INSIGHT HOLDINGS OF OHIO, LLC
OPERATING AGREEMENT
OPERATING AGREEMENT, dated as of August 21, 1998 (this
"Agreement"), of INSIGHT HOLDINGS OF OHIO, LLC, a Delaware limited liability
company.
R E C I T A L S
WHEREAS, Insight has caused the formation of a limited
liability company and desires to establish the respective rights and obligations
of the Members pursuant to the Delaware Limited Liability Company Act in
connection with the operation of INSIGHT HOLDINGS OF OHIO, LLC.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties executing
this Agreement below, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In this Agreement, the following terms shall
have the meanings set forth below when used in this Agreement with initial
capital letters:
"Accounting Period" shall mean, as the context may require,
the period commencing on the date of this Agreement or on the day following the
last day of the immediately preceding Accounting Period, and ending on the next
succeeding of the following: (a) the last day of each Fiscal Year of the
Company; (b) the date upon which the Company shall be dissolved; or (c) any day
designated by the Tax Matters Partner as the date upon which an Accounting
Period shall end.
"Adjusted Basis" shall mean, as of any date of determination,
the Company's adjusted basis in any asset as of such date, as determined for
federal income tax purposes pursuant to Section 1011 of the Code.
"Affiliate" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
"Agreement" shall mean this Operating Agreement as amended
from time to time.
"Capital Account" shall mean as of any date the Capital
Contribution to the Company by a Member, adjusted as of such date pursuant to
the terms and provisions of this Agreement.
"Capital Contribution" shall mean any contribution by a Member
to the capital of the Company in cash, property or services rendered, as set
forth on Schedule A.
"Carrying Value" shall mean (i) with respect to any asset
(other than cash) included in a Capital Contribution of a Member, the fair
market value of such contributed property on the date of contribution reduced,
but not below zero, by all depreciation, amortization, and similar expense
charged to the Members' Capital Accounts with respect to such property and (ii)
with respect to any other asset, the Adjusted Basis thereof.
"CATV Systems" shall mean any cable distribution system that
receives broadcast signals by antennae, microwave transmission, satellite
transmission or any other form of transmission that amplifies such signals and
distributes them.
"Certificate of Formation" shall mean the Certificate of
Formation of the Company filed with the Secretary of State of the State of
Delaware on July 14, 1998.
"Claims" shall have the meaning set forth in Section 11.2 of
this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and any successor to that Code.
"Company" shall refer to INSIGHT HOLDINGS OF OHIO, LLC, a
Delaware limited liability company.
"Credit Agreement" shall mean that certain Third Amended and
Restated Credit Agreement, dated as of January 22, 1998, by and among Insight,
the Lenders party thereto, CIBC, Inc. and Fleet Bank, N.A., as Co-Agents, and
The Bank of New York, as Issuing Bank and as agent, as amended, restated,
modified or supplemented from time to time, including any increase, deferral,
renewal, extension or refinancing thereof or any senior credit facility entered
into hereafter by Insight or any subsidiary Affiliate.
"Default Rule" shall mean a rule stated in the Delaware Act:
(i) which structures, defines, or regulates the finances,
governance, operations, or other aspects of a limited liability company
organized under the Delaware Act, and
(ii) which applies except to the extent it is negated or
modified through the provisions of a limited liability company's
certificate of formation or operating agreement.
2
"Delaware Act" shall mean the Delaware Limited Liability
Company Act.
"Dissolution Event" shall have the meaning set forth in
Section 10.1 of this Agreement.
"Distribution" shall mean the amount of cash and the fair
market value of any other property paid to a Member by the Company.
"Fiscal Year" shall mean the fiscal year of the Company, which
shall be the year ending December 31.
"GAAP" shall mean generally accepted accounting principles
applied on a consistent basis.
"Indemnified Persons" shall have the meaning set forth in
Section 11.1 of this Agreement.
"Insight" shall mean Insight Communications Company, L.P., a
Delaware limited partnership and the sole Member of the Company.
"Insight Ohio" shall mean Insight Communications of Central
Ohio, LLC, a Delaware limited liability company.
"Liquidator" shall have the meaning set forth in Section
10.4.1 of this Agreement.
"Loss" shall mean the taxable loss of the Company for any
Fiscal Year or portion thereof, as computed for federal income tax purposes in
accordance with Section 703(a) of the Code. For this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be aggregated, but there shall be excluded
from such computation any item of income, gain, loss, or deduction which is
specifically allocated.
"Member" shall mean each Person who executes a counterpart of
this Agreement and is admitted as a member of the Company in accordance with
Section 4.2 of this Agreement.
"Minimum Gain" shall mean "partnership minimum gain" as
defined in Treasury Regulation Section 1.704-2(d).
"Net Agreed Value" shall mean
(i) in the case of any Capital Contribution other than cash,
the fair market value of such property at the time of contribution
reduced by any indebtedness secured by such property and assumed or
taken subject to by the Company upon such contribution under Section
752 of the Code, and
(ii) in the case of any property (other than cash) distributed
to a Member, the fair market value of such property at the time of such
distribution reduced by any indebtedness
3
secured by such property and assumed or taken subject to by such Member
upon such distribution under Section 752 of the Code.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Treasury Regulation 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the meaning
set forth in Treasury Regulation 1.704-2(i)(3).
"Percentage Interest" shall mean with respect to any Member,
the amount denoted as such opposite the Member's name in Schedule A to this
Agreement.
"Person" shall mean any natural person, corporation,
governmental authority, limited liability company, partnership, trust,
unincorporated association or other commercial or legal entity.
"Profit" shall mean the taxable income of the Company for any
Fiscal Year or portion thereof as computed for federal income tax purposes in
accordance with Section 703(a) of the Code. For this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be aggregated, but there shall be excluded
from such computation any item of income, gain, loss, or deduction which is
specifically allocated.
