted
by this Agreement, and any attempt to do so shall be null and void. If any
Partner purports to Transfer its Interest in violation of the previous
sentence, the other Partner shall, in addition to all other remedies available
to it, have the right to equitable relief and the right by written notice to
the Transferring Partner to treat such Partner as a Breaching Partner under
Section 9.2(b)(i).
Section 11.2. Exception. Notwithstanding Section 11.1, (a) a
Partner may Transfer its Interest to the other Partner on such terms and
conditions as each Partner may mutually agree upon, and (b) a Partner may,
with the approval of the Board of Directors, Transfer all of its Interest to an
Affiliate that assumes, and agrees to pay, perform, and discharge, all the
obligations of the Transferring Partner under this Agreement.
ARTICLE 12
Non-competition and Confidentiality
Section 12.1. Non-Competition. During the term of this
Agreement, neither Partner may compete directly against the business of the
Partnership without the consent of the Board of Directors.
Section 12.2. Confidentiality. (a) Except to the extent
compelled by court order or as may be otherwise required by applicable law:
(i) Members of the Board of Directors, Partnership
employees, and Seconded Employees shall not be obligated to reveal
confidential or proprietary information belonging to either Partner (or either
Partner's Affiliates) without the consent of such Partner.
(ii) Each of the Partners in the performance of its duties
hereunder will communicate or otherwise make known to the other Partner and
the Partnership information, materials, data and other matter that is not
otherwise known to the recipient Partner or the Partnership and is not
generally known by third parties ("Confidential Information"). It is
generally acknowledged that such Confidential Information would be of value to
each Partner's and the Partnership's competitors and to others were this
Confidential Information known to them. Confidential Information is
considered to be trade secret information, and the Partners shall treat it as
such. Neither the Partner nor the Partnership may disclose Confidential
Information without the written authorization of the non-disclosing Partner.
(iii) The Partners shall keep the terms, conditions and other
material provisions of this Agreement confidential.
(b) Each Partner shall cause the Partnership to obtain from each
of its officers, members of the Board of Directors, and employees who will be
given access to all or any portion of the Confidential Information, prior to
such access, a non-disclosure agreement in form and substance mutually
satisfactory to each Partner. The non-disclosure agreement shall state, among
other things, that it is for the benefit of the Partnership and each Partner
and may be enforced by the Partnership, each Partner, and their Affiliates.
ARTICLE 13
Miscellaneous
Section 13.1. Change of Control. (a) In the event of a Change
of Control, as hereinafter defined, of a Partner (the "Change Partner") without
the prior written consent of the other Partner, the Partner not suffering the
Change of Control (the "Option Partner") may exercise the Purchase Option as
provided for in Section 13.2. For the purposes of this Section a Change of
Control shall be deemed to occur in the following circumstances:
(i) The Transfer or Transfers to a non-Affiliate or
non-Affiliates of such Partner of an aggregate of 20% or more of the stock of
a Partner.
(ii) The Transfer or Transfers to a non-Affiliate or
non-Affiliates of such Partner of an aggregate of 20% or more of the stock of
a direct or indirect holding company of a Partner with respect to which the
revenues attributable to such Partner's Interest would constitute more than
50% of the revenues of such holding company (the "Requisite Percentage")
determined on a consolidated basis in accordance with generally accepted
accounting principles as of the end of the fiscal quarter of the Partner
occurring immediately prior to the date as of which the determination is to be
made.
(iii) The Transfer to a non-Affiliate of such Partner by
merger, consolidation or sale of all or substantially all of the assets of a
direct or indirect holding company of which the revenues attributable to the
Partner's Interest constitute the Requisite Percentage.
(b) Notwithstanding Section 13.1(a) above the term "Change of
Control" shall not be deemed to include the following:
(i) The Transfer by sale of shares, merger, consolidation or
sale of all or substantially all of the assets of (a) the ultimate parent
company of a Partner or (b) any intermediary holding company of which the
revenues attributable to the Partner's Interest constitute less than the
Requisite Percentage.
(ii) A spinoff to holders of capital stock of the ultimate
parent company of all of the stock of a Partner then held or all of the stock
then held of any intermediary holding company of which the revenues
attributable to the Partner's Interest constitute the Requisite Percentage.
