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EXHIBIT 10.17.2
OPERATING AGREEMENT
OF
DELTA THREE DIRECT, LLC
(A New York Limited Liability Company)
THIS OPERATING AGREEMENT, dated as of August 10, 1998, by and
between XXXXXXX ENTERTAINMENT, INC., a Delaware corporation ("Quintet"), and
DELTA THREE, INC., a Delaware corporation ("Delta"),
W I T N E S S E T H:
WHEREAS, Quintet and Delta desire to form, and become the members of
DELTA THREE DIRECT, LLC, a New York limited liability company (the "Company"),
and to provide herein for its management and the conduct of its business and
affairs and their relative rights and obligations with respect thereto;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter provided, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINED TERMS
Section 1.1 Certain Defined Terms. The following capitalized terms
are used herein as defined below:
"Act" means the New York Limited Liability Company Law, as amended.
"Affiliate" of a Person means another Person directly or indirectly
controlling, controlled by, or under common control with such Person from time
to time; for this purpose, "control" of a person means the power (whether or not
exercised) to direct the policies, operations or activities of such Person by
virtue of the ownership of,
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or right to vote, or to direct the manner of voting of, securities of such
Person, or pursuant to Law or agreement, or otherwise.
"Agent" means a Person effecting Agency Sales on behalf of the
Company pursuant to a written agreement.
"Agency Sales" means Telephony Services sold to an Agent for resale
under any Brand Name, provided that any agreement with an Agent other than RSL
USA and RSL Canada shall prohibit sales of Telephony Services to Business
Customers.
"Agent Agreement" has the meaning given in Section 6.13.
"Agreement" means this Operating Agreement, including any Schedules
or Exhibits hereto, as supplemented, amended or restated from time to time in
the manner provided herein.
"Appraised Value" has the meaning given in Section 8.2.
"Board" means the board of Managers.
"Board Deadlock" has the meaning given in Section 6.1(b).
"Brand Name" has the meaning given in Section 7.1(p).
"Budget" has the meaning given in Section 6.1(a).
"Business" means the provision of Telephony Services, and services
and activity incidental thereto, in the Territory, except that activities
prohibited to the Company in Sections 6.8 and 6.13 shall not be included in the
"Business" of the Company.
"Business Customers" means customers (i) who are billed for ten or
more ANI's or (ii) whose average monthly telecommunications expenditure for the
12 months prior to the date at issue $5,000 or more.
"Capital Account" has the meaning given in Section 3.2.
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"Capital Commitment" of a Member means the aggregate amount set
forth under "Capital Commitment" opposite such Member's name on Schedule B
hereto.
"Capital Commitment Balance" of a Member means at any time the
excess, if any, of (a) such Member's Capital Commitment over (b) all amounts
theretofore drawn against such Member's Capital Commitment (and contributed to
the capital of the Company pursuant to Section 3.1(b)), less all such amounts
returned to such Member pursuant to Section 4.1(a).
"Change of Control" means, as to Delta, any transaction or event as
a result of which Xxxx Xxxxxxx is not the Chief Executive Officer of Delta and a
Person other than Xxxxxx X. Xxxxxx has the ultimate power to elect a majority of
the Board of Directors of Delta, and, as to Xxxxxxx, any transaction or event as
a result of which a Person other than Xxx Xxxxxxxxx, Xxxxx X. Xxxxxxx, as
Trustee, Xxxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxx Xxxxxxxx, in the
aggregate, has the power to elect a majority of the Board of Directors of
Xxxxxxx.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder, or any corresponding, or succeeding
provisions of applicable Law.
"Commitment Deficit" has the meaning given in Section 3.1(b).
"Consent" means the approval, authorization or ratification of, or
consent to, any act or matter by the vote of all the Members at a meeting duly
held pursuant to this Agreement or given by such Members in an instrument duly
executed and delivered in the manner provided herein, provided, that for so long
as any Commitment Deficit remains outstanding, "Consent" shall mean the
approval, authorization or ratification of, or consent to, any act or matter by
the vote or signature of the non-Defaulting Member.
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"Customer" of a Person means another Person to whom such Person
provides Telephony Services, including without limitation, through Agency Sales,
pursuant to a written or otherwise documented or verifiable agreement.
"Default" has the meaning given in Section 3.1(d).
"Defaulting Member" has the meaning given in Section 3.1(b).
"Electing Member" means (i) if a Change of Control of a Member
occurs, the other Member, (ii) if Delta attempts to compel any action pursuant
to Section 6.1(c), Xxxxxxx, (iii) in the event of a Default by a Member, the
non-defaulting Member or (iv) a Member which elects, on or prior to September 30
of any calendar year beginning in calendar year 1999, to send a written notice
to the other Member pursuant to Section 9.1(a).
"Excluded Area" means a geographic territory designated as such on
Schedule A.
"Fiscal Year" means a fiscal year of the Company.
"Fractional Share" has the meaning given in Section 3.3.
"Governmental Authority" means any federal, state, local or foreign
government or governmental authority, agency or instrumentality, or any court or
arbitration panel of competent jurisdiction.
"Indentures" means the Indenture dated October 3, 1996 relating to
RSL's 12 1/4% Senior Notes due 2006, the Indenture dated February 27, 1998
relating to RSL's 9-1/8% Senior Notes due 2008 and the Indenture dated February
27, 1998 relating to RSL's 10-1/8% Senior Discount Notes due 2008 and the
Indenture dated as of March 16, 1998 relating to RSL's 10% Senior Discount Notes
due 2008, each among RSL, RSL Communications, Ltd., a Bermuda corporation, and
The Chase Manhattan Bank, as
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trustee, and the related notes, guarantees, security agreements, and other
agreements, instruments and documents thereunder, as the same may be amended,
supplemented, renewed or extended.
"Interest" means the right of a Member to be allocated a Fractional
Share of Profits or Losses, to receive distributions and to participate in the
management of the Company in accordance with this Agreement, and all other
rights, powers, duties and obligations of such Member provided herein or by
applicable Law.
"Initial Capital Contribution" of a Member means the amount being
contributed to the capital of the Company pursuant to Section 3.1(a).
"IP Telephony Services" means telecommunications services and value
added services, including the services and activities set forth on Schedule A,
which are provided by utilizing the Internet and networks based on Internet
Protocols.
"Law" means any statute, rule, regulation or ordinance of any
Governmental Authority.
"Liability" has the meaning given in Section 6.6.
"License" means any license, permit, certification, qualification,
franchise or privilege granted or issued by any Governmental Authority.
"Liquidating Agent" has the meaning given in Section 9.2.
"MD Purchase Offer" has the meaning given in Section 8.2.
"MD Purchase Price" has the meaning given in Section 8.2.
"Make-up Contribution" has the meaning given in Section 3.1(b).
"Manager" means a manager of the Company.
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"Marketing Agreement" means the Marketing Services Agreement of even
date herewith between the Company and Xxxxxxx, as the same may be amended from
time to time.
"Member" means a member of the Company.
"Member's Deadlock" has the meaning given in Section 6.1(b).
"Net Cash Flow" means, for any period, the amount by which the sum
of (a) the gross cash receipts of the Company during such period (other than
capital contributions) and (b) the amount of any reduction in Reserves made
during such period exceeds the sum of (c) the gross cash expenditures of the
Company during such period (other than distributions to Members) and (d) the
amount of any increase in Reserves made during such period.
"Network Agreement" means the Network Services Agreement of even
date herewith between the Company and Delta, as the same may be amended from
time to time.
"Non-IP Telephony Services" means all telecommunications services
and value added services other than IP Telephony Services.
"Offer" has the meaning given in Section 8.3.
"On-Line Service" means the utilization of the world-wide web to
procure and service Customers.
"Order" means any judgment, order, writ, decree, award, directive,
ruling or decision of any Governmental Authority.
"Other Member" means a Member other than the Electing Member.
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"Person" includes without limitation a natural person, corporation,
joint stock company, limited liability company, partnership, joint venture,
association, trust, Governmental Authority, and any group of any of the
foregoing acting in concert.
"Proceeding" means any action, suit, investigation or administrative
or other proceeding at law or in equity, before or by any Governmental
Authority.
"Profit" or "Loss" means, for any Fiscal Year, the Company's taxable
income or loss, respectively, for such Fiscal Year as computed for federal
income tax purposes (including all items required to be separately stated),
increased by items of income which are exempt from federal income tax and
reduced by expenditures which, under federal income tax law, are neither
deductible nor properly chargeable to a Capital Account, other than amounts
required to be specially allocated pursuant to Section 4.3.
"Purchase Price" has the meaning given in Section 8.3.
"Reserves" means, for any Fiscal Year, such amounts as are reserved
from time to time, in the manner hereinafter provided, for the payment of
operating and capital expenses, contingent liabilities and other obligations and
liabilities of the Company.
"Restricted Business" means the business of providing phone-to-phone
IP Telephony Services to end users (other than Business Customers) directly or
through agents, in the United States or Canada, and any other business relating
to additional products, product lines or distribution channels as may be
specified by Consent of the Members.
"Representative" has the meaning given in Section 6.2.
"Reseller/Wholesale Sales" means services sold to a Person,
including wholesale sales to telecommunications providers or to resellers, for
resale by such Person, other than Agency Sales.
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"RSL" means RSL Communications PLC, a public limited company
organized under the laws of the United Kingdom.
"RSL Canada" means RSL COM Canada Holdings Inc. and its
subsidiaries.
"RSL USA" means RSL COM U.S.A. Inc. and its subsidiaries.
"Telephony Services" means IP Telephony Services and Non-IP
Telephony Services.
"Territory" means throughout the world, or such other geographic
territory to which the Members may Consent.
"Trade Right" means any patent, claim of copyright, trademark, trade
name, brand name, service xxxx, logo, symbol, trade dress or design, or
representation or expression of any thereof, or any registration or application
for registration thereof, or any invention, trade secret, technical information,
know-how, proprietary right or intellectual property.
"Transfer" has the meaning given in Section 8.1.
ARTICLE 2
FORMATION
Section 2.1 Formation. The Company is being formed as a limited
liability company under the Act upon the filing on the date hereof of the
initial Articles of Organization of the Company with the New York Department of
State, and, concurrently therewith, by executing this Agreement, Xxxxxxx and
Delta are becoming Members, all upon the terms and subject to the conditions set
forth in this Agreement. The name and address of each Member, its Initial
Capital Contribution, Capital Commitment and Fractional Share are set forth on
Schedule B.