"Records" shall mean:
(i) true and full information regarding the status of the
business and financial condition of the Company;
(ii) copies of the Company's federal, state, and local
income tax returns;
(iii) a current list of the name and last known business,
residence, or mailing address of each Member;
(iv) a copy of this Agreement, the Certificate of Formation,
and all amendments thereto, together with executed copies of any
written powers of attorney pursuant to which this Agreement and the
Certificate of Formation and all amendments thereto have been executed;
(v) true and full information regarding the amount of cash
and a description and statement of the value of any other property or
services contributed by each Member and which each Member has agreed to
contribute in the future, and the date on which each Member became a
Member;
(vi) a copy of each material contract entered into by the
Company;
(vii) minutes of the meetings of the Members; and
(viii) other information regarding the affairs of the Company
as required by an act of the Members or as is prudent and desirable in
the opinion of the Members.
4
"Tax Matters Partner" shall be the Member designated in
Section 8.5 hereof.
"Treasury Regulations" shall mean all temporary and final
regulations promulgated under the Code as from time to time in effect.
"Unrealized Gain" shall mean, with respect to any asset and as
of any date of determination, the excess, if any, of the then current fair
market value of such asset over the Carrying Value thereof as of such date.
"Unrealized Loss" shall mean, with respect to any asset and as
of any date of determination, the excess, if any, of the then current Carrying
Value of such asset over the fair market value thereof as of such date.
ARTICLE II
RELATIONSHIP OF THIS AGREEMENT TO
THE CERTIFICATE OF FORMATION AND TO THE
DEFAULT RULES PROVIDED BY THE DELAWARE ACT
2.1 Relationship of this Agreement to the Default Rules
Provided by the Delaware Act.
Regardless of whether this Agreement specifically refers to
particular Default Rules:
(a) if any provision of this Agreement conflicts with a
Default Rule, the provision of this Agreement shall control and the Default Rule
shall be modified or negated accordingly, and
(b) if it is necessary to construe a Default Rule as
modified or negated in order to effectuate any provision of this Agreement, the
Default Rule shall be modified or negated accordingly.
2.2 Relationship Between this Agreement
and the Certificate of Formation.
If a provision of this Agreement differs from a provision of
the Certificate of Formation, then to the extent allowed by law this Agreement
shall govern.
ARTICLE III
ORGANIZATION
3.1 Formation. One or more Persons has acted as an
organizer to form a limited liability company by preparing, executing and filing
the Certificate of Formation pursuant to the Delaware Act.
5
3.2 Name. The name of the Company is INSIGHT HOLDINGS OF
OHIO, LLC.
3.3 Office of the Company. The principal office of the
Company shall be126 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other
place as the Members shall from time to time designate. The Company may
establish any other places of business as the Members may from time to time deem
advisable.
3.4 Registered Agent and Registered Office. The
registered agent and registered office of the Company shall be as designated in
the Certificate of Formation. The registered office and registered agent may be
changed from time to time by filing the address of the new registered office
and/or the name of the new registered agent with the Secretary of State of the
State of Delaware pursuant to the Delaware Act.
3.5 Term. The term of the Company shall be until December
31, 2060, unless the existence of the Company is terminated sooner pursuant to
this Agreement or the Delaware Act.
3.6 Purpose. The Company is formed for any lawful
business purpose or purposes. The business of the Company is to conduct any
lawful business including (without limitation), directly or through Persons in
which the Company invests, to acquire franchises to operate, and to own, invest
in, design, construct, maintain, manage and operate, one or more CATV Systems or
wireless cable systems, or entities providing telecommunications services, and
to do all things reasonably incidental thereto, including borrowing money and
securing such borrowings by mortgage, pledge, or other lien, and leasing or
disposing of CATV Systems. The initial business of the Company shall be to
acquire a membership interest in Insight Ohio and to act as manager of Insight
Ohio in connection with Insight Ohio's CATV Systems serving areas in and around
Columbus, Ohio, pursuant to that certain Contribution Agreement, dated as of
June 30, 1998, between Coaxial Communications of Central Ohio, Inc. and Insight,
which Contribution Agreement has been assigned to the Company.
ARTICLE IV
MEMBERS
4.1 Names and Addresses. The name and address of each
Member is as set forth in Schedule A to this Agreement.
4.2 Additional Members. A Person may be admitted as a
Member after the date of this Agreement upon the unanimous consent of the
Members and upon compliance with the terms of this Agreement and any other
conditions imposed by the Members from time to time for the admission of
additional or substitute Members.
4.3 Books and Records. The Company shall keep the
Records at its principal place of business or at the office of Insight.
6
4.4 Information. Each Member and its agents may inspect
the Records during ordinary business hours and upon reasonable notice at the
principal office the Company, or other location of the Records.
4.5 Limitation of Liability. Each Member's liability
shall be limited as set forth in this Agreement, the Delaware Act and other
applicable law. No Member shall be personally liable for any indebtedness,
liability or obligation of the Company without entering into a written agreement
assuming such personal liability, except that each Member shall remain
personally liable for the payment of its Capital Contribution and as otherwise
set forth in this Agreement, the Delaware Act and any other applicable law.
4.6 Priority and Return of Capital. No Member shall have
priority over any other Member, whether for the return of a Capital Contribution
or for Profits, Losses, or Distributions; provided, however, that this Section
4.6 shall not apply to loans or other indebtedness (as distinguished from a
Capital Contribution) made by a Member to the Company.
4.7 Liability of a Member to the Company. A Member who or
which rightfully receives the return of any portion of a Capital Contribution is
liable to the Company only to the extent now or hereafter provided by the
Delaware Act. A Member who or which receives a Distribution made by the Company
in violation of this Agreement or made when the Company's liabilities exceed its
assets (after giving effect to such Distribution) shall be liable to the Company
for the amount of such Distribution.