Section 13.2. Change of Control Option. In the event of a
Change of Control as defined in Section 13.1(a), the Change Partner shall
promptly deliver written notice of such event (the "Change of Control Notice")
to the Option Partner. The Option Partner shall determine within 20 days of
receipt of such notice whether it may wish to exercise its rights to purchase
the Change Partner's Interest and the Donnelley Revenue Participation
Interests, if applicable (the "Purchase Option") and, if so, may have the fair
market value (as determined pursuant to Section 13.3) of the Change Partner's
Interest and the Donnelley Revenue Participation Interests, if applicable,
determined by delivering a notice to cause such determination (the
"Determination Notice") to the Change Partner. If no Determination Notice is
received by the Change Partner within such time period, the Purchase Option
will be deemed to have lapsed with respect to the specified Change of Control
and thereafter a subsequent Change of Control shall be determined with respect
to the state of facts existing after giving effect to the Change of Control
specified in the change of Control Notice.
Delivery of the Determination Notice will obligate the Option
Partner, in case Donnelley is the Option Partner, either to (a) purchase
API/IL's Interest for an amount equal to the higher of (i) the value
attributed to API/IL's Interest in the sale or other event that triggered the
Change of Control or (ii) the fair market value of API/IL's Interest as
hereinafter determined or (b) be responsible for 100% of the fees of the
investment banker referred to in Section 13.3 and all expenses incurred by the
Change Partner as a result of the delivery of the Determination Notice.
Delivery of the Determination Notice will obligate the Option Partner, in case
API/IL is the Option Partner, either to (i) purchase Donnelley's Interest and
Donnelley's Revenue Participation Interests for an amount equal to the higher
of (A) the value attributed to Donnelley's Interest and Donnelley's Revenue
Participation Interests in the sale or other event that triggered the Change
of Control or (B) the fair market value of Donnelley's Interest and
Donnelley's Revenue Participation Interests as hereinafter determined or (ii)
be responsible for 100% of the fees of the investment banker referred to in
Section 13.3 and all expenses incurred by the Change Partner as a result of
the delivery of the Determination Notice.
Section 13.3. Determination of Fair Market Value. Fair market
value shall be determined by a nationally recognized investment banker
selected by mutual agreement of the Partners within 10 days (the "Mutual
Selection Period") of the Determination Notice. In the event that an
investment banker is not selected by the Partners within the Mutual Selection
Period, then each Partner shall select an investment banker from the list of
three investment bankers (or their successors) attached hereto as Exhibit A.
Each Partner shall simultaneously deliver to the other Partner such Partner's
selection of an investment banker on the fifth day after the termination of
the Mutual Selection Period. If both Partners select the same investment
banker, the investment banker so selected shall serve as the investment banker
for the purpose of determining fair market value. If each Partner selects a
different investment banker, then the investment banker listed on Exhibit A,
which neither of the Partners selected, shall serve as the investment banker to
determine fair market value.
The selected investment banker shall (i) value the Interest of
the Change Partner at its fair private market value by valuing the Partnership
in the context of an auction process and then applying to such value the
percentage interest represented by the Interest of the Change Partner, taking
into account such other factors as the investment banker deems relevant to
such analysis; and (ii) if Donnelley is the Change Partner, value the Donnelley
Revenue Participation Interests in the context of an auction process, taking
into account such other factors as the investment banker deems relevant to such
process. The valuation shall be completed within 60 days of the selection of
the investment banker and promptly communicated in writing to each Partner.
The fair market value so determined shall be final and binding on the Partners
and the Option Partner must, within 10 days of the delivery of the investment
banker's valuation, indicate whether it will exercise the Purchase Option. If
the Option Partner elects to exercise the Purchase Option, the Option Partner
must consummate the purchase of the Change Partner's Interest and, if
applicable, Donnelley's Revenue Participation Interests, on the terms set forth
in Section 13.2 within 10 days after any requisite regulatory approval has
been obtained. If the Purchase Option is exercised, the Partners agree that
all fees of such investment banker for making such evaluation shall be borne
one-half by each Partner.
Section 13.4. Notices. All notices, demands, or requests
required or permitted to be given pursuant to this Agreement shall be in
writing and shall be deemed to have been given when delivered personally or
when deposited in the United States mail, postage prepaid, by registered or
certified mail, with return receipt requested, addressed as follows:
(a) If to API/IL, to:
Ameritech Publishing of Illinois, Inc.