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Section 2.2 Name of the Company. The name of the Company is Delta
Three Direct, LLC. The Company shall conduct its business under such name, or
under any assumed, fictitious or other name permitted by Law adopted by the
Board.
Section 2.3 Places of Business. The principal place of business of
the Company shall be located at One Blue Hill Plaza, Pearl River, New York, or
at such other place as the Board may determine.
Section 2.4 Purpose. The purpose of the Company is to engage in the
Business.
ARTICLE 3
CAPITALIZATION
Section 3.1 Capital Contributions and Certain Obligations of the
Members.
(a) Concurrently herewith, each Member is making the Initial
Capital Contribution set forth opposite its name under "Initial Capital
Contribution" on Schedule B in cash to the Company. The Initial Capital
Contributions of the Members shall be applied to fund the initial marketing
activities of the Company or to such other purposes as to which the Members may
Consent.
(b) (i) To pay any expense or other obligation or liability of
the Company provided in the applicable Budget or otherwise approved by the
Board, the Board of the Company may from time to time require the Members to
make additional capital contributions to the Company in an amount, as to each
Member, not in excess of its Capital Commitments Balance and in proportion to
the Fractional Share of such Member. In any such event, the Board shall direct
the President of the Company to give written or telephonic notice to each Member
of such required capital contribution,
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setting forth therein the amount thereof. Each Member shall thereupon make the
required capital contribution before the close of business on the second
business day after such notice.
(ii) If any Member (the "Defaulting Member") shall fail
to make a capital contribution in the full amount required pursuant to Section
3.1(b), the other Member may, but shall not be required to, make a further
capital contribution (a "Make-up Contribution") not in excess of the amount by
which the amount of the capital contribution required to be made by the
Defaulting Member exceeds the amount of the capital contribution actually made
by the Defaulting Member (the "Commitment Deficit").
(iii) The Company and any non-Defaulting Members shall
be entitled to the following remedies against any Defaulting Member.
(A) The Company shall withhold all or any portion (up to
the amount of the Commitment Deficit) of any distributions which such Defaulting
Member would otherwise be entitled to receive and apply the same (I) as a
capital contribution for the account of the Defaulting Member to the extent of
the excess of the Commitment Deficit of such Defaulting Member over the amount
of the Make-up Contribution, if any, of the other Member, and (II) as interest
payable to the Company at the rate of 10% per annum. (or, if less, the maximum
rate then permitted by applicable Law) accruing on the Commitment Deficit from
the date that the additional capital contribution would have been required to be
made pursuant to Section 3.1(b) until the date such amount is applied as a
capital contribution to the Company pursuant to clause (I) of this paragraph (A)
(any such interest to be treated as income to the Company, and not as a capital
contribution).
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(B) For so long as any Commitment Deficit remains
outstanding, the number of Managers comprising the entire Board shall be reduced
to five and the Defaulting Member shall be entitled to designate only two such
Managers.
(C) If the Board shall determine that the failure of
such Defaulting Member to make the required capital contribution has a material
adverse effect on the Company, the Board may expel such Defaulting Member, in
which case, such Defaulting Member shall be entitled to receive only the amount
of the positive balance, if any, of its Capital Account on the date on which the
additional capital contribution was required to made pursuant to Section 3.1(b).
(c) If at any time the Board shall determine by
unanimous action that (i) Net Cash Flow is, or is likely to be, insufficient to
pay the debts and obligations of the Company as they become due or to fund
budgeted capital expenditures or the operations of the Company or (ii) it is
otherwise in the best interests of the Company, the Board may, subject to
Section 7.1, (1) request to borrow money from the Member or any other Person,
(2) require additional capital contributions from either or both of the Members
or from any other Person and issue Interests with respect thereto, or (3) take
any other action to provide funds for the Company, on such terms and subject to
such conditions as the Board may deem appropriate.
(d) If at any time after the Members shall have
contributed their full Capital Commitments, the Board shall require additional
capital contributions (which shall be in proportion to the Members' Fractional
Shares) in accordance with Section 3.1(c) and a Member shall fail to make its
capital contribution at the time and in the full amount required (a "Default"),
then the non-defaulting Member may, but shall not be required to (1) send a
written notice pursuant to Section 8.3(a) or
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(ii) within 15 days of such Default, make a capital contribution (which shall be
credited to its Capital Account) equal to the contributions which the defaulting
Member has failed to make.
(e) Subject to the Board's approval, a capital
contribution made pursuant to Section 3.1(b), (c) or (d) may consist of money,
securities, property, including without limitation Trade Rights, or other
consideration. The date and amount of such capital contribution and if such
capital contribution includes any consideration other than cash, a description
in reasonable detail thereof, shall be set forth on Schedule B and the valuation
thereof shall be approved by the Consent of the Members.
(f) Except as otherwise expressly provided in this
Section 3.1, no Member shall be required or permitted to make any capital
contribution or to lend or advance funds or property to the Company for any
purpose whatsoever, without the Consent of the Members.
(g) Subject to Section 4. 1, no Member shall be entitled
to a return of any part of its contribution to the capital of the Company,
except in connection with its expulsion or any permitted withdrawal as a Member
or the liquidation of the Company.
(h) Any return of capital to a Member shall be made
solely from the assets of the Company available therefor; and no Member shall be
required to make any capital contribution or lend or advance any funds to the
Company, decrease its Interest or abandon or waive any right hereunder, or
otherwise be liable to provide for the return of any other Member's capital
contribution.
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(i) No interest shall accrue for the benefit of, or be
paid to, any Member on contributions to the capital of the Company.
Section 3.2 Capital Accounts.
(a) A separate Capital Account shall be established and
calculated daily for each Member in accordance with Treasury Regulation
ss.1.704-1(b). A Member's Capital Account balance shall initially equal its
Initial Capital Contribution and shall (i) increase by (A) the amount of Profit
allocable to such Member and any income or gain specially allocated to such
Member, (B) any cash and the fair market value of any property (net of any
liabilities secured by such property that the Company assumes or takes subject
to) hereafter contributed to the capital of the Company by such Member,
including Make-Up Contributions, and (C) in the case of property distributed in
kind, the amount of gain, if any, which would have been allocated to such Member
if the property had been sold by the Company for its fair market value on the
date of distribution and (ii) decrease by (A) the amount of Loss allocable to
such Member and any losses or deductions specially allocated to such Member, (B)
the amount of cash and the fair market value of any property (net of any
liabilities secured by such property that such Member assumes or takes subject
to) distributed to such Member, and (C) in the case of property distributed in
kind, the amount of loss, if any, that would have been allocated to such Member
if the property had been sold by the Company for its fair market value on the
date of distribution.
(b) In the event of a Transfer by a Member of all or a part of
its Interest in accordance with this Agreement, a proportionate amount of the
Capital Account of the transferor shall be transferred to such transferee.
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(c) The Members may adjust the Capital accounts to reflect a
revaluation of the Company's property on the Company's books in accordance with
Treasury Regulation ss.1.704-1(b)(2)(iv)(f) under the circumstances described
therein. In the event that property contributed to the Company has a fair market
value which differs from its basis (at the time of contribution) or an election
is made under Treasury Regulation ss.1.704-1(b)(2)(iv)(f), the Capital Accounts
shall be adjusted in accordance with Treasury Regulation ss.1.704-1(b)(2)(iv)(g)
for allocations of depreciation, amortization and gain or loss, as computed for
book purposes, with respect to such property.
(d) The provisions of this Agreement are intended to comply
with Treasury Regulations ss. 1.704-1(b) and -2 and shall be interpreted and
applied in a manner consistent with such regulations. The Members may amend this
Agreement (including without limitation to modify the manner in which Capital
Accounts are maintained) in order to comply with such regulations (as they are
currently in effect or may subsequently be amended).
Section 3.3 Fractional Shares. The Fractional Share of a Member
shall equal at all times the ratio of such Member's Capital Account to the sum
of the Capital Accounts of all the Members.
Section 3.4 Interests. An Interest is personal property. A Member
has no right to, interest in, or claim against any specific property of the
Company by reason of its Interest.
ARTICLE 4
DISTRIBUTIONS AND ALLOCATIONS
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Section 4.1 Distributions of Net Cash Flow. The Company shall make
distributions (including interim distributions) of Net Cash Flow to the Members
in proportion to their respective Fractional Shares (or, in connection with the
liquidation of the Company pursuant to Section 9.2, as therein provided):
(a) on the first business day of each calendar month, in an
amount equal, as to each Member, to the excess, if any, on the last day of the
preceding calendar month of such Member's Capital Account balance over the
amount of such Member's Initial Capital Contribution;
(b) at such times and in such amounts sufficient to fund the
payment of any federal, state, local or foreign taxes required to be paid by the
Members in respect of any Profit (or the taxable portion thereof) allocable to
the Members in respect of any Fiscal Year or other taxable period of the
Company;
(c) as provided in Section 6.1(c); and
(d) subject to Subsections 6.1(a), (b) and (c), at such other
times and in such other amounts determined by the Board.
From time to time prior to the liquidation and dissolution of the Company, the
Company may also make such other distributions of property of the Company, in
cash or in kind, to the Members in proportion to their respective Fractional
Shares as the Board may determine.
Section 4.2 Allocation of Profit and Loss.
(a) Profit for each Fiscal Year shall be allocated
as follows:
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(i) Profit shall be allocated first to offset Loss
previously allocated pursuant to Section 4.2(b)(ii), to the extent such Loss was
not previously offset; and
(ii) any remaining Profit shall be allocated to the
Members in proportion to their respective Fractional Shares.
(b) Loss for each Fiscal Year shall be allocated as follows:
(i) Loss shall be allocated first to offset Profit
previously allocated pursuant to Section 4.2(a)(i) to the extent such Profit was
not previously offset and exceeds the cumulative Net Cash Flow distributed on
account of such previously allocated Profit; and
(ii) any remaining, Loss shall be allocated to the
Members in proportion to their respective Fractional Shares.
Section 4.33 Special Allocations.