4.8 Financial Adjustments. No Members admitted after the
date of this Agreement shall be entitled to any retroactive allocation of
losses, income or expense deductions incurred by the Company. The Tax Matters
Partner may, in its discretion, at the time a Member is admitted, close the
books and records of the Company (as though the Fiscal Year had ended) or make
pro rata allocations of loss, income and expense deductions to such Member for
that portion of the Fiscal Year in which such Member was admitted in accordance
with the Code.
ARTICLE V
MANAGEMENT
5.1 Management. The Company shall be managed by its
Members. Each Member shall have the right to act for and bind the Company in its
ordinary course of its business.
5.2 Meeting of and Voting by the Members.
5.2.1 Meetings; Notice. Meetings of the Members
may be called at any time by any Member and shall be held at the Company's
principal office or at any other place, within or outside the State of Delaware,
designated in any notice of such meeting. If no such designation is made, the
place of any such meeting shall be the principal office of the Company. Written
or oral notice stating the place, day and hour of the meeting indicating that it
is being issued by or at the direction of the Member calling the meeting,
stating the purpose or purposes for which the meeting is called shall be
delivered no fewer than ten nor more than sixty days before the date of the
meeting.
7
Notice of a 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 a Member at a meeting, in person or by proxy, without protesting
prior to the conclusion of the meeting the lack of notice of such meeting, shall
constitute a waiver of notice by it.
5.2.2 Record Date. For the purpose of determining
the Members entitled to notice of or to vote at any meeting of Members or any
adjournment of such meeting, or Members entitled to receive payment of any
Distribution, or to make a determination of Members for any other purpose, the
date on which notice of the meeting is mailed or the date on which the
resolution declaring Distribution is adopted, as the case may be, shall be the
record date for making such a determination. When a determination of Members
entitled to vote at any meeting of Members has been made pursuant to this
Section, the determination shall apply to any adjournment of the meeting.
5.2.3 Quorum; Manner of Acting. Members holding
not less than all the Percentage Interests, represented in person or by proxy,
shall constitute a quorum at any meeting of Members. If a quorum is present at
any meeting, the vote or written consent of Members holding all the Percentage
Interests shall constitute the act of the Members.
5.2.4 Action by Members Without a Meeting.
Whenever the Members of the Company are required or permitted to take any
action, such action may be taken without prior notice and without a vote, if a
consent or consents in writing, setting forth the action so taken shall be
signed by each of the Members.
5.2.5 Proxies. A Member may vote in person or by
proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Every proxy must be signed by the Member or its
attorney-in-fact. No proxy shall be valid after the expiration of three years
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Member executing it, except if the proxy
states that it is irrevocable and if it is coupled with an interest in law
sufficient to support an irrevocable power.
5.2.6 Duties of Members. The Members shall
devote such time to the business and affairs of the Company as is necessary to
carry out the Members' duties set forth in this Agreement. Each Member shall
perform its duties in good faith, in a manner it reasonably believes to be in
the best interests of the Company and with such care as an ordinarily prudent
person in a similar position would use under similar circumstances. A Member who
so performs such duties shall not have any liability by reason of being or
having been a Member. Nothing contained in this Agreement shall be deemed to
require the Members to manage the Company as its sole and exclusive function and
the Members may have other business interests and may engage in other activities
in addition to those relating to the Company. Neither the Company nor any Member
shall have any right pursuant to this Agreement to share or participate in such
other business interests or activities or to the income or proceeds derived
therefrom.
5.2.7 Liability and Indemnification. A Member
shall not be liable to the Company or the other Member for any loss or damage
sustained by the Company or the other Member, unless the loss or damage shall
have been the result of fraud, the gross negligence or willful misconduct of
such Member.
8
5.2.8 Officers. The Members may designate one or
more individuals as officers of the Company, who shall have such titles and
exercise and perform such powers and duties as shall be assigned to them from
time to time by the Members. Any officer may be removed by the Members at any
time, with or without cause. Subject to the preceding sentence, each officer
shall hold office until his or her successor is elected and qualified. Any
number of offices may be held by the same individual. The salaries and other
compensation of the officers shall be fixed by the Members.
5.3 Expenses. The Company shall pay or reimburse any
Person for any fees or expenses (including out-of-pocket expenses or allocated
overhead), incurred by such Person in respect of the executive management of the
business or operations of the Company or any of its subsidiaries.
ARTICLE VI
CAPITAL CONTRIBUTIONS
6.1 Capital Contributions. Each Member shall contribute
the amount set forth in Schedule A to this Agreement as the Capital Contribution
to be made by such Member.
6.2 Additional Contributions. Except as set forth in
Section 6.1 of this Agreement, no Member shall be required to make any Capital
Contribution.
6.3 Capital Accounts. A Capital Account shall be
maintained for each Member in accordance with Section 8.2 of this Agreement.
6.4 Transfers. Upon a permitted sale or other transfer of
any interest in the Company, the Capital Account relating to such transferred
interest shall become the Capital Account of the Person to which or whom such
interest is sold or transferred, in accordance with Section 8.2(c) of this
Agreement.
6.5 Modifications. The manner in which Capital Accounts
are to be maintained pursuant to this Agreement is intended to comply with the
requirements of Section 704(b) of the Code. If in the opinion of the Tax Matters
Partner, on the advice of the Company's tax advisers, the manner in which
Capital Accounts are to be maintained pursuant to this Agreement should be
modified to comply with Section 704(b) of the Code, then the method in which
Capital Accounts are maintained shall be so modified; provided, however, that
any change in the manner of maintaining Capital Accounts shall not materially
alter the economic agreement between or among the Members as expressed in this
Agreement without the consent of each Member.