000 X. Xxx Xxxxxx
00xx Xxxxx
Xxxx, Xxxxxxxx 00000
Attention: President
With a copy to:
Ameritech Publishing of Illinois, Inc.
000 X. Xxx Xxxxxx
00xx Xxxxx
Xxxx, Xxxxxxxx 00000
Attention: General Counsel
or at such other address as API/IL may have furnished Donnelley by notice.
(b) If to Donnelley:
The Xxxxxx X. Xxxxxxxxx Corporation
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: President
With a copy to:
The Xxxxxx X. Xxxxxxxxx Corporation
Xxx Xxxxxxxxxxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: General Counsel
or at such other address as Donnelley may have furnished API/IL by notice.
Section 13.5. Amendment. This Agreement may not be amended
except by a written instrument executed by both Partners.
Section 13.6. Applicable Law. This Agreement and the
performance of the Partners hereunder shall be interpreted, construed, and
enforced in accordance with the laws of the State of Illinois.
Section 13.7. Entire Agreement. This Agreement constitutes the
entire agreement between the Partners hereto relative to the formation of the
Partnership for the purposes herein contemplated and there are no other
understandings, representations, or warranties, oral or written, relating to
the subject matter of this Agreement, which shall be deemed to exist or bind
either of the Partners hereto, their respective successors or assigns.
Section 13.8. Further Assurances. Each of the Partners shall
from time to time and at all times do such other and further acts as may
reasonably be necessary in order fully to perform and carry out the terms and
intent of this Agreement.
Section 13.9. Admission of Additional Partners. No additional
Partners may be admitted to the Partnership except upon the unanimous consent
of the Partners and upon such terms and conditions to which they may agree.
Section 13.10. Severability. To the extent permitted by
applicable law, the Partners waive any provision of law that renders any
provision hereof prohibited or unenforceable in any respect. Any provision of
this Agreement that is nonetheless unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Notwithstanding the
foregoing, if any provision is so unenforceable, the Partners shall, to the
extent lawful and practicable, use their best efforts to enter into
arrangements to reinstate the rights and duties arising from that provision.
Section 13.11. Headings. The headings of Sections in this
Agreement are for convenience only and are not a part of this Agreement.
Section 13.12. No Third Party Beneficiaries. The terms of this
Agreement shall be binding upon and inure to the benefit of the Partners and
their successors and assigns. Except for Section 10.1, nothing in this
Agreement, whether express or implied, shall be construed to give any Person
(other than the Partners and their successors and assigns and as expressly
provided herein) any legal or equitable right, remedy, or claim under or in
respect of this Agreement or any covenants, conditions, or provisions
contained herein.
Section 13.13. Counterparts. This Agreement may be executed by
the Partners in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute but one and the same document.
Section 13.14. Waiver of Rights of Partition and Dissolution.
Each Partner waives all rights it may have at any time to maintain any action
for partition or sale of any Partnership assets as now or hereafter permitted
under applicable law. Each Partner waives its rights to seek a court decree of
dissolution or to seek the appointment of a court receiver for the Partnership
as now or hereafter permitted under applicable law.
IN WITNESS WHEREOF, the Partners have executed this DonTech II
Partnership Agreement on the date and year first above written.
THE XXXXXX X. XXXXXXXXX CORPORATION
By: ____________________________________
Xxxxx X. Xxxxxx
Its: President and Chief Executive Officer
Witness:
___________________________________
AMERITECH PUBLISHING OF ILLINOIS, INC.
By: ____________________________________
Xxxxx X. XxXxxxxx
Its: President
Witness:
___________________________________
INITIAL CAPITAL SCHEDULE
The Initial Capital of the Partnership shall consist of the
amounts set forth below, and each Partner shall make such Initial Capital
contributions on the dates indicated.
Date API/IL Donnelley
---- ------ ---------
September 1, 1997 $ 4,500,000 $ 4,500,000
October 1, 1997 $ 4,500,000 $ 4,500,000
December 1, 1997 $ 4,500,000 $ 4,500,000
February 1, 1998 $ 4,500,000 $ 4,500,000
April 1, 1998 $ 1,000,000 $ 1,000,000
----------- -----------
$19,000,000 $19,000,000
EXHIBIT A
LIST OF INVESTMENT BANKERS
Xxxxxxx, Xxxxx & Company
X. X. Xxxxxx & Co. Incorporated
CS First Boston Corporation