(a) Notwithstanding the foregoing, if there is a net decrease
in the Company minimum gain under Treasury Regulation ss. 1.704-2(d) (with
respect to "nonrecourse liabilities") or partner nonrecourse debt minimum gain
under Treasury Regulation ss. 1.704-2(i) (with respect to "partner nonrecourse
debt") during a Fiscal Year, the Members shall be allocated items of income and
gain for such Fiscal Year (and if necessary for subsequent Fiscal Years) in the
amounts and proportions determined pursuant to the provisions of Treasury
Regulations ss.1.704-2(f) and (i)(4), respectively. In addition, if a Member
unexpectedly receives any adjustments, allocations or distributions described in
Treasury Regulation ss.l.704-1(b)(2)(ii)(d)(4), (5) or(6) which creates or
increases a deficit in its Capital Account balance (as adjusted pursuant to such
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regulations), items of Company income (including gross income) and gain
(consisting of a pro rata portion of each item of Company income and gain) shall
be specially allocated to such Member in an amount and manner sufficient to
eliminate such deficit balance as quickly as possible pursuant to the provisions
of Treasury Regulation ss.1.704-1(b)(2)(ii)(d). Any special allocation under
this Section 4.3(a) shall be taken into account in computing subsequent
allocations of Profit and Loss, so that the net amount allocated to each Member
shall, to the extent possible, be equal to the net amount that would have been
allocated had such special allocation not been made.
(b) In the event that property contributed to the Company has
a fair market value which differs from its basis (at the time of contribution)
or an election is made by the Members under Section 3.2(c) to adjust Capital
Accounts to reflect a revaluation of Company property, income, gain, loss and
deduction as computed for federal income tax purposes with respect to such
property shall be allocated in the manner determined by the Members,
consistently applied, pursuant to Section 704(c) of the Code so as to take into
account any variation between the Company's basis in the property and its fair
market value.
(c) In the event that the Interests of the Members vary during
a Fiscal Year, the Profit, Loss, and any amount specially allocated pursuant to
Section 4.3(a) shall be allocated among the Members under Section 706(d) of the
Code in the manner determined by the Members.
Section 4.4 Allocation of Nonrecourse Liabilities. A Member's share
of the nonrecourse liabilities of the Company shall be allocated in accordance
with Treasury Regulation ss. 1.752-3(a), except that excess nonrecourse
liabilities shall be
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allocated among the Members in accordance with the Members' respective
Fractional Shares.
Section 4.5 Amounts Withheld. All amounts withheld pursuant to the
Code or any provision of any state, local or foreign tax law with respect to any
payment or distribution to the Company or the Members shall be treated as
amounts distributed to the Members under Section 4.1 in such amounts as the
Members may determine in accordance with applicable Law.
ARTICLE 5
FISCAL MATTERS
Section 5.1 Tax Matters Partner. Delta shall be the "tax matters
partner" of the Company within the meaning of Section 6231 (a)(7) of the Code.
Section 5.2 Tax Returns. The Company shall prepare and file, or
shall cause to be prepared and filed, all federal and any required state, local
and foreign income and other tax returns for the Company for each Fiscal Year,
and, in connection therewith, may make any available or necessary elections or
determinations.
Section 5.3 Fiscal Year and Other Elections.
(a) The Fiscal Year shall coincide with the taxable year of
the Company and end on December 31 of each year or such other date as the
Members may Consent, subject to applicable Law. All other accounting decisions
and elections required or permitted to be made by the Company for tax purposes
under applicable Law shall be made by the Board, except that without the Consent
of the Members, none of the Board, nor any Manager, officer or Member shall
waive or consent to an extension of the period of limitations for assessing any
tax liability against the Company or computing the amount of any tax items.
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(b) Each Member shall promptly, and, in any event, within ten
days of (i) receiving notice of any proposed tax audit or examination of the
Company, give written notice thereof to the other Member, and (ii) receiving any
material correspondence relating to the Company from the Internal Revenue
Service or any state, local or foreign tax authority, give a copy thereof to the
other Member, and promptly advise the other Member in writing of the substance
of any conversation with any representative of the Internal Revenue Service or
any state, local or foreign tax authority relating to the Company. Any Member
may notify the President of such Member's desire to represent itself, or to
cause independent tax counsel or accountants to represent it, in connection with
any examination, Proceeding or proposed adjustment and if a Member so notifies
the President, the President shall upon request, supply such Member and its tax
counsel or accountants, as the case may be, with copies of all written
communications received by the Company with respect thereto, together with such
other information as may be reasonably requested in connection therewith, and
cooperate with such Member and its tax counsel or accountants, as the case may
be, in connection with such separate representation, to the extent reasonably
practicable.
Section 5.4 Books and Records. The Company shall maintain or cause
to be maintained at the Company's principal place of business complete and
accurate books and records of the assets, business and affairs of the Company,
including without limitation:
(a) a current list of the Members, setting forth in
alphabetical order the full name, last known mailing address, capital
contribution, Fractional Share and Capital Commitment of each;
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(b) a copy of the Company's Articles of Organization and all
amendments thereto and restatements thereof, together with an executed copy of
any power of attorney pursuant to which any Articles or certificate, or
amendment thereto or restatement thereof, is executed.
(c) a copy of this Agreement; and
(d) a copy of the Company's income tax and information returns
and, if any, for each of the three most recently ended Fiscal Years. All
financial statements, ledgers and records shall be prepared in accordance with
generally accepted accounting principles.
Section 5.5 Reports to Members.
(a) The Company shall distribute to each Member:
(i) at least 45 days prior to the beginning of each
fiscal quarter beginning after the date hereof, the Budget for such fiscal
quarter;
(ii) as soon as practicable after the end of each Fiscal
Year, a copy of its Schedule K-1 to the Partnership Tax Return (Form 1065),
together with a statement of such Member's Capital Account and its allocable
share of Profit or Loss, including a brief account of the basis and computation
thereof;
(iii) as soon as practicable, and in any event within 30
days, after the end of each month, a financial statement, including a balance
sheet as of the end of such month and a statement of operations for the month
then ended;
(iv) as soon as practicable, and in any event within 30
days, after the end of each fiscal quarter, a financial statement, including a
balance sheet as of the end of such quarter and a statement of operations for
the quarter and the interim fiscal period from the beginning of such Fiscal Year
then ending, together
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with the comparative information for the corresponding periods of the preceding
Fiscal Year, and
(v) as soon as practicable, and in any event within 60
days, after the end of each Fiscal Year, a financial statement, including a
balance sheet as of the end of such Fiscal Year and statements of operations,
cash flows and changes in Member's equity for such Fiscal Year, together with,
as to the balance sheet and statement of operations, the comparative information
for the preceding Fiscal Year.
All such financial statements shall be prepared in accordance
with generally accepted accounting principles, applied in a manner consistent
with prior periods, except that interim statements may omit footnote disclosure
otherwise required by generally accepted accounting principles and may be
subject to normal year-end adjustments. The financial statements for the Fiscal
Year to be delivered pursuant to paragraph (v) shall be (A) audited by Deloitte
& Touche LLP, as the Company's independent certified public accountants and
shall be accompanied by their report thereon (unqualified as to audit scope),
and (B) shall be accompanied by a report prepared by or under the direction of
the President describing the business of the Company, including any material
agreements or transactions entered into or effected, during such Fiscal Year,
setting forth, to the extent practicable, a comparison of the Company's
financial statements for such Fiscal Year to the projections and performance
targets included in the Budgets for such Fiscal Year, and including any other
information that he deems material to the Members.
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The Company shall also promptly provide such additional
information as any Member may reasonably request for the preparation of its
income and other tax returns or its financial statements.
(b) Each Member may, for any purpose, at such Member's own
expense, upon reasonable prior notice to the other Member, inspect and copy,
during the normal business hours of the Company, any records or information
maintained by the Company, including without limitation the records and
information required to be maintained pursuant to Section 5.4 and the Company's
financial statements, if any, for any Fiscal Year or period.
ARTICLE 6
ADMINISTRATION
Section 6.1 Management of the Company.
(a) The Company's business and affairs shall be managed by the
Board. The Board shall prepare, or cause the President or chief financial
officer of the Company to Prepare and submit to the Board, at least 45 days
prior to the beginning of (i) each fiscal year and (ii) each fiscal quarter of
the Company beginning after the date hereof, a business plan and budget,
including proposed capital expenditures and projected operating revenues,
expenses and income for such year or quarter, as applicable (the "Budget"). The
Board shall review and consider each such Budget, and after making any changes
determined by the Board, shall adopt and approve the same.
(b) Unless the Members otherwise Consent, subject to Section
3.1(b)(iii), the Board shall at all times consist of an even number of Managers,
one-half of whom shall be designated from time to time by Xxxxxxx and one-half
of whom shall be designated from time to time by Delta. Any Member may remove
any Manager
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designated by it, with or without cause, and any Manager may resign, in each
case, at any time upon prior written notice to the remaining Managers or, if
none, to the Members. If any Manager shall resign, be removed, die, become
incapacitated or ineligible, or otherwise cease to serve in such position, the
Member that designated such Manager shall promptly designate a successor by
written notice to the other Member. The number of Managers comprising the entire
Board shall initially be six. Except as otherwise expressly provided herein, the
Board shall act by the vote or consent of a majority of the Managers. If the
Board is unable so to act with respect to any matter because any Manager or
Managers fail to appear or participate at any meeting of the Board (after notice
thereof is duly given to each such Manager) or to respond to any solicitation of
consents from the Managers or a majority of the Managers are unable to agree on
such matter (a "Board Deadlock"), any Manager may give notice to the Members of
such Board Deadlock, setting forth therein a description in reasonable detail of
the subject matter of such Board Deadlock, and the Members shall decide such
matter by their Consent; provided that, if the Members are likewise unable to
decide such matter (a "Member's Deadlock") and such matter involves (i) (in the
aggregate with any other matters then subject to a Member's Deadlock) the
expenditure or receipt of funds in an amount in excess of S2,500,000, or (ii)
the failure to agree upon the Budget, either Member may offer to sell its
interest to the other Member or purchase the other Member's interest pursuant to
Section 8.2.