6.6 Deficit Capital Account. Except as otherwise required
in the Delaware Act or this Agreement, no Member shall have any liability to
restore all or any portion of a deficit balance in a Capital Account.
6.7 Withdrawal or Reduction of Capital Contributions. A
Member shall not receive from the Company any portion of a Capital Contribution
until all indebtedness, liabilities
9
of the Company, except any indebtedness, liabilities and obligations to Members
on account of their Capital Contributions, have been paid or there remains
property of the Company sufficient to pay them. A Member, irrespective of the
nature of the Capital Contribution of such Member, has only the right to demand
and receive cash in return for such Capital Contribution.
6.8 No Rights of Redemption or Return of Contribution.
Except in accordance with the provisions of this Agreement, no Member has a
right to have its Membership Interests or its Capital Contributions returned
prior to the dissolution of the Company.
ARTICLE VII
Allocations and Distributions
7.1 Allocation of Profits and Losses.
(a) Profits for each Accounting Period shall be
allocated among the Members as follows:
(1) First, to the Members with deficit
Capital Account balances at the end of such Accounting Period (but prior to any
allocation of Profits pursuant to this Section 7.1(a)), in proportion to such
deficits, until such deficits are reduced to zero;
(2) Second, to the Members if Members'
Capital Accounts do not correspond to their Percentage Interests at the end of
such Accounting Period (after the allocation of Profits provided for in Section
7.1(a)(1), but prior to any other allocations of Profits pursuant to this
Section 7.1(a)) so as to make Members' Capital Accounts correspond to their
Percentage Interests; and
(3) The balance, to the Members in
proportion to their Percentage Interests.
(b) Losses for each Accounting Period shall be
allocated as follows:
(1) First, to the Members if Members'
Capital Accounts do not correspond to their Percentage Interests at the end of
such Accounting Period, so as to make Members' Capital Accounts correspond to
their Percentage Interests; and
(2) The balance, to the Members in
proportion to the Percentage Interests.
7.2 Distributions. All Distributions other than
Distributions pursuant to Section 7.4 hereof shall be made to the Members in
proportion to the amounts by which their Capital Contributions exceed all
Distributions previously made to such Members until each has received amounts in
the aggregate equal to its Capital Contribution, and then in proportion to their
Percentage Interests.
10
7.3 No Right to Distributions Except
Upon Dissolution of the Company.
The occurrence of a Dissolution Event with respect to the
Company shall entitle each Member to receive the Distributions set forth in
Section 7.4. In the absence of a Dissolution Event, no Member shall have any
right to receive Distributions.
7.4 Distributions Upon Dissolution of the Company. Upon
dissolution of the Company, the Company shall satisfy (or provide for the
satisfaction of) all the Company's debts and other obligations (including any
debts to Members and former Members). Thereafter, all Distributions shall be
made to the Members in proportion to the positive balances of such Members'
Capital Accounts (after such Capital Accounts have been adjusted to take into
account all events related to such dissolution).
7.5 Offset. The Company may offset all amounts owing to
the Company by a Member against any Distribution to be made to such Member.
7.6 Limitation Upon Distributions. No Distribution shall
be declared and paid unless, after such Distribution is made, the assets of the
Company are in excess of all liabilities of the Company.
7.7 Interest on and Return of Capital Contributions. No
Member shall be entitled to interest on its Capital Contribution or to a return
of its Capital Contribution, except as specifically set forth in this Agreement.
ARTICLE VIII
Tax Matters
8.1 Tax Characterization and Returns.
(a) The Members acknowledge that for federal, state
and local tax purposes the Company will be disregarded as an entity separate
from its Member at all times at which it has only one Member and treated as a
"partnership" at all other times. All provisions of this Agreement and the
Certificate of Formation are to be construed so as to preserve that tax status.
Without limiting the foregoing, to the extent the Tax Matters Partner determines
that provisions of this Agreement are inconsistent with the Company's tax status
at any time at which the Company has only one Member, those provisions shall not
apply at such time.
(b) To the extent applicable, within ninety (90) days
after the end of each Fiscal Year, the Tax Matters Partner will cause to be
delivered to each Person who was a Member at any time during such Fiscal Year a
Form K-1 and such other information, if any, with respect to the Company as may
be necessary for the preparation of each Member's federal, state or local income
tax (or information) returns, including a statement showing each Member's share
of income, gain or loss, and credits for the Fiscal Year.
11
8.2 Capital Accounts.
(a) The Capital Account of each Member shall be
increased by
(1) the amount of all Capital Contributions
made by such Member (which amount, in the case of contributed property other
than cash, shall be the Net Agreed Value thereof) and
(2) all Profit and each item of income and gain
which is allocated to the Member pursuant to Section 7.1, 8.3(b), and 8.3(c)
hereof (computed in each instance with the adjustments detailed in Section
8.2(b) below)
and decreased by
(x) all Loss and each item of loss and
deduction which is allocated to the Member pursuant to Section 7.1, 8.3(b), and
8.3(c) (computed in each instance with the adjustments detailed in Section
8.2(b) below) and
(y) all cash and the Net Agreed Value of any
property distributed by the Company to such Member pursuant to this Agreement.