(c) Any other provision hereof notwithstanding, but subject to
Section 8.3 (and without otherwise limiting the power of the Board or the
officers of the Company to cause the Company to make distributions, pay
indebtedness, make loans or advances, or sell, lease or otherwise transfer or
dispose of any of its assets, as elsewhere provided herein), for so long as any
of the Indentures remain in effect and
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the provisions thereof require RSL to be able to do, or cause Delta or the
Company to do, any of the following, at the direction of Delta and/or Delta's
designees to the Board, Xxxxxxx shall take, and cause its designees to the Board
to take, all necessary actions (including without limitation approving or
consenting to any of the following actions at a meeting of the Members or the
Board or by written consent) to cause the Company to:
(i) make any distribution permitted by applicable Law
with respect to the Interests;
(ii) pay any indebtedness owed to any Member or any
Affiliate of a Member;
(iii) make a loan or advance to a Member or any of its
Affiliates; provided, that such loan or advance is on fair and reasonable terms
no less favorable to the Company than could be obtained in a comparable arm's
length transaction with a Person that is not an Affiliate of the Company or a
Member, and
(iv) transfer any of its assets to a Member or an
Affiliate of a Member, provided that such transfer is on fair and reasonable
terms no less favorable to the Company than could be obtained in a comparable
arm's length transaction with a Person that is not an Affiliate of the Company
or a Member.
(d) Xxxx Xxxxxxx shall serve as President of the Company
pursuant to the terms of the Marketing Agreement. As such, he shall be the chief
executive officer of the Company and, subject to the provisions hereof and
thereof, he shall supervise all other officers and employees of the Company
(except to the extent otherwise expressly provided by the Board), represent the
Company, negotiate and review agreements and transactions into which the Company
proposes to enter, and make all determinations with respect thereto, and
administer the business and affairs of the
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Company. Xx. Xxxxxxx shall (i) perform his services in such capacity diligently
and faithfully for the benefit of the Company, (ii) perform such services under
the direction and control of the Board and in accordance with all applicable
policies and practices of the Company, and (iii) devote the majority of his
business time and attention to the Business and affairs of the Company.
Section 6.2 Representatives. Each Member shall appoint a
Representative to act on its behalf in connection with the Business and affairs
of the Company, including giving any required Consent, making any determination
or executing any document for or on behalf of such Member. Initially, Xxxxxxx'x
Representative shall be Xxxxxxx X. Xxxxxxxx and Delta's Representative shall be
Xxxx Xxxxxxx. Any Member may, upon prior notice to the other Members, remove or
replace its Representative.
Section 6.3 Officers.
(a) The following Persons shall serve initially in the offices
of the Company set forth opposite their respective names below:
Person Office(s)
Xxxx Xxxxxxx President
Xxxx Xxxxxxx Vice President
Xxxxx Xxxxxx Treasurer
Xxx Xxxxxxxxx Secretary
(b) The Board may also, from time to time, appoint or
designate such other officers as they deem appropriate for the management of the
Business and affairs of the Company.
(c) Each officer shall hold his office until his successor has
been elected or appointed and qualified or his earlier resignation or removal.
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(d) Any officer of the Company may be removed or replaced with
or without cause by the Board or upon the Consent of the Members.
(e) Any officer may resign at any time by giving written
notice to the Company.
(f) Each Representative shall devote such of his business time
and attention to the Business and affairs of the Company as is reasonably
required to perform his duties as a Representative hereunder. However, no
Representative shall be required to devote any minimum amount of time or to
perform his duties hereunder on a fixed or periodic basis.
Section 6.4 Standard of Care.
(a) In acting on behalf of the Company, each Manager and
officer shall act in good faith and with that degree of care that an ordinarily
prudent person in a like position would use under similar circumstances.
(b) In performing its duties, a Manager shall be entitled to
rely on information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or presented by:
(i) one or more agents or employees of the Company;
(ii) counsel, public accountants, business, investment
or financial consultants or advisors, or other Persons as to matters that he or
she believes to be within such Person's professional or expert competence; or
(iii) another Manager or officer duly designated in
accordance with this Agreement, as to matter within his or her designated
authority, which the Manager believes to merit confidence, so long as in so
relying he or
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she shall be acting in good faith and with such degree of care, but he or she
shall not be considered to be acting in good faith if he or she has knowledge
concerning the matter in question that would cause such reliance to be
unwarranted.
(c) A Person who so performs his or her duties in accordance
with this Section 6.4 shall have no liability by reason of being or having been
a Manager.
Section 6.5 Interested Members.
(a) Subject to Sections 6.5(b) and 7.1 and any applicable Law,
a Member may lend money to, borrow money from, guarantee or act as a surety for,
provide collateral for an obligation of and transact other business with, the
Company, and, shall have the same rights and obligations with respect thereto as
a Person who is not a Member.
(b) No contract or other transaction between or among the
Company and one or more of its Managers or Members or any Affiliate of a Manager
or Member or any other Person in which one or more of the Managers or Members
are partners, members, managers, directors or officers, or have a substantial
financial interest, shall be either void or voidable for this reason alone or by
reason alone that such Manager or Member is present at the meeting of the
Managers or Members which approves such contract or transaction, or that its
consent was given for such contract or transaction, if the material facts as to
such Manager's or Member's interest in such contract or transaction and as to
any such common partnership, membership, managership, directorship, officership
or financial interest are disclosed in writing to the Members, and the Members
Consent to such contract or transaction.
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(c) If such good faith disclosure of the material facts as to
the Manager's or Member's interest in the contract or transaction and as to any
such common partnership, membership, managership, directorship, officership or
financial interest is made in writing to the Members, or known to the Members
Consenting to such contract or transaction, as provided in Section 6.5(b), the
contract or transaction may not be avoided by the Company for the reasons set
forth in such Section.
(d) Common or interested Members may be counted in determining
the presence of a quorum at a meeting of the Members that Consent to such
contract or transaction.
Section 6.6 Limitation of Liability. Except as otherwise provided in
the Marketing Agreement and the Network Agreement, no Member or Manager shall be
liable, as such, to the Company or any other Member for any loss, damage,
liability or expense ("Liability") suffered or incurred by such Member on
account of, or by reason of any claim based on or arising from, any act taken or
omitted to be taken in the course of representing or performing services for the
Company or otherwise in its capacity as a Member or Manager, including without
limitation its appointment or retention of, or reliance upon, any employee or
agent of the Company or any Person referred to in Section 6.4(b),
notwithstanding any negligence, fraud or willful misconduct by such employee,
agent or Person, except to the extent that a judgment or other final
adjudication adverse to it establishes that its acts or omissions were in
violation of any provision of this Agreement, or were in bad faith or involved
intentional misconduct or a knowing violation of Law or that it personally
gained in fact a financial profit or other advantage to which it was not legally
entitled or that with respect to a distribution in violation of Section 508(a)
of the Act its acts were not performed in accordance with Section 6.4.
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Section 6.7 Indemnification. Except as otherwise provided in the
Marketing Agreement and the Network Agreement, the Company shall indemnify each
Member, Manager, officer, Representative, and their respective legal
representatives, successors and assigns, and hold each of them harmless from and
against any Liability suffered or incurred by any of them in the course of
serving in any such office of, or otherwise representing (within the scope of
its authority) or acting, as such, for or on behalf of the Company, except to
the extent that a judgment or other final adjudication adverse to such Member,
Manager, officer, Representative or other Person establishes (i) that its acts
were committed in bad faith or were the result of active and deliberate
dishonesty and were material to the cause of action so adjudicated, or (ii) that
it personally gained in fact a financial profit or other advantage to which it
was not legally entitled; provided, that, any other provision hereof
notwithstanding, any such indemnification shall be from the assets of the
Company, and no Member shall be required to make any capital contribution or
otherwise pay any amount from its own assets as a result thereof. The Company
may procure insurance in such amounts and covering such risks as the Board deems
appropriate to fund any indemnification required or permitted to be made
hereunder.
Section 6.8 No Competition: Other Activities of and Restrictions on
Members and the Company.
(a) Except as otherwise provided in this Section 6.8, no
Member shall (i) engage in the Restricted Business, or serve as a partner,
member, manager, director, officer or employee of, or consultant or advisor to,
or market its services to, or perform services for, or in any manner own,
control, manage, operate or otherwise invest or participate in any Person that
engages in the Restricted Business, or
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(ii) employ, engage or retain any employee of the Company or any Person who at
any time during the 12 preceding months shall have been an employee of the
Company, unless such employee or former employee is or shall have been at any
time during the 36 preceding months an employee of such Member or an Affiliate
thereof, or (iii) knowingly, approach or contact any supplier or other Person
for the purpose of causing any such supplier or other Person to divert business
from the Company in the United States or Canada.
(b) Neither Delta nor its Affiliates shall utilize the On-Line
Services of any Person to offer or service the Business (i) which are being
utilized by the Company or Xxxxxxx or its Affiliates or (ii) as to which the
Company or Xxxxxxx shall have given written notice to Delta to the effect that
the Company or Xxxxxxx or its Affiliates, as the case may be, has made or is
concurrently making a written proposal or offer to such Person to utilize such
Person's On-Line Services for a period of 60 days after such notice is given;
provided that the foregoing shall not restrict Delta or its Affiliates from
using any On-Line Services to provide services which are not included in the
Business, including Reseller/Wholesale Sales and providing services to any
Business Customer.
(c) Neither the Company nor Xxxxxxx or its Affiliates shall
utilize the On-Line Services of any Person to offer or service the Business (i)
which are being utilized by Delta or its Affiliates or (ii) as to which Delta or
its Affiliates shall have given written notice to the Company and Xxxxxxx,
respectively, to the effect that Delta or its Affiliates has made or is
concurrently making a written proposal or offer to such Person to utilize such
Person's On-Line Services for a period of 60 days after such notice is given.
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(d) No Member shall knowingly approach or contact, or permit
any Affiliate thereof to knowingly approach or contact, any Customer of the
other Member or any Affiliate thereof or the Company, to solicit such Customer
or to provide to such Customer, in the United States or Canada, Telephony
Services included in the Business provided, that non-targeted general
solicitations shall not be deemed prohibited by this paragraph.
(e) The Company shall not, directly or indirectly, knowingly
approach or contact any Customer of a Member or any Affiliate thereof, to
solicit such Customer or to provide to such Customer Telephony Services.