(b) Solely for the purposes of maintaining the
Members' Capital Accounts, the Profit or Loss of the Company and each item of
income, gain, loss, or deduction which is specially allocated pursuant to
Section 8.3(b) and 8.3(c) shall be adjusted as follows:
(1) Any income of the Company that is exempt
from federal income tax shall be added to such Profit or Loss;
(2) all deductions for depreciation, cost
recovery, amortization, or similar items attributable to any property (other
than cash) contributed by a Member to the Company (including adjustments under
Section 48(q) of the Code) shall be determined as if the Adjusted Basis of such
property on the date of contribution was equal to the Carrying Value of such
property on such date, in accordance with Treasury Regulation Section
1.704-1(b)(2)(iv)(g);
(3) Any income, gain or loss attributable to
the taxable disposition of any asset shall be determined by the Company as if
the Adjusted Basis of such asset as of the date of disposition were equal to the
Carrying Value of such asset as of such date;
(4) All fees and other expenses incurred by the
Company to promote the sale of (or to sell) an interest that can neither be
deducted nor amortized under Section 709 of the Code shall be treated as an item
of deduction.
(5) The computation of all items of income,
gain, loss, and deduction shall be made without regard to any adjustment in the
basis of Company asset as a result of an election under Section 754 of the Code
which may be made by the Company (except to the extent required by Treasury
Regulation Section 1.704-1(b)(2)(iv)(m)) and, as to those items
12
described in Section 705(a)(2)(B) of the Code, without regard to the fact that
such items are neither currently deductible nor capitalizable for federal income
tax purposes; and
(6) In the event that any Distribution is made
to a Member other than in cash (including liquidating Distributions), the
Capital Accounts of the Members, immediately prior to such distribution, shall
be appropriately adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to the distributed property (determined on the
basis of the fair market value of the property at the time of distribution).
(c) A transferee will succeed to the Capital Account
(or such portion thereof) relating to the interest transferred, and there shall
be no adjustment to the Capital Accounts as a result of such transfer except as
otherwise required under Treasury Regulation Section 1.704-1. If, however, the
transfer causes a termination of the Company under Section 708(b)(1)(B) of the
Code, then, to the extent required by regulations or otherwise deemed advisable
by the Tax Matters Partner, the Company's assets shall be deemed to have been
distributed in liquidation of the Company to the remaining Members (including
such transferee) and recontributed by such Members and such transferee in
reconstitution of the Company, and the Capital Accounts of the Members in such
reconstituted Company shall at such time be determined, and shall thereafter be
maintained, in accordance with the rules set forth in this Agreement.
Section 8.3 Special Tax Rules
(a) Special Rules Relating to Contributed Property.
Solely for tax purposes (and not for Capital Account purposes), in the case of
any property (other than cash) included in a Capital Contribution, items of
income, gain, loss, deduction, and credit attributable to such contributed
property shall be allocated as follows:
(1) first, among the Members in a manner that
takes into account the variation between the fair market value of such property
and its Adjusted Basis at the time of contribution (in accordance with Section
704(c) of the Code and applicable Regulations), and
(2) thereafter, in accordance with Section 7.1
and the other provisions of this Article.
(b) Guaranteed Payments. Notwithstanding the
foregoing, in the event that any fees, interest, or other amounts paid or
payable to any Member are deducted by the Company in reliance on Sections 707(a)
or 707(c) of the Code, and such fees, interest, or other amounts are disallowed
as deductions to the Company and are recharacterized as Company distributions,
there shall be allocated to such Member, prior to the allocations provided in
Section 7.1, an amount of Company gross income for the year in which such fees,
interest, or other amounts are treated as Company distributions equal to such
fees, interest, or other amounts so treated as distributions.
(c) Special Overrides.
(1) Solely for purposes of determining a Member's Capital
Account in applying the provisions of this clause (c), the anticipated
adjustments, allocations, and distributions described in
13
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4)-(6) shall be taken into
account, and each Member shall be deemed obligated to restore any deficit in its
Capital Account to the extent of the sum of its share of the Minimum Gain, as
determined pursuant to Treasury Regulation Section 1.704-2(g)(i), and its share
of the Partner Nonrecourse Debt Minimum Gain, as determined pursuant to Treasury
Regulation Section 1.704-2(i)(5).
(2) Notwithstanding any other provision of this Agreement, no
allocation of Loss, or other allocation of loss or deduction, shall be made to
any Member if such allocation would result in such Member having a negative
balance in its Capital Account at the close of any Fiscal Year in excess of the
amount it would be required to restore on a liquidation of the Company at the
close of such Fiscal Year (or a liquidation of such Member's interest in the
Company).
(3) Notwithstanding any other provision of this Agreement, in
the event any Member unexpectedly receives an adjustment, allocation, or
distribution described in clause (4), (5), or (6) of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) that results in such Member having a negative balance in
its Capital Account at the close of any Fiscal Year in excess of the amount that
it is required to restore on a liquidation of the Company at the close of such
Fiscal Year (or of the Member's interest in the Company), or for any other
reason has a deficit Capital Account balance in excess of such amount, such
Member shall, prior to the allocations otherwise provided in this Section, be
allocated Profit (and other income and gain) in an amount and manner sufficient
to eliminate such excess as promptly as possible.
(4) In accordance with and pursuant to Treasury Regulation
1.704-2(i)(1), all partner nonrecourse deductions (as defined in that
Regulation) shall be allocated to the Member that bears the economic risk of
loss on the debt giving rise to such deductions as determined under that
Regulation. Further, in accordance with and pursuant to Treasury Regulation
1.704-2(f) and -2(i)(4) (and subject to the exceptions set forth therein), if
there is a net decrease in either the Company's Minimum Gain or Partner
Nonrecourse Debt Minimum Gain or both during any Fiscal Year, all Members shall
be allocated, before any other allocation is made of Profit (and other income
and gain) or Loss (or other loss or deduction) for such Fiscal Year, items of
income and gain for such Fiscal Year (and, if necessary, subsequent years) in an
amount equal to the Member's share in the decrease in Minimum Gain or Partner
Nonrecourse Debt Minimum Gain, as determined pursuant to Treasury Regulation
Sections 1.704-2(g)(2) and 1.704-2(i)(4).
(5) It is the intent of the parties to this Agreement that the
chargeback provisions and the limitation on loss allocations provided in this
Section satisfy the "allocation of nonrecourse liability" rules provided in
Treasury Regulation 1.704-2 and the requirements of Treasury Regulation
1.704-1(b)(2)(ii)(d) (relating to the alternate test for economic effect and
"qualified income offset"). It is further intended that the allocations under
this Section shall effect an allocation for federal income tax purposes in a
manner consistent with Section 704(b) and (c) of the Code and comply with any
limitations or restrictions therein. If for any reason the allocations contained
in this Agreement shall conflict with the Regulations promulgated under Section
704 of the Code, the Members acknowledge that such Regulations shall control.
(6) The allocations set forth in this Section (the "Regulatory
Allocations") are intended to comply with certain requirements of Treasury
Regulations Section 1.704-1(b). The Regulatory Allocations may not be consistent
with the manner in which the Members intend to
14
divide Company Distributions. Accordingly, the Tax Matters Partner (or any
successor thereto) is hereby authorized, with the advice of the company's tax
advisers, to devise other allocations of income, gains and losses and other
items among the Members as may be necessary so as to prevent the Regulatory
Allocations from distorting the manner in which Company Distributions will be
divided among the Members; provided, however, that any change in the manner of
maintaining Capital Accounts shall not materially alter the economic agreement
between or among the Members as expressed in this Agreement without the consent
of each Member. In general, the Members anticipate that this will be
accomplished by specially allocating items of income, gain, loss and deduction
among the Members so that the net amount of the Regulatory Allocations and such
special allocations to such Member is zero. However, the Tax Matters Partner
shall have discretion to accomplish this result in any reasonable manner.
8.4 Accounting Decisions
(a) Subject to the provisions of this Agreement, the
Tax Matters Partner will make all decisions as to accounting matters.
(b) Subject to the provisions of this Agreement, the
Tax Matters Partner may cause the Company to make whatever elections the Company
may make under the Code, including the election referred to in Section 754 of
the Code to adjust the basis of Company assets.
(c) The Company shall make the following elections
on the appropriate tax returns:
(1) To adopt the calendar year as the Fiscal
Year;
(2) To adopt the accrual method of accounting
for income tax purposes and keep the Company's books and records in accordance
with GAAP;
(3) If a Distribution as described in Section
734 of the Code occurs or if a transfer of a Membership Interest described in
Section 743 of the Code occurs, upon the written request of any Member, to elect
to adjust the basis of the property of the Company pursuant to Section 754 of
the Code;
(4) To elect to amortize the organizational
expenses of the Company and the start up expenditures of the Company under
Section 195 of the Code ratably over a period of sixty months as permitted by
Section 709(b) of the Code; and
(5) Any other election that the Tax Matters
Partner may deem appropriate and in the best interests of the Members. Neither
the Company nor any Member may make an election for the Company to be excluded
from the application of Subchapter K of Chapter I of Subtitle A of the Code or
any similar provisions of applicable state law, and no provisions of this
Agreement shall be interpreted to authorize any such election.
8.5 Tax Matters Partner. Insight shall be the "tax
matters partner" of the Company pursuant to Section 6231(a)(7) of the Code. Any
Member who is designated as successor Tax Matters Partner shall take any action
as may be necessary to cause each other Member to
15
become a "notice partner" within the meaning of Section 6223 of the Code. The
Tax Matters Partner shall not extend the statute of limitations, compromise any
tax controversy or take any other material action except after consultation with
the Members.
8.6 Tax Returns. The Tax Matters Partner shall cause to
be prepared and filed all necessary federal, state and local income tax returns
for the Company. Each Member shall furnish to the Tax Matters Partner all
pertinent information in its possession relating to Company operations that is
necessary to enable the Company's income tax returns to be prepared and filed.
8.7 Tax Withholdings. The Company shall at all time be
entitled to make payments with respect to any Member in amounts required to
discharge any legal obligation of the Company pursuant to any provision of the
Code or any other tax provision or any provision enacted in the future imposing
a similar obligation on the Company to withhold or make payments to any
governmental authority with respect to any United States federal, state or local
tax liability of such Member arising as a result of such Member's interest in
the Company. Each such payment made to any governmental authority shall be
deemed to be a loan by the Company to such Member and shall not be deemed to be
a distribution. The amount of such payments made with respect to any Member,
plus interest at an annual rate equal to two percent plus the Company's highest
borrowing rate on each such amount from the date of each such payment until such
amount is repaid to the Company, shall be repaid to the Company by (i) deduction
from the current or next succeeding distribution or distributions otherwise
payable to such Member pursuant to this Agreement or (ii) earlier payment of
such amounts and interest by such Member to the Company.
ARTICLE IX
Transfers
No Member may transfer, sell, gift, or otherwise
dispose of all, or any portion of, or any interest or rights in, the interest in
the Company owned by the Member without the consent of all of the Members. Each
Member hereby acknowledges the reasonableness of this prohibition in view of the
purposes of the Company and the relationship among the Members. The transfer of
any interest in the Company in violation of the prohibition contained in this
Article IX shall be deemed invalid, null and void, and of no force and effect.
Any Person to whom interests in the Company are attempted to be transferred in
violation of this Article IX shall not be entitled to vote on matters coming
before the Members, participate in the management of the Company, act as an
agent of the Company, receive Distributions or have any other rights in or with
respect to the interest in the Company. Notwithstanding the foregoing, each of
the Members hereby consents to the pledge of the interests in the Company
pursuant to the Amended and Restated Security Agreement, dated as of March 4,
1993, by and among Insight, the Lenders party thereto, Canadian Imperial Bank of
Commerce, as Documentation Agent for the Lenders, and the Bank of New York, as
Administrative Agent for the Lenders, as amended, restated, modified or
supplemented from time to time, including as a result of any increase, deferral,
renewal, extension or refinancing of the Credit Agreement, and consents to any
transfer of such interests upon any foreclosure or other exercise of remedies in
respect of such pledge.