(f) The foregoing provisions of this Section 6.8
notwithstanding, (i) any Member may invest its funds in securities of an issuer
if the securities of such issuer are listed for trading on a registered
securities exchange or actively traded in the over-the-counter market and such
Member's holding therein represents less than 5% of the total number of shares
or principal amount of the securities of such issuer then outstanding; (ii) no
provision of this Section 6.8 shall prohibit or restrict any business activity
or operation in which any Member is, directly or indirectly, engaged or actively
and diligently preparing to engage on the date hereof as set forth on Schedule
C; and (iii) no provision of this Section 6.8 shall prohibit or restrict any
Member's provision of services to its Affiliates. Each Member acknowledges that
the provisions of this Section, and the period of time, geographic area and
scope and type of restrictions on its activities set forth herein, are
reasonable and necessary for the protection of the Company.
(g) Except as otherwise provided in this Agreement, a Member
may engage or participate in other activities incidental to any employment,
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occupation or business venture or enterprise. Except as otherwise agreed between
them, none of the Company nor any Member shall be entitled to participate or
otherwise have any interest in such other employment, occupation or business
venture or enterprise.
(h) Subject to Sections 6.8, 6.13 and 6.15, the Company, Delta
and Xxxxxxx may all provide the following services through the channels
indicated:
(i) PC to phone and phone to PC IP Telephony Services
anywhere in the Territory and through any medium or channel of distribution; and
(ii) IP Telephony Services, by direct sale methods
(including telemarketing) and through agents, in each case if outside the U.S.
and Canada.
(i) Nothing in this Agreement shall be construed as
prohibiting Delta from engaging in the Business through Reseller/Wholesale
Sales, nor shall any activities which are not Restricted Businesses be
prohibited as to Delta or Xxxxxxx, except as otherwise provided in this Section
6.8.
(j) The terms of this Section 6.8 shall survive as to a Member
so long as such Member or its Affiliates hold an Interest in the Company
provided, however, that such Member shall continue to be bound by Section 6.8(d)
for a period of nine months thereafter.
Section 6.9 Trade Rights.
(a) The Company and each Member shall have joint ownership
rights to any Trade Right conceived, developed or created jointly by the Members
for the Business, whether or not patentable or registrable, provided, that any
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Trade Right acquired by the Company shall become the sole and exclusive property
of the Company.
(b) Each Member hereby grants a non-exclusive, royalty-free
license to the Company to use any Trade Right currently or hereafter conceived,
developed, created, or acquired by such Member relating or useful to the
Business from the date hereof until the nine month anniversary of the date on
which such Member and its Affiliates no longer hold an Interest in the Company.
Each Member shall disclose the same promptly and completely to the Company and
shall, at any time and from time to time hereafter, (i) execute any documents
reasonably requested by the Company to permit its use of the same, (ii) execute
any documents reasonably requested by the Company for filing and procuring such
applications for Trade Rights as the Company may desire to prosecute, and (iii)
give the Company all assistance it may reasonably require, including the giving
of testimony in any Proceeding, in order to obtain, maintain and protect the
Company's right therein and thereto. Subject to Section 6.89, the grant of such
License shall not impair or limit the use of such Trade Right by such Member,
including without limitation the right to license such Trade Right to any other
Person. Upon the liquidation of the Company, each license provided hereby shall
terminate and the Trade Right subject thereto shall revert solely to the Member
that shall have licensed the same to the Company.
Section 6.10 Confidentiality. In connection with the operations of
the Company and the Members' transactions in connection therewith, the Members
and certain of their respective Affiliates may furnish and disclose to the
Company, each other and certain of their Affiliates confidential and proprietary
technical, commercial and other information, including without limitation
information relating to the Company's and each
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Member's (and certain of its Affiliates') organization, personnel, business
activities, policies, strategies, finances, costs, marketing plans, projected
revenues, technology, rights, obligations and liabilities ("Information").
Information so furnished or disclosed by any Member or its Affiliate is
confidential, and the other Member (and each of its Affiliates) shall take all
reasonable care to insure that such Information shall not be disclosed to any
third party, including imposing reasonable confidentiality requirements with
respect to such Information on its Affiliates and its or its Affiliates'
respective employees, agents, counsel, accountants and other representatives,
except insofar as such Information is distributed to such Member pursuant to
this Agreement or insofar as (i) such disclosure may be specifically authorized
in writing from time to time by the Member or its Affiliate furnishing or
disclosing such Information, (ii) such Information is necessarily disclosed by
its commercial use in the operation of the Company or pursuant to any right or
license granted by the Company, (iii) the receiving Member can demonstrate that
such Information was previously made public or disclosed by the furnishing
Member without restriction to a third party, or is in the public domain
otherwise than as a consequence of a breach of its obligations hereunder, (iv)
such Information is known by the Company or the receiving Member or Affiliate
without proprietary restrictions at the time of receipt of such Information, or
(v) such disclosure is required pursuant to compulsory legal process, including
subpoena, civil investigative demands, oral questions or interrogatories;
provided that the party subject to such compulsory disclosure promptly provides
written notice of such legal process to the disclosing party so that such party
may oppose such disclosures or seek a protective order or other confidential
treatment of such Information.
Section 6.11 Public Announcements. No Member shall issue or make any
advertisement, press release or public announcement with respect to the Company,
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or its Business or affairs, this Agreement or any other agreement between the
Company and any Member, without the prior written consent of the Board, unless
required to do so by Law (including U.S. securities rules and regulations and
the rules and regulations of any stock exchange on which the capital stock of
any Member or its Affiliate is traded). The Members agree, to the extent
practical, to consult with each other regarding any public announcement required
by Law in advance of such public announcement.
Section 6.12 Bank Accounts. The Company shall maintain one or more
accounts, including checking, cash management and/or money market accounts, in
such banks or other financial institutions as the Board or the President may
select. All amounts deposited by or on behalf of the Company in those accounts
shall be and remain the property of the Company. Withdrawals from such accounts
shall be made by the President or other signatories designated by the Board or
the President, provided that any payment, withdrawal or other transfer of funds
from such an account covering related matters in excess of $10,000 shall require
the authorization and signature of two officers, one of whom shall be the
President and the other of whom shall be the Treasurer. No funds of the Company
shall be kept in any account other than a Company account, and funds of the
Company shall not be commingled with the funds of any other Person; and no
Member shall apply, or permit any other Person to apply, such funds in any
manner except for the benefit of the Company.
Section 6.13 Restricted Activities of the Company.
(a) Without Delta's prior written consent, the Company shall
not engage in Reseller/Wholesale Sales. The Company shall refer all
opportunities for Reseller/Wholesale Sales to Delta. Without the Consent of
Members or as otherwise provided in the Network Agreement, the Company shall not
purchase or
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otherwise utilize Telecom Network Services from Persons in competition with
Delta or marketing services from Persons in competition with Xxxxxxx.
(b) The Company shall not provide Telephony Services to
Business Customers. The Company shall enter into an agent agreement (the "Agent
Agreement") which shall provide that the Company shall refer all Business
Customers that it sources exclusively to RSL USA and RSL Canada, which entities
shall be required to compensate the Company for such referrals on a commission
basis in an amount to be agreed upon between such parties (the "Agent
Agreement"). In the event that the Company engages in the Business in any
country other than the United States or Canada, the Company shall enter into a
written agreement with the Affiliate of Delta which operates in such country on
terms substantially similar to the Agent Agreement.
Section 6.14 Customers of the Company. Subject to any restrictions
set forth elsewhere herein, a Member may sell any products or services or
otherwise transact business with any customer of the Company; provided, that, if
(i) such Member is not selling such products or services or engaging in
transactions of such type on the date hereof, and (ii) such customer of the
Company is not generated from a customer list of such Member, such Member shall
pay to the Company a fee in respect of such customer based on the rate then set
forth in the Standard Rate and Data Guide (on a per-thousand basis).
Section 6.15 Excluded Areas.
(a) The Company shall not engage in the Business in any
Excluded Area to the extent, and only to the extent, such Business is prohibited
or restricted pursuant to a written agreement with a Member relating to such
Excluded Area.
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(b) Upon written request by Xxxxxxx, Delta shall use
commercially reasonable efforts to cause the counterparties to the agreements
relating to the Excluded Areas to waive the restrictive provisions thereof
relating to the operation of the Business. If any such counterparty waives such
provisions, or otherwise agrees to permit the Company's operation of the
Business within any territory theretofore designated as an Excluded Area, Delta
shall promptly give notice to such effect to the Company and such territory
shall be removed from Schedule A as an Excluded Area. From and after the date in
which the Company engages in the Business in any country in the Territory other
than the U.S. or Canada, no Member shall enter into any agreement (including any
amendment or supplement to an agreement in effect on the date hereof) which
prohibits or restricts the Company from engaging in the Business in such
country.
Section 6.16 Other Agreements. Concurrently herewith, the Company is
entering into the Marketing Agreement and the Network Agreement.
Section 6.17 Permits. Licenses and Other Regulatory Authorizations.
The Company shall not operate the Business in any jurisdiction where it is not
properly qualified to do so or does not have the necessary Licenses to do so.
Accordingly, promptly after the date hereof, the Members shall cause the Company
to obtain any such Licenses to the extent required, and each Member shall
cooperate with the Company in order to obtain such Licenses.
Section 6.18 Other Services of Members. In connection with the
operation of the Business, each Member may, from time to time, upon request by
the Company and subject to approval by the Board, provide the Company with
certain services other than as provided in the Marketing Agreement or the
Network Agreement (including without limitation the use of certain employees of
such Member). In such
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event, the Member providing such services shall be entitled to be reimbursed by
the Company for 105% of its direct cost (without allocation of overhead
expenses) of providing such services, provided that the provision of executive
management services to the Company by a Member shall be without compensation to
the Member. Such Member shall invoice the Company (which invoice shall include a
description, in reasonable detail, of the services provided by such Member)
within 15 days of the end of each month for any services provided to the Company
during such month which are not provided pursuant to either the Marketing
Agreement or the Network Agreement. The Company shall make payment for such
services within 30 days of the receipt of such invoice unless it disputes in
good faith any item or items contained in such invoice, in which case payment
with respect to any item in dispute shall be made within three business days
after the resolution of such dispute.