16
ARTICLE X
Dissolution; Winding Up
10.1 Dissolution. The Company shall be dissolved upon the
happening of any of the following events (each, a "Dissolution Event"):
(a) when the period fixed for its duration in
Section 3.5 has expired;
(b) upon the vote of all the Members;
(c) the occurrence of an event described in Section
18-304 of the Delaware Act regarding bankruptcy or insolvency
of any Member; or
(d) the entry of a decree of judicial dissolution
under the Delaware Act.
10.2 Voluntary Withdrawal. Except as expressly permitted
in this Agreement, a Member shall not voluntarily withdraw or take any other
voluntary action which, directly or indirectly, causes a Dissolution Event.
10.3 Effect of Dissolution. Except as permitted by the
Delaware Act, upon dissolution the Company shall cease to carry on its business
and shall file a Certificate of Cancellation as provided in Section 18-203 of
the Delaware Act.
10.4 Winding Up, Liquidation and Distribution of Assets.
10.4.1 Upon dissolution, an accounting shall be made
by the Company's independent accountants of the accounts of the Company and of
the Company's assets, liabilities and operations, from the date of the previous
accounting until the date of the Dissolution Event. The Member appointed by the
other Member as the liquidator (the "Liquidator") shall immediately proceed to
wind up the affairs of the Company.
10.4.2 If the Company is dissolved and its affairs
are to be wound up, the Liquidator shall:
(i) Sell or otherwise liquidate all of the
Company's assets as promptly as practicable,
(ii) Discharge all liabilities of the Company,
including liabilities to Members who are
creditors to the extent otherwise permitted
by law, other than any liabilities to
Members for distributions declared but not
yet paid by the Company, and establish such
reserves as may be reasonably necessary to
provide for contingent liabilities of the
Company,
(iii) Allocate any profit or loss resulting from
the sales of Company assets to the Members
in accordance with this Agreement, and
17
(iv) Distribute the remaining assets in the
following order:
(1) If any assets of the Company are to
be distributed in-kind, the net fair
market value of such assets as of
the date of the Dissolution Event
shall be determined by an
independent appraisal or the Tax
Matters Partner. Such assets shall
be deemed to have been sold as of
the date of dissolution for their
fair market value, and the Capital
Accounts of the Members shall be
adjusted pursuant to the provisions
of this Agreement to reflect such
deemed sale.
(2) In accordance with Section 7.4
hereof, either in cash or in-kind,
as determined by the Liquidator,
with any assets distributed in-kind
being valued for this purpose at
their fair market value in
accordance with the requirements set
forth in Treasury Regulation Section
1.704-1(b)(2)(ii)(b)(2).
10.4.3 Notwithstanding anything to the contrary in
this Agreement, upon a liquidation within the meaning of Treasury Regulation
Section 1.704-1(b)(2)(ii)(g), if any Member has a deficit Capital Account (after
giving effect to all contributions, Distributions, allocations and other Capital
Account adjustments for all Fiscal Years, including the year in which the
liquidation occurs), such Member shall have no obligation to make any
contribution to capital, and the negative balance of such Member's Capital
Account shall not be considered a debt owed by such Member to the Company or to
any other Person for any purpose whatsoever.
10.4.4 Upon completion of the winding up,
liquidation and distribution of assets, the Company shall be deemed terminated.
10.5 Return of Contributions to Capital Nonrecourse to
Other Members. Except as provided by law or as expressly provided in this
Agreement, upon dissolution each Member shall look solely to the assets of the
Company for the return of its Capital Contribution. If the Company property
remaining after the payment or discharge of the debts and liabilities of the
Company is insufficient to return the Capital Contributions of one or more
Members, such Member or Members shall have no recourse against any other Member.
ARTICLE XI
INDEMNIFICATION
11.1 Exculpatory Provisions. None of the Members nor any
of their respective shareholders, members, partners, officers, directors,
employees or control persons (as such term is defined in the Securities Act of
1933, as amended, and the rules and regulations thereunder) of such Members
(collectively, the "Indemnified Persons") shall be liable directly or
indirectly, to the Company or to any other Member for any act or omission (in
relation to the Company or this Agreement) taken or omitted by such Indemnified
Person in good faith, provided that such act or omission did not constitute
gross negligence, fraud or willful violation of the law or this Agreement.
18
11.2 Indemnification of Members. The Company shall, to the
fullest extent permitted by the Delaware Act, indemnify and hold harmless each
Indemnified Person against all claims, liabilities and expenses of whatever
nature ("Claims") relating to activities undertaken in connection with the
Company, including but not limited to amounts paid in satisfaction of judgments,
in compromise or as fines and penalties, and counsel, accountants' and experts'
and other fees, costs and expenses reasonably incurred in connection with the
investigation, defense or disposition (including by settlement) of any action,
suit or other proceeding, whether civil or criminal, before any court or
administrative body in which such Indemnified Person may be or may have been
involved, as a party or otherwise, or with which such Indemnified Person may be
or may have been threatened, while acting as such Indemnified Person, provided
that no indemnity shall be payable hereunder against any liability incurred by
such Indemnified Person by reason of such Indemnified Person's gross negligence,
fraud or willful violation of the law or this Agreement or with respect to any
matter as to which such Indemnified Person shall have been adjudicated not to
have acted in good faith.
11.3 Advance of Expenses. Expenses incurred by an
Indemnified Person in defense or settlement of any Claim that may be subject to
a right of indemnification hereunder may be advanced by the Company prior to the
final disposition thereof upon receipt of an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall ultimately be determined
that the Indemnified Person is not entitled to be indemnified by the Company.