ARTICLE 7
CONSENTS; MEETINGS OF MEMBERS
Section 7.1 Consents. Any other provision hereof notwithstanding,
without the Consent of the Members, the Company shall not:
(a) admit a Member or issue an Interest;
(b) call for or permit to be made any capital contribution or
investment in the Company;
(c) except as provided in Section 4.1(a) and 6.1(c), declare
or make any distribution with respect to Interests, or apply any of the
Company's property or assets to the repayment of any contributions to the
Company's capital;
(d) adopt, amend, restate or revoke the Articles of
Organization of the Company or this Agreement
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(e) dissolve, liquidate or wind up its Business and affairs;
(f) sell, exchange, lease, mortgage, pledge or, except as
provided in Section 6.1(c), otherwise transfer all or substantially all of the
assets of the Company;
(g) merge or consolidate with or into another limited
liability company or other Person; or enter into any business combination,
partnership or joint venture; or acquire or dispose of all or any interest in
any other Person or business;
(h) engage in any business, other than the Business, or in any
activity not consistent with the Company's purpose;
(i) engage in the Business in any country in the Territory
other than the United States or Canada;
(j) create, incur, assume or otherwise become liable with
respect to any obligation for borrowed money (including a guarantee of, or
contingent liability for, the indebtedness or other obligations of any Person),
or issue any bonds, debentures, notes or other evidences of indebtedness, other
than in the ordinary course of business or if as a result thereof the total
principal amount of such obligations at any time outstanding would exceed
$100,000 or such greater amount as to which the Members may from time to time
Consent;
(k) subject to Section 6.1(c), sell, lease or otherwise
dispose of assets of the Company whose fair market value exceeds $100,000 or
such greater amount as to which the Members may from time to time Consent;
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(l) subject to Section 6.1(c), make any loan or extend credit
to any Person if at any time the total principal amount of such loans and other
credit then outstanding exceeds $100,000;
(m) enter into any transaction or series of related
transactions involving capital expenditures, including lease commitments, of a
total value in excess of $100,000;
(n) adopt or approve any annual or longer term budget,
business plan or operating strategy for the Company, including without
limitation changes in the management or operating structure of the Company or
marketing practices,
(o) change its independent auditor, or establish, modify,
amend or repeal the Company's accounting practices, except to the extent that
such establishment, modification, amendment or repeal shall be required by
applicable Law;
(p) except as provided in Section 6.1(c), authorize or enter
into any agreement, commitment or other transaction, or any series of related
agreements, commitments or other transactions between the Company and a Manager
or Member or an Affiliate of a Manager or Member;
(q) adopt any trademark, trade name, brand name, service xxxx,
logo, symbol, trade dress or design identifying the Company or any of its
products, other than "Delta Three Direct," the names listed on Schedule D hereto
or a variation thereof (together with "Delta Three Direct," each, a "Brand
Name");
(r) enter into or renew any employment or consulting
agreement, commitment or arrangement providing for, or that could reasonably be
expected to obligate the Company to pay, annual compensation in excess of
$100,000;
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or establish, modify, amend or repeal any plan, program, scheme or arrangement
in the nature of an employee compensation plan or benefit plan applicable
generally to employees or to classes of employees, including without limitation
pension and retirement plans, savings plans, stock ownership plans, and medical,
health, accident, disability and life insurance plans;
(s) commence, join in or settle any Proceeding by, against or
involving the Company which may materially affect the operations of the Company;
or
(t) confess a judgment against the Company.
Section 7.2 Meetings of Members.
(a) The Members shall hold an annual meeting within four
months of the end of each Fiscal Year. Other Members' meetings may be called by
the Board or either Member upon 10 days' prior written notice, given in any
manner provided in Section 11.3, when any action requiring Consent of the
Members is to be taken or when it is otherwise deemed to be in the best interest
of the Company. Meetings shall be held at the office of the Company or at such
other place to which the Members Consent.
(b) A Member may appear and vote at a meeting in person or by
proxy. Any proxy shall be dated and signed by the Member (or his
attorney-in-fact) and shall remain effective for a period of 11 months from the
date thereof. Any such proxy may be revoked at any time, such revocation to be
effective upon the presentation of a later-dated proxy or written notice of
revocation given to the Company.
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(c) Member may participate in a meeting by means of a
conference telephone or similar communication equipment by means of which all
Persons participating in the meeting can hear each other simultaneously and such
participation in a meeting shall constitute presence in person at such meeting.
(d) The presence of all Members shall constitute a quorum at
any meeting of Members. Once a quorum is present at a meeting, any action
properly taken at the meeting remains valid and effective, notwithstanding the
subsequent withdrawal of any Member from the Meeting. If a quorum does not
appear at a Meeting, any Member present may adjourn the meeting despite the
absence of a quorum.
(e) Written notice shall be given by any Person entitled to
call the meeting or by the President or any other duly authorized officer of the
Company stating the place, date and hour of the meeting, indicating that it is
being issued by or at the direction of the Person calling the meeting and, in
the case of a special meeting, stating the purpose or purposes for which the
meeting is called. An affidavit of a Person giving the notice that the notice
required by this Section has been given shall, in the absence of fraud, be prima
facie evidence of the facts therein stated. When a meeting is adjourned to
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted at the
original date of the meeting.
(f) Notice of meeting need not be given to any Member who
submits a signed waiver of notice, in person or by proxy, whether before or
after the meeting. The attendance of any Member at a meeting, in person or by
proxy,
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without protesting prior to the conclusion of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by it.
(g) Whenever under this Agreement Members are required or
permitted to take any action by vote, such action may be taken without a
meeting, without prior notice and without a vote, if an instrument or
instruments setting forth the action so taken shall be signed by all the Members
and delivered by hand or by certified or registered mail, return receipt
requested, to the office of the Company, its principal place of business, or an
officer, employee or agent of the Company having custody of the records of the
Company. Every such instrument shall bear the date of signature of each Member
who signs such an instrument, and no such instrument shall be effective to take
the action referred to therein unless, within 60 days of the earliest dated such
instrument delivered in the manner required by this Section to the Company,
instruments signed by all the Members are delivered to the office of the
Company, its principal place of business, or an officer, employee or agent of
the Company having custody of the records of the Company.
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ARTICLE 8
TRANSFERS
Section 8.1 Transfers.
(a) Except as provided in Sections 8.2 or 8.3, no Member may
withdraw from the Company (prior to the liquidation of the Company) or sell
assign, exchange, give, pledge, hypothecate, grant a security interest in, or
otherwise encumber, or otherwise voluntarily or involuntarily transfer or
dispose of (collectively, "Transfer") any Interest in the Company, except to an
Affiliate of such Member, without the prior written consent of the other
Members, which consent may be withheld in their sole discretion. In the event of
such a Transfer, the transferee shall become a Member only if the
non-Transferring Members Consent to the admission of the transferee as a Member,
which consent may be withheld in their sole discretion, and such transferee
accepts and agrees to be bound by this Agreement by executing a counterpart
hereof, expressly assumes all of the obligations of the transferor hereunder and
executes and delivers such other agreements, instruments, certificates,
affidavits, opinions of counsel and other documents as the other Members may
reasonably require in order to admit such new Member. Any purported Transfer in
violation of this Agreement shall be void ab initio and shall not bind the
Company.
(b) A Transfer of an Interest shall not dissolve the Company
or entitle the transferee to participate in the management and affairs of the
Company or to become, or to exercise any rights or powers of, a Member. The only
effect of a Transfer, unless the transferee is admitted as a Member, is to
entitle the transferee to receive, and to the extent Transferred, the
distributions and allocations of
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Profits and Losses to which the transferor would be entitled. Until the
transferee becomes a Member, the transferee shall have no liability as a Member
solely as a result of such Transfer.
Section 8.2 Member's Deadlock Buyout.
(a) If a Member's Deadlock occurs, the Members shall promptly
(and in any event within 20 days after the occurrence of a Member's Deadlock)
select an investment banking, accounting or appraisal firm to determine the fair
market value of the Company based on a valuation of its business and assets. In
the event the Members are unable to agree on the selection of such firm within
such 20 day period, then the Company's regularly engaged independent certified
public accountants shall make such determination. Such firm, shall provide an
appraisal within 30 days after its selection and, utilizing its appraisal of the
fair market value of the Company, as provided above, such firm shall also
determine the appraised value of each Interest in the Company (the "Appraised
Value"), and shall deliver to the Company and each Member a certificate setting
forth therein the Appraised Value of each Member's Interest and a statement in
reasonable detail of the basis therefor. The determination of Appraised Value by
such firm shall be conclusive and binding upon the Company and the Members.
(b) Within 10 days of receipt by the Members of such
certificate of Appraised Value, either Member may offer in writing to purchase
the other Member's Interest (the "MD Purchase Offer") at a cash purchase price
in U.S. dollars (the "MD Purchase Price") equal to the Appraised Value of such
other Member's Interest by giving written notice of such offer to the other
Member within such 10 day period. If the other Member desires to accept the MD
Purchase Offer, it shall give written notice to such effect to the offering
Member within 15 days of receipt of the
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offering Member's notice (the "Acceptance Notice"). In order to effect such
sale, the party selling such Interest shall execute and deliver to the party
acquiring such Interest all necessary assignments, membership transfer forms or
other instruments or documents as are necessary in order to effectively transfer
the Interest.
(c) If an MD Purchaser Offer is accepted, the parties shall
agree to a closing date, which shall be no more than 20 days after the date of
the Acceptance Notice. The MD Purchase Price shall be payable in full in
immediately available funds, at the closing.
(d) If neither Member elects to purchase the other Member's
Interest, or if both the Members elect to purchase the other Member's Interest
and Member desires to sell its Interest then, unless the Member's Deadlock is
resolved within 45 days after the receipt by the Member of the Appraisal Value
certificate, the Company shall proceed promptly to be liquidated pursuant to
Article 9.
(e) Upon consummation of any sale of an Interest pursuant to
the MD Purchase Offer, the purchaser shall (i) deduct from the MD Purchase Price
the amount of any distributions from the Company which the seller has received
since the date on which the MD Purchase Offer was made and (ii) add to the MD
Purchase Price Offer the amount of any capital contributions to the Company
which the Seller made since the date on which the MD Purchase Offer was made.
During such period the Members shall make capital contributions to the Company
consistent with past practices.
Section 8.3 Buy/Sell Provisions.
(a) In the event that either (i) a Change of Control of a
Member occurs, (ii) Delta elects to compel any action pursuant to Section
6.1(c), (iii)
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a Default occurs or (iv) a notice is delivered by a Member in accordance with
Section 8.3(f), then the Electing Member may send a written notice to the Other
Member offering both (i) to sell all of the Electing Member's Interest to the
Other Member (the "Sale Offer") and (ii) to purchase all of the Other Member's
Interest (the "Purchase Offer" and, together with the Sale Offer, the "Offer").
(b) The Offer must (i) specify a single cash purchase price
(the "Purchase Price") in U.S. dollars per share applicable both to the Sale
Offer and to the Purchase Offer and (ii) provide that, in connection with either
the Sale Offer or the Purchase Offer, the Purchase Price is to be paid in
immediately available funds on the date of consummation of the transaction.
(c) The Offer shall be irrevocable for a period of 30 days
from and after the receipt of such Offer. The Other Member may, on or before the
30th day after receipt of such Offer, accept either the Sale Offer or the
Purchase Offer. If the Other Member shall fail, within such period of 30 days,
to accept either the Sale Offer or the Purchase Offer, the Electing Member shall
thereupon have the obligation to purchase, and the Other Member shall have the
obligation to sell, the Interest owned by the Other Member at the Purchase Price
specified in the Purchase Offer and otherwise on the terms and conditions
provided in such Purchase Offer.
(d) Any sale or purchase of an Interest pursuant to the Sale
Offer or the Purchase Offer shall be consummated (i) within 30 days following
the Other Member's acceptance of such Sale Offer or Purchase Offer, as the case
may be, or (ii) if the Other Member declines to accept either Offer, within 60
days following the Other Members receipt of such Offer. In order to effect such
sale, the party selling such Interest (the "Seller") shall execute and deliver
to the party acquiring such Interest (the
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"Buyer") all necessary assignments, membership transfer forms or other
instruments or documents as are necessary in order to effectively transfer the
Interest.
(e) Upon consummation of any sale or purchase of shares
pursuant to the Sale Offer or the Purchase Offer, the Buyer shall (i) deduct
from the Purchase Price the amount of any distributions from the Company, which
the Seller has received since the date on which the Offer was made and (ii) add
to the Purchase Price the amount of any capital contributions to the Company
which the Seller made since the date on which the Offer was made. During such
period the Members shall make capital contributions to the Company consistent
with past practices.
(f) If a Member shall have given notice of an election to
dissolve pursuant to Section 9.1(a), such Member shall be deemed to have given
notice as an Electing Member pursuant to Section 8.3(a), shall include in such
notice a single cash purchase price and other information in accordance with
Section 8.3(b), and the remaining Member shall be deemed to be an Other Member
for all purposes of this Section 8.3.
Section 8.4 Delta Three Withdrawal License. If Delta shall sell or
otherwise dispose of its Interest pursuant to Section 8.2 or 8.3 while Xxxxxxx
remains a Member, the Company shall have the right to use, and Delta hereby
grants to the Company a non-exclusive royalty-free license to use, the "Delta
Three" name and related Trade Rights in the Business to the same extent and in
the same manner as used previously in the Business prior to such sale or
disposition for a period of 12 months after the date of such sale or
disposition.
Section 8.5 Services Agreement Wind-down. Notwithstanding the
complete withdrawal of either Member pursuant to Section 8.2 or 8.3, the Company
may
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(but shall not be required to) continue the Marketing Agreement or the Network
Agreement, as the case may be, in effect until the first anniversary of the date
of such withdrawal or such earlier date as the Company may determine to
terminate such agreement upon ten days' prior written notice to such Member.
ARTICLE 9
DISSOLUTION AND LIQUIDATION
Section 9.1 Dissolution. Subject to the provisions of applicable
Law, the Company shall be dissolved upon the first of the following events to
occur:
(a) December 31, 1999 or any December 31 thereafter if any
Member gives a notice of termination to any other Member on or before September
30, 1999 or any September 30 thereafter provided, that in the event such notice
is given the provisions of Section 8.3(f) will apply and a dissolution shall not
be required;
(b) the bankruptcy of any Member, unless within 180 days after
such event the remaining Members Consent to continue the Company;
(c) the sale of all or substantially all of the Company's
assets;
(d) neither Member's Interest is sold pursuant to the purchase
option provided in Section 8.2;
(e) by Xxxxxxx upon the termination of the Network Agreement
or by Delta upon the termination of the Marketing Agreement, in each case upon
10 days' prior written notice to the Company; or
(f) the Consent of the Members.
Section 9.2 Liquidation.
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(a) Upon a dissolution of the Company, the President or
another Person appointed by the Board (the "Liquidating Agent") shall take or
cause to be taken a full account of the Company's assets, properties,
indebtedness and liabilities as of the date of such dissolution and shall
proceed with reasonable promptness to liquidate the Company's assets and
properties and to terminate its Business and affairs. Subject to Section 9.2(b),
the Company's property or the proceeds from the liquidation thereof, shall be
applied in cash or in kind in the following order:
(i) to the payment of all liabilities and obligations of
the Company, including expenses of the liquidation and obligations and
liabilities to the Members (other than on account of their Capital Accounts or
liabilities for distributions under applicable Law),
(ii) to the establishment of such reserves for
contingent liabilities of the Company as are deemed necessary or desirable by
the Liquidating Agent; provided, however, that such reserves shall be deposited
in escrow with a bank for the purpose of disbursing such reserves for the
payment of such contingent liabilities and, at the expiration of such period as
the Liquidating Agent may reasonably deem advisable, for the purpose of
distributing the remaining balance in accordance with subparagraph (iii) below,
and
(iii) to the Members, to be divided among them in
accordance with their respective Capital Account balances.
(b) The Liquidating Agent shall be allowed a reasonable time
for the orderly liquidation of the Company's assets and properties and the
discharge of indebtedness and other liabilities to creditors, so as to preserve
and, upon disposition, maximize the value of the Company's assets and
properties.
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Section 9.3 Fiscal Year of Termination. Upon the liquidation of the
Company (or any Member's Interest) within the meaning of Treasury Regulation
ss.1.704-1 (b)(2)(ii)(g), the liquidating distributions shall be made, if
practicable, on or before the close of the Fiscal Year in which the liquidation
occurs, and, in any event, within 90 days after the date of such liquidation. In
the case of the liquidation of the Company, such distribution may be made to a
trust established for the benefit of the Members for purposes of liquidating
Company assets, collecting amounts owed to the Company, paying any indebtedness
and other liabilities of the Company and distributing the remaining amounts to
the Members in the same amounts as would have been distributed by the Company
without regard to the trust.
Section 9.4 Continuing Liabilities and Other Obligations. Except as
otherwise expressly provided herein, no reconstitution, dissolution, liquidation
or termination of the Company shall relieve, release or otherwise discharge any
Member, or any of that Member's successors, assigns, heirs or legal
representatives, from any previous breach or default of, or any obligation or
other liability therefore incurred or accrued under, any provision of this
Agreement or applicable Law, and any and all liabilities claims, demands, or
causes of action arising from any such breaches, defaults, obligations and
liabilities shall survive any such reconstitution, dissolution, liquidation or
termination.
Section 9.5 Final Statement. As soon as practicable after the
dissolution of the Company, the Liquidating Agent shall cause a statement of the
Company's assets and liabilities to be prepared as of the date of such
dissolution and furnished to the Members.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
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Section 10.1 Ouintel's Representations and Warranties. Xxxxxxx
hereby represents and warrants to Delta as follows:
(a) Xxxxxxx is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the full
power and authority to own its assets and carry on the Business as and in the
places where such assets are now owned or such Business is conducted.
(b) Xxxxxxx has full corporate power and authority to execute
and deliver this Agreement and the Marketing Agreement and to assume and perform
its obligations hereunder and thereunder. The execution and delivery of this
Agreement and the Marketing Agreement by Xxxxxxx and the performance of its
obligations hereunder and thereunder have been duly authorized by all requisite
corporate action on the part of Xxxxxxx. This Agreement and the Marketing
Agreement have been duly executed and delivered by Xxxxxxx, and this Agreement
and the Marketing Agreement are legally valid and binding obligations of
Xxxxxxx, enforceable against Quintet in accordance with their respective terms,
subject to (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) equitable principles limiting the availability of certain remedies. The
execution and delivery of this Agreement and the Marketing Agreement do not, and
the performance by Xxxxxxx of its obligations hereunder and thereunder, will
not, violate any provision of Xxxxxxx'x Certificate of Incorporation or By-laws
and do not and will not conflict with or result in any breach of any condition
or provision of, or constitute a default under, or create or give rise to any
adverse right of termination or cancellation by, or excuse the performance of,
any other Person under, or result in the creation or imposition of any lien upon
any of the assets of the Company or have a
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material adverse effect on the Company by reason of the terms of, any contract,
indenture, instrument lien or Order to which Xxxxxxx is a party or is subject or
which is or purports to be binding upon it or its assets.
(c) No consent of, or notice to, any Person is required as to
Xxxxxxx in connection with Xxxxxxx'x execution and delivery of this Agreement or
the Marketing Agreement, or the performance of Xxxxxxx'x obligations hereunder
or thereunder.
(d) No Proceeding is pending or, to the best of Xxxxxxx'x
knowledge, threatened against or affecting the Business or the assets or
operations of Quintet in which an unfavorable Order would have a material
adverse effect on the Company, or prohibit, invalidate, or make unlawful, in
whole or in part, this Agreement or the Marketing Agreement, or the carrying out
of the provisions hereof or thereof. Xxxxxxx is not in default in respect of any
Order, nor is there any such Order enjoining Xxxxxxx in respect of, or the
effect of which is to prohibit or curtail Xxxxxxx'x performance of, its
obligations hereunder or under the Marketing Agreement.
Section 10.2 Delta's Representations and Warranties. Delta hereby
represents and warrants to Xxxxxxx as follows:
(a) Delta is a corporation duly organized validly existing and
in good standing under the laws of the State of Delaware and has the full power
and authority to own its assets and carry on the Business as and in the places
where such assets are now owned or such Business is conducted.