11.4 Control of Claim. The Company shall have the right to
select counsel (provided such counsel is reasonably satisfactory to the
Indemnified Person) and to control the defense of any action giving rise to a
Claim, provided that an Indemnified Person may nevertheless employ counsel to
represent and defend it, but the Company will not be required to pay the fees
and disbursements of more than one counsel in any jurisdiction in any proceeding
(unless by reason of potential conflicts of interest, representation by more
than one counsel is necessary). The right to control the defense of any action
shall not include the right to enter into a settlement with respect to such
action, unless such settlement is for money damages only (and the Company first
posts a bond or other security satisfactory to the Indemnified Person
sufficient, without regard to the provisions of Section 11.6, to cover the full
amount of the proposed settlement).
11.5 Non-Exclusivity. The right of any Indemnified Person
to the indemnification provided herein shall be cumulative of, and in addition
to, any and all rights to which such Indemnified Person may otherwise be
entitled by contract or as a matter of law or equity and shall extend to such
Indemnified Person's successors, assigns and legal representatives.
11.6 Satisfaction from Company Assets. All judgments
against the Company or an Indemnified Person, in respect of which such
Indemnified Person is entitled to indemnification, shall first be satisfied from
Company assets before the Indemnified Person is responsible therefor.
11.7 Notices of Claims. Promptly after receipt by an
Indemnified Person of notice of the commencement of any action or proceeding or
threatened action or proceeding involving a Claim, such Indemnified Person will,
if a claim for indemnification in respect thereof is to be made against the
Company, give written notice to the Company and each other Member of the
commencement of such action, provided that the failure of any Indemnified Person
to give notice as provided herein shall not relieve the Company of its
obligations under this Article XI, except to
19
the extent that the Company is actually prejudiced by such failure to give
notice. Each such Indemnified Person shall keep the Company and each other
Member apprised of the progress of any such proceeding.
ARTICLE XII
General Provisions
12.1 Notices. Any notice, demand or other communication
required or permitted to be given pursuant to this Agreement shall have been
sufficiently given for all purposes if (a) delivered personally to the party or
to an executive officer of the party to whom such notice, demand or other
communication is directed or (b) sent by registered or certified mail, postage
prepaid, addressed to the Member or the Company at its address set forth in this
Agreement. Except as otherwise provided in this Agreement, any such notice shall
be deemed to be given three business days after the date on which it was
deposited in a regularly maintained receptacle for the deposit of United States
mail, addressed and sent as set forth in this Section.
12.2 Amendments. This Agreement contains the entire
agreement between the Members with respect to the subject matter of this
Agreement, and supersedes each course of conduct previously pursued or
acquiesced in, and each oral agreement and representation previously made, by
the Members with respect thereto, whether or not relied or acted upon. No course
of performance or other conduct subsequently pursued or acquiesced in, and no
oral agreement or representation subsequently made, by the Members, whether or
not relied or acted upon, and no usage of trade, whether or not relied or acted
upon, shall amend this Agreement or impair or otherwise affect any Member's
obligations pursuant to this Agreement or any rights and remedies of a Member
pursuant to this Agreement. No amendment to this Agreement shall be effective
unless made in a writing duly executed by all Members and specifically referring
to each provision of this Agreement being amended.
12.3 Headings. The headings in this Agreement are for
convenience only and shall not be used to interpret or construe any provision of
this Agreement.
12.4 Waiver. No failure of a Member to exercise, and no
delay by a Member in exercising, any right or remedy under this Agreement shall
constitute a waiver of such right or remedy. No waiver by a Member of any such
right or remedy under this Agreement shall be effective unless made in a writing
duly executed by all Members and specifically referring to each such right or
remedy being waived.
12.5 Sole Member. Upon formation, there shall be only one
Member of the Company. Unless and until there is more than one Member, all
references in this Agreement to Members shall be deemed to be references to the
sole Member.
12.6 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law. However, if any provision of this Agreement shall be
prohibited by or invalid under such law, it shall be deemed modified to conform
to the minimum requirements of such law or, if for any reason it is not deemed
20
so modified, it shall be prohibited or invalid only to the extent of such
prohibition or invalidity without the remainder thereof or any other such
provision being prohibited or invalid.
12.7 Binding. This Agreement shall be binding upon and
inure to the benefit of all Members, and to the extent permitted by this
Agreement, their respective legal successors and assignees.
12.8 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which shall
constitute one and the same instrument.
12.9 Governing Law. This Agreement shall be governed by,
and interpreted and construed in accordance with, the laws of the State of
Delaware without regard to principles of conflict of laws.
12.10 Further Assurances. The Members each agree to
cooperate, and to execute and deliver in a timely fashion any and all additional
documents and do such further acts as may be necessary to effectuate the
purposes of the Company and this Agreement.
IN WITNESS WHEREOF, the parties have executed this Operating
Agreement as of the date first written above.
Insight Communications Company, L.P.
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general partner
By: /s/ Xxx X. Xxxxx
-------------------------------------
Name: Xxx X. Xxxxx
Title: Executive Vice President and
Chief Financial and Operating Officer
Insight Holdings of Ohio, LLC
By: Insight Communications Company, L.P., its
initial member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its
general partner
By: /s/ Xxx X. Xxxxx
---------------------------------
Name: Xxx X. Xxxxx
Title: Executive Vice President and
Chief Financial and Operating Officer
21
Schedule A
Members
Capital Percentage
Name Address Contributions Interests
---- ------- ------------- ----------
Insight Communications 000 Xxxx 00xx Xxxxxx $10,000,000 100%
Company, L.P. Xxx Xxxx, XX 00000