(b) Delta has full corporate power and authority to execute
and deliver this Agreement and the Network Agreement and to assume and perform
its obligations hereunder and thereunder. The execution and delivery of this
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Agreement and the Network Agreement by Delta and the performance of its
obligations hereunder and thereunder have been duly authorized by all requisite
corporate action on the part of Delta. This Agreement and the Network Agreement
have been duly executed and delivered by Delta and this Agreement and the
Network Agreement are legally valid and binding obligations of Delta,
enforceable against Delta in accordance with their respective terms, subject to
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors' rights generally and (ii)
equitable principles limiting the availability of certain remedies. The
execution and delivery of this Agreement and the Network Agreement do not, and
the performance by Delta of its obligations hereunder and thereunder, will not,
violate any provision of Delta's Certificate of Incorporation or By-laws and do
not and will not conflict with or result in any breach of any condition or
provision of, or constitute a default under, or create or give rise to any
adverse right of termination or cancellation by, or excuse the performance of,
any other Person under, or result in the creation or imposition of any lien upon
any of the assets of the Company or have a material adverse effect on the
Company by reason of the terms of, any contract, indenture, instrument, lien or
Order to which Delta is a party or is subject or which is or purports to be
binding upon it or its assets.
(c) No consent of, or notice to, any Person is required as to
Delta in connection with Delta's execution and delivery of this Agreement or the
Network Agreement, or the performance of Delta's obligations hereunder or
thereunder.
(d) No Proceeding is pending or, to the best of Delta's
knowledge, threatened against or affecting the Business or the assets or
operations of Delta in which an unfavorable Order would have a materially
adverse effect on the
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Company, or prohibit, invalidate, or make unlawful, in whole or in part, this
Agreement or the Network Agreement, or the carrying out of the provisions hereof
or thereof or the transactions contemplated hereby or thereby. Delta is not in
default in respect of any Order, nor is there any such Order enjoining Delta in
respect of, or the effect of which is to prohibit or curtail Delta's performance
of, its obligations hereunder or under the Network Agreement.
(e) Delta or an Affiliate thereof is a party on the date
hereof to an enforceable agreement that prohibits or restricts, or pursuant to
which the other party or parties thereto would be entitled to assert or exercise
a right or remedy to prohibit or restrict, the Company's operation of the
Business (or any aspect of the Business) within each Excluded Area and the
Excluded Areas are the only geographical territories subject to any such
prohibition or restriction as of the date hereof.
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ARTICLE 11
MISCELLANEOUS
Section 11.1 Limitation of Authority. Except as expressly provided
herein, no provision hereof shall be deemed to create any partnership, joint
venture or joint enterprise or association among the parties hereto, or to
authorize or to empower any party hereto to act on behalf of, obligate or bind
any other party hereto.
Section 11.2 Fees and Expenses. All fees and expenses, including
without limitation attorneys' fees and expenses, incurred by the Members in
connection with the initial organization of the Company shall be borne by the
respective Members.
Section 11.3 Notices. Except as otherwise expressly provided herein,
any notice or demand required or permitted to be given or made hereunder shall
be deemed to have been duly given or made for all purposes if (a) in writing and
sent by (i) messenger or an overnight courier service against receipt, or (ii)
certified or registered mail, postage paid, return receipt requested, or (b)
sent by telegram, telecopy, telex or similar electronic means; provided that a
written copy thereof is sent on the same day by postage-paid first-class mail in
the case of a Member at its address or fax number as set forth on Schedule B
hereto, or any such other address or fax number as any Member may at any time,
or from time to time, direct by notice given to other Member in accordance with
this Section. The date of giving or making of any such notice or demand shall
be, in the case of clause (a)(i), the date of the receipt; in the case of clause
(a)(ii), five (5) business days after such notice or demand is sent; and, in the
case of clause (b), the business day next following the day that notice or
demand is sent.
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Section 11.4 Amendment. Except as otherwise provided herein, no
amendment of this Agreement shall be valid or effective, unless in writing or
signed by or on behalf of all the Members.
Section 11.5 Waiver. No course of dealing or omission or delay on
the part of any party hereto in asserting or exercising any right hereunder
shall constitute or operate as a waiver of any such right. No waiver or
provision hereof shall be effective, unless in writing and signed by or on
behalf of the party to be charged therewith. No waiver shall be deemed a
continuing waiver or waiver in respect of any other or subsequent breach or
default, unless expressly so stated in writing.
Section 11.6 Governing Law. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
without regard to choice or conflict of laws principles.
Section 11.7 Jurisdiction. Each of the Members and the Company
herein irrevocably consents and submits to the jurisdiction of the Supreme Court
of the State of New York and of the United States District Court for the
Southern District of New York in connection with any Proceeding arising out of
or relating to this Agreement or the transactions contemplated hereby, waives
any objection to venue in New York County or such District, and agrees that
service of any summons, complaint, notice or other process relating to such
Proceeding may be effected in the manner provided by clause (a)(ii) of Section
11.3.
Section 11.8 Remedies. In the event of any actual or prospective
breach or default by any party, the other parties shall be entitled to equitable
relief, including remedies in the nature of injunction and specific performance.
All remedies hereunder are cumulative and not exclusive, and nothing herein
shall be deemed to
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prohibit or limit any party from pursuing any other remedy or relief available
at law or in equity for any actual or prospective breach or default, including
the recovery of damages.
Section 11.9 Severability. The provisions hereof are severable and
in the event that any provision of this Agreement shall be determined to be
invalid or unenforceable in any respect by a court of competent jurisdiction,
the remaining provisions hereof shall not be affected, but shall, subject to the
discretion of such court, remain in full force and effect, and any invalid or
unenforceable provision shall be deemed, without further action on the part of
the parties hereto, amended and limited to the extent necessary to render such
provision, as so amended and limited, valid and enforceable.
Section 11.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and which together
shall constitute one and the same agreement.
Section 11.11 Further Assurances. Each party shall promptly execute,
deliver, file or record such agreements, instruments, certificates and other
documents and perform such other and further acts as any of the other parties
hereto may reasonably request or as may otherwise be necessary or proper to
consummate and perfect the transactions contemplated hereby.
Section 11.12 Assignment. Except as otherwise provided elsewhere
herein, this Agreement, and each right, interest and obligation hereunder, may
not be assigned by any party hereto without the prior written consent of each
other party hereto. Any purported assignment without such consent shall be void
and without effect.
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Section 11.13 Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement is not intended, and shall not be deemed,
to create or confer any right or interest for the benefit of any Person not a
party hereto.
Section 11.14 Titles and Captions. The titles and captions of the
Articles and Sections of this Agreement are for convenience of reference only
and do not in any way define or interpret the intent of the parties or modify or
otherwise affect any of the provisions hereof.
Section 11.15 Grammatical Conventions. Whenever the context so
requires, each pronoun or verb used herein shall be construed in the singular or
the plural sense and each capitalized term defined herein and each pronoun used
herein shall be construed in the masculine, feminine or neuter sense.
Section 11.16 References. The terms "herein," "hereto," "hereof,"
"hereby" and "hereunder" and other terms of similar import, refer to this
Agreement as a whole, and not to any Section or other part hereof.
Section 11.17 No Presumptions. Each party hereto acknowledges that
it has participated, with the advice of counsel, in the preparation of this
Agreement. No party hereto is entitled to any presumption with respect to the
interpretation of any provision hereof or the resolution of any alleged
ambiguity herein based on any claim that any other party hereto drafted or
controlled the drafting of this Agreement.
Section 11.18 Entire Agreement. This Agreement embodies the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes any prior agreement, commitment or arrangement relating thereto.
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Section 11.19 Effectiveness of Agent. Notwithstanding anything else
herein to the contrary, this Agreement shall not be and become effective and
binding upon the Members until the Members shall have agreed to a Budget for the
first full year of the Company's operations; provided, however, that if no such
Budget is agreed upon by August 31, 1998, this Agreement shall be null and void
ab initio, and no party shall be bound thereby.
IN WITNESS WHEREOF, the Members, by their respective duly authorized
officers, have duly executed and delivered this Agreement as of the date set
forth the Preamble hereto.
XXXXXXX ENTERTAINMENT, INC. DELTA THREE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxx Xxxxxxx
------------------------------- ----------------------------------
Xxxxxxx X. Xxxxxxxx, President Xxx Xxxxxxx, Chief Executive Officer
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SCHEDULE A
The IP Telephony Services shall include, subject to Article Six, the
following services which are provided by utilizing the Internet and
networks based on Internet Protocols:
1. On-line services
2. Dial around products
3. Value-added telecommunication services accessible via telephone or
internet, including without limitation voice mail, online/offline,
call forwarding, call conferencing, fax storing and forwarding,
e-mail and e-mail text to speech, unified messaging programs
4. Calling cards
Excluded Areas:
Norway
South America (all countries)
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SCHEDULE B
Name and Initial Capital Fractional Capital
Address of Members Contribution Share (initial) Commitment
------------------ ------------ --------------- ----------
Xxxxxxx Entertainment, Inc. $245,000 49% $3,185,000
Xxx Xxxx Xxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Atn: President
Delta Three, Inc. $255,000 51% $3,315,000
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: President
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SCHEDULE C
Xxxxxxx:
IP Telephony network with Grey Peak Technologies
Delta Three:
Riparius hand set bundling deal
EDU 2500 program
NACC agreement
LDM program
Co-Marketing Agreement between Delta Three, Inc. and the globe
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ARTICLES OF ORGANIZATION
OF
DELTA THREE DIRECT, LLC
Under Section 203 of the Limited Liability Company Law
The Articles of Organization of Delta Three Direct, LLC, a New York
limited liability company (the "Company"), are herein set forth as follows:
1. The name of the Company is Delta Three Direct, LLC.
2. The principal office of the Company is to be located in Rockland
County, New York State.
3. The Secretary of State of New York is designated as agent of the
Company upon whom process against it may be served, and the post office address
to which the Secretary of State of New York shall mail a copy of any process
against the Company served upon him or her is:
Delta Three Direct, LLC
Xxx Xxxx Xxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn:President
4. The Company is to be managed by one or more managers.
IN WITNESS WHEREOF, the undersigned Organizer of the Company signs these
Articles of Organization and affirms that the foregoing is true under penalties
of perjury on this _____________________ day of August, 1998.
-------------------------------------
Xxxxxx X. Xxxx, Organizer
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